Author Topic: Looking for ways to expose our home to local investors  (Read 1525 times)

sonya

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Looking for ways to expose our home to local investors
« on: May 17, 2019, 08:44:27 PM »
Hello, I'm crossposting from Ask A Mustachian.


See very long, original post here:
https://forum.mrmoneymustache.com/ask-a-mustachian/57-years-old-would-like-some-input-on-my-plans-(long)/msg2375989/#msg2375989

In a nutshell:

Husband and I need to sell our house. It's paid off, but we need to put the proceeds in a retirement account, since we are close to retirement and don't have much put away. It's a lovely large home in an established neighborhood, and it needs paint/carpet/countertops cosmetically.

The problem is the house still has the original 25 yr old nonleaky roof, and it needs foundation work in the front. Banks won't make a loan because of these problems. Our listing agent, who is a trusted friend doing this for half the usual commission, found a roofer and foundation company who will do the work now and be paid at closing, but my husband, being in construction, is too paranoid about predicted costs (about 23k for roof/foundation) going higher because of unforeseen problems. (Negative and paranoid is his usual state of mind, there's no reason to think there will actually be unforeseen problems.) The investors she found mostly were not interested because of the roof/foundation work, although one low-balled us by about 80k. This leaves us back to finding investors who would be ok with the extra work (because I'm not up to forcing the issue). We will be competitive, especially because the house needs a roof and foundation work. But because this is our retirement money, we can only go so low. I know investors are looking for great deals, and there is *some* money to be made here, but I guess it just depends on the investor. Sorry, I really don't know how it all works.

If anyone has any input on what we need to do to get exposure to local investors, or any other suggestions, I'd much appreciate it.


waltworks

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Re: Looking for ways to expose our home to local investors
« Reply #1 on: May 17, 2019, 08:53:35 PM »
You don't want to sell to "investors". Investors are looking to buy for cheap/below market and then either flip or else rent the place.

Fix the foundation and the roof and list the house for sale just like any other house. Sell it to a normal person who will pay full pop.

This is pretty basic stuff. Your husband is, no offense, being an idiot. Sure, it could cost more to fix, stuff comes up with any kind of renovation. That's life. It's not going to cost the $80k less you've been offered.

-W

spartana

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Re: Looking for ways to expose our home to local investors
« Reply #2 on: May 17, 2019, 11:41:42 PM »
You don't want to sell to "investors". Investors are looking to buy for cheap/below market and then either flip or else rent the place.

Fix the foundation and the roof and list the house for sale just like any other house. Sell it to a normal person who will pay full pop.

This is pretty basic stuff. Your husband is, no offense, being an idiot. Sure, it could cost more to fix, stuff comes up with any kind of renovation. That's life. It's not going to cost the $80k less you've been offered.

-W
Although this can depend on your area. As I mentioned in another thread, the house I use to own, like most recent sales in my old hood of smaller older homes, were sold for the high land value, razed and mcmansionized. So no amount of improvements would have increased the value. The little 1000 sf 1950s house is being turned into 2 houses on one small lot with 9 bedroom and 9 baths. YIKES! Investors are buying these up like crazy. $600k for a hunk of dirt.

ilsy

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Re: Looking for ways to expose our home to local investors
« Reply #3 on: May 18, 2019, 03:10:07 AM »
You don't want to sell to "investors". Investors are looking to buy for cheap/below market and then either flip or else rent the place.

Fix the foundation and the roof and list the house for sale just like any other house. Sell it to a normal person who will pay full pop.

This is pretty basic stuff. Your husband is, no offense, being an idiot. Sure, it could cost more to fix, stuff comes up with any kind of renovation. That's life. It's not going to cost the $80k less you've been offered.

