House #18: The Haggle House

September 5, 2010 · 13 comments

It’s been a while, but we just put House #18 under contract…it was the house I’ve been discussing in my “Follow the Offer” posts… (full credit to Tom Tarrant for coming up with a great name for this one!)

Last Wednesday, I mentioned that the bank had verbally accepted our final offer, after much negotiation over several weeks. I don’t know if they were having second thoughts, were having difficulty getting final approvals or if they were just playing games, but it took two days to get from verbal agreement to an actual contract (this bank was being very responsive, so I doubt that the delay was due to their being too busy).

Of course, once they got us the final contract and addendum, they “required” us to get everything signed and back to them immediately. Gotta love the double standard…but that’s just part of dealing with banks and REO properties…

Anyway, we got the docs back late Friday evening, and then found out that our amazing closing attorneys had already started pulling title and preparing for close. Even with the long holiday weekend, we expect to be able to close this one before the end of the week!

A couple of people posted comments asking about our plans and the numbers around this property. We’re currently debating whether to hold this property as a long-term rental or do a quick rehab and flip. We’ll probably do the rehab and put it on the market for a few weeks just to see if there is interest at a reasonable selling price; if not, we’d likely rent it out.

The rough numbers are as follows:

Purchase Price: $43,500
Rehab Costs: Between $6000-8000
After Rehab Value (ARV): Between $65,000-90,000
Market Rents: Between $825-975

It’s hard to determine the ARV of this property, as there aren’t too many comps in the area, and while this home didn’t get affected by last year’s flooding, this general area did — so we’re not sure if that will scare buyers off or not.

If we’re able to sell above $75K, we’ll make our minimum $15K profit (after all fixed costs); so we may put it on the market and see if we get any offers above that, and if not, we’ll rent it. From a rental perspective, if we can get at least $825/month in rent (which shouldn’t be a problem in this area), it would cash flow well.

So, as you can see, we have at least two potentially great exit strategies on this one, and we’ll likely just let the market decide which way to go…

13 responses to “House #18: The Haggle House”

  1. Harry says:

    Congratulations, J. Good to see it work out for you.

  2. Luis says:

    At that price point you might be better served on doing a lease purchase. You might be able to push the rent to close to a $1,000. Because of the price point your potential buyer will probably need help in qualifying for a loan, so you would have to use one of those credit repair companies to help them through plus you probably will not be able to get a whole lot of down payment, if any.

  3. Shae says:

    Awesome, J! I like hearing you talk about some possible long term holds now πŸ˜‰

  4. Steph says:

    Congrats on the deal J!

    You mentioned that your title co was ready to close… do you guys usually get to pick the title company on your REO deals?

    If so, I’m jealous.

  5. […] Flipping Homes: Knowing Your Exit Strategies Posted by: mandy | Category: Flipping Houses, Real Estate Investing, Rehabbing Houses, Reos […]

  6. Rob says:

    What would the numbers look like if you’d hold it and rent it for $825? Are you looking for a minimum monthly cashflow or a certain return or both?
    Would you refinance (if you bought for all cash) or keep 100% equity in it?
    Are you planning on doing your own property management?

  7. J Scott says:

    Steph –

    This is the first REO where we’ve negotiated to use our own title company. The seller didn’t put up a big fight, but it does require our closing attorney to coordinate with the seller’s closing attorney.

    Just to make you more jealous, the contract was finally signed at 4pm on Friday afternoon, Monday was a Federal holiday, title was pulled on Tuesday, and if the seller’s closing attorney wasn’t dragging their feet, we’d be ready to close on Wednesday.

    Yup, literally 2 business days from contract to close on an REO! I can’t believe it either…

  8. J Scott says:

    Rob –

    All good questions. See my latest post…

  9. J Scott says:

    Luis –

    Lease purchase is last on my list of potential exit strategies for this property. I have a feeling this house will see rapid short-term appreciation — it was on the border of where the floods hit last year and once the memory of the flooding subsides, this property could increase 30-40% in value. A lease purchase would lock me in to a low selling price, which would just hurt my returns down the road.

    I’ll either go for the quick sale or hold as a rental and sell for a (hopefully) appreciated price in a couple years…

  10. Shane in TX says:

    Thanks for such a wonderful website and educational tool. I’ve spend the last month or so contributing to your site visit count, and time spent on each page count. I started from the beginning, blog page 50, and now I’m here. I’m sure I’ll talk to you/hear from you more in the future as I continue my education towards my goal of quitting my not-so-9 to 5-not-really-day job to supporting my family and improving our quality of life through real estate, and eventually passing the knowledge and skills (and maybe a property or two) onto our kids so they’ll never be broke. Wow I just realized that’s one REALLY long sentence.

    All that said…this comment was originally, before i was struck with vomiting of the keyboard…to let you know that the closing attorney’s link in this blog doesn’t work. πŸ™‚

    Looking forward to reading up to date in the next week or so, and shooting you an email at some point with some pointed questions that I haven’t seen answered here…or maybe I have but it’s escaped into information overload land.

    ~Shane in TX

  11. J Scott says:


    Thanks for the kind words! And also thanks for pointing out the issue with our closing attorney’s incorrect web address (I typed it in wrong!).

    Feel free to post any questions you have…I’m happy to respond…

  12. Shane in TX says:

    Thanks J. I didn’t receive an email letting me know you replied, but figured I’d check anyway. I see the lawyer link works now, and your email may be in my junk folder. Forgot to look there til just now. πŸ™‚

    I’m up to page 13 now…gonna continue reading. It’s been a great journey for you and your team. I’m learning all I can from yours so when I jump in, I will be ready.


  13. Shane in TX says:

    Ok, I’m super slow…I didn’t check my email tonight, AFTER you commented. Email’s there. Thanks again!!


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