Behold the ‘Honk Your Horn’ house (named so because the grandson of the seller was in his car honking the horn over and over again while we were signing the contract on the trunk of my car). We closed this one last week on Friday.
The contractor has started work and is doing the work and providing the materials listed below for $11,000. We will still need to pay my carpet guy separately for the carpet going throughout most of the house.
This is a 4 bedroom, 2 bathroom, 1400 sq. ft. house that was built in 1985.
|Settlement Fees:||$3,379 (title policy, closing fee, insurance, loan fee)|
|Estimated Holding/Selling Costs:||$12,000|
• Replace any rotted siding or trim (not including facia).
• Install 1×4 trim on bottom edge of siding around sides and back of house.
• Install new oil-rubbed bronze doorknobs and deadbolts for back door and door to garage.
• Install new light fixture for back porch (see material specs).
• Remove storm door.
• Paint entire exterior (see material specs).
• Replace fencing where rotted or missing.
• Haul off construction debris and trash (including junk in yard – but not the play gym).
• Remove carpet throughout house.
• Remove wall paper borders throughout house (including little trim pieces).
• Replace front door frame.
• Repair back of front door (sand and match stain).
• Texture any imperfections in walls and ceilings. Match texture.
• Repair sheetrock where necessary (including in garage) and match texture.
• Remove stickers from ceiling fan in ‘princess’ room.
• Prep interior for professional painting (remove all nails and things attached to walls and neatly caulk and sand) Paint interior (see material specs).
• Paint kitchen cabinets and install new hardware (11 pulls, 9 knobs) (see material specs)
• Replace kitchen faucet (see material specs).
• Run Dishwasher and report if working correctly.
• Replace light fixtures (see material specs)
• Replace interior doors with new six-panel doors and oil-rubbed bronze hinges.
• Replace interior doorknobs with oil-rubbed bronze (and strike plates).
• Remove all mini-blinds (keep 2” blinds in living room)
• Make sure all light bulbs are working throughout.
• Make sure all switch and plug plates match throughout the house. Replace broken /painted ones.
• Re-caulk around toilets and where necessary.
• Replace return air grill and install new air filter.
• Install smoke detectors where necessary.
• Replace all doorstops with oil-rubbed bronze doorstops.
Master Bath and Hall Bath
• Remove everything from the bathroom (keep toilet).
• Repair walls and texture.
• Tile floors (tile needs to be approved by owner before installation – assuming between $1 and $1.50/sqft for tile purchase)
• Install new metal, white tub, tile surround and install new oil-rubbed bronze trim kit.
• Install new vanity and faucet (see material specs).
• Install new vanity light.
• Install new oil-rubbed bronze hand towel, 24” towel rack and toilet paper holder.
• Install new framed-mirror (see material specs).
Walls – Realist Beige SW 6078 FLAT
Trim – Extra White SW 7006 SEMIGLOSS
Ceiling – Flat White
Sides and Back Siding – Classical White SW 2829 SATIN
Trim – Tony Taupe SW 7038 SATIN
Front Siding: To Be Determined
Color to be determined.
Bath Mirrors: Martha Stewart Living Mead 24 in. x 32 in. Framed Mirror in Espresso SKU 652509 $67
Bath Faucets: Pegasus Estates Oil-Rubbed Bronze Faucet SKU 666068 $89
Bath Vanitites: Master Vanities: Woodcrafters Del Mar 30” Espresso w/Top SKU 672-477 $199
Cabinet Knobs SKU 400389 $1.79/each (they are a little cheaper in the 18 pack)
Drawer pulls for cabinets SKU 803786 $2.39/each.
Bathroom Vanity Lights – Progress Lighting North Park Venetian Bronze SKU # 552-400 $70
Exterior Light Fixture Black SKU 245746 $8.97
Ceiling fan for Living Room SKU 161-646 Hampton Bay Glendale $65 (make sure you get Oil-Rubbed Bronze).