-W
Although this can depend on your area. As I mentioned in another thread, the house I use to own, like most recent sales in my old hood of smaller older homes, were sold for the high land value, razed and mcmansionized. So no amount of improvements would have increased the value. The little 1000 sf 1950s house is being turned into 2 houses on one small lot with 9 bedroom and 9 baths. YIKES! Investors are buying these up like crazy. $600k for a hunk of dirt.
The OP said that banks won't finance, once banks are out, it's only the investors. Not many investors are going to pay $600k in cash. In order to do that, the investors need to find hard money lenders, those have higher interest rate, first, and second it's a large home with already a long list of repairs from the owner (investors might make it even longer in order to sell for high dollars themselves) and hard money lenders might think that it's too risky since so much work is needed and ask for even higher interest.

The improvements will get the banks on board, and obviously more buyers. Most investors won't touch it, if they don't make at least $20K, and that's including carrying costs (the longer the list, the more time it would take, the higher the carrying costs). $80k minus $23k, minus paint/carpet/countertops, closing costs, carrying costs, and you get to about $20k (doesn't seem too unreasonable to me). Some unexpected problems might even dig into $20k profit. I was very surprised to learn that replacing soffits, fascia, and gutters costed as much as roof replacement (that's an example of an unexpected problem). And that's not accounting for the problems caused by the creatures that lived in the attic that I wasn't aware of at the time of the purchase. Buying a house as is (no inspection, like in this case) is very risky.

On the other hand, it's $23k vs. $80k, I think $23k wins.

sonya

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Re: Looking for ways to expose our home to local investors
« Reply #4 on: May 18, 2019, 04:40:41 AM »
The numbers look more like this (3000 s.f., 4/2.5/2)

$27k for roof and foundation work
$20k for paint, carpet and new countertops
$200k purchase price

$247 total investor cost, minus closing costs, not sure how much

Can sell for $280 - 290k

I originally wanted us to walk away with $200k, but I don't think that's going to be possible.


chasesfish

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Re: Looking for ways to expose our home to local investors
« Reply #5 on: May 18, 2019, 06:01:53 AM »
The numbers look more like this (3000 s.f., 4/2.5/2)

$27k for roof and foundation work
$20k for paint, carpet and new countertops
$200k purchase price

$247 total investor cost, minus closing costs, not sure how much

Can sell for $280 - 290k

I originally wanted us to walk away with $200k, but I don't think that's going to be possible.

Two thoughts:

You're going to get the highest proceeds by doing the repairs.

Second thought is to head over to the Bigger Pocket forums and find some people in your area to give you offers.  I've looked at deals like this and I probably wouldn't do the deal at 200k.  At a $280k sales price, I'd probably clear 260k after commissions and closing costs.  $13,000 just isn't enough money to take that kind of risk.  $160k would be more interesting for the time/money/costs/risk in this deal.

SwordGuy

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Re: Looking for ways to expose our home to local investors
« Reply #6 on: May 18, 2019, 06:38:44 AM »
Do more of the work yourself.

spartana

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Re: Looking for ways to expose our home to local investors
« Reply #7 on: May 18, 2019, 08:28:05 AM »
You don't want to sell to "investors". Investors are looking to buy for cheap/below market and then either flip or else rent the place.

Fix the foundation and the roof and list the house for sale just like any other house. Sell it to a normal person who will pay full pop.

This is pretty basic stuff. Your husband is, no offense, being an idiot. Sure, it could cost more to fix, stuff comes up with any kind of renovation. That's life. It's not going to cost the $80k less you've been offered.

-W
Although this can depend on your area. As I mentioned in another thread, the house I use to own, like most recent sales in my old hood of smaller older homes, were sold for the high land value, razed and mcmansionized. So no amount of improvements would have increased the value. The little 1000 sf 1950s house is being turned into 2 houses on one small lot with 9 bedroom and 9 baths. YIKES! Investors are buying these up like crazy. $600k for a hunk of dirt.
The OP said that banks won't finance, once banks are out, it's only the investors. Not many investors are going to pay $600k in cash. In order to do that, the investors need to find hard money lenders, those have higher interest rate, first, and second it's a large home with already a long list of repairs from the owner (investors might make it even longer in order to sell for high dollars themselves) and hard money lenders might think that it's too risky since so much work is needed and ask for even higher interest.

