Okay. Just wanted to pass along news on two purchases I am in the midst of. The first one is a 1800 sq. ft SFH 3 bed 1.5 Bath with two car garage. It is HUD owned and in very good condition other than the roof and about half of the windows need replaced. The rest is cosmetic. Mechanicals are all in great shape. It sold in 2005 at the height of the market for $117K. My offer of 42K was accepted I plan on putting 22-23K into it and my exit strategy is to put it on to the market by May 17th at an asking price of 99K. I close on April 15th. The other purchase is right next door to the 5 unit I bought a year ago for 22K. This one is also a steal. 3 unit that I will be converting to two. It should never have been a 3 unit. I am buying it for 5K. It’s nearly 2800 sq. ft. And the city is moving a utility pole so I can create an easement from my adjoining property and expand the parking lot. I love this business. It needs a little work but each unit will rent for at least $600 each once completed. It should provide very good long term return if I don’t over do the improvements. Oh and I bought both cash, as-is, no contigencies. Should close on the multi by the end of this month. I’ll keep you updated on the progress.
Now that is real estate investing. Duplex purchased at 5000 and renting for 600/ mo on each side. In just over 4 months you have your money back and killer cash flow after that. Not bad Congrats :beer
redhawk
$5,000 for a 3 unit that doesn’t need much work and will gross $1800 a mo is a nice deal.
Would be nice to be able to find those type of deals in my area!
Wow, that is awesome. I have only purchased 1 property so far, but if could run across some deals like those I would have a few more properties… Hopefully in the current market we can all find a few more “deals” out there. Thanks for the update!
I close on the SFH a week from today and the two unit by month’s end.
and i was happy to purchase a 4 bed 2 bath 1800 sq. ft. home minutes from downtown houston for $28k…
a 3 unit for $5k… you gotta be in Detroit, right! Congrats none the less, I see you aren’t participating the recession…LOL (What recession?)
Closed yesterday on SFH. Most electrical was completed today. Roof comes off tomorrow should be completed by Saturday. I want it back on the market by May 15th so I can take advantage of the late Spring/Summer buying season. After rehab value is over 100K, my exit strategy is a $99,900 price point which will make it a very attractive consideration for potential buyers.
WOW! How in the world did you get a three unit for 5K? How much was it advertised for? Was it an REO, FSBO, or what? The price is so unthinkably low, that I can not help but get extremely curious how do you get a deal like that, what are your steps once you get it, etc. Do you mind sharing? We are in Maine, and even buildings scheduled by the city to be burned down never go that low. Where are you, if you don’t mind me asking?
I’m in Ohio and when I close this property, which is before the EOM I will explain the whole story on how I ended up with this property. Very very unconventional and it should be an interesting tale for most.
Congrats! Man, that’s awesome!
My friend was telling me he’s got 11 full time crews working in a certain zip code in detroit. He picks them up for $5K puts max of $10-15K into them and then rents them out…something crazy like 900 a month.
I said it only works in one zip code, but I’m going to put some money into that area for sure. Who cares about appreciation with those price points, cashflow pays off house in 2 years…that works!
All the best and keep us posted on your endeavors.
Jay!
Jason S. Gray
One last snag to overcome but I will be at the closing table on Friday. I promise to give everyone a full report after closing.
Way to go, Brockovich! Please give us reports. It helps keep me motivated on those days when I don’t feel like doing anything. And I just need to get off the couch.
