Just a quick post so I can finish catching up.  I am so happy to report that as of Sept 1, 09 we sold House #4.  We bought this house way back in October and it was an ambition project.  The previous owners had converted it to a duplex illegally and city code enforcement officers go in real aggressive and threatened the bank who inherited it that they would demolish it if it was not fixed.

We spent wayyy too much money on this project along the way.  We did not start our blue prints for permits until 30 days after we closed escrow and finished demolition.  Now we start them right when we put a house under contract (if we need to get permits).

Overall we still made a great profit on this deal, I would imagine we left an extra 15-20k on the table with cost overruns and additional carrying costs.  But we definitely learned a lot along the way.

This property also has another negative first.  This is the only property we have put in escrow with a buyer that could not close the deal.  Basically, the agent, was not very good and somehow got loan approval for a buyer that could not get a loan on this property.  It sounded like she had overtime income that they would not credit her for.  We tried to work something out by financing about $10,000 with a 1 year balloon payment, but it was just more wasted time.

The second agent who put this property was a pro and he closed in under 30 days.  His buyers are in love with the property and very happy with our work!

Our favorite part is we are carrying very little inventory going into the winter.  The property we’ve owned for the longest is House #15 which we purchased 7/27.  I will make a post on the rehab for this one as it is almost done.

The remodel on our first rental is coming along excellent.  Our contractor is very motivated to move-in so he is rushing everyone along.  The kitchen cabinets went in today, the granite will go in tomorrow.

I am still at a pretty big loss on all the paperwork required to “do it right”.  I have almost finished reviewing the course we got and will start doing some research.  The goal is to have all the rental docs, the deposit in and the paperwork signed early next week.  Rental agreements, amendments, all that fun stuff need to be figured out.  I trust the tenant a lot, but I want to separate the relationships between our work and renting the house to them.

Not much else to post about right now, we are working on closing our purchase escrow on a bunch of properties and selling a bunch of properties.

House #13 got a review appraisal on Tuesday.  My partner met the appraiser out there and she told him “not to worry,” but I am worrying a little bit, based on the comps she could easily come in 20,000 low.  I printed a stack of comps (two of them where our previous sales) and we will see if she ends up using them.

House #4 the appraisal came in at the purchase price and they are working with Bank of America for the loan.  Bank of America is really slow.  The 17 day full contingency removal comes up tomorrow, I sent them the form today and we will see if they send it back signed tomorrow.

House #12 is set to fund Monday, and record Tuesday next week.  If everything goes as planned I will be really happy as that is by far our best deal yet!  The buyer has put all the money they need to escrow (almost 50,000 down on an FHA transaction).  I guess that is what happened when they pay over appraised value.

That’s all for now.

If you have been following the blog, you probably know that right now our biggest problem is not finding a willing buyer, but getting a bank that is willing to fund the loan.  The rules have changed and appraisers now are our biggest challenge.

Most of our properties sell to FHA Buyers, so we already have to deal with the FHA 91 Day Rule.  Some banks allow the loan officer to pick the appraiser, so we try to work with smaller lenders and ones we know give us some control in the process.

When all other attempts fail and we get a review appraisal ordered or we are working with a big bank and cannot recommend an appraiser for the original appraisal we are stuck and need to find a way to make lemonade with lemons.

Step 1, typically the appraiser will call the seller’s agent and ask how they can gain access to the property.  At the start I’d happily give them the lock-box combo and let them view the property at their convenience.  We have changed our game plan and now we always go meet the appraiser at the property.

Step 2, we are never very pushy with the appraiser but we tour them through our property and spend a lot of time discussing what we did to upgrade the property.  Essentially, our goal is to build a relationship with them while making a case for the increased value.

Step 3, we discuss that we have received multiple offers on the property and talk about how some appraisers can use these in lieu of comparables.  Most appraisers have turned this method down as I think most of them are uncomfortable with this.

Step 4, we offer our business card and discuss how “hot” the current market is with them.  How we have seen multiple offers, values increasing etc.

