So..the big news is that it appears we are buying the Chocolate House. We are taking the plunge and BB is going into a real estate career pretty heavily.
The last post stated that we had countered the banks counter offer by increasing our 1st counter offer by $1k.
The bank accepted!
I think we had a good negotiating hand because we made the first offer a few days before Christmas, and we negotiated through until we had an accepted offer about 2 days after christmas.
We didnt plan it that way, but we knew we had a strong hand because people are not looking at properties during the holidays, so it was unlikely there were any other showings around the time we submitted our offer.
On top of that, it rained for 2 days over christmas and we were able to make sure our realtor indicated to the banks realtor that there are water marks on the ceiling from the roof. We already knew the roof needed attention and built that into our offer, but since it was raining during negotiations, we reminded the bank that there are more water marks growing by the day! (There are not really, but the bank doesnt know that.)
So it was lucky timing for us.
We close in a few weeks, whenever the bank is ready, we'll be ready. We offered a 10 day closing, but have heard the bank wont be ready in time. Works for us.
So far we have had the pest guy out there, no termite damage.
A roofer is coming out in the next 2 days to give us an estimate.
The Air/HVAC is being inspected tomorrow.
The home inspection is scheduled for Wednesday.
The electricity and water was just turned on. BB and I did a walk through to see what is needed to get it renter ready.
The place is missing a lot of ligh bulbs, faceplates and some broken windows. One floor washer/dryer needs to be replaced, and a faucet downstairs. And several rooms need to be repainted.
When everything is done, I'll post pictures!
There is a local private college in town that fills most of the city rentals. We are hoping to rent each unit to the students. I doubt many students are looking to rent in February, but I think we'll get it rented to someone pretty quickly.
In other news, the tenants moved out of the upstairs unit of our original duplex (my Heart House). I'm not sure when they moved because when I went by this morning it was vacant. They never called to say they were going.
So BB and I worked for 3 hrs today cleaning the unit. It took longer than expected, and we did an inventory of some biig expenses coming in the next few yrs. But for now, we just needed to get a new stove and kitchen light. We ordered a stove for $360 and it will be in on Saturday. I picked out a pretty brushed nickle light for $130 to replace the pretty gross flourecent light.
I listed the place on craigslist today.
I saw the downstairs tenant (2 single guys) and they have requested pretty girls for the upstairs. I told them they have a 50/50 shot!
I hope the calls come soon!
Viewing the 'Owning a house' Category
So..the big news is that it appears we are buying the Chocolate House. We are taking the plunge and BB is going into a real estate career pretty heavily.
Well, a friend of mine put an offer on a foreclosed duplex across the street from me.
The property was rented up until September and then it was vacant. A foreclosure notice went up about 2 weeks ago and I was curious about the asking price.
When a "For Sale" sign went up last week, I called to get the asking price.
$99,000!! I was totally floored. I paid $160k for my place and that was the cheapest purchase on the block in ten years.
I called my husband who was hanging out with our realtor friend. My husband relayed the asking price and the realtor immediately called the agent for the details. There were already 3 offers on the place.
The realtor put in an offer of $135k for a mutual friend of ours who has been looking to get into real estate by getting a duplex.
Over the last few days I had become a little bitter. This place was bigger than mine, a free standing property (mine is a rowhouse), and it has a double balcony! An upstairs and downstairs balcony. It had features I would love to get at a cheaper price!
Today we learned that her offer was accepted. So we all went to see the property. Why they didnt see it before, no idea. But since it is across the street from me- I got to go too.
I walked in, and instantly I had waves of stress and dismay radiate over me from the poor condition of the inside. It reminded me of my huge renovation that was completed in April and I realized...I am in no way ready to go through another renovation! The memories this place brought back were not good.
So I learned that I am not leaving my property for a long time...I cannot put myself through another renovation.
Back to my friend, she was overwhelmed. The place was in need of the same thing mine needed...tear down and start over. Actually it was in worse condition because I was able to continue renting my property out after purchase and had to ask the tenants to leave when I was ready to start construction.
This place...is not able to be immediatly rented. The kitchen was missing several parts of it, the 2 additions built onto the back were falling (I thought my floors were uneven), the porches do not feel secure under your feet. And the roof is leaking.
So the bad news is that my friend is going to pass on the property. It would need too much money to get it rentable, and be a long term constant repair property unless the structure was fixed and everything was replaced.
She is not looking to buy a major multi month long renovation.
The good news is that this is the worst looking property on the block and it is not immediately rentable without a good amount of improvements. So whomever does buy it will have to do some considerable improvements to it, ultimately raising the value of the neighborhood and my property!
I am quietly hoping it gets converted to a SFH like mine was. It would be such a great SFH with so many porches and being such a huge building!
So, changes on the block are coming!