Furnishedowner
Okay I am back and ready to do a full report on this property now that I own it. I closed last Friday. This is a property that is next door to a property that I closed on last year for 22K. That building at the time was a six unit that I converted to a five unit. It is completely renovated and has been producing $2325 of rental income per month. The beauty of that deal was a local bank was in a tough spot when a bunch of properties that they had financed all went belly up from an investor who had no clue what they were doing. That property was purchased in 2005 for 190K and it appraised at 208K when we(my brother and I) bought it. It now is probably worth 1/4 million or more although I have no intention of selling it. It is partially commercial as one unit is being rented by my contractor. Another unit was designed with a commercial tenant in mind but done in a way where it was flexible enough to be used as a one bedroom residential apartment. In other words, a kitchen is in it, with a full bath, and I even had a washer dryer hook-up installed. We did not get a commercial tenant so we rented it to residential tenant in Jan of this year to fill the building up. One other note on this project, We applied for and were granted a CRA and because it is partially a commercial building we were able to lock in the tax rate for 15 years. After securing that we disputed the tax assessment (using an attorney) and stated the value should be for assessed at our purchase price. Believe it or not, the auditor ruled in our favor and the building was re-assessed at $22,000. So our new tax amount due ANNUALLY is $317. That’s right, $153.50 per half. And because of the CRA, this will be our tax rate for 15 years. So we leveraged everything available to us to improve the investment return. And we were able to split a tax rebate in the amount of $5600 for my 2008 return. To say this was a deal would be an understatement. Any way, the neighborhood is pretty nice. Brand new Funereal across the street, rehabbed building that we own, they worked on another property next to the funereal home last summer but the building next to ours was an eyesore. It just so happened to be one of the properties the same investor had owned and financed through the local bank. However, the bank was being a little less generous with this building and wouldn’t negotiate the same kind of deal. Time went by and they were down to four properties that they could not get rid of. The city had applied for and was granted some funds for a property land bank program and the bank and the city began discussions about those four properties. I had been in all of them but had passed initially on all of them. However, since I had a vested interest in the property next door I wanted to make sure it ended up in a good investor’s hands. I know a couple of key people in city government and have established a reputation as an investor who does things right when it comes to rehabs so they call me when they have condemned homes and some I do end up buying directly from families trying to get rid of them. Anyway, I initially asked them if they could buy the property and raze it. They were open to the idea but had not yet purchased them from the bank. Eventually the bank worked out a deal to sell them four properties for 40K. They bought two for the land value and basically were given the other two at a purchase price of $1. One of the ones they bought for $1 was the one next door to mine. I then said, Hey, I might be interested in seeing that building renovated so it doesn’t leave a hole in the cityscape at this location. I teed up a meeting with city leadership and said I might be interested in buying the property. They have since gotten approval to raze the other three properties and will be sending that out to bid shortly. The problem is there is no parking except on the street for this property next door. The adjoining property we already own has a parking lot behind it and has a potential easement into that property next door and a parking lot could be created. So I pressed the issue by asking for some “In Kind” concessions. I asked them if the could relocate a utility pole that is in the middle of where the easement would be. I asked them to do all the survey work. I asked them to provide a design for the parking lot and for them to pave it for me. Hey, it can’t hurt to ask right? We had been bouncing around a purchase price of 10K. After these requests they came back and said they would provide a $1500 allowance for the design and $3500 allowance towards the expense of the parking lot and in essence would sell me the property for $5,000. They agreed to everything else, utility pole relocation, survey, legal preparation and we had a deal. So there you have it. It pays to work closely with local banks and city governments in the cities in which you invest. Ask questions and ask for concessions. The worst they can say is no. The building needs some work which will begin next week after securing the necessary permits and advanced planning. Both units should rent for $650-$700 per month and now we have synergies with the property we already own next door. Oh and we need to do a CRA and then challenge the tax assessment. We’ll se if the Auditor is as generous this year as last. This same building sold for 78K in 2005.
Brockovich,
Really an interesting story of how to work your neighborhood! I hope you do some before pictures of the street. I take it that this was an old area and badly needed renovation. City fathers love that. Can you access any special rehab monies?
What is an CRA? I could not find that in the glossary. How did you reduce the taxes with the CRA?
Furnishedowner
Community reinvestment area.
http://www.development.ohio.gov/edd/cra/
It doesn’t reduce taxes, it locks in your tax rate. This combined with the tax reassessment is a powerful tool if executed properly. We locked in the rate and then disputed the taxable value. With that reduction it now cannot be raised for 15 years, even if the value is reassessed.
Hopefully in the current market we can all find a few more “deals” out there. Thanks for the update!
My friend was telling me he’s got 11 full time crews working in a certain zip code in detroit. He picks them up for $5K puts max of $10-15K into them and then rents them out…something crazy like 900 a month.
Very interesting, thanks. I’m going to search if there are CRA’s around here.
Furnishedowner
I did close to the same thing and purchased a 2,200sq ft duplex a year ago for $4,950. It had a demolition order on it and was being sold at tax sale.
I got in it prior to the sale and all in all it was not that bad. Extensive water damage from some large holes in the roof but the floor joists were not rotten. Just a bunch of plaster on the ceilings of both levels damaged. The floors were fine. So what is the cost of a sheet of drywall? It needed a heat system… so baseboards throughout. All the pipes were leaking all over the place so I completely replummed it. The front porch had a roof and porch over the roof that was collapsing which cost about $12K to fix and both the outside and inside needed scraping and painting due to severe peeling paint.
I called friends in code enforcement prior to the sale and asked if they would lift the demolition order for me if I bought it. They agreed. No one at the sale wanted to bid on it because of the Demo order. They all thought they were looking at a 10K piece of land and 10K in demolition plus the purchase price at the sale.
By the end I had a grand total of 25K in the house. I originally expected 15K in repairs. Hidden problems like the plumbing presented themselves down the road. The house now looks fantastic. There is a 3br that rents for $650 and a 4br that rents for $700.
We are about 6 weeks off for completion of the renovation. All permits are pulled and we are digging in. We will end up with 2 (3) bedroom apartments with 1500 sq ft in one and 12 in the other. $1300 o f rental income at least.