After deciding I wasn't going to sit on the fence any longer, I hooked up with a RE agent in late Jan/2005. I told her my intentions and that I would be submitting a lot of low-ball offers with almost all of them being rejections. She was “OK” with it. I then started looking at all types of houses: bank REO's, HUD/VA foreclosures, FSBO's, and so on. I had submitted about 15 offers in less than a month, with most being rejected and some countered at almost full list price, but I knew it was a numbers game. Within a day or two, I received an email from my agent saying my 7th submitted offer was accepted. It was a HUD foreclosure I had submitted the around the 2nd week, and one which I had long forgotten about. Immediately, I loaded up the spreadsheet for the property to refresh my memory on the numbers:
List Price: $112,000
Offer Price: $101,000
My agent had earlier referred me to a broker, but I hadn't conversed with him yet. Soon after learning I was the winning bidder, I called the broker up and got the financing rolling. HUD is usually slow about closing, and mine was no exception (in a way I was glad). It took them 45 days to close, which was in late April. I only needed to spend about $1,000 on repairs (paint and a few other items), and with other fees, closing costs, and ~3 months of holding costs, I had spent about $9k out-of-pocket. Not good. However, as I write this (Jul/2005), I have a renter lined up who will not only pay for my monthly costs now, but I'll pocket about $200/mo in CF. Soon after learning I had a renter lined up, I found out a buyer was seriously considering giving me full offer price ($135k). Therefore, minus my costs to-date associated with the deal and my estimation of FMV being in line, I have a positive net worth in this deal of about $25k, along with $200/mo positive CF.
Although my first intention was to sell the property for a quick retail flip, I've decided now to hold it long term as a rental for long-term appreciation. It's not a super deal (~77% current LTV and 27% immediate ROI), but being my first one, I am very proud of the results.