I’m back.

20070615_escrow_2Wow, it’s been a long time since my last post.

Currently, we own seven properties… Five of them are in sales escrow. All but one of them are in escrow above our asking price.  So this is all great news, I just wish things would close faster.

The market is very odd lately.  Every property we list gets 4-5 offers almost instantly, we could sell them all for $15-20,000 more but they won’t appraise any higher, so it’s a game of picking the best qualified buyer versus with the most money down versus taking the highest offer.  It seems kind of counter-intuitive.

We have also been shopping for more properties and been missing houses by a lot.  Investors have been getting too agressive (or we are too cheap).  Our highest bid will be $137k ALL CASH and everyone else will be at $155k ALL CASH.  So we’re pretty far off.  I think we will wait until the winter before we raise our prices too much, that is a much better time to buy, as less retail buyers are shopping.

On a positive front we have found our focus, we want to buy the CRAP.  AKA, the kitchen is stolen, the house is burnt down, it seems we have a lot less competition on this invetory.  We have also built a very good crew of contractors that are getting used to the finished product we expect.

Four of the five houses we have in escrow should close, so we should end up with a solid amount of cash.  This means we will most likely start pursuing some rental properties.  I will keep you updated on this progress as well…

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2 Responses to “ I’m back. ”

  1. Sandra says:

    Thanks for the blog! I just discovered it after becoming discouraged as a homebuyer in NorCal.

    We have been approved for FHA financing, but we continue to get squashed by competitors with cash or conventional loan approvals in mediocre areas. One house was listed at $202,950 and needed a little work. 24 offers (Yikes!) We submitted our offer at $252,500 and still got rejected.

    I suggested to my real estate agent that we should flip a property in a less than desirable area that meets FHA guidelines for under $100K. After a $20-30K rehab job, we would do a 1031 exchange on the gain into a property in an area where we keep getting outbidded. She mentioned the Hard Money thing, but I don’t fully understand how it works. She also sprung the 90-day rule on us, which does not allow the free market to be free, duh.

    I’d be willing to flip a property or two or three to build up enough cash to put us in a position to put a substantial downpayment on a home we want to actually live in. If we succeed, we might consider doing a few flips a year on the side.

    Steve, how would you approach it if all you had was a $300,000 FHA pre-approval letter in the Bay Area and just wanted to buy a house in a safe area?

  2. Steve says:

    Hi Sandy,

    Thanks for the comment. Unfortunately, I don’t really have a good answer to your question.

    1. You did not mention how much $$ you have, but I assume because you are working on an FHA loan it is not enough to buy the $100k property cash. You could look at Hard Money, but you typically need 20% of total costs.

    None of the rehabs we buy come close to meeting FHA guidelines, so to get an FHA loan on a rehab is near impossible.

    So you can go Hard Money, I’ve made some other posts on how that works.

    2. Re: your personal residence. The market here in SoCal is going to drop very hard in November (my opinion only). California just finished their moratoriums so there is almost nothing on the market right now, this will correct itself, but not for a while. So I wouldn’t buy a personal residence until this winter.

    If you can flip something in between it might be worth it, but you’re going to end up holding it at least 5 mos, if you sell it to an FHA buyer.

    So to answer your final question, if I was looking for a personal residence, I would wait until this winter and buy a nice house at a discount. I would be cautious mixing investments with your personal residence. One is a business, one isn’t.

    Good luck!

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