Suggestions for looser house?Krulac,JT,Kaiser... - Posted by Kristy-Az

Posted by Kristy-Az on May 02, 2003 at 21:40:11:

Hi Todd,

We thought about that too. As far as holding a 2nd. We even offered that in our marketing and the MLS. Now it’s come down to the wire.

I think you missed the part about the 18% intrest. We are racking up $1600 per month in interest alone! It’s a hard money lender! So we can’t carry the whole thing. Plus we want our money back out of it.

Thanks for the thought…

Kristy-AZ

Suggestions for looser house?Krulac,JT,Kaiser… - Posted by Kristy-Az

Posted by Kristy-Az on May 02, 2003 at 13:57:46:

Hi all,

We get one of these a year. Here’s the breakdown…

Bought house at auction in Jan. (was occupied, couldn’t see the inside)

We paid $117K
Down + costs $10K
Repairs $10K (this more than we had anticipated)
Interest 18% (used hard money lender on this one)

Comps for the area are in the $150’s.

Now…after we got inside we almost fell over! Needed more work than we had figured. OK…so we make it beautiful again and put it on the market 3 weeks after purchasing it.

We had it listed for $147K. Only one low offer. It’s been on the market since Feb. at 18% interest. (that’s $1600 mo.)

Now, we considered re-fing the house and renting it out, but then we wouldn’t get our money back out of it. (the down and fix up costs)

I reduced the price to the bare minimum to where we would at least break even, we just got 2 offers on the property last night. We countered some minor things.

My husband is having a fit that we put all that work into it and are just breaking even. He’s still not used to loosing money. I’ve tried to explain, that it happens sometimes in this business and he should realize this. I would rather break even than keep it on the market and have to pay to get rid of it.

Anyone have any other suggestions?? I thought about re-fing and taking some money out to cover the costs of the rehab. Then maybe renting it, BUT we would still be out $10K till it actually sold in about a year or 2.

Doing a L/O won’t get us much money back up front as people are only asking $2K to $3K down on L/O around here. There is alot of L/O houses around.

So do you feel that by taking the lower offer is in our best interest just to unload it? I keep trying to explain the reasoning to my husband, but he it still upset.

Input would be greatly appreciated.

Kristy-AZ

Could you move your family into the house? - Posted by Dave Swett-CA

Posted by Dave Swett-CA on May 03, 2003 at 17:08:28:

Then you would qualify for lower cost owner occupant financing–to reduce your monthly nut.

Do I read you right that you now have a $117k loan, then the added $20k makes your break even amount at $137 plus the cost of broker and closing. That totals $146k or so. Maybe a refi won’t work, you are already at 80% LTV.

good luck,
DJ

If it’s loose, tighten it! :wink: NT - Posted by Andrew

Posted by Andrew on May 03, 2003 at 10:19:53:

NT

$ 247.00 - Posted by JT-IN

Posted by JT-IN on May 03, 2003 at 08:24:33:

Kristy:

I,ve been probably more Lucky than Good, in this business. I have never lost money on a deal, but I did have one house that my spread was $ 247.00 I hated being in that spot on that house, and was emotionally distressed about that one, at the time.

However, what I have lived and learned to tell about since then is that this ordeal on that house has actually made me lots of money over the years since. why…? Just as Ron * said, “I have changed my buying criteria”. Whenever I get a bit too agressive, I always think back the .50 cents per hour that I made on that shack… and the lesson lives on and on. So if I factor the knowledge gained, it was still a successful venture.

You and your husband may just be reacting emotionally here. Sometimes you must do things in business, that emotionally are uncomfortable, but are invariably are the right move. Do you think that WalMart has ever bought something that hasn’t sold as well as they anticipated…? Of course they have, and unloaded it at a loss… but they were absent emotion in that decision. They did what they had to do in order to get themselves onto the next profitable marketing effort, and that is what the two of you should do as well.

The consumers in the RE market won’t lie to you… if you are getting adequate traffic and no (or low) offers, then you are receiving a good appraisal from them. All you can do is serve the marketplace what they will buy, at a competitive price.

