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Property #8

September 1, 2012

Our second acquisition this year was a FSBO that I have been working for several months now. It was for sale about 18 months ago with a realtor at $85k. The seller switched realtors and re-listed at $75k. This listing expired and they went the ‘For Sale by Owner’ route.  

This is a Class C property across the street from one of my other rentals and would need very little to be rent ready.  There is a large garage/workshop and storage shed in the backyard. The outside AC unit was updated in 2011, water heater in 2009, and in general there was no deferred maintenance on this home. I typically don’t buy my rentals in this condition, but I am anticipating much less maintenance than my typical purchase.

The home did have a garage conversion, but it was done well. This expanded the kitchen and afforded a separate closet for the washer dryer. The home had a great floorplan, that combined the old charm of these 1950-style homes with more of today’s functionality. It would certainly differentiate this property from others in the neighborhood.

First Offer

I actually made 2 offers on my first pass at this house. An all cash offer of $48k or an owner financed offer at $55k. The seller thought both offers were “way too low”. They did not even counter. The agent made it clear they were not interested in owner financing.

Second Offer

About 3 weeks after the first dual offer attempt, I made another all cash offer at $50k. I was trying to entice a counter and then perhaps wave the owner financing carrot again. 

I asked the listing agent to convey that I can be flexible with the sellers on close dates and final move out. I know they still have furniture and other belongings in the home. I wanted the agent to remind the sellers that other buyers may not be this accommodating. In the end it came down to the dollars and they were just not desperate enough to sell.

Another 3 months pass

They finally gave up on their agent and went FSBO. I like this as I got a chance to talk directly with the seller. We negotiated for a few more months, but their urgency to sell was just not there. I continued to call them from time to time to check their temperature and see if they were willing to sell.

Another couple of months passes and during one my calls they said they had a buyer willing to pay $60k. I congratulated them and reminded them I pay cash with no inspection in case their deal fell through. They called a few weeks later – their buyer flaked out and they were ready to sell. We finally put a deal together. Total time elapsed for this process was over 9 months. This is very uncommon – I usually make a stab at a place and quickly move on. They kept calling me back, so I kept letting them know I was out there and ready to buy.

My rehab consisted of changing out the carpet in one room and changing the vinyl flooring in the kitchen. There are great hardwoods underneath the carpets, but the carpet is good so I am keeping it for now. I touched up the paint, had the grass mowed, and changed the door locks. This is as close to turn-key as I have ever purchased. Total rehab cost was less than $1k. I did all the flooring the same day I closed (actually let the flooring guys in the house, then went to the title company to close). I closed on Friday and took a deposit Saturday morning.

Here are some of the details on this one:

Initial list date: Sept 7, 2011

3-1-1 –  1,050 square feet

List price: $75k

Tax Value: $64k

Estimated Retail Value: $65k

Purchase Price: $55k cash

How we purchased: Line of credit (from another free and clear property)

Rehab: $900

Closing costs: $330

Rent Amount: $825

Rent Ratio:  1.45%

Below are some pics with a couple of before and after at the bottom:

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One Comment
  1. It looks like your patience really paid off.

    Thanks for sharing those photos. It looks like a nice rental house.

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