By Ellen Sanford
May 10 2011
Last year at the end of August I was working with a Realtor to purchase investment properties. My goal was to buy and flip the property and this Realtor said that his main client was the Investor so he was very familiar with the cost to do business and what an Investor needed in a property for it to be profitable. So, I agreed to work with him and he brought me a property that he said would be a guaranteed great investment. So, I signed a Purchase and sales agreement on this REO; and lo and behold it was accepted!!! It was almost too easy. I was now the proud owner of a new property that I was going to make a ton of money onâ€¦..or so my Realtor told me. I hadn't seen the property yet, I usually don't run all over town checking out properties because most of the offers I had made up until that point usually weren't accepted. Anyway, this Realtor, he was so excited, tells me how I can easily make 20k, and if I walk with less than 10 I have done something wrong. Tells me I can sell this baby within 90 days and in 90 days I'm going to kiss him I'll be so happy cashing my check. Perfect, I say, a paycheck in 90 days sounds good (I haven't had one in about 4 months). He says you are going to see how great it is to work with me, I've got you hooked up with a money guy, a title guy and now I'm getting YOU this Steal of a Deal! "Oh my!", I think, "I am one lucky girl."
So, with much excitement and trepidation I went out to this glorious property that my Realtor told me I would kick myself if I did not buy -- to find a house that is almost a DUMP. Ok, ok, I'm in the business of buying dumps and making them pretty and reselling them, right? That is what I am doing as a real estate investor, right? Heck yeah!
I had explained to the Realtor that I really could only handle properties that were sure to sell quickly. I didn't need another property sitting on my hands for a long period of time. Now, it just goes to say that you have to know your market and in this case I was being very careful because the Spokane area market is still pretty new to me. Anyway, the Realtor was very busy telling me all the pros and cons, the fix up and the potential resale value. He kept assuring me that this was a winner and that I would really do well with this property. He sent me comps, the comps backed what he was saying and then some! How exciting, man do I ever need a paycheck!!!! Butâ€¦ and, of course, there is a but, I start my due diligence, and lo and behold, the house 2 houses down is for sale, has been for 120 days for 183k. It's not moving. Explanation: the house is way dated. Ok, maybe, but that area still wasn't boasting house prices of over 185 and to make money I would need to sell for at least that amount.
Ok, take it in stride, let's look at the place. The neighborhood is great!! Houses are pretty, the house 2 doors down-great! Whoa, wait a second, this nice looking house, 2 doors down, price dropped, down to 169k. Ok, look in the house, see what we can do- oh my gosh, house needs kitchen update, new vanity for a double sinks in the bathroom, new tub, new windows, new doors, trim throughout, a new stove, a new master bath update, new exterior paint, some siding replaced, the basement is a wreck with all these itty bitty creepy rooms down there, (eww), what else, there is even more-the cost of this rehab is adding up in my head. Ok, well even with this, let's look at the house 2 doors down to see why I will be able to sell my house at a higher price.
Two doors down, it is clean, newly painted, has new kitchen cabinets, new floor in the kitchen, wood floors polished, it looks nice. Only issue I see upstairs is some fuddy-duddy wallpaper on one wall and a green counter top in the bathroom. The basement, on the other hand, has old, ugly carpet and needs paint. So, how does this compare with my prospective house. Well, my Realtor says that this house does not compare because it is so dated, it looks like some blue haired lady lived here with 80 light fixtures and pink flower wall paper. In my house, he tells me that I should take up the carpet and polish the wood floors, don't replace the cabinets in the kitchen-see about painting them, buy a new stove, paint the exterior, paint the pink bathtub, new floor in the kitchen, paint interior, clean it up and call it good. So, tell me how am I going to sell this for more than 169k like the house 2 doors down? I'm doing almost exactly the same thing but wait I won't have new kitchen cabinets and my house has itty-bitty creepy rooms in the basement. So, what should I do-Realtor says he is willing to take risks, that is what you do in this business, so buy it, and then wait, oh yeah, hold it for 6 months and if it doesn't work make it a rental. I don't have 6 months to waitâ€¦.
Sorry, can't buy, it doesn't meet my criteria. Thank you for insulting my intelligence and using your hard core pressure sales tactics, but no thank you.
It's been 6 months now and the house did sell for a little less than my accepted sales price. The house 2 doors down for 169k--it is still on the market. I am so happy I didn't get into this one!
Ellen Sanford - Real Estate Investor, Business Entreprenuer, Note Investor, Mom For more Investing Resources and coaching program check out my site :Home with Heart.
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