My name is Kim Tucker, a local Kansas City real estate investor and MAREI Director. My husband Don and I have been real estate investing in the Kansas City area since 2000. Usually I work on getting deals under contract and Don does a great job at rehabbing them. Wanted to share about one of our latest real estate rehabbing flip deals completed last August 2012.
The Property: We purchased a patio home/town house/half a duplex in Kansas City, Missouri on the Golf Course. This home was built in 1989, and required a lot of cleaning and deferred maintenance on the roof, windows, and HVAC and some updating. Based on comparables in the area, a similar sized 3 bedroom, 2 1/2 bath patio home on the golf course should sell between $140,000 and $160,000.
The Comparables: A similar renovated home with a walk out basement that sold for $163,500, a home pending at $169,900 in 27 days and a 2 bedroom that sold for $148,500. We estimated our after repair value at about $145,000 without a finished walk out basement and about $155,000 with a finished basement.
Repairs Needed: Exterior recently painted by HOA. House was in need of a new roof, windows, deck repairs, minor updates to kitchens and baths (mainly fixtures and granite tops), a good cleaning and interior painting: About $35,000 total in estimated rehab repairs.
Maximum Allowable Offer:
$145,000 x 70% = $101,500
Less Repairs of $35,000
Maximum Allowable Offer: $66,500
How We Found The Deal: We have a website on Wordpress that we pay $12 a year for and maintain ourselves. In addition we post about 5 to 10 “We Buy Houses” ads about 5 days a week on Craigslist.com and Backpage.com. The sellers say they found our website on the Internet. So either they saw one of our ads or they did a search and joined our website.
Seller's Story: Sellers inherited the home free and clear several years ago and have not paid HOA dues or taxes since. They owed about $22,000 in back taxes and the property was actually going to ‘tax sale' the same month if the back taxes and liens did not get paid. They also owed about $8,000 in back HOA dues. They wanted to net $70,000 after all of the above had been paid.
They received an $80,000 offer from another buyer that was going to pay off all the back taxes and HOA up front and then pay them the remaining $50,000 over 5 or 6 years time. They also received a similar offer to ours that was a bit higher but with a pushed out closing date. Sellers wanted to close on the 14th of August, which based on the tax sale, they need to have the closing on or before Friday Aug 17th.
Why Seller Accepted Our Lower Offer: We had the lowest offer, but we agreed to pay them $2000 upon proof of clean title and their signing of closing documents, so they had funds to rent a new place to live. We also agreed to closing on the 16th, to stop the tax sale, but gave them the weekend to move out. We gave them something the other offers did not: full cash sale now, moving money before the official closing, and possession after closing so they have time to move out.
Funding: Funding for this deal came from a private partner who funds purchases and we manage the rehab for a split of the eventual profit.
Exit Strategy: We could of wholesaled this for quick cash. I estimate we could have gotten a wholesale investor buyer at about $80,000. Alternative exit strategy – we could have fixed the roof, windows, and mechanicals for about $12,000 and sell to an owner occupant as a fixer upper for about $100k to $110k as that's what fixer uppers bring in this area. Or we could have chosen to fully renovate and sell at $145,000 and potentially finish the basement and sell for $155,000 (or more).
This Dynamic Duo investing team choose to rehab and upgrade the property and we put it for resale at $159,900
Thanks for reading about this real estate investing success deal submitted by the Tuckers, who are long time Kansas City area investors who purchase homes for cash to renovate and resell and make real estate profits!!!