The improvements will get the banks on board, and obviously more buyers. Most investors won't touch it, if they don't make at least $20K, and that's including carrying costs (the longer the list, the more time it would take, the higher the carrying costs). $80k minus $23k, minus paint/carpet/countertops, closing costs, carrying costs, and you get to about $20k (doesn't seem too unreasonable to me). Some unexpected problems might even dig into $20k profit. I was very surprised to learn that replacing soffits, fascia, and gutters costed as much as roof replacement (that's an example of an unexpected problem). And that's not accounting for the problems caused by the creatures that lived in the attic that I wasn't aware of at the time of the purchase. Buying a house as is (no inspection, like in this case) is very risky.

On the other hand, it's $23k vs. $80k, I think $23k wins.
That's probably true in the OPs case but I was just throwing it out there as a possibility since that is the way it works in many HCOL areas of SoCal where the value is in the land and not the house - which is almost always torn down, mcmansionized, and sold for much much more or, more often, rented by the investor/owner.

But yes, in a normal housing market that isn't already investor driven the OP will likely need to do at least some non-cosmetic things like replacing the roof and doing the foundation to allow for a traditional bank loan from buyers. Around my neck of the woods most investors have no problem funding large cash purchases and then paying to raze the old place and build a new mcmansions or 2 on the lot.

Also the OP needs to add in agent sales commission and compare that to an investor cash deal. Repairs plus commission costs - something you may not have to pay for if using going with an investor - may make it a wash.
« Last Edit: May 18, 2019, 08:31:26 AM by spartana »

tralfamadorian

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Re: Looking for ways to expose our home to local investors
« Reply #8 on: May 18, 2019, 09:21:31 AM »
The numbers look more like this (3000 s.f., 4/2.5/2)

$27k for roof and foundation work
$20k for paint, carpet and new countertops
$200k purchase price

$247 total investor cost, minus closing costs, not sure how much

Can sell for $280 - 290k

I originally wanted us to walk away with $200k, but I don't think that's going to be possible.

You don't want an investor. A cookie cutter biggerpockets investor is going to want buy at ARV*70% - repairs. So, you'll probably get offers around the $156k range. Since you suggested that someone has already offered you $200k, then you're most probably not going to get anything higher.

If someone buys at $200k with $47k in renovations, then sells for $280k-290k with 8% closing costs, they are already at ~10-20k profit without taking hard money borrowing costs into account (4pts/12%). 4pts = 9880. Holding time of three months @12% = 7410.

This leaves a whopping profit of -$7.3k to $2.7k for the flipper if all the numbers provided are correct.

chasesfish

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Re: Looking for ways to expose our home to local investors
« Reply #9 on: May 18, 2019, 05:06:35 PM »
Hey @tralfamadorian - my ballpark of $160k was on, not bad for my former banker math

GreenEggs

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Re: Looking for ways to expose our home to local investors
« Reply #10 on: May 22, 2019, 08:14:48 PM »
This is just like trying to sell a broken car.  Only bottomfeeders will buy your broken car. 


Fix the house then sell it.  "New roof" is a selling point, right? 

Xlar

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Re: Looking for ways to expose our home to local investors
« Reply #11 on: May 23, 2019, 09:55:58 AM »
This is just like trying to sell a broken car.  Only bottomfeeders will buy your broken car. 


Fix the house then sell it.  "New roof" is a selling point, right?

I agree with this. Plus anyone that wants to buy your house to fix it wants to make a profit. Why not fix it and have that profit yourself? Is there a lack of capital to do the repairs yourself?

Cassie

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Re: Looking for ways to expose our home to local investors
« Reply #12 on: May 23, 2019, 10:14:50 AM »
Since the repairs can be made and not paid until closing do that. If this is most of your retirement money itís a good hill to die on.   Plus investors never pay anywhere what the property is worth. Itís foolish to not fix and sell to a regular buyer.

