Step One...

So, my little option property is a little like an episode of flip this house right now. Well, maybe more like one of the curb appeal shows since all I'm doing is sprucing up the yard a bit.

This option is a little strange because I am going to do work on the property myself rather than have the owners do the work. Since there isn't a lot of equity to work with, I need to make the place as pretty as possible for my retail buyer.

Generally an investor will only buy an option on a property if it is a "pretty house" and doesn't need a lot of work. But for a few thousand dollars I'll tear up a ramp, cut up some tree limbs & rake the leaves. No problem.


Apparently, the city of Virginia Beach will hire a contractor to come out and build a wheelchair ramp for your house when you get old and can't walk anymore. This is how the ramp came to be in front of my option house. At least that is how it was explained to me by the executor. Get old, stop walking, get free ramp. Hmmm... I'll stay young & walk often. But I digress...

My oldest son & I had the great pleasure of doing some demo work on the ramp. It was a blast. Banging, ripping, tearing wood, pulling nails, awesome guy stuff. Hammers & crowbars were the tools of the day. I even got to use my chainsaw to cut up some of the support beams. We got the job done in about 2 1/2 hours.

I placed an ad on Craigslist.com for the 'Free Wood' left over from the demo and I got 13 responses in the next 2 hours. Nails & all. People love wood.

1st Signed Contract!

My lovely bride is skeptical, but I am cautiously optimistic that I can make money on this skinny deal.

I have been working this probate lead since Oct 07. They have had it listed with a Realtor for 9 months and it didn't sell. I kept in touch with the executrix during that time and with the bank deadline looming, she finally decided to listen to what I have been telling her and let me take the property.

There is a reverse mortgage on the property and there really is not a lot of equity to speak of so I took the property on a 30 day option contract and plan on marketing it -retail- with a 9 day sale.

I'm not going to say much about the 9 day sale except I just learned about the strategy and it seems like just the thing for a pretty house in this market.

I'll keep you posted as we move along, but for now it looks like I've got something to work on!!



Pending Deal Update:
"More hood than hood" is moving along slowly. I had a contractor come by the place & give me his expert opinion on rehab costs and the number was $$BIG$$. Near $100k (I'm sure that's a retail price though. A good investor will see right through that one...)

The heirs are like a bunch of cats in a box. If this thing actually closes it will be a true Christmas miracle. In fact, it will be a true "pray for Taylor" miracle. Keep praying. I need the miracle.

The heirs raised their price on me and once I found someone to partner with & accepted their new higher price, the spokesman dropped the bomb on me this evening at 8:30pm (they were supposed to sign the contract Tomorrow...) that they want to have my contract reviewed by their Attorneys... You read that right. Plural. Attorneys. This battle for the $$ between the family has been going on for such a long time that 3 of the 6 heirs banded together to get an attorney to represent them. Another got his own attorney and the other two... well, let's say I don't think they care one way or the other.

Needless to say, I will be spending my Friday morning at the office of attorney #1 having my contract reviewed while my lovely bride and kids head out to the beach for the last day of spring break. Didn't I decide to go into business for myself for more beach time with the kids?

Oh yeah, it was the MONEY. Money first, freedom later. My new mantra. Instead of figuring out ways to hide from the man, I'm trying to figure out how to squeeze more out of each day so I can get more done.

Hopefully I can get there in time to have lunch on the beach. It's supposed to be near 80 tomorrow. It would be nice to feel the sand again.

Also, more deals on the way! I got calls from 2 deals today that I thought were dead deals. Boomerang deals. Listed with an agent and already changing their mind. It's all coming back around...

More Hood than Hood Prt 2

I finally got a chance to get into the two houses in the "more hood than hood" post on this blog.

The interior needs some serious rehab, but I think they are workable properties. I have a verbal offer to the heirs (6 heirs again!) and they should let me know in a few days what everybody thinks.
It is a pretty cool setup.

The city used to allow building on 25' wide lots in this neighborhood. So the original owner (grampa) build 2 houses on one city assessed lot back in the day. So if these two houses were knock-downs, the new owner would only be able to re-build one house on the lot.

However, since there are two houses there now, they will allow for rehab and not force demolition. Nice. That creates a situation for 3 rental units to be on the same property. Hello Cash Flow! My landlord buyer types should love this beauty.

Living Room in Single Story House
Nice Kitchen... (Downstairs of 2 Story Duplex)
Oh, and don't fear the uninhabitable warning sign on the window. Not condemned! A quick purchase and clean-up and the city will remove the warnings and permits can be pulled. Zoning/code enforcement was actually easy to talk to.

Small Setback

After what seemed to be an eternity of waiting, I finally heard from my "Probate Sellers" from my previous post. I was at Panera Bread for a quick pop-in visit and answered my cell.

Caller: "Hi Taylor, this is Sallie Seller."
Caller: "It's a go"

Me: "It's a go? Great, when can we get together?"

We set up a time to take care of the paperwork on Monday night. Supposed to be tonight. At 5:30.

Got the voicemail cancellation at 3pm. No re-schedule time. I'll phone her tomorrow to follow up & reschedule. Said she has personal stuff to take care of. Okay, no problem.

