The Quest for Project 2

[brianb_cobbres]

I decided to start a new thread to keeps some notes on where I am at in finding a new rehab project. For those that dont know I am looking for rehabs in the North West Atlanta suburbs (cobb, cherokee, paulding, and bartow counties). Where my last project was intended to be learning experience (at it was), this one will be an purely based on speed to market.


So feel free to ask questions or make comments. I will lay as much out there as I can so that everyone can see how I am going about things.

Quick notes: I am sort of stuck using the MLS as my project source due to busy work schedule, and I base comps only on the same subdivision rather than on distance from the subject property.

So with that, lets get the ball rolling.


EDIT; I should also add the realtor I am working with will put in any offer I request but told me repeatedly that I need to be within 80% of ask to get any response. I am trying to test that theory so I build a new financial model in Excel that uses 80% of ask as the baseline and works up from there to tell me how much would be left for the rehab. The model deducts all interests, carrying costs, expected expenses, and selling expenses, and profit and lets me know what is left over for the rehab. Actually it spits the numbers out for several situations including a straight rehab for resale, a rehab and improve for resale, and a rehab for rental.

Anyway.

[brianb_cobbres]

The first project I am looking at is a small 3/2 on Rambling Road. Its only 1000sf on a good size like in a suprisingly good school district. The neighborhood comps to $129k and the current ask is down to $77k so my target offer is net $61,600.

The problem is that this house it trashed and by trashed I mean it needs new windows, doors, roof, gutters, and siding on the outside and a complete rehab on the inside including a new kitchen, appliances, bathrooms, and HVAC. I should also mention that there is an above ground pool and the yard is so overgrown it needs to be scraped and replanted or at least that would be easier.

I am looking at at least 35k to bring it back. I have not put in an official offer but I did drop the listing agent an email to let them know what I was thinking. No response of course. I have to go back through the rehab estimate and see what I can come up with but would love to hear what some of you think I should offer based on the numbers.

I should also mention I may consider this a rehab for rental but have not looked at the numbers yet.

[brianb_cobbres]

Bah, I have to take the house rabbit to a speed dating playgroup. Back later. And yes I mean a rabbit that lives in the house and is lonely.

Update: We now have 2 house rabbit. We had a 12lb Flemish Giant named twigs and just got him a girlfriend, a gray lop named, um, gray.

[brianb_cobbres]

On to house number 2.


Just saw this one yesterday. Its listed at 104k and comps at 140 as a 3/2 but 165 as a 4 or 5 bedroom by adding 2 beds in the basement with a bath.


The roof is shot and as a result the ceilings are in pretty rough shape. The deck was so bad I was scared to walk on it. Gutters, garage doors, a couple fogged windows, and some yard cleanup. The inside just needs a complete update. There is a catch.

They tend to "hang" additions off contemporary, You know, jutting a few feet out to create some addtional rooms. This house is no exception except these are quite literally falling off the house. Three in all in the kitchen, guest bath, and master bath.

[Debbie]

Keep it coming Brian! Love your thread!

P.S. - Congratulations on being a new Moderator! Thank goodness the Admins will pick on you instead of me! (just kidding!)

[brianb_cobbres]

I would like to put out an APB on my real estate agent. She seems to be MIA. Great, just when I was getting her broken in.


My mortgage broker is also getting kind of flaky. Any lenders out there looking to finance some rehabs, rentals, and a possible major improvement project?

[brianb_cobbres]

Welp, I found my realtor. She had been getting my emails and was working on a response but was having some trouble with the wording.

You guessed it. She just fired me.

What is the line? If it weren't for bad luck I'd have not luck at all......

[brianb_cobbres]

I really do have the worst luck.


1. 1st deal was an REO from option one. Scheduled to close on a Monday, my realtor gets a call from the closing attorney on Friday that the closing was off. No reason just that it was off. Turns out option one sold the house to another bank and did not care it was under contract. When asked what they intended to due about it they quite literally said sue us.

2. Finally bought first project and was about to close and I had been sending emails to the broker trying to get a copy of the hud1. Several emails and calls when unreturned. Finally, 3 days before closing I get a call telling me the loan did not go through because the bank was "no longer doing those type of loans" meaning rehab loans.

