more activity - buying the REOs

While SFH #3 was being rehabbed another property that I had my eye on came into my price range and I was able to buy it - this was SFH #4. It was in need of a bit of rehabbing but it was a great price and could bring a good deal of rent. At the time that I wanted to buy this, the mortgage industry had started tightening a bit and I was no longer to get a 100% loan to buy so I pursued a hard money loan for this property. I shared the hard money details with my brother and he suggested that he should loan me the money and we could create a win-win scenario.

Tip: If you choose to borrow money from a friend or family member to buy property I strongly suggest that you have the person lending file a lien against the property and a promissory note with the county clerk at the time of the loan. This will help greatly when it comes time to refinance that loan.

I took several bids on the rehab for this property and chose a company that I had been recommended to by a fellow investor (I had seen their work). Sadly, the GC lost most of his good workers and could seem to hire any more skilled labor. Needless to say, I had a new group of boobs working on this property. They did below average work on everything and they couldn't fix anything correctly. I got the property to an acceptable state after about 6 weeks and rented this property to a great family. Unfortunately, I am still trying to refinance this property into conventional financing after about 8 months.

At the beginning of June, I found a great 3/1 SFH (#5) in the same neighborhood that had been remodeled in 2005. The place looked great and didn't appear to need much work. It ended up that it needed a new furnace and water heater and paint. I used a traditional hard money lender who charged 3 points and 15% I/O. After $3ooo and 1 month of disjointed work I was able to rent this property and refinance into conventional financing which allowed me to cashflow at $250/mo.

I found a great 3/1 HUD property (#6) around the 1st of August. It, as are many of the properties that I buy, was misrepresented in the listing. This property needed a new kitchen and a lot of work in the basement (new ceilings, plumbing, furnace, and wall new walls). Additionally, it needed all new carpet, paint and appliances. I used a hard money lender that I found who would not only lend the purchase price but also the rehab costs. I used a rehabber that I nearly used for SFH #4 but his schedule would allow it. He is the brother of a mortgage broker that I use and he and his crew did a great job, and completed it on time. The rehab took about 4 weeks to complete and I was able to rent this property within 2 weeks after that. After I get conventional financing on this one it will cashflow at $300/mo.

Currently, I have under contract a 2/1 that needs sewer repairs ($6500) and I am waiting on the seller/bank to let me know if they will reduce the purchase price of $59K to compensate for this repair. Other than that, the property needs no fixup and will rent for a cashflow of $200+/mo. I am also waiting to hear back on an offer of another 2/1 which needs no repair and with cashflow at $300+/mo. Finally, I am waiting to hear back from my hard money lender to see how many properties he will allow me to buy simultaneously because there is a bank owner 5-plex which needs only about $5K in repair and will cashflow at $1000+/mo if I am able to buy it at the price I want ($900 if I pay asking price).

I'll log in later to give some general commentary on the market in Denver and what I foresee for my portfolio in the coming months.

Cheers!

10 months later... a quick update on #3

So the closing for SFH #3 went quite well - unfortunately that was the last thing that would go well for about 8 weeks. I hired a contractor which was a friend of my realtor and seemed to be a competent worker. In the end, I had never yelled so much at anyone on the phone that I have to this incompetent boob. He was so, so horrible and he tried convincing me that he had done a good job for the money that I had paid him. He was cheap, and I got what I paid for. In the end, after 2 months of working on a 2 week job he finished and then my most excellent g-friend and I went in afterward and fixed a lot or crap that was either undone or done wrong. I rented the property to a nice family for $950/mo and they've been great. As of today (Nov 2007), I've only had to repair one thing that the jackass contractor/hack (Vince) screwed up. It cost me $700 to fix the plumbing leak that he created which leaked through a ceiling in the basement. "Very esoteric" as the dumbass used to say. All is well now, the property is stable and is in long term financing. The cashflow on this property is $200/mo.