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Good morning. I have done about 5 highest bidder sales in the past and I currently have 5 properties we have already purchased/closed at significant discounts in Georgia with the intent on doing a combination of Highest Bidder Sales and/or rehabs. I’ll lay out the numbers below:
House A:
ARV $115k
Rehab $300 (touch up paint, run ozone to remove cigarette smoke, carpet cleaning)
Purchase $70k
Status:Ready to market today, have not had inspection done.House B:
ARV $175
Rehab: $10k (paint, laminate tile and carpet flooring, lighting, AC drain pan repair) Almost complete
Purchase Price $123k
Ready to Market this weekend, home inspection complete no big items.House C:
ARV: $170k
Rehab:$25k (new septic drain field, paint, flooring, lighting, laminate, tile, carpet flooring)
Purchase Price $102k
Status: Needs full rehab or sell as is, no inspection done.House D
ARV:$85k
Rehab: $10k
Purchase Price: $38k
Status: Needs full rehab or sell as is, no inspection done.My 10 year am note payments on the houses to a private lender total around $4,500/mo and I’m beginning to read about market down turn predictions in articles posted here and other places. I’m beginning to think that rather than rehab and sell these properties retail/listing I need to plan to dump these ASAP. So far our market has only seen a nominal slow down since the beginning of the year, when we were getting multiple offers over asking price on day 1 of the listing. Luckily, i think i’m into the houses cheap enough that if i sold them as-is today i would expect at minimum $10k profit in each one, probably $25-30 on a couple of them. My Problem is that if i run one sale per week, that’s still one month of marketing and the closings start to happen farther out into the school year and into September/October time frame, which is additional time for market news to affect buyer confidence. I’m starting to get a little nervous that i may not have enough time to conduct the sales in sequence, and get stuck holding the bag on some high interest private money loans. My lender is a pro and would be willing to ride the tide with me if we needed to end up splitting the deal and cutting the losses, so i’m not terrified, but rather i’m motivated to get these moves ASAP, like really ASAP.
Here are my questions:
Has anyone been able to conduct multiple HBS simultaneously, like maybe 2 per weekend?
Do any of you have any thoughts or recommendations on the current situation on these four houses?
How quickly is this market turning?
What should my level of concern be with my exposure on these current houses?.
Taking your questions in order:re: multiple HBS events on the same weekend.
1. Are your houses far enough apart so that simultaneous HBS promotion for any one won’t cannibalize the market for the other(s)? The worst possible case would be if 2 or more were practically together in the same development.
2. To run 2 or more on the same weekend means having multiple sets of helpers who are trained and equipped on what to do. You might get away with sign installation workers who could do all the signage for one house, then another, etc, but you definitely would need a duplicate set of helpers and paperwork for the open house(s), and especially for the Sunday evening Round Robin. Whether you could train such helpers in time, or if you’d feel more comfortable inviting some other CFD members to pitch in (or some of both) … is your call.
re: How quickly is this market turning?
It depends on where it is; it depends on how fast the news of other areas in trouble travels; it depends on how much impact the withdrawal of foreign money has on any given area; and it depends on news that hasn’t happened yet since this is a global phenomenon — not just some local politicians making life miserable. The recession a decade ago didn’t face foreign nations bailing out of the US dollar to make their petroleum purchases — as is happening now.
We know that some areas have been suffering housing declines for at least a half year so far, and it can only get worse. So any regression analysis of market declines so far won’t be reliable as a predictive tool.
Re: What should my level of concern be with my exposure on these current houses?
My thought would be to extract whatever value is in all five of your deals as quickly as possible — on the scary assumption that things are not going to get better for a long time — and that doing rehabs in a collapsing market is probably one of the most high risk and destructive plans possible. Any entertainment value derived from watching how far down the market bottom will eventually pale in comparison with value preservation at the moment.
I do believe this will be a far nastier recession than the 2008 event, and it invited comparisons with the 1930s Great Depression for some victims. You want to be a vulture, not a victim.
–Dee
PS. Any additional, or even contrary, insights are always welcome.
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