Soldiering on: To continue or persist, despite adversity or difficulty. This is so appropriate for a rehab.
Negotiation. Contract. Inspections. Contractor. Funding. Sold! Finally, we are under way with our very first house to rehab. We weren’t sure it would ever happen. We have been searching for 4 months, made several offers, got close on a few, but finally we have purchased our very first investment. Let me tell you about it because we weren’t sure it was even going to happen.
I’m a realtor, so we’d been searching the Multiple Listing Service. Because of this, we have the opportunity to be one of the first ones to look at new listings. It’s plenty helpful because with our busy schedules by the time we could get around to looking at a house, there would already be a handful of business cards laying on the counter of the house we were viewing. This was evidence that other realtors had been there before us. Next, we spent time analyzing the numbers. Could we make money or is it a wash. Most of the time it was either a wash, the sellers would not come down, or other realtors who own their own company and had a lot of cash lying around could offer more than we could. When you’re borrowing at 10-14% interest plus points up front, this adds up in a hurry. Even getting the Buyer’s side of the commission couldn’t off-set it because my Broker takes a huge chunk. But, we soldiered on with our rehab.
I expanded our search to the surrounding communities, and bingo! We found our first house and the seller was willing to negotiate. We had an agreement the same day. What was interesting was that we went to a networking meeting and started hearing negative sounds about buying a home in a hamlet town outside of Kansas City. You see, lenders don’t like to take chances on what they call “rural properties” because the market doesn’t usually move as fast. But, we soldiered on with our rehab.
We first thought we’d better get a contractor up there and get some solid numbers put together so we knew exactly what we could potentially make, how long the rehab would take, and when they could get started. In this industry where the holding costs are high, moving through the rehab and getting the property sold as quickly as possible can make a huge difference to the bottom line. The contractor didn’t have time to meet us for at least a week, another contractor was 10 days behind and so on. Ugh! The clock was ticking. We needed to get good numbers prior to the close of our inspection period which was 2 weeks away. Being a newby and a planner, I thought this would give us plenty of time when we got the property under contract. It was, but it was very, very close. The inspection date came and went, and we soldiered on with our rehab.
We put in a call to our coach to ask his thoughts on it all. The first question out of his mouth was “do you have your financing lined up?” Well I was under the impression that I needed good numbers from the contractor before I lined up the financing. WRONG! Apparently, my first phone call should have been to a lender. Oops! We were a few days ahead of our inspection deadline at this point, so I called a couple of good contacts that had been given to me through our networking group. The first one seemed pretty expensive, so I went with the second one. I got an email approval from him and we ordered the appraisal. We’re all set, and we let the inspection date go by and remained under contract. Then, out of the blue 7 days before we were supposed to close, we got a phone call. “We’re sorry. We didn’t realize this property was a ‘rural property.” I wanted to scream at them, “this is not a rural property,” but of course I didn’t. I might want to use this lender again in the near future. So I got on the phone and started calling everyone I knew who might want to invest in our wonderful, perfect property. You see, we knew this is just the most perfect flip, and why can’t anyone else see that? Responses we got ranged from, “we’re spending too much rehabbing our Jeep to take it to Colorado and New Mexico,” to “you’re too new, call me after you’ve done your first one so I can see how you did” to “I don’t know enough about real estate investing, so no.” Sleepless nights and panic set in but we soldiered on with our rehab.
Finally, I got a brilliant thought and I called the first lender back and asked them if they would do it. Yep. They would do it, but they wouldn’t give us as much money as we thought we needed. The obtained a Broker Price Opinion that was half of the cost of what we had the property under contract for. What? How can that be? Panic set in again. Remember, I’m a real estate agent, and I had already run comp after comp after comp. I don’t know who that agent was, but in my mind they clearly didn’t have a clue how to do a BPO. I called the lender in a panic and carefully and slowing explained the situation then emailed her the same comps I was looking at. She went to her investor board members, and we got approved for 65% of the after rehab value that was closer to what we thought; however, not quite as much as we hoped. We were just a day before our closing, so we extended 2 more days. Our lender advised to go back to the drawing board, cut out all the fancy stuff, and get to a rehab number that made more sense and was bare bones. We wouldn’t market the home for as high as we wanted, but we’d probably make about the same amount of money. That’s what we did and low and behold, the numbers started to work again. We closed on the property last week, and we’re soldiering on with our rehab.
What’s happening now? Well the dumpster arrives Friday, the contractor starts on Friday. This is a small rehab, so we believe we can get it on the market within about 3 weeks from now–maybe less. Even though we have had much stress and a lot of sleepless nights, we are having so much fun! Tune in next week for an update on our progress.
Karen Rothermich — give me a call if you have any questions. We’d love to help! 816-866-1332
Remember: Soldiering on means to continue or persist, despite adversity or difficulty.
Please leave a comment or a like. We really want to know any thoughts you might have. Thanks a bunch!