We picked up our 30th house last week (in the same neighborhood as The Drought House)!
This one is a Fannie Mae property that has a 90 day deed restriction — which means we are legally forbidden from reselling it within the first 90 days of ownership for more than 20% above what we purchased it for. In other words, if we purchase it for $50,000, we have two choices:
- Sell it for less than $60,000 in the first 90 days; or
- Wait more than 90 days and sell it for whatever we want.
This means that we can either try to wholesale it (sell it to another investor) quickly for a small profit or rehab it and have to wait three months to sell it. If we decide to wait the 90 days to sell it, we can actually sell on day 91, so we can still spend the 90 days rehabbing, finding a buyer and getting their financing lined up.
Since we don’t know if this would be an attractive wholesale deal or not, what we’ll likely do is the following:
- First, we’ll do a very minor rehab — clean the carpets, paint touch-up, ensure the utilities work, etc — and get it into rental condition. We’ll relist it, trying to wholesale to a landlord for a small — but quick — profit. The actual purchase price is $53,000, so the maximum resale amount in the first 90 days is $63,600 (20% above purchase price).
- If, after a month or so, we haven’t sold it, we’ll do a more substantial rehab and start marketing it to retail buyers.
I’m calling this one The Easy House, as the rehab on this one will be about as minor as we’ve ever done. The retail comps for this house will be pretty low, so even if we decide to get this one into retail shape to sell to an owner occupant, the rehab will likely be less than $10,000 — the smallest rehab we’ve ever done for a retail sale.