I had a really big revelation this weekend regarding the rental property in CA. I wanted to share it, I doubt it’s a new perspective but it was a new to me perspective.
I have been debating about whether to keep or sell a property I inherited in California. There are pros and cons to both decisions, but a decision needs to be made soon because my renter is leaving in January.
I was trying to determine long term gain of the property if I decide to keep it. To look at the future, I looked at the past.
There are some assumptions at play here, but even being very cautious, the numbers kind of blew me away.
My mom bought the place in 1976 and lived there for 2 years before moving in with my dad in another town. She bought the place for $45,000. This property has been in the family for 35 years.
I assume there was a mortgage, so here are the assumptions:
Assuming she put 20% down, she had a mortgage of $36,000.
Assuming she had a 10% mortgage interest rate (I heard that rates were in the double digits in the 80’s. I’m not sure about late 70’s.
Assuming it was a 15 yr mortgage (I have heard the 30 yr mortgage is new?) She paid $78,080 total for her condo. Taxes are fixed at $1200 per year so in 35 yrs she has paid $42000 in taxes. In total, the place has cost her $120,080 plus HOA fees.
She has rented the property for 33 years. Rent goes up so I have no way of knowing what she has charged through the years. Right now the property nets (after HOA fees) $1250 a month. I’ll assume her rental income has averaged a net of $800 a month.
$800/month x 12 months =$9600 year. $9600 x 33 yrs = $316,800.
The property has brought in $316,800 and cost $120,080. Over the years, my family has had a $196,720 income boost from the property. And then on top of that- it has appreciated to a value of about $440,000! So with realtor fees and closing fees and fix up fees, we’ll say the property will net $400,000 after the sale.
So with the property equity and rental income, this little condo has given my family $596,720!!
Is my math right on this? Is my line of reasoning correct?
And I do understand there were vacant months where no money came in, things broke, needed repair. But even rounding down to $500,000. Whoa! That is serious money!
Now I can better understand why long term real estate can be so lucrative for long term investments!
Seeing the long term return on investment numbers are a bit more crazy than just considering how the monthly amount might impact/help your budget.
In this case, it pays to be patient with the real estate market.
ok, I started renovations in September 2010 and moved in April 2011. I owe everyone some pictures! So here they are; my big renovation:
Length of the house
The Dining Room
(I have a thing for light fixtures.)
Thats all the pics I have right now. I just wanted to share because I love looking at pictures too!
I am back from another long hiatus and I'd like some perspective from the seasoned savers.
A fun fact to keep in mind: I live in Georgia.
In 2007 I inherited a $1300 sq ft condo in Foster City, California. It was my parents place when they first got married and the mortgage was paid off long ago. (I found paperwork showing they bought it for $40k!)
Since the early 1980's, the place has been rented out. I inherited the place and left it alone because the tenant had occupied it for almost 10 yrs and had no plans to leave.
She was paying $1750 a month, and I pay almost $500 month in HOA fees. The taxes are $1000 per year.
Last year the tenant was laid off and the rent was reduced to $1250 month for 6 months while a job was found.
The 6 months turned into 8 months, and now it will be 12 months and we have agreed that the tenant needs to find somewhere else to live in January because they are still unemployed and cannot afford the actual rental charge of $1750.
So in January I have a big decision. Sell or Rent?
During the day I am inclined to rent out the property and tell myself that "real estate is at the bottom and this is the time to stay in the game if I want to get the full value of the property someday."
To rent it out, I figure I'll need some renovations, a trustworthy property manager, and some luck.
My currently unemployed husband (another blog for that story) and his contractor friend are planning to fly out to CA in January, and complete the renovations. They would put in builder grade materials and update the kitchen cabinets, countertops, bathroom tiles, vanity, maybe shower, and carpeting. And paint. We are hoping this can be done for $10,000. in 2 weeks. (Sounds like an HGTV show...)
Then we would use a property manager to rent it out for...$1900 a month? maybe $2000? But I'm sure 10% would go to the property manager, and then $500 in HOA fees, so I would clear about $1300 a month.
My fear with this scenario is that the property manager would be useless or unreliable and essentially steal our money. (I have heard scary stories!)I dont have any contacts out there so I would be hiring based on websites, phone conversations and gut.
And I fear that the place would be a merry go round of tenants who only stay a year and move, stay a year and move. So the $1300 a month would be spotty.
The pro of the idea is that I get to keep a completely paid for asset in one of the highest real estate areas in the country. (Though I'm also afraid an earthquake will take it down. It's insured...but you know how insurance companies are.)
Or I can sell it. This is the plan I formulate late at night (like tonight) when I am unable to sleep because of pending bills.
I am guessing I could net $420,000 for it as it is now. I could pay off some debts I have accrued and still have $366,000 to bank.
But where to bank it? In a bank for 1% interest? I have less faith in the stock market than the real estate market so it's not going there.