Flushmount for breakfast area, kitchen, upstairs hall (2) SKU 720163 $15 Commercial Electric Oil-Rubbed Bronze (make sure to use at least a 60W bulb)
Owner will provide SKU for pendant light for over the kitchen sink.
Check out that back yard. Now you really can appreciate what we are going through down here with this insane drought!
Next: Follow Along As I Open Up My House Flipping Business
Danny…. I’m just starting to get into real estate investing and will be taking a huge leap this week… for once. Love the site. Have finally caught up with all the weekly updates. Took a few days of reading. Read every word.
Taking the Honk your Horn house, I have a general finance question. With a private lender, would you get $95000 from them for all costs? You get $25000 profit, what do they get? Where do they get their profit from?
Thanks for the site. Will keep coming back to it dailey.
Glad to hear that you plan to start taking action.
I typically just borrow the purchase and repair costs, so about $80k for this one. They typically get 1 point origination fee ($800 in this case) and 10% interest only monthly payments ($666.67 per month in this case). Then they get all of their loan principal back when I pay off the loan when the house is sold. So, being interest only payments, the payments do not reduce the loan balance and is all profit for them.
I’d love to hear about any progress you make. You can do it.
Love the site too, and just getting started reading every word. Can you help me back into the numbers in regards to where you say, “10% interest only monthly payments ($666.67 per month in this case)” I am playing with loan calc. online and I am not seeing it?
Also correct me if wrong, but that property, if held for 1 year would be a 10% ROI, for the Money person? (which now that I think about the above statement is what makes it that!) But after playing with a ROI calc, and doing 6 months, it is 6% ROI for the investor. Is this correct what I am calculating and is this standard for a private money lender?
Last but not least, did you post about how you obtain your financing, more specifically the how and what you/to say to the private money lender?
Thanks again, can’t wait to consume more of this blog!
For the monthly interest only payment calculation: total loan amount ($80,000) times .1 (10% interest) = $8,000 divided by 12 months = $666.67 per month.
I’m not big on calculating returns and all of that mumbo jumbo. Give me a good payday at closing and I am happy. Work hard to buy super cheap and sell for a good price in a short amount of time. I don’t usually work with these calculations so take my answer for what it is worth. ROI is usually considered over the whole year. So even if they only received payments for 6 months, it would still be 10% ROI for the year as the number would be multiplied by 2 to make 12 months. Not sure if this is what you were looking for. Private lenders tend to be very happy with 10% safe and steady return.
Have you read this: Finding and Working With Private Money Lenders
No problem. Enjoy the blog.
[…] updated the Honk Your Horn House Before Post to include the rehab scope of work and materials specification, as well as the cost for the new […]
[…] Finally closed the ‘honk your horn house’. Here are the before rehab pictures. […]
So, YOU provide the contract? Not the seller (as is traditonal.. around here anyway)?
Would you post a copy of that online?
Do you give the seller any kind of deposit? (I’m thinking that a deposit is necessary to make the contract legeally inforceable) I’m guessing the risk of losing the deposit is greater than them renigging on the contract and you “forcing” them to sell (enforcing the contract). Hmmm… But maybe THEY want a deposit so they know you are motivated to close.
I do use my own contract. It’s not weighted one way or the other. Typically, my earnest money deposit is $10 – $25. Usually not a problem.
Ten to Twenty-five dollars? What?! Typo?
Isn’t it typical (in traditional deals) to offer 3-5% (or more)?
Don’t the sellers bulk at that pocket change?
No typo. When dealing with listed properties you will need to put more for earnest money. Here, for listed properties, I typically have $1,000 as earnest money. When dealing directly with homeowners that aren’t selling through an agent, $10-$25 is what I use. They usually don’t even say anything about it. If they complain, it gets changed to $250.
Great stuff, Danny. Thank you for the blog…it’s been an education!
So the $10-$25 deposit is given directly to the homeowner, or is it given when receipted at the title company?
The $10-$25 earnest money deposit is given to the title company when receipting the contract.