3. Same house. Another broker steps in and manages to get me a new loan and close the following week. It was for purchase only with the plan being to get a 2nd the following week. I was so relieved that I did not read the paperwork. Keep that in mind.

4. Closing goes off without a hitch and I take posession of the house. The following week I am ready to do the 2nd and have all the rehab money. Yippee. Not so fast, the bank is not ready and it will be a few more days, then a few more days, then a few more days, then a few more days, and eventually month. Everytime I am being told the NOO loans are drying up but they will get one for me. Eventually my guy gets fired and the broker is not really sure what happened.

5. I contact another broker who does some research on my original loan and finds the problem. My loan is a negative amortization loan but the paperwork was so vague the it took the new guys a couple reads to figure out what was going on. problem is that it is very difficult to get a 2nd when you have a negative am loan. So what are my options?

6. So I have to refinance out of the negative am to get a 2nd. That means all new closing charges and you would be amazed how fast the principal can grow with a negative am loan. So relieved that I can now get the 2nd.

7. Get the second and of course more closing costs.

8. The rehab gets done and the house is on the market so time to start looking for another project. My new loan brokers father is a realtos so I decide to give him a try. He is a snake, I know he is a snake and I do not mind that he is a snake. He gives me his FMLS password. Yippee again.

9. He shows me a couple houses. I find one I like and want to put in an offer. Attention all offices, please be on the lookout for a missing realtor.

10. I call his son-in-law (the loan broker) to find out what is going on and their number is dead and their website is gone. All calls go unreturned.

11. Did I mention the father was the RE Broker and has his own agency. Finally get in touch with the agent running the office and find out the father had a nervous breakdown and was carted off to live with family in North Carolina. There goes my FMSL access, or does it. As the broker, the agents are keeping his stuff current or so I am guessing. Woohoo

12. Trying to sell first project FBSO, long hold time, end up using realtor, lose money.

13. Need another project to make back my losses. Working with original agent and things are going good.

14. Get divorced by my agent.


So that is my 2006 in a nutshell. I am sooooo depressed now.

[Greta_B_in_RVA]

This a fascinating story and thanks for posting! I wonder if the whole RE industry is in this kind of chaos, with realtors having nervous breakdowns and getting fired?

[brianb_cobbres]

This a fascinating story and thanks for posting! I wonder if the whole RE industry is in this kind of chaos, with realtors having nervous breakdowns and getting fired?

Honestly, I think it is just me. I cannot count the number of houses I have looked at and decided to put in an offer only to find out it sold the same day. I am not talking one or two but dozens.

[thepower]

Wow, your a Moderator now?

Anyways, why did the agent fire you? Doesnt she want to make money from your purchases? or Did she not feel like doing paperwork on offers she assumed would never be accepted...?

[brianb_cobbres]

she not feel like doing paperwork on offers she assumed would never be accepted...?

[thepower]

she not feel like doing paperwork on offers she assumed would never be accepted...?

Yea, thats what I asked "Did she not feel like doing paperwork on offers she assumed would never be accepted...?"

[Debbie]

LOL!!!

I suspect ThePower was asking if you have been working her to death whereas she's not getting paid. After all, you did mentioned about you almost done breaking her in. :SM029:

[brianb_cobbres]

LOL!!!

I suspect ThePower was asking if you have been working her to death whereas she's not getting paid. After all, you did mentioned about you almost done breaking her in. :SM029:




Not even close to working her to death. I dont ask her to show me houses and only occasionally ask her opinion about valuation. I think i have put in one offer this year through her.

I dont really care, and not mad about it. Just par for the course.

[dwford]

Gee, filling in those blanks on the Purchase Contract is soooo hard. What, it takes 10 minutes and a quick fax??

When I was looking for my 1st flip, my agent showed me at least 1/2 dozen houses, wrote offers on several. Then the week before closing, I asked her to show me my competition, and we took a tour of the town and looked at least 8 houses we had no intention of buying. No complaints from her.

And when I decided to list my residence with a realtor, yes I called her. So she has gotten 2 sales from me. She is now sending me options for my next flip - without my asking...

[brianb_cobbres]

I think part of the problem is that she does not believe, and I am starting to agree, that the REO market is really worth the effort. The banks are simply not willing to negotiate much below asking price regardless of condition.