Just the way that I view things…

JT-IN

Suggestions for looser house?Krulac,JT,Kaiser… - Posted by GL - ON

Posted by GL - ON on May 02, 2003 at 17:52:57:

This is one of those things that happens when you are in business. You make your best effort but sometimes you make a mistake.

I pay you the compliment of assuming you know what you are doing as regards getting the best price.

Under the circumstances the best thing to do is get rid of it and move on.

If you are stuck with a loser, don’t let it drag you down. If you try to hang on it will sap your energy and use up more time than 5 good deals.

Your husband will get over it, I hope. Naturally he is vexed but I am sure when he calms down he will agree with you.

Houses dancing across the desert? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on May 02, 2003 at 16:09:52:

Kristy–(AZ)------------

Just remind him of the big profits on the other ones.

It’s hard to second-guess selling from a distance. I’d suggest you look at how hard you were working on marketing it. If you did a strong job, sure just go on and accept what you can get. Go on and use the return to make the next deal.

So, are you thinking about tightening up your purchase criteria? Maybe pay no more than 60% or 65% of market value?

“Suggestions for looser house?” I had an image of a house up on a corner schimmying across the desert sands. Dancing up a storm.

Good InvestingRon Starr*******

you got to know when to hold/fold… - Posted by David Krulac

Posted by David Krulac on May 02, 2003 at 16:03:09:

as that great real estate investor Kenny Rogers used to say.

There are several approaches:

  1. How good is that $150,000 comp? Here there is an active seller’s market, but that doesn’t mean that buyers will buy anthing at any price. When doing comps, its not the neighborhood because some houses may be newer, larger, nicer etc. You want to compare houses as close to the subject in age, size and location and ACTUAL sales for the last 6 months, not asking prices.

  2. If you wanted to rent it out would it be positive cash flow after refi? If so It might be worth keeping. I would not generally recommend renting unless it would be positive cash flow.

  3. “If a property hasn’t sold in 90 days and is properly advertised then the price is too high.” If the only problem is the price that’s easily remedied. Lower the price. I also believe in price points like $139,900, and $129,900.

  4. I hate losing money and I’m stubborn, but there comes a time to move on. That’s a judgement call on your part. I don’t like empty houses, bad things happen like something breaks and needs repaired. For me some houses, I’m willing to carry longer, maybe because its in a better area, or closer to other properties. And on the other hand I’d willing to move quickly to sell a property that is inferior even if the inferiority is only distance away from me.

David Krulac
Central Pennsylvania

Re: you got to know when to hold/fold… - Posted by Kristy-Az

Posted by Kristy-Az on May 02, 2003 at 16:38:52:

Hi David,

In response…

  1. the comps are for houses that have sold in the area, same age, size etc. and in the past 6 mo.

  2. If we rented it out, it would be a positive cash flow of about $200 or more a month. However, we wouldn’t get back any of the money we put into it right away. Down pmt & rehab.

  3. I did lower the price by $10K. And we just got 2 offers on it last night. We countered with minor details. Will see what happens.

I don’t mind having rentals IF I’m not tying up a bunch of money in the mean time. And I don’t mind breaking even on the property by lowering the price. But my husband is having trouble seeing that. We worked pretty hard putting this house back together, and now we won’t be getting any profit. My thoughts are to get rid of it and move on to the next one. I don’t like stressing over the fact that we could loose money on it.

It’s in the MLS, we’ve advertised in the paper, we held open houses, and even tried the 5 day method. So the marketing has been there.

Just trying to show my husband, that we can’t always make money in this business, and it’s better to break even, than try and wait for that “perfect” buyer only to end up loosing money while we wait.

Thanks for the response.
Kristy-AZ

what about… - Posted by todd

Posted by todd on May 02, 2003 at 17:40:15:

Holding a note???
Why not hold a small second. Ask for the buyer to get an 80% percent first for 120k and hold the 20% or 30k as a note. How about getting a little down and owner finance the whole thing. Then sell the note at closing (if possible) or a little later, and pay off the underlying mortgage and get at least a few bucks for profit. anyway, I am no expert so a grain of salt is needed.
thanks for your time.
Todd Williamson…(CO)