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!