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All Forum Posts by: CRAIG BILLINGS

CRAIG BILLINGS has started 1 posts and replied 25 times.

Hey

I'm in Baton Rouge and trying to get into real estate investing. I'd like to know more.

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

FINAL SUMMARY: Yes, it ended. The seller actually cancelled the sale but I am relieved and a bit frustrated. Here is the quick run down along with lessons learned.

1. Our first bid for this house was 100K. We ended up going to 135K with the seller paying 5K in closing costs. This was with the FHA203K loan. We figured we might be able to get the math right on the back end with repair costs. 
Mistake: not having any experience we assumed the cost was going to be 50K-60K to repair. After 9 contractors and 5 weeks the estimates averaged 150K without lead paint removal costs. Total loan would have pushed 300K!!!! 
Lessons learned: Know your numbers and stick to them. Now we know what to look for in rehabs and specifically what the VA, 203K, and other loans will require. We also have good numbers on some repair items to compare on future properties.

2. We ended up going through 9 contractors. 4 never showed up to the property. 5 gave us quotes. 3 quotes were not itemized as we asked and 2 were verbal. It took over 5 weeks from the first offer accepted to get the first bid which was NOT itemized. 
The work needed is full electrical replacement, full plumbing replacement, 20K in foundation repair, lead paint removal, exterior siding and carpentry repair, roof repair, both bathrooms replaced, sheetrock work, second floor needs more bracing, asbestos siding was disturbed, workshop 25'x50' needs to be demoed, hvac install, stair repair, all carpet upstairs removed due to human and animal waste, and back porch repair. All this is necessary and not cosmetic needs. A real makeover number would be 210K which includes appliances, kitchen repair, paint, first flooring replacement, windows, doors, exterior siding.

Mistake: We should have contacted the HUD consultant FIRST for a job this big.
Lessons Learned: Thanks to Mr. Paul, we know now to do this for a standard 203K loan. But the HUD consultant can also be a good project manager on any loan (if you find the right one.)

3. Sellers are people too. Sellers and buyers have their beliefs, positions, and desires. This particular seller in this house was very difficult to work with. They left a home full of poop, destroyed, and basically condemned. They are hard on their stance of wanting 130K minimum. 6 contractors and the HUD consultant told me this house should not be listed for over 100K at most. But we were willing to settle in due to this being our first rehab and 'forever home'. The seller even called me an idiot (via Facebook. Yes they messaged me and said as much) to say I should not be expecting a price so low and that this property doesn't need to be rebuilt. They eventually cancelled the sale since it was taking too long and we asked for a price drop. This is a blessing in disguise. Saved me a massive headache in the end. We asked the price to drop to 80K. That is the only way this loan or property would actually work mathematically.
Mistake: Trying to work with a seller who has unrealistic expectations.
Lessons learned: Just be yourself and don't get emotionally involved with sellers or properties.

 Overall what I learned: 

Find your team. We had the wrong realtor, lender, and contractors. I even have unanswered emails from my lender. Mr. Paul Weldon actually answered more questions that the lender I tried to use on this property. The HUD consultant was the one who really knew what was going on. We should have contacted him the day after we had the accepted offer. That could have saved 3-4 weeks of headaches and stress. I now know so much more about real estate that I would not go back and redo any of this. I will definitely change up what I do in the future but the amount of experience I learned in the last 5 weeks is priceless. Thanks to you Mr. Paul for helping. Thanks to the Bigger pockets folks who responded. This is not over. We are still looking for a home and we are also keeping our eyes open for investment properties. We are studying the market and areas to determine the best ROI.

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

Update - Met with HUD consultant and stated his concerns:

Chipping lead paint, foundation issues, electrical and plumbing all needs replacement, minor roof repair. All things we knew needed to be addressed.

The 25'x50' existing workshop needs to be fully repaired (electrical, framing, and plumbing,) or torn down. And he is concerned about the span of the 2x6 joists for the second floor. He claims they span too far and is worried about structural integrity. This seems a bit odd for a 130 year old home to all of a sudden have second floor issues of which there is no signs of issues. 

His full report will be coming this week. And yes, we should have called him first and saved 3 weeks of headaches and loads of time wasted. He even said so. The current lender doesn't know what they are doing is still claiming "to call the HUD consultant is a strategy and not a requirement". And now is telling me there is no other option to purchase this property other than FHA203K or conventional. Maybe that is all they offer?

So far this property is NOT an investment property to pull out equity or for flipping. This is a forever home for someone interested....my wife. We will never recover our money 1:1 on this. 

The seller is wanting an actual closing date by this coming Friday. I highly doubt this will happen since we need the full HUD property write up, then the contractor to submit his report, submit these to the lender, and then get a new date for closing. At this point I don't care if the seller pulls out. They may be doing us a favor. 4 people have already told us that 135K for this home is overprice in its current condition. But we are dumb. lol. No seriously, the potential is there for us to make an actual forever home out of this. It won't stop me from pursuing my real estate investment future. No matter what I have learned so much from the last 4-5 weeks. If anything the $2000 I spent so far was better than any book education I could get. I'll keep you posted on the progress.

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

Yes it does my friend. I appreciate you very much. I will let you know what happens in the next couple of days. The HUD inspector warned me that ALL property on the premise could be forced to be brought up to snuff if the FHA appraiser/inspector declares it. There is a 25'x50' workshop that is also trashed. Rotten sill plates, rotten framing, insulation hanging from ceiling, rotten exterior walls about 2' up, bad electrical, previous termite damage, bathroom needs replacing. So that adds A LOT more to the cost.

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

Yes, of course. But what I am wondering is if I put 10% down and go conventional, then go secure the money on my own with the contractor that I trust will it be cheaper in the long run? Sure the interest rate on private loan is so much higher. But if I can save 25K on a contractor markup and then refinance in about a year or so will I come out better? 

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

I know this is a crazy question but I figured this is a crazy situation. I’m considering going conventional with 10% down. If we do that then how do we finance the repairs after the sale and having a current mortgage on our home. We would need a couple or months in our home to make this new “possible” home liveable. Is this even an option or a good idea? Supposedly it’s a lot cheaper this way that the 203k loan. 

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

Yea. Hey if anything comes from this the amount of knowledge I gained is priceless. 

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

Wow. That’s a great idea. I say this. The next time I need a lender I’ll be callin you 

Post: First post/first investment

CRAIG BILLINGSPosted
  • Posts 25
  • Votes 12

Update (again):

My realtor is trying to convince the seller to calm down since we are surely to buy this property. If they cancel they will have to start the process all over with someone else when this is not a good time for anyone to buy a rehab home (but I'm crazy. lol) 
I got my first bid from a contractor for 95K. That includes making the place livable by upgrading the wiring, plumbing, repairing the roof, repairing the foundation, and any related items (sheetrock, paint, et) associated with those repairs.

My lender yet again told me that there is no "rule" who to call first. I spoke with another lender (sent them info last night). They are trying to see what they can do in such a short time with an impatient seller. 
My current lender gave me the contact info for a hud specialist. They are going to inspect this weekend. During our call guess what question they asked: "Why didn't you call me first"? I almost lost my cool. Not on them though. 

Anyways, we shall see what happens by this Friday. So far we are paying $135K for a trashed home that looks like it will take $100k-$120K to make it livable and up to a decent shape. I am not sure what the appraisal will come back and say but this is a lot of money. It's starting to NOT look like an investment property but more of a "we want the house kinda thing" But I'm learning. So that's a plus right ? lol