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Wednesday, April 10, 2013

Rental House Update and What You Must Know Before Purchasing Rental Property

My rental house is now sold! (my favorite four letter word in real estate).

In the previous post about this house I wrote about how we had taken a chance and decided to sell the house instead of rent it. It turned out that the interest for purchasing was much higher than the interest for renting.

Not only was it very easy to get an offer on this house, we got several offers on the house within 48 hours. To top it all it was fairly smooth transaction to get to the closing table.

First off we had to sort through all the offers that we got. Initially we got two cash offers slightly under the listing price of $125,000 and one financed offer at asking price. But then the offers kept pouring in but all of them at listing price. That is when I decided to roll the dice…

I countered back offer by offer at more than listing price. I told all the buyers that we had several cash offers on the house and that we were looking for "highest and best". That is a little piece of lingo that I have learned from buying foreclosures. When a bank has multiple offers on a house they go back to the buyers and ask for their highest and best offer.

So why not do the same?...

Sure enough I was able to get offers all the way up to $135,000! However the offer I accepted was for $131,000. 

Why? You might ask...

This is simply because the $135,000 offer was financed and the $131,000 was cash. With a financed offer there would have to be an appraisal and I just was not sure if the house would appraise for that based on recent nearby sales. Therefore the risk of that sale falling through was considerate.

Also with the cash offer we would be able to close in 15 days vs. 30+ with the financed offer.

Once we had accepted the cash offer the buyer did their inspection and asked for several repairs. All in all I spent about $500 in repairs and 10 days later the house was no longer mine. That was easy!

It turned out that the buyer was international and was an investor, they were going to be putting the house back on the rental market. Go figure...

There has been a lot of that going on in Atlanta over the last couple of years. A lot of foreign money coming in to buy real estate in this city and all over the country. 

Anyway, I put together two articles to go into the detailed financial analysis of this house and how it performed as an investment and the lessons learned from being a landlord and how you can avoid some of my mistakes. I highly recommend you read them whether you own rental property or are considering it:

Selling Rental Property...Even If It's Making Money

Before Purchasing Rental Property...What You Can Learn From My Mistakes

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