We have used this strategy three times so far and we have got the desired results everytime.  Some appraisers just will not work with you regardless (especially VA and special program appraisers), so we don’t expect it to work all the time.  But us being there and trying to be friendly is not going to hurt our value and in most cases I think it will help matters.

My partner met someone at House #4 for a FHA Bank of America loan on Thursday.  The appraiser was adament on how impressed she was with our work.  At the end of the meeting she told him “not to worry about the value, as we will easily get there.”  That is sure a comforting thing to hear in this market!!

House #4 is the house we have owned for the longest right now.  We closed purchase escrow 10/31/08 the rehab took a long time because we did an addition and had huge issues with city Code Enforcement.

The buyer has a great credit score and has more then enough cash to get it done, but she has a car payment that is $500/mo.  So she cannot get approved for any loan.

We put it back on the MLS and have quite a few people looking at it (and even one low offer).  We are considering carrying a small second and letter the buyer completely pay of their car so they can qualify… I am not that anxious to take a second, but if it’s small enough it’s worth thinking about it.   We have a ton of cash tied up in this house and our hard money loan balloon payment is due 11/03/09 so we don’t have a ton of time.

So if we can’t close with the existing buyer we will put it into escrow with someone else and hopefully we can get it all done pretty quick.  If it falls out again, I will probably have to pay off the hard money loan and tie up even more cash into this property!

Sorry again for the lack of activity, I have been swamped with a couple other businesses I’m involved in and getting our existing properties into escrow.

House #6: This house has been in escrow forever now, since March.  The buyer had credit issues that are now fixed, but the agent has not been ideal to work with.  I think she has been stretching the truth the whole way through (but what agent doesn’t ).  It is set to close within the next week, if it does not, I have an $8,500 earnest money deposit that I will be keeping (and won’t feel very bad about it), as they have removed all contingencies.

House #5: This one has also been in escrow for a long time.  We’ve put the property back on the market (and got an offer today), but my escrow officer has a connection at the loan company and it sounds like this one should go through with the existing buyer before the end of the month as well.  This one has been in escrow about 50 days now, which is a long but seems to be the norm on FHA sales right now.

House #8: This one has been in escrow 45 days now, and we have all loan conditions removed, just waiting for docs.  Should close mid-next week .

House #11: Apparently, I haven’t written about this one at all, but this one we picked up at a sweet deal!  We accepted a really high VA offer, but VA appraisals are assigned randomly and the appraisal came in $28,000 under what we had it in escrow at.  We had a couple backup offers that fell through, so we did some fancy negotiating but still took a $15,000 hair cut (from original).  Luckily, it is a meaty deal, so there is still pletny of profit.

House #4: I will write about this one and upload some pictures.  We put it in escrow about two weeks ago, appraisal was good and we’re have a strongly qualified buyer, so I am hoping for smooth sailing.

The good news, if everything goes as planned we should close four properties before the end of June.

The bad news, we’ve looked at over 100 properties in June and probably made at least 50 offers.  So far we’ve missed everything, and not by just a little bit.  The moratoriums have really made the market go haywire.   One property was listed at $89,000, we were willing to pay $115,000, it ended up getting 40+ cash offers and went into escrow at $144,500.   Just amazing!  We’re going to keep on looking, hopefully I’ll have some time to catch up on the older blog posts.

House #4 is beginning to becoming a major pain!  The inspector keeps adding what seem to be new requirements.

• Once we pulled the roof off, he forced us to re-inforce the existing rafters.
• The existing footers needed to be re-inforced.
• And now for some reason, he does not like a rock wall he previously approved.

We are dealing with it one step at a time, but it is really starting to balloon our budget.

The purchase escrow on the fire house closed yesterday.

The buyer’s loan funded for House #3 today, so we are excited as we should record tomorrow.

We have had a massive crew working at House #4 over the last two weeks.  The pour and inspection are done for the addition (footings) and we should have a completely new roof on the house by noon Friday.  When it is supposed to start raining again.

Roof and Addition

The previous roof had 4 or 5 layers on it.

We are thinking that this property will be done the first week in April.