TheCutlery said:
Yeah, sounds like a solid plan that"s worked out pretty well for everyone up until now.
I am no guru and only point out what was worked for me in the past including after the real estate bust. I only buy houses that I personally want to live in and could long term if things really went bust. I would say 95% of this wouldn"t work in any metro area and or anywhere on either coast. I am not a flipper. I look at it as I want to buy a house but don"t want to pay full retail of a house because I am willing and able to do a LOT of the work myself and would rather do that than pay someone else to do it. Plus I"m not a big fan of the way homes are built and finished nowdays and like my "quality" over most that I have seen for sale. Most people who work 40 hours or more a week wouldn" thave the time to do most of the work I do on a house. Another bonus I have is that because of my work if I couldn"t sell my house it wouldn"t have any bearing on me much at all. I just moved 300+ miles and kept the same shop opened.
Spoiler Alert, click show to read:
You have to pick the right house and live in the right area. Our market hasn"t been hit anywhere as hard as the rest of the country. I missed out on several houses because I didn"t make an offer in the first 24 hours. Paying cash also has it"s bonuses because people are in a hurry to get out of a house or out from under it. If you can offer cash and have an inspection done and a survey within 48 hours of them accepting the offer you can close in under 2 weeks with connections and that appeals to a lot of people, even if you are paying less. Also the bonus of cash is even if you sell at a later date for a loss you are able to sell. I see some homes that are dropped a tiny amonth monthly and they tell me that"s because their payoff went down that tiny amount each month. I couldn"t live like that. Turnover on houses here is real low unlike a lot of metro areas as well and that helps a lot. If you are interested in a certain part of town or a rural area you might have to wait months for a house to go up for sale in that area. Where I am renting now the lady who has my rent house (an agent) said she gets calls daily asking what has come up for sale in our area because it"s popular.
I just sold my last house in April for 20% more than I paid for it in 2008 right before the bust because I chose the right house. Plus it helps when there aren"t 10,000 foreclosed homes on the market here. The few that do go on the market that are foreclosed most of them are in shit shape and will stay on the market forever because apparantly people don"t believe in maintance anymore. I bought it and it wasn"t even for sale at the time. I talked to some people who knew someone who was thinking about selling their house but wasn"t sure it would sell because it needed some minor work. I called and went by and paid cash for it and they were happy and I was happy.
Also the downfall of a lot of flippers (I"m not a flipper - I buy a house I want to live in and like doing the work and if it sells for more when I get ready to move then good) was they never took any profit. They poured everything from one house into the next until the house of cards fell. I could afford a house that cost probably close to 10x what this one cost (housing is cheap here compared to the rest of the country - this house is in a country club on a gulf course on 2.5 acres and it is selling for $150k and could probably be turned around in a month for $225k with updating) but no way I would tie myself into that much in one basket. Right now here locally I think there are several bargains if you can live in a house that doesn"t have granite countertops, new appliances etc...and have the ability to do those things yourself at cost without hiring someone to do it. People getting loans on houses nowdays won"t have the credit or cash after buying a home to do those improvements. If you can do themself yourself cheaply and have the means to pay for them there "can" be a payoff. Any house that has been for sale for a month normally means it"s going to stay for sale for a long time - for a reason.
Another thing in my favor is I do 99.9% of my labor myself. Prior to the house I bought in 2008 becuase I was in a hurry I built my last two homes and my parents house. That doesn"t mean general contractor, that means built. I did everything minus the slab pour and the shingling.
One thing I"ve done for every house I"ve owned is built a shop. Around here you pretty much can"t hardly sell a house on acreage without a shop of at least 24"x36" for peoples hobbies, work, or storage for multiple boats etc...Since I do steel fabrication and erection for a living I do that at about 50% cost of what someone would pay to have it done. So right there I can add about $20-$40k worht of value to a home quickly and cheaply. Plus I have to do it because I have to have a place to put my tools/equpment.
Anything is possible and anyone can loose money. But at least it"s paid for and I will have had the use of it if I need to cut my losses and get out unlike a lot of people. If I truly got stuck with it I could either live there or if I had to totally write it off at zero I could walk away from it (not likely).
Lastly - here almost all houses (even in "town") are eligible for rural development loans. Which means you can buy the house at a great rate and put down only 5% - 7.5% for a down payment and not have to pay PMI. That"s a huge bonus when you are trying to sell a house. You don"t need people who need 20% cash to buy the house.
As an example. One house I looked at in perfect shape would easily sell for about $250k. Around here that"s a nice house and this one was and on about 10 acres. However when it was foreclosed on they stole the condensor/compressor for the A/C unit outside and some minor stuff like light fixtures inside the house. They listed the house at $150k and I talked to the listing agent who said she had tons of interest, but here was the rub. People could get a loan for $200k, but if they got a loan for the house at $150k they didn"t have the money to fix the AC and other stuff (I figured between $10k and $12k). They used to offer loans that you could get to improve a home and it would include the price of the house and XX amount for repairs. Apparently they have really clamped down on those and are impossible to get. I passed because I didn"t want to live where it was. I asked about it a month later and someone had paid cash for it at $150k, spent the $10k to fix it and had it up for sale at $215k and she said they alread had an offer at $200k. All under a month from when it was put up for sale the first time. Which is why you have to make an offer around here on these types of houses very quicky and have someone who can do an inspection/survey in your pocket within 2-3 days or you will loose it to an investor very quickly.
So basically even tho I plan on living there long term I wouldn"t ever buy a house that I don"t think I could work on and improve and sell it for more than I paid for it even if the prices here go down 20% - which they haven"t yet at all.
Getting a great deal on a house from a private seller is going to be tough because they don"t have the room to come down or they will sit on it till they get what they want. Notice the house I"m buying is from a company. I figured they are selling the house at just over what they paid for it 12 years ago for the executive who lived there and the research at the course house agreed with my hunch. To them they want to get rid of it in a reasonable time after they decided to sell it and profit was not the major motivation, but rather to get rid of it and buy another one where they are moving the guy. They know the market is down and price it accordinly to sell fast. Same thing for the house I made an offer own that was gifted to the university. Estates can be a good deal too "if" there aren"t 14 heirs and the heirs that are selling can agree quickly on a price and actually need the money out of the house. If they were more well off than their parents forget it, they"ll sit on the house for years waiting to get full asking price. An heir that got a house and needs the money will sometimes come down a lot very quickly if you dangle cash in front of them.
