"I received a call today from her asking if I was still interested. The escrow is cancelled and she has not put the property back on the market yet. It is a lovely home down a private driveway that needs a lot of work. She also has a new listing coming up for a very distressed house in La Mesa, still owner occupied, that has huge views. Needs a lot of work. "
She wants a sale. That’s all.
“Both of these are not listed yet and I can get them without competing in the market. However, I have a big problem… no money!!!”
I doubt YOU are the only one she is calling. So be careful.
Do you want to have to split the profit with someone else in order to get these “without competing”’?
Dont get caught up in the feeding frenzy.
Sorry I have nothing to add about the discussion regarding the deck. All too technical for me. Except, getting the permit would be critical to me as a prospective buyer. I sure wouldn’t want to risk standing on a funky non-permitted deck 25 feet above the ground.
I think the two new properties sound exciting and – assuming they are good properties on which you could make a reasonable profit – you should go for them. On HGTV’s “Flip or Flop,” it’s obvious that they own and work on several houses at the same time. IMO, that’s how you make the big bucks.
PRO - I would have inventory and would have something available immediately to start when we finish this project. That would cut down 7-8 weeks of downtime - especially for my crew who has to scramble to find work during that down time (although my carpenter got over booked during the downtime with all the requests)
PRO - I could start doing a lot of work on the other house with subcontractors such as roofing, etc.
PRO - it would give me some breathing room to concentrate on a solid design before we even get started. Unfortunately I am always racing against time making snap decisions. Sometimes those snap decisions result in rework down the line. We are all used to it - we know we are going to do a little bit of rework along the way.
PRO - I would be able to do smarter shopping to get the large ticket items ordered before we even start. As an example, sometimes I have no choice but to run out and buy appliances in one day because I need to know my appliances before I finalize kitchen designs.
CON - Huge carrying costs while holding the house since I will have to borrow a lot of money. I would be paying interest, property taxes, utilities, insurance, etc. while it sat dormant. This will diminish profits.
CON - I have tapped out my usual private investors buying Liberace House. I would have to scramble hard to find loans - I would need the entire purchase cost. Sometimes I research how my competitors purchase and I see them getting loans from small local banks. I may be visiting some of those banks on Monday!
These homes are in the $450-$475 purchase range and have potential for about $650-$700k sale.
Have made my decision this morning that I will not build an expanded deck without a permit. Just cannot do it. So, I have called the workers coming on Monday and pushed them off until the structural engineer reviews the deck design.
Yes, I love the diagonal steel support posts with a beam halfway out. That might even get me a slightly larger deck. I’m really going to fight for a minimum of 10’ for deck
I caught up on some taped shows (you know… important industry research!!! that’s how I explain my addiction to HGTV to my husband) They actually showed a Flop. I couldn’t believe it. I think they lost $3 or $4k on the project (probably a lot more, but not telling us)
well, if you can pull it off - getting the bridge loans, and it makes sense financially- not eating into your anticipated profit $ more than doing one project at a time, then go for it.
I dont think you are going to be able to save a LOT on the large ticket items ordered ahead of time btw- maybe 10%?
I have the name of a “wholesale” appliance supplier in Livermore, who ships to builders all over the state. PM me if you want her contact info.
I like the simplicity of steel posts instead of going to the trouble of trying to cantilever out that far.
I dont think that a 10 ft vrs 8ft deck ft- will make or break a deal to buyers- remember they will have an additional downstairs patio area as well to enjoy the views.
I’d refinish the concrete area downstairs and put in a gate at street level to give a greater sense of privacy from the street above.
Part of the design / decision process. We don’t have to tear up the living room floor - although it would be no big deal because it was carpet that was already torn out and thrown away. We would just have to pull up plywood sub floor. But, we have plenty of room to work underneath the floor. It has a drywall ceiling (partially opened up already to analyze what our joists are). We were planning to tear out the drywall because we are building a drop ceiling down there anyway - to get new ceiling below the ducting and sewer lines running at the ceiling.
tearing up the floor I know is no big deal, its the additional weight of adding all those sister joists that would give me pause. How is the additional weight going to be supported from below?
cb, I saw that episode of Flip or Flop where they “flopped.” I thought it was about time they showed an episode where they didn’t make money. Obviously the couple is doing extremely well, so I’m sure one minor flop isn’t going to set them back. On the other hand, even though they lost a tiny bit of money on it, there must still be some satisfaction in taking a house that was totally crappy and making it better.
They also had an episode where they sold a house for (IIRC) $300K but the appraisal only came in at $290K, so they accepted $290K from the buyer. It’s kind of weird – shouldn’t the appraisal represent what the “market” thinks a house is worth? And since someone agreed to by it for $300K, that’s the market speaking!
The appraisal coming in at less than the agreed-upon purchase price happens all the time, VeryHappy. If the agreed-upon purchase price was simply allowed, why would they bother with an appraisal at all?
Even if you are good at assessing these carrying costs and the time period during which you have to carry them, make sure you add a healthy margin for safety before you figure your potential gain. I’m generally averse to real estate as investment, having never lived anywhere during a time period when real estate was profitable. But, I’m thrilled to follow along your progress.
Deck question: We have a large deck that is 20’ above a steep slope, and everything was completely permitted.
They first put concrete piers into the ground (forms that got filled with concrete) – the piers extend up above ground level. The uprights (6x6?) come up from that. No cantilevering involved. And, because of the stream abutting the slope, they certainly didn’t get heavy machinery down there. It has been rock solid for 25 years. We will probably replace it in the next 2-3 years, but the uprights are still in excellent shape. (We check.)
What would the carrying costs be on something like this?
Seems to me the trade-off is a couple extra months of carrying costs vs. a couple months of making nothing while you search for another property. And you might be able to recoup some of the carrying costs because you will be able to work on multiple projects at once, and finish quicker.
“What would the carrying costs be on something like this?”
she would have the interest + principal payments +commission for the sale to her realtor+ taxes[ have to be prepaid] + loan points [ and that is assuming she can actually qualify for a loan from a bank for a $450 purchase price , when the interest rate will be closer to 7-8%, as it is not her personal residence]
^ I know what the components are, I was looking for a dollar amount.
There would be no commission cost on the purchase.
An extra month or two of taxes would probably not be a large amount.
7 or 8% on a loan sounds high, but I don’t know what the actual rate would be.
Closing and loan costs are going to happen to some degree regardless of whether CB has two properties going at the same time or not. Difference is, the loan amount would be higher since she can’t roll any of her own money into it.
Without money from her own, it will be next to impossible to borrow money from a “bank”, at the best, she could get it from a “hard Money” lender. Most of the time, in a larger transaction, you need equity funding. I just helped equity funding for a $25M real estate project. The sponsor would have to have good track records and for the new investors, the sponsor is heavily being questioned for his integrity all the time.
