All Forum Posts by: Angelo Aguirre

Hey BP,

I'm just curious about a transaction that seemed odd between a realtor and a person selling her house. This is a retail/market price attempt at a sale by the home owner. Within 7 hours of the listing 2 offers come in. 1 cash and one conventional financing. The cash offer buyer states he will use the property for a rental property. The conventional buyers are a family. The seller states he specifically would like to sell it to the family because (1) they are offering more ($20K more) and (2) the thought of a long-term family next to her neighbors of 15 years was her goal. The agent acknowledges the seller's goal. During the process of financing, the family ran into 'credit' problems and could not close with 3 days to go to closing. The seller is now in a tight position as she has been working with a builder for house that is ready to go, papers signed, and closing scheduled not-contingent on this sale. The builder and seller were able to work out a 1 month extension. At this time the realtor suggests to the seller to sell her the house at a discount ($22K below recently appraised value), and shows him on paper how, selling it to her at a discount would "Net" her the same amount as if she were to sell to a buyer at retail (commissions, closings, so forth), saving her that amount and walking away with the same amount of money. Her father, will be moving in with her, asbancelled his lease with the retirement facility for the next month. Therefore, the seller opted to take the realtor's now 'investor' price. The realtor made it not contingent on inspection, no closing costs, very attractive. She disclosed it was a 'private' sale and she would not be collecting commissions. The realtor's buyer was her husband. Now, 2 months after meeting, the realtor and the seller are 24 hours away from closing. Contracts signed and only waiting for tomorrow. The seller then gets a call from the mortgage company reveling a 2nd mortgage. This was a 2nd mortgage taken out approximately 2-3 years earlier that the seller had forgotten about. This added just shy of $10K in extra costs associated with the closing of the seller's new house. Seller calls realtor, realtor claims to have never run a title search or any inquires furi month journey to her acquisition of the property. Again, seller is forced into an unexpected financial situation. The seller pleas with the realtor (now investor?), whose selling to her husband, to negotiate on the price of the house ($22K under ARV) to alleviate some of his financial distress. The realtor (even though not the buyer?) states it would not make financial sense for her to come up on her price. Now, approximately 12 hours before closing, the seller is forced to deplete his savings in order to make the transaction happen, so that the realtor didn't take a hit and lose money. Seller expresses clear disappointment with the treatment of him and of the deal, the realtor/buyer/buyer-representative/investor - person, acknowledges this dissatisfaction while closing on her new investment property. 

Fact: Net sheet presented between realtor and seller never accounted for the missing $10K

Fact: Realtor never did a title scoop 

Question: What's your opinion of this transaction? How often do you seen realtors changing relationship status from client relations to investor-seller relations? Does that role change as fast as this example? Or was the house listed for more that 4 days? 

Please ask if any questions, thanks. 

Angelo 

**Update**

The buyer backed out of the sales contract when the roof (previously deemed good by contractor) came back that they are asbestos tile and needs replacement. Looking at a $10-15k repair. Time for Plan B...BRRR(R)!

Currently working to refinance this loan, currently at 56% ARV, to about 68% ARV so I can get the roof fixed. At this new mortgage, the rent will be at a 0.96%. I'll be about breaking even after all PITI & Expenses are paid.

I’m pretty excited that, even with all of these hurdles ($30+K over in rehabs + $15k roof replacement), at the end of the day, when rented out, I can still call this house an asset. Time is only on my side at this point!

@Bob B. Thank you! The flooring in the kitchen is tile and the rest of the house is it’s original hardwood. It was a big project but worth it to see the beautiful originals. 

@Account Closed Yessir, you nailed the first part of it. And, I should begin with that I am only upset with myself for not doing those things. For example, I did not check as many references as I should have for the contractor, I did not know a lot about his construction background or past successful projects. We ended up getting a private money loan (rehab + acquisition) and I allowed him to have access to the draws in order to keep the project going. In my head I thought, "Okay, he will take the draws and use it properly to conduct and complete the project." Without my knowledge, he was taking the draws to pay himself and not debts he created with this project. For instance, he took out a $10K loan at a supply company for supplies on the house; however, he never paid them a dime (on NET 30 terms) throughout the project. Oh, but he did not forget to pay himself. According to him, he is allowed to pay himself because as he states, "As an 'employee' of my company, my company has an obligation to pay me." He never did have a good reason for why he didn't pay his debt accounts though, he was at a lost for words when trying to explain that. All in all, this contractor racked up $23K in construction liens, all while paying HIMESELF $12K.  

