One of my contractor friends called me about a house in Carter Lake owned by a gentleman who had just lost a spouse, and was looking to sell his house as-is, ASAP. I had driven by the house a million times since I live in Carter Lake and it is on one of the main streets, so I knew exactly which one he was talking about. It was 3 bed, 2 bath slab (no basement) house with no garage, but a couple of janky sheds that were on their last legs, and a pretty rickety fence. It did have a newish roof and the vinyl siding wasn’t terrible. And that sums up the positives.
The owner of the property had been through a lot recently, and dealing with cleaning out/up the house was getting to be understandably overwhelming. He was looking to move out of state and get the house sold right away without having to do much else to it.
We end up agreeing on a price of $40,000, as-is, cash with a 1 week closing date. Having a good relationship with title companies helps a lot in this business, because a 1 week closing date is a quick turnaround and makes a lot of title processors’ eyes start twitching. The owner wanted a little extra time to get everything he wanted moved out of the house, so I get possession of it a week later.
A lot of times, when you are in the house flipping business and dealing directly with sellers, you don’t have a ton of time to take a really good look at the house. It isn’t like a normal house buying process where you make a showing appointment with your agent, walk through it, spend 30 minutes there opening cabinets, checking out the floorplan, looking closely at everything to make sure you can envision yourself living there. In many cases, the owner of the house is talking to you the entire time, there may be dogs, cats, snakes, kids, TV’s on, people sleeping in a bedroom, people using the bathroom, mystery rooms that you can’t even get into, etc. You just never never know what you are going to get. And that’s OK, it’s part of the business. It sure makes the Possession Day exciting when you get to check out what you just bought.
Possession Day – Here is what $40K will buy you:
Uh oh. I may have overpaid. I mean, it’s not the worst house I have ever bought, but the whole thing needs gone through and put back together. It is also a weird layout because what used to be a garage was turned into a quasi bedroom/kitchen/bathroom combo. I think I remember the red carpet from Mama’s Pizza on Saddle Creek. Fun for the whole family.
I had the ARV (after repair value) estimated at around $120,000. That may sound like a big spread with a lot of room, but these remodeling costs were going to add up quickly, and after taking out buying, holding and selling costs plus taxes on profits, it would not add up to much left over, especially considering it would be a substantial rehab and probably about 4 months worth of time spent managing it. So, I decide that selling the house at a small profit to another investor is probably a better way to go.
I get calls quite a bit from other investors who are either looking for properties to buy, or have properties to sell. At the time, I just happened to be talking with one of a couple of brothers from Idaho who were investors and were going to be moving to the area to begin flipping houses full-time. They were looking for rehab project houses in Pottawattamie county, so I told them about my beauty. They showed some interest, so I took them through the house and they agreed to buy it for $46,000 plus closing costs. So after giving my contractor friend a $1,000 referral fee for telling me about the house, I would end up with a small wholesale profit of $5,000. Not fantastic, but I decide I like the idea of spending no time working on it and no risk better than the alternative.
Fast forward to a couple weeks after I sell the house to the Idaho Brothers. I don’t know if any of you remember what the weather in late December 2017 was like, but it was BRUTALLY COLD. Like the kind of cold that normally happens in late January here where your face hurts and your snot freezes. Well, one of the brothers that I sold the house to ended up giving me a call to see if I wouldn’t mind driving by and taking a look at the house, just to make sure everything was OK with it. They had not yet been in town to start work on the property, so were just checking to make sure it was still secure with no problems. I say, “Sure, I’d be happy to.”
Well, let’s just say that it was secure, all right. This is what I walk up to when I go around the back of the house to get the keys from the lockbox. There was about 2 feet of ice securing the door, and the lockbox was now a lockboxcicle. There was no way to get in through that door.
I knew right away that a pipe had burst, but I had no idea how long it had been leaking water. I listen closely and I can hear the sounds of water spraying on the inside of the house. I am not looking forward to the call I am about to make. I dial up Idaho Bro and tell him the situation and offer to break into the house to try and shut off the water. He thanks me and apologizes and swears profusely all in the same sentence. He is not having a good day.
So, cursing my choice of footwear (this is a common theme with me), I kick in the door and immediately I have water pouring over my feet. Like 33 degree, Hypothermia Water. This is the scene from the front door:
Not my best camerawork, but I was probably already shaking and half frostbitten at the time, so give me a break.
I am now ankle deep in water with a BP of probably 160/100. I quickly locate the water heater (thank The Lord) and turn the shutoff valve to off, all the while getting sprayed from the broken water line above, with what felt like 100% of it going directly down my shirt and into my buttcrack. I actually am not expecting the shutoff to work at all, so this was a pleasant surprise. I look around the rest of the house from where I am standing, and it looks about like you would expect a flooded house to look. I guess at least the decisions on what to demo will be easier? Gotta find the silver lining somehow.
I give the unfortunate owner a call back with a sitrep. I feel really bad for him – what a helpless feeling that had to be over a thousand miles away. I tell him I am sorry to be the bearer of bad news, but thank him for buying it off of me a couple weeks ago. Too soon? Just kidding, I didn’t say the last part.
Well, I will say, as disastrous as that situation was, those boys from Idaho sure made lemonade out of lemons (or is it potato salad out of potatoes?). Check out their handiwork, it is pretty impressive:
So the post-flood/ice product ended up selling for $135,000 about 5 months later. I must say, that house looks pretty damn sharp. I ended up talking to one of the brothers later on, and he told me that they ended up roughly breaking even on the project because of all the extra costs involved. I am happy they were able to scratch their way out of negative territory. I am even more happy that it wasn’t me dealing with Elsa’s Carter Lake Igloo.
Fun read! The Idaho brothers made it look fantastic and smart of you to take the small profit in beginning.
Thanks Suzanne! Good to hear from you, hope you are doing well.
Wow, hard to believe that’s the same house!