Probate Sellers

Thursday evening I met with a nice lady and her brothers who had inherited property from an uncle who passed away back in June of 07. Of course, they all got a letter from me back then and the executor held onto my letter and decided to call me last week.

There was equity, so I set an appointment.

The meeting went well and since they need to sell in a pretty short time period (45 days) I was the best deal going.

The home comps at $245k and has 12-15,000 of repairs to make it sell-able on the market. With carpet, paint and some updating to the bathrooms (6-8k) you'd have a nice rental.

The offer I made was for $136,600 since one of the garage doors needed to be replaced. I said I'd love to offer more, but until I knew more specifically how much it would cost to get that garage door in there I'd have to stick with the offer.

Well, wouldn't you know it, she called upstairs to her brother in law who just happens to work in the garage repair business! What are the chances of that happening? Of course, they added the 5k that we were talking about for the repair/replacement of the garage door on to my offer and after a little more back & forth we settled on $142,600 as my offer price.

Since there are a total of 6 heirs and I had 3 there with me, I moved forward with filling out the offer paperwork, something of an assumed close on my part. They had to wait to talk to all the other heirs before moving forward with the offer papers.

I would have liked to have walked out of there with a signed contract, but with probate I feel like I have more ability to be flexible & understanding since they have the challenge of trying to get all the heirs on the same page to get the property sold. Plus, I was the only person besides a realtor that they had heard from about the property. Less competition, less pressure to get a signature on the first visit.

She was supposed to call me Friday afternoon, but when the phone didn't ring I wasn't surprised. One of the heirs lives in El Salvador, so getting in touch with her is going to take more than just a quick call in the car on the way home from work.

With an offer price 100k below the comps in the neighborhood, I am confident that I'll be able to sell it once I get a signed contract.

More call-backs on Saturday and hopefully scheduling some follow up appointments for the other 5 properties I looked at last week.

At least my probates are finally starting to pay off.

Thanks for checking in-
Taylor

-Taylor

I have no excuse.

I'm an emotional guy. Some of you know this. I'm also a high energy, motivational sort of guy too. Which is why I loved this video.



Motivation and a couple tears. Nice way to start off the week...

-Taylor

Cash Now, Cash Flow, Cash Future...

I am almost to the point where I am looking at a house a day. I had a meeting with a great prospect yesterday and got really creative with my offer. It was a total rush. Hard to put into words the satisfaction of having all the study & struggle finally come together.

Details:
Existing mortgage of 75,000 with a 750 monthly pmt.
Current tenant pays $1350/mo and the rent hasn't been raised for 2 yrs. Could get 1450-1500.
Current tenant's rent is being paid by a trust and is auto-deposited into the landlord's account every month like clockwork. Never a late-pay.
Seller wanted to get 190k for the property.
Tax assessed value $240,000.
Realquest.com: $207,000
E-appraisal.com: $192,000

I gathered this info over the phone and after looking at the quick math ($190k-75k= 115,000 rough equity) and applying my rule of:
"If there is equity, GO!"
I set the appointment.

I'm getting my presentation down pretty well now. We reviewed the state of the local market, the national market and what the seller was hoping to do by selling this house. We went over the reality of selling a house, especially a rental where the balance of cash flow vs price is so critical to getting a quick sale.

He was really stuck on getting his price, so we discussed the concept of the different types of cash...

• Cash now: most people think of when selling a house. It is the large lump sum at closing.
  

• Cash flow: regular monthly pmts/income from a property
  

• Cash Future: similar to cash now, only waiting for the lump sum until some date in the future.
• Cash Flow Future: Regular pmts starting at some date in the future.
  

After reviewing the three types of cash I went over what my offers would be. My cash now, all cash offer was 133,400. Best case, most cash offer. It was too low for him. I knew that, but offered it anyway. Cash costs money (interest/points/holding costs) so my offer was low for those reasons.

However, if he would be able to wait for some/all of his cash for 3-5 years... I could get much higher on the price. Say... $175,000.

He liked the number & asked more questions about how it would work.

$75,000 underlying mortgage taken subject to.
$10,000 cash now at closing to the seller.
$90,000 cash future to the seller in 3 yrs (no interest, no pmts)
$175,000 offer price.

Since he would have a big tax consequence in the future with the $90,000 pmt in 3 years, we discussed the option of him taking cash flow/pmts at that time.

The seller really liked the higher offer price, but needed to compare it to his other offer of $145k from the ugly house people. Since I was planning on wholesaling the deal and this is still my first contract, I didn't push for a signature on the spot and agreed to follow up with him on Monday.

I suppose I should have had him sign a contract anyway & made it cancel-able in 3 days or something like that, but I didn't. Maybe next time. Cut me some slack, it's my first time...

I'm looking to wholesale this one. An investor buyer would need to come up with $15,000 cash plus closing costs (10k to the seller, 5k to me) and would have a positive cash flow of roughly $500/month with a 100% pay tenant. Sweet.

I ran it buy my mentor and he really liked the terms. He said he'd buy it as long as we got a good termite inspection.

So I've got that going for me.

Which is nice.

-Taylor