If I bank it for 1% interest I am getting about $3,600 a year vs the $15,600 a year that the rent would potentialy bring in.
I could pay off my primary house mortgage with $150,000 of the $366,00 and that would eliminate $1380 a month bill from my life.
Then I would have $216,000 to bank at 1% interest but the only debt I would have is a rental property that pays double its mortgage every month.
So it seems like $150,000 of the $420,000 would eliminate a $1380 bill that I was planned to have for 28 years. So that will actually put $463,680 in my pocket. Plus I would have $216,000 left over from the sale of the property.
...right? Am I thinking this out correctly?
So does it seem like the right choice is to sell it while it is at the bottom of the market and use the money to pay off (affordable) debts? Or to rent it for a nice monthly cash profit and wait for the real estate market to come back?
(I said "affordable debts" because we can make our monthly payments on our current debts.)
I want to do the right thing for long term sucess. Not short term gains. It's just hard for me to see the forest from the trees right now. I need perspective.
I have to confess that the construction on the house also left me with a lien on my house. Thinking about the whole thing gets me angry and stressed. So I have been in denial. But yesterday I received another letter from the company and know it is time to deal with it.
Essentially, when we bought the house, the back wall was sinking and had dragged the floors down with it so the back of the house was slanted. The load bearing walls in the interior had been moved to non-load bearing areas and had warped the floors from the weight of the house sitting on them. This was all covered up with plywood floating on top of the floors so it appeared that everything was level. I am still really mad at whomever decided to fix the problem by floating plywood and then carpeting and not revealing the problem when they sold the place. But it is what it is.
Anyways, my general contractor hired a construction company to straighten out the floors. We went with the mid priced company who is a big name in town. The construction company sent some guys out and after a week we saw less and less of the guys. The job was dragging out. And the job site was vacant most of the time.
After a few weeks the guys said they were done. This was already longer than expected to take to complete the job. My general contractor (GC) went out to the site and pointed out areas that still needed work.
A few weeks later they said they were done again. My GC pointed out more areas that needed work.
Then they said they were done again and my GC went through and took pictures of everything that needed work and sent them to the owner of the company with a furious email blasting the company and threatening to tell everyone in town about the quality of work from this company. My GC got a VM apologizing and the owner went through the next day with the GC and they identified what needed to be fixed.
The workers came out the next day, did some work and said they were done.
My GC came out and they had done nothing to fix the problems under the house.
At that point he told me to forget this company, don’t pay them the remaining $3k and we’ll get someone else to fix it. He called the owner and said that we were not going to pay because the work was not complete and now we don’t even want them to complete it. The owner told the GC to pay what was fair for the work done. The GC said he would think about it. Then the GC had a day laborer who was on the job already fix under the house, and our carpenter kind of jigged the flooring so it was even-er. The plan was to send the difference in money to the construction company, but my GC got so angry every time he thought about it that he said to not pay anything. So we didn’t. But the dining room is still tilted, you can tell because my china cabinet leans. And my back guest bedroom is still slanted; you get a miniature case of vertigo when you walk across the floor. Both problems are so minute that people question me when they see it; “is it me, or is that cabinet case tilted towards the fireplace?”, “Gamecock, is something wrong with this floor, I kind of feel like I’m walking downward.”
I just nod my head and say “I know, it’s tilted.” And laugh it off because we are in a hundred year old house.
Anyways, I stopped communicating with the construction company. My better judgment was to call and explain why I was not paying the last draw, but my husband and GC both told me the owner of the company would construction talk me in circles and end up making me feel like I should pay or end up saying something he’ll use against me in court. So I never called.
I received a letter saying they were going to put a lien on my house. Oddly enough, it was for $4k, not the $3k I owed.
My GC explained I had two options:
I could go to the court and put down the $4k as proof that I have the money and have the money held in escrow type account while this is settled in court.
I could ignore the lien because it does not effect me until I sell my house which we have no intention to do. The lien needs to be renewed every 4 yrs by the construction company just to stay valid and chances are after 4-8 yrs they’ll stop renewing the lien.
We ignored it until construction was over. We were still ignoring it up til yesterday when I got another bill from the company asking me to pay $2200 of the $3k that I owed.
I am tempted to just pay it. But my GC says not to- we can go to court and win this because our floors are not level within ¾ of an inch which the contract states they would be. And our carpenter who jigged the floors and then worked on the rest of the house said he’ll go to court for me and we would win hands down.
But I don’t want to go to court. I don’t want to hire a lawyer. I don’t want to risk losing. I wish BB would handle it for me but he is more inclined to believe the GC and wait it out and not do anything.
I think I am going to call the owner and offer $1500. And ask them to send me a notice that the contract has been paid in full. But I am afraid the owner will argue me in circles or offer to come fix it now or corner me into something I am not prepared to do.
Ugh. I think I will think on it longer and deal with it next week.