Thursday, February 24, 2005


My offer for House 11 has not been signed yet. The agent was on his way over to the seller's this morning when he got another offer - this one is also all cash with a price of $128,000. He's faxing me the offer to prove it's real and will give me a counter offer equal to it. If I accept it, the other offer will be in a backup position. Damn damn damn. If that contract was signed yesterday, I could have saved $8,000.

I'm still going ahead with this. I did some more research on comps and I think I can sell the place for a bit more than I thought. Not $8,000 more, but a couple thousand more.

This just proves how competitive the Phoenix market is.


Steve said...

Sorry to hear that, Shaun, but stick with what works for you. As I said in my blog a few days back, I had a fabulous HUD home I was salivating over with an offer of $118,500. Another investor bought it for $11,000 more. I could have offered about $5k more, but $11k would have had me negative after everything was settled.

Keep up the persistance - it's contagious!

Shaun said...

Yeah, I can handle the extra $8,000, but it still sucks :-) Anyway, the other buyers actually offered $132,000, but they have an agent, so the seller would need to pay about $4,000 in commission to him. So my $128,000 offer equals their $132,000 offer. Actually, I could have offered $127,600 since the other offer included the seller paying $400 for a home warrantee policy, which I am not buying. I let that slide. Bottom line is I think there is still room here for money to be made. So I only get a 37% ROI instead of 40% :-)

Bginvestor said...


I'm would be interested how you calculated your ROI.. thanks!

Shaun said...

Oh..sorry.. 37% and 40% were just numbers I plucked out of the air. The point was that my ROI would drop by maybe a couple points, but would still be pretty big.

Using some guesstimated numbers: total cost of buying the house, fixing it up, insuring it, paying escrow costs on the purchase and sale, and paying agent commissions on the sale, should be about $137,900. If I sell it for $149,900, then I have $12,000 profit. I plan on holding this property for two months (1 month for fix up, 1 to sell.) My ROI then is $12,000 / $137,900, which is 8.7% in 2 months. That translates to a yearly ROI of 52.2%. Had I not had to raise my bid by $8,000, my total costs would be $129,900, my profit would would be $20,000, the 2 month ROI would be 15.4%, giving a yearly ROI of 92.4%. Ok, so the extra 8 grand caused it to drop a bit more than a couple points. But I'll still take a 52% return anyday!

Michael said...

You might want to rethink your ROI figures. In the numbers you shared, you're appear to be planning to sell without a realtor at a premium. If it takes you 4 months (to buy, fix, sell and close), your ROI drops to 8.7 in 4 months, or 24% annually. Also, I'd suggest you make sure you allow for the unexpected which always comes up.

I just finished my fourth rehab and, without fail, it always costs me about 10-15% more than I planned for repairs and associated costs.

Shaun said...

The market here in Phoenix is crazy. I expect it will sell in no more than 2 months. Escrow for the purchase will be no more than 2 weeks and, actually, we are on track for a 1 week close now, assuming the title company can get the title search done in time. The sellers want out ASAP.

The last property I sold went for full price - which was slightly more than FMV. I can thank California investors flooding into this market for that.

Buying the house does not incur any commission costs to me. Selling the house incurs 4% commission costs - my agent will list for 1%. Those figures are included in my $137,900 figure for expenses:

$128,000 - house
$300 - home and termite inspection
$350 - 1 year insurance (the unused portion of which will be refunded to me when I sell, so most of this will come back to me)
$6,000 - commission when selling (4% of $149,900)
$2,500 - fix up costs
$750 - misc. title fees for buy and sell

Those add up to $137,900. Right now, the only unknowns are what the fix up costs will actually be and the exact amount of the title fees. I get a 30% discount on title fees and I got the $750 figure from looking at past sales I have done. There is no loan involved, so I don't have an appraisal fee, origination fee, or underwriting fee. There may be 1 or 2 months of property taxes I have to pay. 2 months taxes on this property comes to $152.

But you're right - there are always unexpected things. Check back here and see how it goes. I will be posting my final numbers when all is done. We'll see how close my estimate comes to the actual numbers.

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