It is a bank owned property. The listing price is $137,700. There were offers already before I saw it. The listing agent showed me the house. It is in good conditions compared with most REOs. It only needs ~$1000 for painting and changing carpet to laminate flooring. I told her I would make an offer at the listing price and she agreed .
I went there the following day to sign the offer. The listing agent told me that there were offers around 150K. I was not very happy because she did not tell me in advance; otherwise I would not come. She tried to persuade me that the sold price in that area is pretty close to this (that is true). I told her that I don’t care about other houses and I would not compete with other buyers. I have my bottom line as an investor.
A week later the listing agent called me that other offers were rejected by the bank and asked me if I am still interested. I said yes but only at the listing price. I made the offer (137K) and the bank accepted it. The listing agent did a very good thing for me: She asked the bank to pay closing cost and it is approved. What a surprise! It is now 10 days in escrow.
Banks like cash offers because it is quicker and safer. But if you have good credit, enough saving for dowpay and told them you will close escrow in 30 days they will likely accept your offer.
I believe this property would be sold at 145-150K without a problem if the listing agent waited a little bit longer. Of course she did not want to wait because I did not have buyer’s agent. I told her don’t wait next time once you have a buyer without agent. She said it is bank’s rule to wait for 3 days.
Financial analysis:
30-yr fix; Down payment (25%) plus other fee: ~$35,000
P & I: $570/month
Property tax: $140/month
Insurance: $ 50/month
HOA fee: $75/month
Total: $835/month
Rent: $1250/month (I will not cover anything)
Purchasing price:rent ratio: 110:1
Net profit: $3730 per year (assuming 1 month vacancy per year)
Net income/investment: 3,730/35000=10.6% (principle not considered as income). I will fix every thing if needed.
This property valued more than 320K in 2006. In Southern California, it is difficult to reach the goal 100:1. My previous properties are below 100:1; but I put tremendous amount of time to fix them by myself. This one will cost me <$1000 and 3 days of work.
