Fourth in a series of occasional articles tracing the exploits of a newbie investor who has transitioned from accidental landlord to advanced beginner in a flash.
Picking up from last time, my wife and I — along with our son Brian — have been regularly talking to, and meeting with, our real estate agent to scope out various properties in Brian’s designated locations. While short sales have been out of the question due to time restrictions, bank-owned homes (REOs) are seeing multiple offers and outright bidding wars ending at above listing price (there goes the investor’s profit margin!).
That leaves government foreclosed homes and traditional sales listings. Those, along with the occasional REO, have given us a good amount of potential inventory to work with, although not as abundant as in past years.
The agent has been superb in sending out regular email alerts to me whenever a new property listing comes to market in our price range and in the geographic areas he knows we want to search. Some alerts are repetitious, but most of those are properties that have gone through a recent price reduction.
It’s All in the Details
In the short amount of time we’ve been searching for property, we’ve seen everything from converted apartments (a sad excuse for what the owners consider to be “condos”) with an old wall heater in the hallway and a built-in wall A/C unit in the living room, to single family homes and actual condo complexes.
The problems have been numerous. From condo HOA fees in some complexes reaching upwards of $500 a month, to single family homes measuring not much more than 900 square feet for a two- or three-bedroom, one bath built in the 1920s. If we’re lucky, some of these have been fixed up to acceptable living standards but often that means they’re in the upper end of my price range.
The Non-Foreclosure Route to Investment Ownership
Many times I’ve interviewed real estate agents who have told me their buyers who came in to a purchase deal with intentions of buying a foreclosure ended up buying a traditional listing instead. Now I see why.
After a few weeks of looking, we decided to submit offers on two condo units, both traditional sales. Oh well, so much for foreclosures this time. One of the complexes is in Point Loma, while the other is in Pacific Beach. Both are highly desirable locations, both units are two bedroom, two bath around the same square footage and around the same listing price. HOA fees are much more reasonable for both.
We ended up being the backup offer on the condo in Point Loma, beat out by a buyer putting more money down. However, after the seller of the Pacific Beach condo countered our offer, he accepted our counter to his counteroffer. We ended up $20,000 below his original list price (he had already taken a $10,000 price reduction).
Unfortunately, this particular condo project is not FHA approved, and our lender found out that the FHA is not currently doing “spot approvals” so we have no chance of qualifying for their Kiddie Condo loan program with a 3 percent down payment (a program especially catering to the likes of college kids and recent grads to help them buy their first home).
We’re in escrow with less than two weeks to go before Brian’s college commencements.
Next time, more from the trenches….
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)