Well, I am finally able to update! The kids have been using the computer most of the afternoon so I had to wait until they were in bed so I could type up a detailed post.
I met the seller in town and we drove over to the house. He had some guys working there, clearing out the place, and doing some work on the inside. My first thought was "Hmm...ok, he's doing some work on the property, maybe he's not so motivated after all." Turns out he's doing the work because he just didn't like the condition the house was in, and just wanted to do something. He's very much a do-er, but yet he has no interest in holding onto the property. He basically said he could get rid of it tomorrow.
The house is solid, but needs updating. The carpets need to be ripped out, and there is great hardwood flooring underneath that could be refinished. The kitchen needs new cabinetry, appliances and flooring. The same goes for the bathrooms (it's actually a 1 1/2 bath, not a 1 bath). There is a deck out back that would need to be rebuilt.The windows are original to the house, and are the ones with storm windows and wood framing. I'm not sure if they would need to be replaced. The lot is a nice size, with a creek running out way in the back of the property.
My very rough guesstimate for rehab is $20k, but I wanted to get a couple of contractors out to the house to give me a more accurate estimate.
Figuring the ARV is giving me problems. The last homes in the subdivision that sold were back in March for an average square foot of $59 1/2. If I take that price an multiply it by the SQ FT on this house (1,414) it gives me an ARV $84,133. If I go out of the subdivision but stay in the general area (same house style, built around the same time) I get $56 sq ft., or $79,184. It seems low to me, but the problem is that the square footage is so much smaller than the other homes in the area, so I guess maybe it really isn't that low. The seller said he had ordered an appraisal, but hadn't gotten it back yet, so it will be interesting to see what the appraisal comes in at.
Next, we went to the other property that the seller owned himself. I was rather perplexed, as the seller indicated that he would not rent to anyone, as he didn't want to put up with the hassle, so I was curious to find out why he had rental property. Turns out this was the house where he was born and grew up in! It had apparently stayed in the family, and his sister had been living there until she had to go into a nursing home a couple of years ago. I guess when she passed, he inherited it. He had completely redone the inside and outside, and just held onto the house. He told me that he figured he'd use it if he wanted to stay in town and was too tired to drive back to his house (he lives about 45 min away).
This house is a small 2/1. It's called a "mill house" because it was built during the 1920's when the textile industry was in it's prime, and the mills would build homes nearby for their employees. Many of these neighborhoods deteriorated once the mills began closing down and are considered the poorer sections of town now. Most of these homes don't retail for more than $30-45k, and as such, are nearly impossible to finance as rental property through conventional financing.
He told me he would let it go for $35k tomorrow. I thought that was fair, but I know he was basing this on the homes in the mill area being marketed for $60k. When I took a look at comps, the one house that sold on the same street as a contract for deed for $45k. Again, like his brother's home, it would be interesting to see what the appraisal comes out to be.
So, where do I go from here? Well, I am going to call a couple of local contractors to see if they will come out to the brother's house and give me a couple of estimates. From there, I'll call the seller to see if he got the appraisal back yet. Once I determine the ARV and the contractor's estimate, I'll prepare an offer and meet with the seller again. As for the mill house, I'll see if I can come up with more comps and get a better handle on an ARV. I'll have to see if there are any cash buyers for this area that I could wholesale to. I'm also going to email the woman at the property management company that I spoke to back in September, to see if she can give me an idea for how much both of these properties could rent for. If anyone has any ideas of how else I should proceed, please let me know - I want to make sure I'm on the right track!
I will have to post pics tomorrow, as my camera is dead and I don't have any batteries at the moment.
All in all, I was very happy with my meeting. The seller was very nice to talk with - he reminded me a lot of my dad and my grandfather. He might be a good candidate, too, to approach for being a private lender, as he does have money, and would probably find the idea of lending it out at a decent rate very interesting.
I almost forgot - I received call number 2 today, just after I got in the door from my meeting. I'm going to meet them tomorrow. I'm not sure what to make of this one - it's also a mill house, in Spartanburg in a school district that the property manager said to stay away from because she has a hard time finding good tenants for that area. But I did see that there was selling activity in that area recently, so I think it's still worth checking out.
And I had to laugh, because just after I got the call, I logged onto Scott's blog,
Struggling to Get Started, and he, too, just got his second phone call from his mailings. This probate lead marketing really works!
Until tomorrow!
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