A little late, but did I do anything wrong?

Question

First off, let me say I am so happy that I found this forum.  I spent most of Friday and most of my morning today reading such informative posts.

Anyway, I am new to all of this and have not so recenlty completed my first rehab.  It was a 80K HUD sfh that was appraised at 115K.  Needed some work, so I partnered with my brother (I had the money, he's got the construction skills) and bought the house.  
I used my HELOC on my primary residence to pay cash for the property and 0% credit cards to finance the repairs (13K).  Today its on the the market for 129K.  Its been on the market for 5 months (through winter) and I'm anxiously awaiting an offer so I can move on to our next house.
I am actually looking for anyone that wants to to critique what I did/am doing.  Fire away!

Chris Berger · Answer

Yikes!  Late update here and I do plan on re-introducing myself in another post.  Ended up selling the property for $127K on 7/2006.  Profit was $17,500 split with partner.  Did one more flip immediately after this one and did much much better on that one.  We now own 13 properties (2 are duplexes) and only have one very small mortgage.

Hope I can get my profile reactivated and fixed.

Dana Whicker · Answer

That's pretty awesome updating a thread after 8 years LOL.  I wonder how many old timers around here just gave up on it.

N/A N/A · Answer

Mike,

Thanks for the reply.  You're right, but things are a little difficult for me right now.  I'm in Iraq, and won't be home until June for leave, and then I won't be back for good until Oct'ish.  Looks like my father-in-law is about to get it rented out for about $150/mo cash flow.  That money is long gone and it's kind of depressing, but that's the last thing I stay up worrying about.  When it sells, I'll still get something, and right now I can afford the loss I'm taking.  Hell, I'm already planning my next rehab in Nov...

-Dean

N/A N/A · Answer

berger,

don't feel bad.  i have almost the exact same deal that i've been sitting on for about a year.  hud, sfh, paid $85k, about $11k repairs, appraised at $117k.   actually. you did a lot better, since yours is worth about $15k more ARV.  i got frustrated and started looking for a deal, instead of an investment.  it's frustrating, but i look at it as a lesson learned.  my profits have long since been eaten up by holding costs.  hopefully, you'll get rid of it sooner.

Michael Rossi · Answer

drweltman,

If you are still sitting on that property, then I would recommend rapidly lowering the price to get rid of it.  Obviously, it is continuing to cost you money and it is counterproductive to hold it.  Usually, the early loss is the smallest.  If you had dropped the price faster several months ago, you would have probably gotten rid of it.  Now, the same situation still exists, except that you've lost money every month from then to now.  That money is gone forever.

When you factor in that the current market is very fragile; that a recession is looming; and that an avalanche of foreclosures is pending; then holding a bad property is VERY RISKY.  I'd drop the price and unload that alligator.  Take your losses and lick your wounds.  Live to fight another day.

Good Luck,

Mike

Ryan Webber · Answer

Appraisal or not, if its not selling, its priced too high.  Now I would say that sometimes a house doesn't sell even though its priced correctly because of lack of exposure.

Now the MLS (via a realtor) and a sign in the yard are the two best ways to expose and sell your house.  If you have it listed and its not selling then as Mike already stated, I think its safe to say that its priced too high.  Try dropping it 5% or 10% and see what happens.

Chris Berger · Answer

Thanks Mike.  The appraisal was from before we got in it.  It was appraised at 134 when we put it on the market.

Michael Rossi · Answer

My only comment would be that you might have the house priced too high.  If it's appraised value is $115K, why do you have it priced at $129K?  Pricing a property above the market price is not a good way to sell a house quickly.

Also, I would consider your local market.  In many parts of the country, the inventory is rising and the market prices are beginning to fall.  If that is the case in your area, you need to be priced below the market.

On future deals, I would try to buy at even a bigger discount to guard against a looming housing market meltdown and recession.

Mike