My First (Unsuccessful) Deals

As I'm in Denver and the market is tight, I quickly realized a beginner like me was going to have some trouble getting started in a competitive environment. So I decided to get started by looking out of state. My idea target was to find a house for under $20k, that only needed $10k or so of fix-up, but was valued at $40-50k ARV. Surprisingly, there are plenty of these deals available across the US, especially in the midwest. 

I pulled out the computer, and started looking or cities that had the most houses that met my criteria. After a dozen or so searches, I settled on St. Louis, particularly a city named Cahokia.  Hmm... cheap houses, and hardly any crime (reported). Perfect!

Next I called a few realtors in the area, and asked them all the "investor questions". I settled on a RE/MAX because my wife does business with them in her sign company. I picked an agent, and gave her my criteria. Using Realtor.com made it easy, as all I needed to do was call her and tell her what houses I wanted to offer on. Then I decided to go get a feel for the area, so I flew out there for a few days to check things out. Luckily, there was a seminar that I could attend at the same time, so it was a dual purpose trip.

We went and looked at close to a dozen houses. It was a whirlwind of showings, and I did my best to take photos and remember which house was which. After that trip, I needed about a week to collect myself. So I waited, then started making offers again. a couple of weeks later, I had two offers accepted, the Loren house and St. Nicholas. Thinking I was on a roll, I started calling property managers to find someone to manage my investments.

For some reason, nobody wanted to take on the management in Cahokia. Finally, after several calls and referrals, I called a manager named Joanne. Cahokia... no problem. Cool, I was in! So I scheduled my next trip, and flew back out there. I scheduled this trip around a time one of my mentors was going to be out there, and she had scheduled a tour with one of the top wholesalers in the area. He took us on the tour of St. Louis, to the good sections and the bad sections. They are only blocks apart and somewhat mixed, so you really need to know the area to succeed out there.  

Back to Cahokia, which is actually in Illinois, across the Mississippi river. A suburb of St. Louis, but because of the different state, not many vendors or realtors cross over in either direction. Two different licensing requirements are going on there. Anyway, I met Joanne at the Loren house. We went through it, and I shook my head. What was I thinking? I had seen the house on the first trip, but obviously missed all the issues. Termites were the biggest problem, and even at a $7000 purchase price, I knew I made a mistake. I had to bail on that deal, but unfortunately, my realtor was on vacation, and didn't get my objection in on time. So, I walked away from my earnest money on that deal, and chalked it up to the cost of doing business. Damn, I hate to lose money!

Then we went to the St. Nicholas house. 4 bedrooms, 2 bathrooms, brick house that needed about $5-7k of rehab. Could rent for $700-800, at a buy price of about $13,900! What a deal!! This one I was keeping, so we pushed the deal. But, it was a government deal, and they needed my corporate paperwork, signed. by the time I was able to get my wife's signature, get the copies sent to me and get my signature on the paper and deliver it to the realtor, the deal crashed with no explanation! (that house later sold for $12,000, go figure)

Back to the drawing board...