In a way this is a good thing because it forces me to look into other avenues. I will still call her when I need to sell a house or when should I get a verbal from a listing agent but not going to anything speculative with her.

I need a birddog in my area.

[SlumLordMike]

Brian, there are challenges in the REO sector just like any other. I can attest that the VA Repos are not very price negotiable. BUT, there are still a few deals to be had. A couple years ago I found a VA Repo in my home town that was not even properly listed. No sign, no indication it was for sale, etc....

I paid full asking price of 34k for a 3br 1ba. I fixed the sprinkler system (old plumbing) under the house and did some cosmetics. It has been rented for $600 ever since and would sell quick for 65k.

Found it right here:

http://www.ocwen.com/reo/residential/reoproplist.cfm

[brianb_cobbres]

Brian, there are challenges in the REO sector just like any other. I can attest that the VA Repos are not very price negotiable. BUT, there are still a few deals to be had. A couple years ago I found a VA Repo in my home town that was not even properly listed. No sign, no indication it was for sale, etc....

I paid full asking price of 34k for a 3br 1ba. I fixed the sprinkler system (old plumbing) under the house and did some cosmetics. It has been rented for $600 ever since and would sell quick for 65k.

Found it right here:

http://www.ocwen.com/reo/residential/reoproplist.cfm



LOL, the first house I bring up on the ocwen site seems to be missing something. Front steps lead to a solid wall.

[SlumLordMike]

They call that a "feature".

[Burke]

They call that a "feature". As in "security feature". It helps to keep the thieves out.:icon_verw

[SlumLordMike]

What say the seller changed the design of the house including entrances. And lets think that they (seller) may have listed or got foreclosed on) before completing the deck all around the home. If that were the case, I reckon I would have left that free set of steps too. It makes more sense than trying to pour concrete around and under a deck.

[brianb_cobbres]

Actually, I did a bit of research on this one as the ask price is only 40k. Was kind of suprised to see it had sold for 110k at one point. Turns out it is only one of 2 houses on the street and rest is owned by a paper company. It is really near nothing so bad location. I will drive by this weekend to take a look but no rush as it has been on the market for 101 days so every investor has already looked and you have to wonder why.

[brianb_cobbres]

The first project I am looking at is a small 3/2 on Rambling Road. Its only 1000sf on a good size like in a suprisingly good school district. The neighborhood comps to $129k and the current ask is down to $77k so my target offer is net $61,600.

The problem is that this house it trashed and by trashed I mean it needs new windows, doors, roof, gutters, and siding on the outside and a complete rehab on the inside including a new kitchen, appliances, bathrooms, and HVAC. I should also mention that there is an above ground pool and the yard is so overgrown it needs to be scraped and replanted or at least that would be easier.

I am looking at at least 35k to bring it back. I have not put in an official offer but I did drop the listing agent an email to let them know what I was thinking. No response of course. I have to go back through the rehab estimate and see what I can come up with but would love to hear what some of you think I should offer based on the numbers.

I should also mention I may consider this a rehab for rental but have not looked at the numbers yet.



Okay, I sent a nice email to the listing agent letting her know I was interested in the property but the repair estimates were more than I expect meaning my offer was much less than ask. I let her know she could contact me should the bank decide the really need to get rid of the place. Here is her response.

"This is a foreclosure and all we can do is present offers - they will either
take it, counter offer, or reject. That is how they work."

Thinking through next step.

[brianb_cobbres]

Okay, I sent a nice email to the listing agent letting her know I was interested in the property but the repair estimates were more than I expect meaning my offer was much less than ask. I let her know she could contact me should the bank decide the really need to get rid of the place. Here is her response.

"This is a foreclosure and all we can do is present offers - they will either
take it, counter offer, or reject. That is how they work."

Thinking through next step.

I think I am going to claim some level of ignorance when dealing with this listing agent. She does quite a bit of REO stuff so I am going to find out if sending repair estimates and supporting documentation really makes and difference or if it even makes it to the bank.

[brianb_cobbres]

Okay, I sent a nice email to the listing agent letting her know I was interested in the property but the repair estimates were more than I expect meaning my offer was much less than ask. I let her know she could contact me should the bank decide the really need to get rid of the place. Here is her response.

