Last in a five-part series of articles tracing the exploits of a newbie investor who has transitioned from accidental landlord to advanced beginner in a flash.
Last time we were already in escrow on the condo and counting down the days to Brian’s college graduation. Well, it’s a week and a half after his commencements now, our loan funded just yesterday and we recorded and closed escrow today. Such a deal!
From start to finish, the entire process of purchasing this two bedroom, two bath condo in 1,110 square feet of living space, with two parking spaces and in a highly desirable beach community in San Diego County, took less than three months altogether. Escrow was extended a couple of times, so we didn’t exactly complete the transaction in the 30 days we originally laid out, but other than that everything else went smoothly.
Unfortunately, due of time constraints caused by my son’s need to move off campus shortly after graduation, there was not enough time to pursue a short sale. Government foreclosed homes ended up not being an option either since they were not in his desired locations. And although we did get to tour a few REO listings, by the time I was pre-approved by the three major lenders — Bank of America, Wells Fargo and Chase — in order to be able to bid on their REO properties, offers had already been accepted so I was too late.
In San Diego, as in some other parts of the country right now, the inventory of available foreclosed homes has shrunk exponentially. Whether or not a second wave of foreclosures will come to market from the shadow inventory banks are allegedly withholding, it doesn’t matter. Now was when I was looking and the inventory in stock for the areas we were considering was mostly traditional sales.
But as I quickly learned in this process, just because you’re not buying a foreclosed home it doesn’t mean you can’t get a “good deal.” I feel I did. I ended up buying for $20,000 below the original list price. The appraisal came in $10,000 above what I paid for it, and I understand that the property sold five years ago for a lot more than I am paying for it now.
Plus, by the time I locked in the interest rate for the loan, rates had gone down so I ended up paying 4.5 percent on a 30 year fixed instead of the 4.65 percent the lender had originally estimated. Located in an area where I can get $1,800 a month for a condo like this in a 120-unit complex with tennis and volleyball courts, pool, spa, guest apartment, fitness center and club house, I stand to positive cash flow a few hundred a month after PITI plus monthly HOA dues.
I give credit where credit is due, and my Realtor deserves a lot of the credit for keeping this going as smoothly as it did. My lender helped a lot as well. We’ve done two deal together now (including the refi on my family home) and we’ll probably do more in the future.
My only regret in all this, as an investor friend recently said to me, is that years from now I’m probably going to be sorry I didn’t buy five more of these units.
More From the Diary of a Rookie Real Estate Investor
Time to Get into the Game (Part 1)
From Accidental Landlord to Cash Flow Positive (Part 2)
Better to Buy Bank Owned, Short Sale or Traditional Sale (Part 3)
Foreclosed Homes a No-Go this Time Around (Part 4)