Potential Refinance Property #3

You know, looking for a property is hard. It’s even harder when I have specific numbers in mind that narrow the field significantly. Other than the two I’ve written about, I’ve seen a few more that were not worth documenting. A couple were in neighborhoods that made it unnecessary to go inside. Another needed too many repairs. I mean, seriously. You have an asking price of $30,000, the amount of repairs is about $40,000, and the assessed value is $60,000?! If the combined price of purchase and repairs is more than the assessed value, why the fuck would I bother?! But then I saw a property for sale that caught my attention. This is Potential Refinance Property #3, or PRP #3 for short.

The immediate repair is evident. Right? Need some front steps! The windows need to be replaced and wrapped to get rid of that ugly wood trim.

This single-family property has an asking price of $35,000. It has 4 bedrooms and 1 and a half bathrooms. The neighborhood tucked in the prestigious Eastling area, and the property value is anywhere between $72,000 and $85,000. Of all the places I’ve seen, this one had the most potential. So I set up an appointment with REA (Real Estate Agent) John, who sent his assistant to show the place on Wednesday afternoon. The homeowners were there, so we went inside:

Right away, I knew I was gonna need a U-haul to get rid of all the junk and clutter in the damned place. I would wonder how people could live with so much junk, but I do the same thing. They’ve lived there for over 20 years, so it was definitely understandable.

Kitchen

The kitchen will be where most of the remodeling will be done. I mean, I want to rip out ALL those bullshit cabinets and bring that kitchen out of the 1940s.

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Half bathroom. The great thing about half baths is that they don't really need renovations or fancy decor. A sink and toilet will do just fine

Hole that needs to be patched

Most of the walls are perfectly fine, but some need repair… like those giant holes in the staircase walls.This is why I hate plaster. Replacing it with sheetrock requires more work than if it were already sheetrock. Plus it's messier.

The leak has already been fixed in this room, so it's a simple scrape/paint job.

Now here’s a dilemma: this furnace is old as fuck but works perfectly fine. I thought about replacing it to add property value, but it only adds value if I’m gonna sell the place. Buyers want to see brand new utilities so they know it won’t need replacing for a long time. Renters don’t really give a damn, so long as they get heat. So I’ll probably leave it as is, but add central air conditioning to ensure I get the highest rent possible.

Now here’s a dilemma: this furnace is old as fuck but works perfectly fine. I thought about replacing it to add property value, but it only adds value if I’m gonna sell the place. Buyers want to see brand new utilities so they know it won’t need replacing for a long time. Renters don’t really give a damn, so long as they get heat. So I’ll probably leave it as is, but add central air conditioning to ensure I get the highest rent possible.

The homeowner stated that the back porch’s roof has a little leak… as does the garage roof. And that’s that. Handyman Alfonso couldn’t be there but I’m able to gauge his pricing from past experience. So, let me take a look at those numbers, with materials and labor added into pricing: 

Purchase Price: $35,000
Refuse Removal: $500
Front Steps: $400
Windows (approx. 15): $3,000
Kitchen: $5,000
Carpentry Work: $2,000
Central A/C: $1,500

Total Repair Costs: $12,400, but let’s just make it $15,000 for the hell of it.

Total Money Spent: $50,000 (purchase price and repair costs)

I would love to lower that purchase price down, but this isn’t just any property that’s for sale. This, my dear blog, is a short sale.

Short sales are when banks agree to sell a property for lower than its value. Short sales can take anywhere from the standard 2-3 months to INFINITY. This is why a lot of people stay away from short sales. If $35,000 is the minimum the bank will take, I’m not gonna waste time haggling over the price just so they can reject my offer. $35,000 works. I stand to make over $20,000 once I refinance, so I really don’t care about the extra thousand here and there. I can always make that back from the rent profits during the refinance process.

So, $35,000 to buy and $15,000 to repair. Assessed value above $70,000. Good neighborhood and easy to rent out. Is this a good deal? In honor of Daniel Bryan I say yes, Yes, YES! I sign the offer tomorrow and then the wait begins. During that time, I'll still look for properties to buy. Depending on how long this process takes, I can actually buy another property and get work started on it, while still being able to afford PRP #3 at its closing through the rehab loan money. That's the beauty of being an investor instead of a homeowner. The longer it takes to close, the more time I'll have to buy another property with no real pressure on me, unlike a homeowner who wants to close as soon as possible. After a month and a half of finding nothing, it seems like things might be looking up.