Well, after all the research and reading, I finally proved that my action has paid off! Please know that I love to go into detail and answer questions, but I'll try to stick to an outline, and then people can ask if they want to know more.
Around September I drove around and wrote down the addresses of vacant houses. I looked them up on the tax website and sent them hand-written yellow letters. I probably sent about 40 letters and had about 6 people call me. One person called who was under the impression he didn't own the house any more, that the bank did (I found this a common misconception among distressed homeowners). He had abandoned the home, but still was paying insurance on it. He agreed to come down and show me the house. He owed the bank $37,000.
I didn't really realize it at the beginning but it turns out the house was actually a 10x40 mobile home from 1965 that had a number of additions on it. 1/3 acre of land.
I jumped through the hoops to get authorized to speak to the bank, and I offered them $10,000 in early October. They accepted it without countering and I rushed around to get the abstract done. I closed on about October 21 at 10 am, had my dumpster guy there at 2 pm, and got the ridiculously tall grass mowed, and most of the junk cleaned out by 11pm. It needed flooring in 2 rooms, some slight drywall repair, a window removed and replaced with a solid wall, and a fridge, painted and cleaned to get rid of the smoke smell, and some light fixtures. My roofer took a look and told me it needed a roof, so we got that done, too.
The rehab was done within 30 days and it was listed by Thanksgiving for $53,000. Due to the time of year, it took a little longer than I hoped to get a buyer, but we got a signed contract at the end of January for $45,500. Finally closed March 31.
Purchase Cost $10,000
Closing Costs $1300
Back Taxes $1200
Holding Costs $1600
Selling Costs $4700
Sold for $45,500
I invested $10,000 in cash and financed the rest on 0% credit cards. People can hate on those all they want, but as long as you take enough out to make the minimum payments while you're holding the property and have an emergency fund, that is seriously cheap money.
My estimation of costs and repairs worked out really well. With the unexpected roof replacement, costs still came in right at my worst-case scenario. The dumbest thing I did was that the power was still on and I just let it run without calling them. It worked out ok, and they didn't shut it off until just before closing. Don't do that.
Also, I would have paid for a survey when I purchased it, because the buyer's bank is probably going to require it. I made an agreement with the buyer for him to pay for it, but not all will do that, and it held things up a little. If I had the survey in hand, it would have been smoother. Feel free to offer criticism, ask questions, or hit me up in private messaging. Thanks guys! Real estate is awesome :-)
Also, I was 26 when I purchased (I'm 27 now).
Dude that is AWESOME. We have very similar stories. I started investing around 25 26... I found BP in 2011. Just finished my first couple flips and its a great feeling! The first is always the worst btw..
Great to hear!
Congratulations! Keep it up and keep posting.
Great Deal! Always nice to see your driving for dollars pay off. As you do more deals you gain more and more confidence talking to buyers. Goodluck on your Realestate Journey.
Congrats @Craig Shute !
Congratulations, I'm glad you were able to make a profit
Congratulations! How did you decide to go the back taxes route?
@Sterlena T. not sure what you mean. The taxes were not being escrowed and the owner had stopped paying them. I had to pay the back taxes or eventually the county would have taken the house.
I was asking about the beginning of your story; you drove around looking at empty houses and then looked up on tax website. Were you just looking for a good deal or were you looking for a house that just owed taxes, vs a foreclosure, etc. Did you start out with the intention of buying a tax lien property? Just curious what your plan was when you were driving around looking for those houses.
Oh I see. I didn't have any motivation for looking at the tax website other than I needed to find out who the owners were, and where to send them letters. That also reminds me that at first I was planning on using this as a buy and hold. However, I ran the numbers and selling it blew the cash-on-cash out of the water. Plus, it's not a property that I would want to hold long-term anyway.
Nice. What a great start! Hope I can share a happy ending on my first flip! Thanks for sharing.
Wahoo! Well done!
Congrats @Craig Shute
I do mobiles too. Lots of fun and great returns. Again Congrats!
Congratulations! What where the hoops you have to jump through to be able to talk to the bank? What steps were required, how did you even know who or where to call within the bank and how did the homeowner have to contribute?
Here are the steps I took:
I told the homeowner to request a payoff amount, which they sent him, and on that it had the phone and fax of the lady in charge of his case. I called to confirm what she needed and she said they needed an authorization from the homeowner that they could talk to me, and a signed purchase agreement. I wrote up a simple, plain-language purchase agreement (1 page) where I detailed all the problems with the house. The contract has to include the Loan #. I met the seller and we signed it and he wrote a statement at the bottom that I was authorized to speak to them. I faxed that in and emailed her pictures of the condition of the house. The approval came back shortly and had a closing deadline of about 3 weeks later. I made sure that their approval stated that the borrower was not responsible for any deficiency. He had to contribute nothing. He had already filed for bankruptcy and abandoned the home.
I remember I was very nervous until I got the abstract of title back, wondering if there were any junior lien holders. There weren't, and if there had been, most of them should have been wiped out by the bankruptcy.
If anything was unclear or you have any other questions, feel free
Very nice man! It's nice to read the whole story in one place. In the days and weeks of a project it's easy to get lost in the weeds.
Any issues working with a mobile home, and a renovated one on top of that? My experience is that many of them are made of particle board and cheap materials. (So something like a water leak causes much more damage).
@Craig Shute...Sweet deal! Now that I'm looking for a great flip, I'm getting more creative. The pickings are slimmer...
I did not find that to be an issue. I don't think anything in there was originally, and the only part that was the mobile home was the center 400 sq ft, out of roughly 1000 sq ft.
You da man Craig!
Fantastic work! Nice job on getting such a great return with minimal risk.
Craig, I just joined BiggerPockets and want to say it was nice to read a success story right out of the gate. Congratulations and more power to you!!
Congratulations @Craig Shute .what a great start with all that research and reading paying off
Congratulations on your first flip! Sounds like it was a good experience. Keep up the good work and good luck to you!
Nice work bro!
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!