First Deal offer/accepted
I've been patient for many years. When the market was going crazy at the beginning of the run-up in 2002, I didn't have the money or the time to invest. My wife and I bought our primary residence and then upgraded to a single family home in the fall of 2005, just about the top of the market. When the market bottomed out in 2008, I was ready to get in the game but my wife wasn't. Sales were all cash from investors in the market I was interested in.
About a year ago, we noticed our elderly neighbor starting to show signs of health issues. Then she disappeared, we didn't know what happened. Months went by and no one was at the house. The first sign of human presence at the house, I approached and asked what had happened. I was put in touch with the woman's heir and we began to talk. Being that this would be my first deal, I am super cautious, or trying to be, about the details. I gave her a verbal offer that I knew was low, but fair for a 1950s home with no improvements in 'as is' condition. She asked if she could get an appraisal first to see what the house was worth, since I didn't think that there was much value in the condition of the home, I agreed. The appraiser came back $100K higher than my offer. UGH...
Now I started doing research. I started picking apart his valuation and the comps and his assumption and adjustments. Bottom line, I think he inflated the numbers or didn't make adjustments based on land values. So I asked if she would agree to a home inspection before I made an offer to see what the actual condition was and she agreed. EVERYTHING FAILED. The hot water heater pilot light wouldn't light, only one window in the house would open, there was not a single grounded outlet in the home, etc... So I did some math, and then I would do some more math. I finally gave her an offer that was $25K higher than my initial but was more informed. She rejected it and said that there were other interested parties. "That's fine." I told her, as I reassured myself that I wouldn't get caught in a poor emotional decision. That was the last time I heard from her from February until Tuesday night.
After trick-or-treating with our kids, I received an email asking if the family was well and if I was still interested in the property as she was now ready to proceed. I told her my wife and I would discuss and get back to her. Her response startled me and I jumped into action. Since we both agreed to keep costs down by not hiring a realtor, I used a legal website for a free contract and drafted the offer I made in Feb. If she was coming back to me, then my last number was still good as long as the condition of the house hadn't changed. After some discussion about the contents of the home, she agreed to empty any personal effects but would leave the furniture and any new items. There are a lot of clothes that still have the tags on them, which will go to charity.
And then at about 5:30, we asked our neighbors to be witnesses to the signing of the contract. Fortunately, I have a great mortgage broker that I have used to re-fi my primary house numerous times and the knowledge that while I didn't pay a rock bottom price, we are under contract 5% below the tax assessed value and after she called a junk company to clear the piles of stuff, the house looks better than I remember. Although the kitchen still needs a gut job and I'm pretty sure the ceiling tiles in the basement are asbestos.
Now for a 30 day close that will have two federal holidays in the middle.
I intend for this to be a BRRRR, and kick off a side hustle of 2 deals per year. The Cash on cash is >5% depending on the interest rate, closing costs and repairs/improvements. One of which I have more control over.
Wish me luck, I'll keep you posted...
Dave in NOVA