What’s a Good First Home?Posted on September 14, 2011 by
Dorsie Boddiford is a smart, cheerful, inquisitive young lady who just graduated from Georgia Tech. Instead of following most of the other 2011 graduates who think working for corporate America is the answer, she’s decided to follow in her father’s footsteps and become a real estate investor.
Kim and I have been working with Dorsie this summer. She’s learned a ton and just bought her second property at this month’s foreclosure auction! Her goal is to own enough paid-for investment properties that she’ll be financially independent by the time she’s in her thirties.
A couple of weeks ago, Dorsie found a target property in Marietta, Georgia that she considered buying as her primary residence. It’s an older, bank-owned, single-family home that needs about $15,000 in repairs. The asking price is around $100,000 and, after fix up, it will be worth about $115,000. The house is around the corner from her folks.
She asked what I thought about the deal. Poor girl, she didn’t realize what a high opinion I have of my opinion!
The only thing I liked about the deal was that it was close to Dorsie’s folks. It’s hard to put a value on a property if the main goal is to live in a VERY specific place. For example: Yesterday, we sold a property in The Planters. The buyers only wanted to buy in THAT subdivision. They had a new baby and the wife’s mother lives in The Planters. Having the wife’s mom close by meant the world to the buyers.
There are a number of reasons why I didn’t like Dorsie’s deal. For example, she was paying too close to retail; plus the house was old and needed a lot of repairs.
In today’s real estate market, because there are so many newer homes sitting empty on the market, the buyer is king! Why pay close to retail for an older home that needs a lot of work, when you can buy a newer home in great condition for a lower price?
Let’s consider two of the properties that sold at this month’s foreclosure auction. One is a beautiful, newer three-bedroom, two-bath home that needs zero work. It has wood floors and granite countertops – it is a show place. It is worth $125,000 and sold for a low $58,000.
We partnered with Dorsie to buy another foreclosure property. It’s at 491 Waterford Drive in The Waterford subdivision in Cartersville. The average 2011 sale price for comparable homes in that subdivision is $249,000. We bought the home for $155,001. After doing a bit of fix-up work, we’ll put it on the market low in order to sell the property quickly.
As an investor, if you’re looking to buy in this market, be sure to look for newer homes that don’t need much work that you can buy for pennies on the dollar. Lord knows there are a ton of these types of deals out there!