Telecaster

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Re: Looking for ways to expose our home to local investors
« Reply #13 on: May 23, 2019, 10:59:21 AM »
Hello, I'm crossposting from Ask A Mustachian.


See very long, original post here:
https://forum.mrmoneymustache.com/ask-a-mustachian/57-years-old-would-like-some-input-on-my-plans-(long)/msg2375989/#msg2375989

In a nutshell:

Husband and I need to sell our house. It's paid off, but we need to put the proceeds in a retirement account, since we are close to retirement and don't have much put away. It's a lovely large home in an established neighborhood, and it needs paint/carpet/countertops cosmetically.

The problem is the house still has the original 25 yr old nonleaky roof, and it needs foundation work in the front. Banks won't make a loan because of these problems. Our listing agent, who is a trusted friend doing this for half the usual commission, found a roofer and foundation company who will do the work now and be paid at closing, but my husband, being in construction, is too paranoid about predicted costs (about 23k for roof/foundation) going higher because of unforeseen problems. (Negative and paranoid is his usual state of mind, there's no reason to think there will actually be unforeseen problems.) The investors she found mostly were not interested because of the roof/foundation work, although one low-balled us by about 80k. This leaves us back to finding investors who would be ok with the extra work (because I'm not up to forcing the issue). We will be competitive, especially because the house needs a roof and foundation work. But because this is our retirement money, we can only go so low. I know investors are looking for great deals, and there is *some* money to be made here, but I guess it just depends on the investor. Sorry, I really don't know how it all works.

If anyone has any input on what we need to do to get exposure to local investors, or any other suggestions, I'd much appreciate it.

The house is already devalued by the price of the foundation work and roof.   Even if it was eligible for a loan, any potential buyer will see the deficiencies and lower their price accordingly.   Since you are already out the money, you should do the repairs and sell your house on the regular market. 

The cosmetics are a little bit of a judgement call.  Agents always want you to do them because they probably will increase the selling price, but you don't always recoup your costs.   New paint is always a good idea.   Carpet and countertops are grey areas.   In same ways, it is a feature because the buyer can rip them out and install what they want.

In my neighborhood, the land is more valuable the original houses, so it is common for investors to buy a house, demolish it, and build something big and fancy.  Accordingly,   I get unsolicited cash offers about three times a week.    I suspect if your house had some big upside potential, the investors would be finding you.   

spartana

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Re: Looking for ways to expose our home to local investors
« Reply #14 on: May 23, 2019, 01:19:46 PM »
^ Same in my old hood. Investors would make offers constantly. One neighbor was having a garage sale and an investor cruised by and offered to buy it. For around $600k as is just for the land. She sold it, they razed it and built a fancy giant 2 story house. I did the same but went with a traditional sale via a realtor even though investors were constantly around. It of course was razed and 2 houses are being built on the property totaling 5000 sf (not counting garages or parking) amd 9 beds and 9 baths.
« Last Edit: May 23, 2019, 01:22:35 PM by spartana »

lhamo

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Re: Looking for ways to expose our home to local investors
« Reply #15 on: May 24, 2019, 02:40:00 PM »
20k for paint/carpets/new countertops seems really high.

When you say the one offer you had lowballed you by 80k, what does that mean?  If they offered you 200k, as is, I would take it.  They are assuming the risk that you are not willing/able to carry through the repair process.

clarkfan1979

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Re: Looking for ways to expose our home to local investors
« Reply #16 on: June 18, 2019, 09:48:33 PM »
I agree with the other posters that most investors will offer 160K. The best deal for you is to do the work yourself. If you don't want to do the work, anything over 180K is more than fair.

chasesfish

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Re: Looking for ways to expose our home to local investors
« Reply #17 on: June 21, 2019, 08:02:24 PM »
I saw this thread pop back up and was hoping to find out what happened to the house