I find it ironic that I tell myself to FOCUS (Follow One Course Until Success) ALL THE TIME, when in reality, my investing strategies are still all over the place right now. Let's take a minute to recap where I'm at right now:
1. I'm looking for a single family property for myself
2. I'm looking to partner with my friend on a buy-and-hold dupex (Partnership Leads #1 and#3)
3. I'm looking to partner with my friend on a single family value-add property (Partnership Lead #2)
We'll, either way, I've got to tackle things one at a time. Seeing as I already lost out on three single family properties just a couple weeks ago, my business partner and I are going to be aggressive:
We take a big look at Partnership Lead #1
Remember, it's listed for $105,000, each unit is a 3bed/2bath, total gross rents are $1,525, and it's in Warren (a pretty decent neighborhood we like). Crunching the numbers, and we're talking more than a 15% Cash on Cash return!
Yeah, we've got to hop on this thing quick. So, I ask my agent to get out there as soon as possible to do some recon. Definitely want to get photos, videos, and her take on the property/neighborhood. According to the listing agent and her impression of the place:
-1 Tenant has been there for a year
-The other Tenant just moved in, but it's a couple making over $60k combined and they haven't had issues paying.
-Property is being sold AS IS.
-Roof is about 12 years old
-HVAC systems are 17 years old (YIKES! That's an upcoming expense)
-There were a few cracked tiles inside, but overall, things looked "real good" according to my agent
My partner and I go real deep into the analysis of the property and finally around midnight, I send my agent a few last questions....everything from yard maintenance responsibilities, to replacement roof cost estimates. We're literally 12 hours away from putting in an offer...
I knock out for the night, exhausted. And the next morning at 6am, get the following email from my agent:
Just talked with the list agent - unfortunately they accepted an offer last night. They had an offer come in with a midnight response time (!!) and went ahead and accepted it. I let the list agent know to keep me in the loop. Sorry!! Knew this one would go quick, but midnight offers is crazy!
WOW. Seriously. WOW.
I know, investing shouldn't be emotional. But, I was upset. And it lingered for days. Dang it. We wanted that one! BAD! But, I'll repeat this lesson: you've got to get OVER IT! And move on!
We take a look at Partnership Lead #2
Remember, I literally found this lead on my phone while walking through Target on my lunch break. This would be a HUGE departure from what my partner and I have experience in. This single family property is a For Sale By Owner listed at $60,000 and it's a value-add investment. All fixed up, it should be worth around $95,000. Basically, my partner and I would buy it all cash, renovate it so it'll appraise for $95k, rent it out at $950 per month, then refinance it and pull most of our money back out. At the end of the day, we'd have VERY little money in property, it would cash flow, PLUS we'd have most of our money back and ready for the next investment!
Breaking down the numbers to determine our offer price:
After Repair Value: $95,000
Renovations: about $15,000
Agent Commission: $1,800 (because it's a For Sale By Owner, we offered to pay commission)
General rule of thumb on flips or value add investments, you want to be "ALL IN" for 75% of ARV. So, if our ARV is $95,000 we have to be ALL IN for....
Which doesn't give us a ton of wiggle room. Especially since the list price is $60,000. We go for it anyway, and offer: $52,000
Andddddd, we get a quick response:
There's already another offer in at $63K cash - buyer is paying all closing costs and commissions, So total out of pocket to the buyer is higher than $63K, I would assume somewhere in the $67-$68K range. I told him I'd talk with you and see what you want to, but it sounds like we're quite a bit apart.
My partner and I definitely can't go that high. ANOTHER ONE BITES THE DUST! Damnnnnn.
We take a look at Partnership Lead #3
Here's another attempt to go in on a duplex with my partner. A couple interesting things about this property:
-it's outside of the neighborhoods we generally look at and not very close to downtown.
-the owner is late on their taxes and owes over $4,000. We've never dealt with anything like this...
-Rents are currently at $750 per side, but there's a strong case for being able to raise them to $850.
Things check out after running the numbers and even though we don't know this neighborhood AT ALL, it looks very safe and clean so we're very comfortable Jumping IN.
We go for it and offer $143,000 with a little wiggle room to negotiate up if needed.
We're hit with a "multiple offer notification" meaning, the sellers are asking for every buyer to submit their "highest and best" offer by tomorrow 10:00am.
This is always a tricky situation. You never know where you stand in terms of your offer amount compared to others. You could VERY WELL already be the highest offer and getting emotional now can hurt you in the end. Ultimately, as an investor, it comes down to what number are you still comfortable buying the asset for and what returns do you want. In our case...
We offered our HIGHEST AND BEST at $146,000. That's the absolute HIGHEST! And we're not moving up from there.
SAD FACE :(
The next morning we're hit with an email: "I heard back from the agent on the duplex - they went with another offer."
This is where frustration REALLY hits you. All the hours of work put into researching properties, looking up expenses, running spreadsheets, reading disclosures, putting in offers....
It's TOUGH. It HURTS when you fail and lose out on a deal, or two, or three, or six. But, to really make it in this business, it's going to take hundreds of hours to master. It'll take WAY more offers than you'd ever want to submit.
All you can say is:
ON TO THE NEXT ONE.