I shared it already, but I have a new house! You also will have seen it amply reflected in the precipitous increase in my debt load. This is my fifth property in my attempt to use Real Estate to FIRE (hence the name, see what I did there?) This post will be a bit of a deep dive into the details of the purchase and some pictures of what the place looked like initially. I’ll do a followup in the weeks to come with some during and after pics, as well as further details about the final disposition of the loan/purchase.
I purchased this as an owner-occupant through homepath.com using a construction loan. There’s a lot to unpack in that sentence, so here goes. Homepath.com is where all foreclosures for Fannie Mae are listed, and this is where I bought my last house (as well as this one). The HUD homestore is also a good resource, but it’s harder to submit offers and I rarely see houses in my area on it, so I focus on homepath. One additional benefit of homepath (from my perspective) is what’s called the First Look period. During the first 20 days of a homepath listing, only owner-occupiers can submit offers. There’s no guarantee an offer will be accepted, but you have 20 days to try and find the right number for Fannie Mae.
In some cases a foreclosure is move-in ready, but usually they will require repairs – which is where the construction loan comes in. A construction loan is calculated on the ARV (after-repair value) of the property as if it were all fixed up and shiny. The bank will generally lend you a percentage of this value (70-80% of the ARV is a good conservative assumption when you’re running your numbers) including the purchase price and all the repairs. You’ll need to have a livable house at the end of the process, so all repairs need to be completed within your budget, or you’ll have to make up the difference out of your cash. The house will also need to appraise high enough to meet your numbers. So the strategy is fairly risky.
I’ll go into a deeper dive of the final numbers in a later post, but here’s what we had initially:
- Initial list price: $29,900
- Purchase price: $26,000
- Repair estimate: $14,000
- Final total: $40,000
- Appraised value: $55,000
The house was a small 3 bedroom 1 bath with a really funky layout and a very tiny third bedroom. The repair budget allowed me to upgrade the kitchen and bath and cut an entry into the hallway from the kitchen (original entry was through the utility room, which was strange and inconvenient). I also planned to install central air and replace the furnace out of my own funds if necessary.
The appraised value came as a nice surprise as I had initially estimated this as at $48,000 ARV, though it caused some issues with the loan I’ll cover later. In any case, enjoy some pictures of the original state of the place:
New house front view 
entry next to garage 
Garage/kitchen entry hall 
Garage 
Garage/kitchen entry hall – west view 
Kitchen entry through utility room 
Utility room 
Kitchen south wall 
Kitchen 
Dining room looking west 
Dining room looking east into kitchen 
Living room looking west 
Living room looking east 
Front entry 
North bedroom N view 
North bedroom 
SW bedroom 
SE bedroom closet 
Bathroom
Not too lovely, right? Well, it worked out ok so look forward to future posts about the construction and then the final product (which will be messy from unpacking – sorry). Before that however, we’ll have my November update next week. Unless I get highly motivated and want to tell the whole story real quick. Toodles, loves!
