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real estate musings

December 26th, 2011 at 07:46 am

Happy Holidays everyone! I enjoyed reading everyones Christmas blog and hearing about their family celebrations.

BB's father came down here to GA for a week and we spent the day watching movies. Relaxing day for sure.

On the real estate front, I last stated that we were going to look at a property for a rental income.

We went and saw the place that day, it is very impressive. I call it "The Chocolate House". It is painted a chocolate brown with white trim. It is a duplex and with 4300 sq ft it is huge! One of the biggest duplexes I have seen in the city. The upstairs is 5 bd 2 bath, and the downstairs is 4 bd 2 bath. It needs to be cleaned up, fresh paint and it'll be ready to rent.

It's a foreclosure listed at $189,900. We put in an offer for $165,000 with 10 day closing. The bank countered at $185,000 and asked for 10% earnest money.
We have countered at $170,000 with 10% earnest money. We are waiting to hear what the response is.

We went out and looked at it again 2 days ago to double check everything before we countered. We went over it as thoroughly as we could. It has been winterized, so the water and electricity is off. But assuming those areas are good, for work we found:

Thorough cleaning/touch up paint needed
Washer/Dryer upstairs needs to be replaced
Stove downstairs needs to be replaced
Upstairs toilet missing
Upstairs kitchen sink faucet needs to be replaced
Some porch boards needs to be replaced

The biggies is the roof and siding.
The roof might be leaking in spots. Because there are water stains along the outer edges of the ceiling. It is either the roof or the gutters are not working. We'll get a roofer up there if we go under contract. If it can be patched for a year, we'll be ok. If not, then we wont buy the house.

The siding. The paint is peeling pretty bad. It could use a paint job today. But can wait a year or two. The siding has not yet been impacted by peeling paint so no rot.

The numbers:
We think we can rent the upstairs for $1600 a month, and the downstairs for $1400 a month. With a $3,000 income, we will put $1k a month away for future repairs, $400 for taxes and insurance, and that will leave $16oo cash flow for the investor.

If we save $1k a month for 9 months, we can put on a new roof. After that, if we save $1k a month for another 7 months, we can repaint the whole house. So the big items will be taken care of in the next 1.5 yrs.

The next big question is the electric/plumbing/HVAC.

We feel that paying $170k plus $5-10k in repairs/closing costs is the very top of what we can afford. So if any of the systems are out, we are not going to go forward.

The reason we feel good about this house is because a very high end investor owned the property and restored it before he went into foreclosure. He had a reputation to use high end rehab materials and saw his projects as a restoration of the community. His vision was in line with mine, to have a quality product that will last a long time and add to the value of the area.

So we feel optimistic about the systems.

In the meantime, to keep BB from having his heart set on this property, we have tried to find back up properties.

We found one yesterday that we thought had already sold. We saw the "For Sale" sign out front and checked online. It had sold in Nov, but the deal fell through so it's back on the market.

The duplex had belonged to a contractor friend of ours in 2009. So now we refer to it as "Jason's House" We had dinner there once. He lived in the top floor with his wife and son. A few months after we met him, his wife got a job in another state and they moved.

The house did not sell and went into foreclosure.

The current owner bought it for $130k and now has it listed for $200k.

We walked around it yesterday and looked at the pics online, it does not need anything to make it renter ready. Actually, the bottomn floor is already rented for $1400/month. It's 3300 sq ft.

BB called our realtor today and learned that the new owner put alot of updates into the house, and thats why they are asking $60k more than they paid for it.

So thats a bit of bad news. We were hoping there was a lot of negotiating room. Noneless, we are going to look at it today.

If the numbers figure that the Chocolate House and Jason's House are the same all in, then we'll be on an even playing field and I'm not sure what we'll decide.

But having Jason's House enter our conversations has really calmed BB. He is much less into the Chocolate House now and he's being more conservative with what he is willing to pay for it.

Thats exactly what we needed, so even if Jason's house is a no go, it accomplished my goal of showing BB that there are new opportunities everyday and we dont have to be fixated on one place.

3 Responses to “real estate musings”

  1. Ima saver Says:

    Good luck with the houses!

  2. snafu Says:

    Good luck on getting the deal. Is there a strong rental market in your community? What happens to your financial plan if a tenant does a runner and a unit remains empty for a couple of months? I am guessing that you and DH are experienced property managers with skill sets required to repair small, annoying components that go awry like drippy taps, flapper/handle and stirs that squeek

  3. baselle Says:

    Good luck. Do you have issues with tweakers stealing metal from foreclosures? Its a big issue in Seattle and we got hit at the farmette (steel bulk milk tank got stolen) while it was under probate.

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