If I could give any advice about this its, don't do what I did! Get several references from RECENT projects. Ask their previous customers if they were on time, easy to work with, and if they did a quality job. 

As I stated, I am not angry at the contractor (any more). I've realized that people will behave and conduct business in any fashion they wish. It is up to us to dig in deep, ask them the hard questions and learn everything we can about them BEFORE entering into a contract with them. Seems simple but I definitely missed the mark on that one. I tend to give everyone the benefit of the doubt and that they are a good person. Now, I realize to hear what people say about themselves, their company, their success, and their vision but we HAVE to confirm with others that can vet them out.  

*Update*

I have an accepted offer for this house with a close date of June 13 (fingers crosses). Finally, I will out of his headache and on to building a better, more focused team.

Hi Paul, thanks for the complements! I was debating if I should put a SS appliance package in but the realtor thought it would be okay for buyer to 'imagine' their own preferred brands and such. We also have a $2K appliance package written into the listing. 

With the list price of $200K I would have came out a head (a little) but we had no serious offers after about 30 days of listing so we just price-dropped to $190K. At that price I will be breaking even, if not losing a few $K. But seeing how this flip took nearly a year, a nightmare of a contractor, I think I am still coming out ahead with all of the knowledge!

Investment Info:

Single-family residence fix & flip investment in Portage.

Purchase price: $53,000
Cash invested: $56,000

This was a 6 month estimated project that turned into 1 year, and still going. But it is now on the MLS!

How did you finance this deal?

Hard money

How did you add value to the deal?

Rehab

What was the outcome?

On the MLS NOW :)

Lessons learned? Challenges?

Vet out the contractor!

Investment Info:

Single-family residence fix & flip investment in Portage.

Purchase price: $53,000
Cash invested: $40,000

Fix-and-flip project.
Upstairs carpet is all torn out, beautiful original hardwood revealed!
A LOT of work has been done to this point.
Rewired, new plumbing, new boiler system, opened up walls, brand new kitchen.

What made you interested in investing in this type of deal?

I wanted to try a fix-and-flip project.

How did you find this deal and how did you negotiate it?

I found this deal through a General Contractor who needed a financial partner. We negotiated 50/50 split of all profits upon sale.

How did you finance this deal?

HELOC on my primary residence.

How did you add value to the deal?

Complete rehab from wiring, plumbing, exterior, roof, flooring, cabinets, appliances, and much more.

What was the outcome?

We are still working on this house. It will be ready for marketing by the end of January 2019.

Lessons learned? Challenges?

Will not invest in a pre-1900s house. All outdated utilities. Ran into too many unforeseen costs. Holding costs went 4 months past initial assessment. Always have a construction crew ready to go! We've had a lot of 'unskilled' laborers do no-call no-shows, sick calls, or just quitting the day of work.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Paul Robertson of Fix-n-Flip Corp has been great to work with as we learn this process together.

Hello! There is a home for sale right across the street from what is currently the city's fleet maintenance, a large warehouse style building, not very attractive. However, the city and developers have been working over the course of four years on plans to move the fleet services building to another location. The development plan for that space will include a "Public Market" and new private commercial space, offices, and housing. According to the article, "The private component could bring $30 million to $40 million in investment for a first phase with more in a second phase..." Furthermore, "The properties are in two zoning districts, both allowing buildings up to five stories with height under a conditional use." Housing could be up to six stories. The city budget plans construction to start this year, 2018.

My question is whether the house currently for sale will be affect positively by the major renovations and transformation of this area. The house is directly across the street from what will be restaurants, multi-family housing, and private commercial space. The front of the house faces the future development. I've had my eye on this property for a while as a potential investment property. The thing keeping me away is that it is on a busy intersection with traffic lights. It's a 1000 sqft, 3 bed/1 bath house that currently rents for $1395/month with a purchase price of $180k. Coming in under 1% it doesn't seem like the best option for cash-flow, however, with the future developments in mind, could the house have more potential for overall value increase? Thanks!

@Michael Seeker

Thank you for all of that great information. It seems like the tax benefits may take some paper pushing but may be well worth it in the end. Being a flip, I don't think we can take full advantage of them but should be eligible for a percentage. I'm excited to see the end product! Thanks again.

@Jay Leisten,

That's great to hear that your friend does this type of rehabbing. It is new to me, and it's encouraging to hear others are doing it. Thank you!