Beware of the Odd Floorplan

I recently saw a house (around 2400 sq. ft.) that had an asking price of $225,000 which was below the prices of most other houses in the neighborhood. It was a 4/2 that was totally remodeled. It had two bedrooms downstairs that shared a bathroom. Upstairs were two bedrooms on opposite ends of the house that shared a bathroom. The floors were gorgeous, the walls were painted a neutral color, the interior doors were new. I know why the house isn’t selling. It lacks a master bathroom. The master bedroom shares a bath with another bedroom. Also, this bathroom is in hallway rather than connected to the bedroom. For $225,000, you would expect a master bath. Even if I could get the house for $195,000, I doubt it would sell quickly. Until a master bath is added, this house will probably remain unsold unless a very specific buyer comes around. I could imagine a single parent looking to move into a good neighborhood that wanted a “separate area” for two children to each have a bedroom. Also, there was an addition that could be used for a game room that led to the outside. If the parent did not mind going down the hall to use the small bathroom, this would be an acceptable house. But for $225,000, you would expect a master bath.

One that got away

I found out that the house I bid on this week won't be added to my inventory at this time. The seller had the Agent email the following reply. "Our price doesn't include the furniture. You can tell him that I have no reason to sell that low and will not even counter. I have had some other options come up." Apparently this seller is more interested in listing his house than selling it. He had too much pride to even make counter offer. Don't let pride get in the way of your real estate investing. I feel no shame that the offer was rejected. You must kiss a few frogs before you get your prince. If every offer you make is accepted, you are offering too much.

What do we learn from this, keep playing the game, keep hunting houses and eventually you will get a good deal.

My Latest Offer on House

I put an offer in on a 3/2 yesterday. The house is has decent curb appeal, as you can see. If I get the house, I can assure you that I will repaint the pink on the front a more trendy color such as beige or brown. This 1950 house is a one owner house. It has been in the same family since new. The owner passed away over 8 months ago and the house is in the estate. The executor is the son of the deceased and the house has sentimental value to him. It still contains most of the original 1950's furniture also. My bid included the furniture because it was in great shape. The walls are wood paneling and knotty pine. I personally don't like knotty pine because it is so dark, but at least it is clean. There are hardwood floors under the carpet that is perfect. This 1250 sq. ft. house with central HVAC would sell for $120,000 or more if renovated and it was in a more desirable neighborhood such as University of Memphis or Highland Terrace. Unfortunately, it is not. The asking price was $84,900 and I offered $60,000 with the furniture. The tax assessor has the house at $66,700.

I know that the agent for the seller will work hard to try to get the executor to accept the bid. This house has been on the market over six months and since I am not represented by an agent, the sellers agent can take all 6% of the commission. If another buyer was represented by an agent and the offer was $84,900, the agent would make LESS money than she would with my offer at $60,000. That is the harm in the seller getting an agent. She is now in a funny situation. I have taken away her financial incentive to refuse the deal by making a cash offer without an agent. I will keep you posted.

Real Estate Magazines

House magazines at the grocery store can be a good source. Be sure that the issue is current. In my local market, new issues arrive on Thursday in preparation for shoppers looking for houses over the weekend. I like these free magazines because they have color pictures and the houses are grouped by area. In Memphis, I can search the three areas I like flipping pages faster than any other method. Also, I can tell right away if the house has curb appeal. Price is usually listed. The good deals will almost stand out on the pages and the duds will be obvious too. Be aware that these grocery store magazines hardly ever have the FSBO's in them since FSBO's don't usually go into MLS. These can also be great reference tools to see which part of town you would like to invest in by getting a feeling for the type of houses in an area.

4/2 in Sherwood Forest

Here is a picture of the upstairs. The plumbing pole has been painted to blend in with the walls. This large room would really make a great entertainment room because it is separated from the rest of the house. I could imagine parties up here while the rest of the house was oblivious.

4/2 in Sherwood Forest

I recently met with Landra Pryor, an agent with Crye-Leike here in Memphis. She is a real go-getter. I usually don't have good experiences with agents but she is truly different. I was meeting her at a house that was reduced from $30,000 to $15,000 near Sherwood Forest, which is about a mile from the University of Memphis campus. The house had water damage and as we later found out, damage to the foundation. The house had cracked along the centter and formed a V at the midline. This was much more than I would ever want to tackle. She took me to two other houses that were in the area. One was a 2/1, but because of the way it was laid out, it was really more like a 1/1 plus a nursury. Not a good piece to buy for rental purposes. The next one in this picture she showed me was really nice. It is a 4/2 across from Sherwood School. The hardwood floors were nice, but not perfect. The interesting addition made for a great large 4th bedroom or could be used as a great gameroom/entertainment room. Contact me if you are interested.

Still a Good Market for Real Estate

I just missed making an offer on this 1200 sq. ft. traditional house located in a working middle class area of Memphis called Berclair. This area is full of hard working people with a mix of owners and renters. This neighborhood has been a solid income producing neighborhood for many years and has held its value well. This house has CHA, 3 bedrooms, 1 and half bath, concrete driveway and a porch off the side. The large backyard is great for kids and dogs. Location on a cove is also a plus. The seller states that the interior was recently painted and it has new carpet. The asking price was $75,000 and it has a contract on it after only 33 days on the market. This would be a great little rental property. I would expect it to produce about $200/month income in this market. It is possible that it may even produce more. If the buyer got the house for $65,000 which is not unreasonable, the note would be about $575 PITI and a fair rent would be $775/ month. This is still a great market to find deals. You just have to be quick to find them.