Phoenix Real Estate Market Keeps Tanking (Scottsdale, Maricopa: foreclosed, renters, mortgage)

[bgray9]

Originally Posted by Captain Bill

If you give a little more thought to it, you'll see that, if an individual takes on the same project they will have close to the same expenses, and probably more.

• It's going to cost them time and money to have someone find that house and bid on it for them, because about the only place one can find a home to rehab today is at the trustee sales.
• They will have the same closing costs for the purchase, title insurance, escrow fee.
• They will have the same carrying costs of the vacant home until they make it move in ready including insurance, utilities, HOA fees, and so on.
• They will either pay cash, use hard money, or have a mortgage.

It will probably cost the individual more than the $25,000 that it would cost an experienced rehabber who has the contractor sources and knows how to be sure s/he's not overpaying for the work.

Plus they are going to have to manage the project themselves, or pay a general contractor a fee for managing the project. Then they still have to oversee the contractor.

The only amount that would not be in there is the final sales expense, as long as the owner keeps the house. But at some point in time if they sell the home, they will incur sales expenses. Therefore, they will probably have more than an $80,000 cost to rehab.

I think you're leaving some things out. When a rehabber buys a house, they incur all the expenses of buying the house, then there are all the expenses of selling the house. Someone buying directly cuts out one entire buy/sell transaction, saving significant dollars. And of course the rehabber/flipper is making a profit, in your example $24,000. Just those two right there make it a whole lot more profitable to do it directly. Certainly it's not for everyone, and if a person is someone that just wants to walk in and live and not have any issues to deal with from day one, that's absolutely not the way to go. But, if someone has some basic knowledge of things and some sense of hiring decent folks to do various projects, and wants to go through a bit of trouble for a month or three, you can come out much better than having a rehabber do it for you.

We're actually doing just that at this time, having closed on a short sale in early January, getting it at a good price due to several years of neglect, and moving in this weekend. We were tempted by several rehab/flip houses, but are extremely glad we didn't buy one of those, but rather went through a few months trouble on our own for a good deal of long term benefit. We're ending up with as nice or nicer house than the flip/rehabs we looked at, and saving a big chunk of money over buying one of them. And my wife has gotten to put a good number of touches on things that we wouldn't have been able to do on a flip/rehab without significant additional cost. I like having been there and through the process to know what was done, how it was done, why it was done, and having a hand in deciding those questions and more. Again, not for everybody, but it can work out very nicely.

[MN-Born-n-Raised]

Originally Posted by azjack

Of course, many already have capitulated, but there is no public record of their loan not getting paid for the last 3, 6, 9 months or more. How soon Trustee Sale notices are filed seems to be largely luck of the draw, but clearly Fannie, Freddie, FHA, etc will have plenty of inventory in Maricopa County on their hands. A tighter MLS inventory is just not a good reason to overpay when the large-scale picture is quite different.

If someone is flipping a home and raising the prices 20-30% quickly, they got a steal-of-a-deal. I'm betting they didn't bid against a bunch of people on MLS and they probably bought it on the steps of the courthouse. That has an amount of risk unless you know the home ahead of time.

Nothing stops me for asking $120 for that $100 bill that I found. Of course, I'm not going to have too many people interested at $120 but I surely could attempt to sell it. All my point is you better be buying property a right to make 20-30% quickly (if that is even possible). New pricing is about 25% less than the distressed properties. I just don't think people are getting anything near that amount on a flip.

[ReadyFreddy]

But, if someone has some basic knowledge of things and some sense of hiring decent folks to do various projects

Can you impart some sense of decent landscapers and pool men to me, please? Because my basic knowledge (and referrals and ads) are turning up some duds so far.

I like having been there and through the process to know what was done, how it was done, why it was done, and having a hand in deciding those questions and more.

I'm in a similar boat but I'm finding I might have preferred to not be there to see how it was done, why it was done, etc.

Actually I'm in agreement with a lot of your points. I'm sure when I'm done with this house what I spent will add up to a lot less than what a 'done over' house would've cost. But right now I'm not so sure the headaches are worth it. For me. And I'm not so sure I have skill in making the decisions, either. Buying a furnished model home sounds about perfect right now.

[Captain Bill]

Originally Posted by bgray9

I think you're leaving some things out. When a rehabber buys a house, they incur all the expenses of buying the house, then there are all the expenses of selling the house. Someone buying directly cuts out one entire buy/sell transaction, saving significant dollars. And of course the rehabber/flipper is making a profit, in your example $24,000...