"This is a foreclosure and all we can do is present offers - they will either
take it, counter offer, or reject. That is how they work."

Thinking through next step.

So I asked the listing agent about sending estimates and the like. Here is her anwer. Remember, she does quite a bit of foreclosure work.

It does not matter if I work both sides or you get a buyer's agent. The
foreclosure company looks at the bottom line only. Sending estimates will
not get to the foreclosure company - they already know the condition of the
property. They do not review estimates. I have to taken pictures and given
estimates to the foreclosure company; there has also been an appraisal done
on the property. If you want me to type of the offer, just let me know; or
if you want a buyer's agent, I can recommend someone if you don't know
anyone. Thanks so much.

[brianb_cobbres]

So I asked the listing agent about sending estimates and the like. Here is her anwer. Remember, she does quite a bit of foreclosure work.

It does not matter if I work both sides or you get a buyer's agent. The
foreclosure company looks at the bottom line only. Sending estimates will
not get to the foreclosure company - they already know the condition of the
property. They do not review estimates. I have to taken pictures and given
estimates to the foreclosure company; there has also been an appraisal done
on the property. If you want me to type of the offer, just let me know; or
if you want a buyer's agent, I can recommend someone if you don't know
anyone. Thanks so much.


Playing naive can be fun. I just dropped the listing agent a quick note saying my offer would only be in the mid-40's and to let me know if it is a waste of time. I know it is but want to see what she says. If she agrees to put in the offer for me then she must believe there is at least a chance. Who knows what will happen. I expect her to laugh at me and that is fine. I already learned something from her so such is life.

[brianb_cobbres]

Playing naive can be fun. I just dropped the listing agent a quick note saying my offer would only be in the mid-40's and to let me know if it is a waste of time. I know it is but want to see what she says. If she agrees to put in the offer for me then she must believe there is at least a chance. Who knows what will happen. I expect her to laugh at me and that is fine. I already learned something from her so such is life.

Okay here is the response from the listing agent.

"Not a problem. You may need to double sharpen the pencil on this one. I
tried to get them to list it lower than they did but to no success on my
part. Just let me know. "


That sounds like the listing agent agrees with my numbers or at least understands where I am coming from. I am going to take another look at the numbers and put in a lowball offer and see what happends. Can't hurt to try.

[Burke]

Have you asked her what the appraisal came back at yet?

[brianb_cobbres]

Have you asked her what the appraisal came back at yet?



I did not think of that, I wonder if she will or can tell me...

[Burke]

She seems as though she has been very willing to share other information.

I tried to get them to list it lower than they did but to no success on my part.

It certainly can't hurt to ask.

[brianb_cobbres]

I have walked away from all these projects for a variety of reason. I am finding out that working with the listing agent may actually be a bit easier.


I went and looked at another house earlier this week. The siding is shot and the roof needs some repairs and possibly replaced but everything else was in pretty good shape from what I could see. I could not get in.

So, I just spoke with the listing agent and he gave me the door code. More importantly he told me the house had been under contract last month but the deal fell apart because the house did not pass inspection due to the siding. He now knows the house cannot be sold retail and is working with the bank to set a more reasonable ask price based on the condition. The thing is the house comps around 180 and the ask is already 129. I am going to check out this inside later today and will put in an offer ASAP before they have a chance to lower the price. Mkay..... Back to the real J.O.B.

[brianb_cobbres]

So here is the story on the house I mentioned earlier today. I got the door code and did a more thorough inspection this afternoon. Here are the highlights


1. Siding is shot and will not pass inspection for traditional financing. It is this very loosly pressed strandboard that looks like it was never painted. Primed, hung, and forgotton. The bare wood was exposed on all but the primary surface and water has wicked up into the material making it look spongy. The trim was all in good shape which saves lots of time.

2. The roof appeared in good shape until I got inside and found evidence of moisture damage in the masterbed room and bathroom. Probably needs a new roof even though it was only built in 94. Given the way the siding was installed I am guessing the roofing system was not installed correctly. I am expecting to find the shingles nailed directly to the sheathing.

3. Front door and side lights are gone. It looked okay until you opened the door and could see the entire structure was rotted through.

