I do not know if this will help anyone but I am going to try and cronicle the events of finding my first property. Just to let you guys know what my strategy is I intend to purchase rehab homes and sell for as much profit as I can to build up capitol that will allow me to start buying and holding properties for rental. My situation is that I am just coming out of chapter 7 bankruptcy with a very poor cash position. Good news is I have managed to keep my house. I am a very handy person and can do almost anything so I have the know how to complete the project and I also have a some financial backing to get the deal done and do the rehab work. So here is the house I have found and where I am now.
On 25th I found this house while looking at homes on the forclosure list that will be up for sale on 7 Feb. Took a digital picture of front of house and came back to the house to start looking up tax and owner information. House turned out to be owned by a lady out of state. Records show she is the daughter of the original owners who have passed away. Tax records show the house is 1187 sq ft with tax value at $11,100.00 and most other properties in the neighborhood show tax value at 45-50 k here that number is tipically 15% lower than actual value. So value should be in the 50-60k range when the house is finished. I have an address that I have confirmed is accurate for the owner but number is unlisted.
On 26th continued searching for a phone # with no luck.
On 27th returned to house and spoke to neighbors and confirmed that house was indeed empty. Took my digital camera back and took more pictures of the house. Found that the house seem to be inhabited at least occasionally by homeless people. The roof is rotten several windows are broken and the back door is standing wide open there are no doorknobs on either door. Returned home and drafted a letter to the lady explaining the condition of the house and asking her if she would be willing to sell the house. I enclosed the pictures that I had taken to show her the shape of the house and that I was not trying to be devious. I will mail this letter by certified mail tomorrow.
I will be adding to this daily so everyone can see my progress (or lack of). If anyone has anything to add that they think I may be missing please feel free to let me know. Like I said this is my first property that I am trying to get so I am sure I will make some mistakes but I figure that I will learn and maybe my experience will help someone else.
Can you please let us know the State and City where you plan to purchase?
It makes a world of difference since I live in California where home prices are huge compared to most states and finding rehabs is almost out of the question. So, I’d like to learn about other states and opportunities.
I live in the Upstate area of South Carolina. I could not imagine the prices of houses that I have seen or heard in California. I currently live in a 3/2.5 with detached 2 car garage and wrap around porch on 2.2 acres of land on a 13 acre pond that I paid 139k for in 1999. It has appreciated respectably but nothing compared to what I hear from CALI
I like the idea of sending pictures, it appeals to the emotions of an individual whom would rather forget about it.
realestatefox - I live in the north east, NJ and NY and like you realestate prices are just plan wacky!!! I don’t understand where the average consumer can afford to live here anymore. I have focused my attention to the DC area and Maryland, alot of good rent levels with major restoration and renovation happening every day in these areas. This will surely raise property values. If you need some help I can refer you to the realestate broker that i have been working with in Maryland his specialty is HUD properties. Alot of good rehabs in HUD!
I think sending pictures is a good Idea because there may be some emotional attachment to the house like they lived there as a child. If this is so then they may have one image of the house from their childhood and then you get to show them what it eally looks like now. Of cource this could backfire on you but I think it is worth the risk if you can appeal to her emotions and let her know that you are planning to invest time and money into the place to make sure that it never looks like that again.
I mailed the letter certified receipt requested today. Post Office said expect to have it delivered on monday. I also continued trying to locate a phone #. Went back to courthouse and went through death records and found an old home and work # but both have been disconnected. I really hope this all works because I really want this house I believe that this house will be a great deal if I can get the lady to sell.
New Roof 3-4k (Contractor)
New Windows and Doors 2K (Me)
Replace subflooring 500 (Me)
Update very small Kitchen 2K (Me)
Update both baths 3K (Me)
New Central heat and Air 3K (Contractor)
New Carpet and Vinyl 2K (Both)
Paint inside and out 1K (Me)
Cleanup Yard and plant 500 (Local South of the border workers)
Should sell for 55k
So total rehab should cost less than 20K
hopefully cost to buy around 5k
3 months holding cost 800 holding cost
figuring 5k closing cost
this should leave 24k profit. Considering I am shooting for 20k profit I have room to manuver and some of these estimates are figuring high.
I think what you are doing is great…posting your progress. I hope this does work out for you. Please help me get a grasp of your numbers though. How do you plan to get free and clear title for ~$5000 if the house is going to forcles? Doesn’t this presuppose a balance due to the bank?
This house is just a house that I ran across while I was going to look at other Forclosure property. It is not in forclosure the Original owners only paid 2100.00 for it back in 1972. They are both dead and Daughter is now owner free and clear for the last 4 years. She happens to be living in Washington DC and does not seem to care about the house so I am trying to see if she has any interest in selling the house. It is in really bad shape but is exactly what I believe that most rehabbers are looking for. If she is interested and does not have high expectations as to what the house is really worth then I may get a very good deal. Of course it is only a good deal if I can get the work done with the figures I have and it sells in a reasonable time frame for what everything else in the neighborhood is selling for.
Hey, You have the right idea. I dont want to discourage you at all because i think you might make this deal work but consider the repairs you listed. I know you said you were handy but to take on the complete repair of an entire home could take one person a year. You have to replace subflooring and the roof is gone and its been raining in their for who knows how long. You could have major rot and structural problems and not even know it.
I would suggest that you keep it simple especially on your first deal. You should look for a place that doesn’t need so much work. This is my suggestion.
If you can buy at a cheap enough price on a house that is still standing, SOMEONE will want to rehab it. SO if it turns out it is more than you can handle you can flip it to a more experienced investor or atleast one with more of a labor force that can carry it through.
Guys the roof is not completely gone it is still keeping the rain out but would need to be replaced. Also I have a lot of time on my hands that I would be able to devote to this project. My other business can create enough income to live on in a very short amount of time when we have jobs available to work. So I truely do not have a standard 9-5 job. Some months we have several jobs lined up and other months we do not so I have great amounts of spare time to persue this.
You need to figure in costs for your labor in your estimates as well. I have made this mistake and am still doing so. All of a sudden I am working on three projects at once with one being a 31 unit rehab. There is no way I can do all the work involved here. I need to hire $13 per hour guys to do tile work and carpentry. The parts that i lake to do but do not have the time. Not getting paid for my labor means I had to wait until the end of the project to get money for groceries and house payments for myself. Living from closing to closing is hard. You get those big checks and bang it is all gone in weeks just catching up with old utility bills and the like. Better to pay yourself and deduct from the rehab costs monthly and then get a little bit smaller check at closing. A whole lot less stress mentally.
As usual your insight is very helpful. Yes I am planning to get paid while I am doing the work. There will be a Handi-man business set up for me that will invoice the work with a small profit margin built in so that I can get paid too while doing the work.
How is the project progressing? Did your letter get delivered, was it received by the daughter? Did you get a signed Certified Receipt card back? Or did the letter come back undelivered? Was that the correct address, I presume you got the address from the tax rolls?
Question, were the taxes paid during the past 4 years while the house was vacant? Any thing new to tell us? Hang in there.
Due diligence and keep going. Regards, Longshot