Tell your wife, risks just ARE.
You can Accept, Reduce, and Eliminate risks.
Think along those lines. Some risks you just have to accept.
I let my wife write down all her risks (and fears) and then I went through the thinking process of ones I could Eliminate, if not eliminate, reduce, if not reduce accept. For example, How do I get paid for the work that I have done on the house if it burns down since I only have liability nsurance on what I paid for it. My way of reducing this was to get Builder’s Risk Insurance through Zurich. It covers the work you have done. In my case, I farm out the work because (a) my wife says I suck at remodeling and (b) I still have a well paying JOB and (c) I can write off the expense.
Ask a Realtor for a report on how fast Houses are selling in your area for the price range you are in. IF you get past this time, you need to change your marketing. I am in the middle of a foreclosure rehab now. Good Luck to you and me, I have six months too.
I am approved with a hard equity lender for 70% of AMV of a foreclosure. Problem is, that I have cold feet.
My wife has brainwashed me into thinking that I’ll be stuck with this house if we can’t sell it within the 6 month period that I have the loan. (Interest for 6 months, then a balloon). 6 months also seems like a VERY long time for a home to sit if it is rehabbed in a nice area.
Has ANYBODY been in a situation where you have an average home in an average neighborhood that just won’t sell? I would imagine that it would have to be a really weird setup or something like that, but this home is nice and will be very nice when we’re done. Also, would you do the fix ups w/yourself being the supervisor and just calling Home Depot to do carpet, windows and hire Joe the Plumber to replace the toilets and bath tubs? Any help would be appreciated. Thanks,
Dave
I have definitely had houses that did not sell for 6 months or more. It is not a comfortable feeling to say the least. When you are 4 months into it you will be getting pretty antsy and your wife will be going up the wall, you may well get stampeded into selling too cheap just to get out.
I would NEVER get into a deal that I had to get out of in 6 months unless I had a backup plan.
Around here, banks have 6 month or 1 year mortgages but they will automatically renew them. I wouldn’t deal with a private party without such a guarantee. Unless I knew I could get a conventional mortgage at that time.
Always have a backup plan, such as renting if it doesn’t sell.
When you are negotiating a sale, you need to have the calm confidence of a Christian with four aces.
I understand your frustrations. A rehab seems like an insurmountable task your first time. You worry about all the things that can go wrong. These worries can a deal killer if you let them overwhelm you. But as the others said, have a plan to reduce your risks.
One thing not mentioned, is always have a back-up plan. The concern: What if I can’t sell this house within six months? Back-up plan: What will the house rent for? And can I refinance this house to pay off the hard money lender, pull my expenses and profit out and still cashflow when I rent it? If you’re concerned about selling, have a back-up plan.
I tend to do alot of my own work, but you should really hire your work out, especially if you’re worried about your timeframe. Generally, subcontractors will get it done faster and better than you. The sooner you can rehab, the more time you have to market and sell the property.
Dave,
Do you have a fulltime job or are you doing RE fulltime? Is this your first rehab? Remember dealing with contractors and handymen are a job in its self. If you hire people you will still need to answer questions for them get materials and make sure they are doing the work correctly. If you do the work with some people you will hire then you will be spending a lot of time at the project. The biggest obstacle in rehabbing is getting the work completed in a timely fashion. You will run into problems and expense.Also explain to your wife that driving your car or walking outside is a risk! As far as the property selling in 6 months count on 6 months to get rid of it. You will be learning a lot if this is your first rehab. I am not trying to rain on your parade just trying to give you some facts. If you want to be in this business and the deal looks good then do it. I hope this helps.
I don’t like 6 month balloons,to many things can happen or go wrong in that short of time.I use a hard money lender who gives me a 5 year balloon.Even though most of my houses sell in 6 months,some do not.I slept much better at night knowing I have more time if I need it.As far as fix up,I have a two man team who does most of the rehab.I pay them buy the job,not buy the hour.
Sounds like you answered your own concern. Nice house, nice neighborhood. Is the market ok there? If you are not sure, call a few agents who work the area.
If you are having trouble selling a property, it is usually because the price is too high. Obvious solution: reduce the price some.
If you don’t get it sold within four months, you probably can get an extension of the loan you have on the property, maybe by paying some more fees. Also, there is the possibility of getting some other loan on the property from somebody else. Again, this will probably cost you some money. Since the property will be fixed up then, you should be able to pay off the existing loan when you get the new one. If necessary you could then hold the property–either as a rental or by doing a lease with option to purchase.
Your wife is probably worrying too much.
How you do the fix-up is dependent upon your own skills, time, knowledge, and available money. Also, how much of your profit you want to give up to those you pay to do the work. I think it is good in the beginning to learn a lot about the fix up. If you can do that by hiring knowledgeable people and learning from them, fine. If you need to struggle through a couople of fix-ups doing it yourself, that is fine. You can learn from others, books, the internet.
Dave Life is full of risks.However, real estate is one of the safest investments one can make, provided:
a) you do not over pay for the property when you buy
b) you do not over renovate, remember you are not going to live there. It has to be clean and have that show and tell look, that’s it.
c) you know what the market will bear after renovating
d) you don’t get too greedy on your first few deals
e) learn to market…market…market…creatively.
everything will sell with the right price and terms.
Just a note: If you are going to be in the real estate business you better get some tools and know how to use them. If your not handy now then hire people with skills and work with them to learn.There are so many retired handy people out there that are looking to make extra money to pay the bills…they thought they had enough to retire but now find that their pension doesn’t go as far as they thought! I used to run small classified ads in the paper:ie: Small Homeowner looking for handyman with tools. $7.00/hour call xxx-xxxx You would be amazed at how many calls you will get. However, not everyone can do what they tell you, you will still have to screen them. Start them off with a few small jobs to find out their skill level. good luck. go for it! wpage