Inside the house was better

4. Carpet, paint, general updates, appliances, some drywall repair. Standard stuff.

5. POLYBUTYLENE in all its plastic glory. Go ahead and google PB if you are not familiar with the name. The stuff is actually fairly stable if properly installed but is perceived to be a nightmare requiring special disclosure. I have to ask around to see if this is going to be a big problem.

You know, every time I put together a rehab estimate I step back and run through the numbers again to make sure I am not over compensating or over rehabbing, or being overly consertative. This is one of those cases where there is really nothing I can eliminate. This house is going to cost $35,000 to rehab plus expenses.


So here is a math question for you rehabbers out there. What would you offer for this place using the following assumptions.

ARV $170,000
ASK $129,000
REHAB $35,000


I am looking at two loans. The first is a construction loan at 2 points, 8% interest, and extreme closing costs and major restrictions, the other is 5 points, 10% interest, reasonable closing costs and much less restrictions. I am leaning toward the 5point 10% loan as I can act as my own general contractor.

This would be for resale, probably using a realtor.


So, what would you offer?

[thepower]

Looks like a house on Amy Lane in Marietta that was on the market a while back..

Anyway looks like a slim margin no matter how you cut it....

[brianb_cobbres]

Looks like a house on Amy Lane in Marietta that was on the market a while back..

Nope, different house


Anyway looks like a slim margin no matter how you cut it....

Thats not what I asked. How about answering the questions :icon_verw




Trying to figure out how much to offer.

I would just pass on this one Brian, it appears to be a classic moneypit not to mention time consumer!

[thepower]

Trying to figure out how much to offer.


Break out the excel program you've spoke about & study the numbers.. If your excel program is correct, then start discounting until have enough of a sufficient margin you can make it worth the risk....& not eat you like carribou

[brianb_cobbres]

Break out the excel program you've spoke about & study the numbers.. If your excel program is correct, then start discounting until have enough of a sufficient margin you can make it worth the risk....& not eat you like carribou

Yeah I did. Just looking for some verification to make sure I am not over compensating.

[LEE - LJ]

Brian --

I came up with 80k as the max offer because I also accounted for a 10% overrun of the rehab cost.

So if they are asking 129k, you have alot of work to put in to get this one!!!

Good Luck

LEE

[brianb_cobbres]

Brian --

I came up with 80k as the max offer because I also accounted for a 10% overrun of the rehab cost.

So if they are asking 129k, you have alot of work to put in to get this one!!!

Good Luck

LEE



Thanks, thats pretty much what I came up with. I should add this is an REO so there is really no work to do. They will either accept or not. The listing agent has confirmed that no supporting documentation will make it to the lender. The banks decision is based purely on the number as they see it even if their price is not based in reality.

I had my lender change my pre-approval letter to specifically say condition was not an issue and that the program I was using is specifically for this type of situation, and my offer would be AS-IS. Hopefully those will make some impression.

[brianb_cobbres]

Okay, so I decided to play this on a bit different just to see what kind of response I get. I just sent the listing agent and broker an email with a high level rehab plan and an overall expense number (that included all expenses including buying, carrying, and selling expenses) as well a how much I could offer. I did not ask them to put in the offer rather to let me the best way to approach the bank. I am finding that listing agents are willing to spill their guts and tell me exactly what the bank says or might say. Lets see what they have to say.


So, anyone looking to fund a couple rehabs in Georgia?

[brianb_cobbres]

They say you can create more curb appeal by highlighting the front door or entry way.....



.....But this is maybe taking it a bit to far?

[thepower]

So, anyone looking to fund a couple rehabs in Georgia?

Hey Brian, im surprised with your real estate 24/7 research & your other cereniti brothers in arms, that you havnt locked down a few goto lenders by now:SM135:

You might have issues finding someone to go %80 percent of ARV without wanting your first born in todays environment...

[brianb_cobbres]

Hey Brian, im surprised with your real estate 24/7 research & your other cereniti brothers in arms, that you havnt locked down a few goto lenders by now:SM135:

You might have issues finding someone to go %80 percent of ARV without wanting your first born in todays environment...

I can get loans from any one of a dozen lenders. Thats not the problem. I am looking for a better program.


And its really not 24/7. I just picked up the habit of flipping through real estate sites while I am on conference call or at lunch and then at night. I do not watch much television so the internet has become my source of entertainment.