A regular buyer cannot buy or sell a home any cheaper than a rehabber. Today it's extremely difficult to even buy a short sale at a price where one can make a profit. But if the rehabber and a regular buyer buy a short sale, they both have the same purchase expenses of closing costs, cost of money, carrying costs, etc.

The only place to buy a home and have that opportunity today is at the trustee sale. If both a regular buyer and a rehabber buy through a trustee sale bid service, they will both pay the same amount. If the rehabber is a repeat customer, then he may pay a slightly lower fee.

The regular buyer is going to pay the same price to purchase and close on a trustee sale home as a rehabber. However, a rehabber who buys lots of homes may have a relationship with a title company where he gets a discount on the escrow fee and title insurance.

The carrying costs are going to be the same for anyone.

The rehab costs are probably going to cost the regular buyer with no rehab experience more money than a rehabber.

At some point the buyer will sell the home. At that time the selling expenses will occur.

The $24,000 profit will be the savings that a regular buyer will have. However, in my example, it will probably be less than $24,000 because the regular buyer will not be able to do the rehab at the same cost as an established rehabber. But whatever it is, that is the payoff for the hard work of a regular buyer doing the work himself. If a regular buyer is willing and able to take on a project like this, then it is certainly a way to save some money.

[Captain Bill]

Originally Posted by MN-Born-n-Raised

If someone is flipping a home and raising the prices 20-30% quickly, they got a steal-of-a-deal. I'm betting they didn't bid against a bunch of people on MLS and they probably bought it on the steps of the courthouse. That has an amount of risk unless you know the home ahead of time.

Nothing stops me for asking $120 for that $100 bill that I found. Of course, I'm not going to have too many people interested at $120 but I surely could attempt to sell it. All my point is you better be buying property a right to make 20-30% quickly (if that is even possible). New pricing is about 25% less than the distressed properties. I just don't think people are getting anything near that amount on a flip.

My target was 15% net profit on my rehab projects. I made more on some, and less on some, so the average was in that ball park.

[Captain Bill]

[quote]

Originally Posted by ReadyFreddy

Can you impart some sense of decent landscapers and pool men to me, please? Because my basic knowledge (and referrals and ads) are turning up some duds so far..

If you're in the 85234 area of Gilbert, I can give you a great pool guy name. He limits his area, and number of clients.

If you're in Chandler or Gilbert, I can give you the name of a great gardener. Just PM me.

[ReadyFreddy]

Originally Posted by Captain Bill

My target was 15% net profit on my rehab projects. I made more on some, and less on some, so the average was in that ball park.

Just curious, was that 15% after 'paying' yourself something for your time, or was that your entire take-home?

[ReadyFreddy]

[quote=Captain Bill;23289545]

If you're in the 85234 area of Gilbert, I can give you a great pool guy name. He limits his area, and number of clients.

If you're in Chandler or Gilbert, I can give you the name of a great gardener. Just PM me.

Thanks but I'm in north Mesa. I don't need ongoing pool/landscape maintenance, just initial repairs to the pool/spa and landscape installation.

On the topic of saving money by doing the fixer-upping ourselves, I think most people pay the higher cost of buying a house "done" because the whole cost is in a low interest, 30 year mortgage. If my bank wants 5% down, I only need to come up with $10k cash to get in a $200k house. But if I want to buy a $140k house that needs $35k in work and get that $200k house for $175k, I need $7k down plus the $35k to do the work. So I need $42k cash for that option vs. $10k for the "done" house. Or I need to somehow finance the $35k in repairs, and you don't want that on your Visa card.

[Captain Bill]

Originally Posted by ReadyFreddy

Just curious, was that 15% after 'paying' yourself something for your time, or was that your entire take-home?

The 15% was the total net profit. My pay and office overhead is in the 15%.

[Captain Bill]

[quote=ReadyFreddy;23290057]

Originally Posted by Captain Bill

Thanks but I'm in north Mesa. I don't need ongoing pool/landscape maintenance, just initial repairs to the pool/spa and landscape installation.

If it is north Mesa and not north east in Las Sendas area then the gardener may be able to go there. The pool guy can't. Let me know a major cross street and I can tell you.

On the topic of saving money by doing the fixer-upping ourselves, I think most people pay the higher cost of buying a house "done" because the whole cost is in a low interest, 30 year mortgage. If my bank wants 5% down, I only need to come up with $10k cash to get in a $200k house. But if I want to buy a $140k house that needs $35k in work and get that $200k house for $175k, I need $7k down plus the $35k to do the work. So I need $42k cash for that option vs. $10k for the "done" house. Or I need to somehow finance the $35k in repairs, and you don't want that on your Visa card.

You're absolutely correct.