Yay !!! Another closed deal in less 2 months (Off Market)

[Redgy Saint-Germain]

I wrote an article a few weeks ago about my first deal and how I did it so I wanted to talk about another deal we`ve closed on 6/15. 

Read here

My GF been living in a SFH (3BR 1Bath 11000sqft yard) for the past 3 years. When I started my real estate journey back in January of this year I was analyzing every deal that I could find and when I ran the numbers on her rental she`s already contributed 50k plus in rent in over 3 years so I figured it was better to try to buy the house instead of paying her landlord`s mortgage for her. A few weeks after I met my realtor I took it upon myself to contact my GF`s landlord and told her that we were shopping for real estate, since my girlfriend loves the house so much we would be thrilled to buy it if she wanted to sell it. She said she wasn't interested at that time. Fast forward a few months later I received a call from her asking if I was still interested in buying the house because her grandchildren wanted her to sell it and retire close to them. Since I was already in the process of buying my duplex using and 203k loan I couldn't get another one under my name so we agreed that my GF had to take on the mortgage with both of our name on the deed knowing she will have to live in the house without me for another year (well worth it). We already had a joint account which made things a bit easier in terms of financing because my income is stronger than hers. The deal was off market with no realtors involved so it was easier to negotiate with her Landlord as there were no other offers on the table.

The numbers 

Asking price 220k

Buying price 185K including 5k closing cost

Cash due at closing 4.8k

  Reno 46k + 10% contingency 

ARV 259k

Projected cash flow when we rent the property after a year.

Monthly Income: $1,900.00	Monthly Expenses: $1,618.82	Monthly Cashflow: $281.18	Pro Forma Cap Rate: 6.43%
NOI: $16,654.00	Total Cash Needed: $8,282.00	Cash on Cash ROI: 40.74%	Purchase Cap Rate: 7.04%

Closing this deal was not as smooth as closing my duplex deal and because I have learn so much throughout the whole process that I felt compelled to share my experience on BP so other people can avoid the mistakes I've made.

Closing was originally scheduled for 6/5 but it was postpone due to mistakes on my part that I've outlined below.

-Not returning the 203k paperwork weeks before closing ----Please dont do this, sign and return the bank papers as soon as you get them or it will cost you

-Using the contractor profile from my previous deal---Do not, and I repeat do no use papers from a different bank or deal for a 203k, I have done it and it was a pain in the neck. The bank had specific forms and they were not willing to accept mine despite the fact that it was a form with the same information on it.

-Not using the bank specific clause on the bid and repair paperwork---The bank wanted the contractor to write on the final SOR " I agree to the labor and breakdown cost specified in the SOR" and signed it again. That clause was already on the SOR from the HUD consultant and I was arguing with the bank that it was redundant to manually re-write that. After days of going back and forth I gave up and had the contractor write it (That one got me upset and I still dont get it)

-Not talk to my contractor about his references---Huge mistake and perhaps the real reason for the postponed closing. This is very important, please make sure that your contractors references are people he actually did work for and they can vouch for the quality of work he did. All my paperwork were in order but they refused to close the deal because the initial references from my contractor did not pan out. That was on 6/1, he didn't give them the right references until 6/5 in the morning.

Bottom line, do what the bank ask you to do no questions asked

I Almost forgot. I wish I had known this on my first deal. i would have saved me a good amount of money on repairs for my duplex --DO NOT share your HUD consultant SOR numbers with your contractor. If there are additional work to be done,  ask the contractor how much he will do it for but again DO NOT share the numbers.

Redgy