Buying A Repossession

The local estate agent has been busy in my street recently.

One house had a for sale sign up for less than a month – and then sold at £125,000 ($212,500 in US funny money)

The day after the sold notice went up on the first house, a for sale sign went up on the house next door asking for offers over £70,000 ($119,000).

Now that’s one heck of a difference for two identical properties.

So – naturally intrigued (also called being a nosy neighbour) I called up the agent to find out what was the deal.

It turned out that the second, very cheap property had been repossessed by the bank and was in a very poor state of repair. The bank were accepting offers on the property for a cash only purchase. With the closing date for offers on Friday morning the same week.

Still being a nosy neighbour – I asked for a viewing. And boy was it bad.

  • No Kitchen
  • Broken Windows
  • Rotten Frames
  • The bathroom from hell
  • Dirt (lots)
  • No Central Heating  (not even any radiators)
  • A garden full of mares tails (a weed thats really hard to get rid of)
  • A wobbly staircase
  • Broken interior doors and frames
  • +lots more waiting to be discovered

Hmmm no matter how bad the interior decoration this house was still selling at a 44% discount of £55,000 ($93,000) to the one next door.

The exterior walls are plumb straight with no signs of cracking or earth movement under the foundations, the roof is sound – its a purely cosmetic refurbishment project. £15,000 or $25,000 of DIY with professional assistance would sort this house out in 3 months.

For me – an ideal opportunity to wipe out my card debts in one fell swoop.

Only problem being – I don’t have the cash in the bank to buy it.

Until I started thinking about it.

I have an investor friend with whom I already jointly own two rental properties on a 50/50 basis. She provides 70% of the capital – I provide 30% and do all repairs and management. These properties were bought at public auction and we have both of these properties up for sale at present (I want to wipe the expensive card debts off with the profit we expect to make) but properties sometimes take time to sell when asking top money.

A quick enthusiastic phone call later – I have the offer from my friend of £110 (or $170k) to buy the property in her name and I will do it up. Once the rennovation is complete – we sell the property – she gets her money back and I keep the profit. (our friendship goes back a long way – and she just wants me to get out my current debt hole). Thats what friends are for!

Convoluted – not really – just the benefit of trust built up over 10 years of doing little projects together.

So – back to the repossession house.

I first saw it was up for sale last Monday

I viewed it on the Wednesday

Sorted out the financing of it on Wednesday/Thursday

Made an offer on the Thursday morning  at £86,000 which was rejected by the lender.

Made a second offer on Friday morning at £90,100 which was accepted :)

So now I have 14 days to complete the deal. Get the cash from my friend. Sort out the sale contracts and then hopefully in 14 days pick up the keys and start work. This is the first time I have had a go at buying a repossession property directly from the bank rather than through a public auction so it will be interesting to see how the process differs.

So the house has ended up costing £90,500  ($153,000) to purchase including legal fees

I think it will cost in the region of £15,000 ($25,000) to bring it back into a good state of repair and be attractive to a purchaser

I hope to sell the property for £125,000 ($212,500) giving me a profit of £20,000 or $34,000 – wiping out my debts in one go.

Here are a few photos of the house – as you can see I’m going to be a busy boy for the next 3 months.
Capture 11

Capture 12

Capture 13

Capture 14

It looks grim doesnt it and you might think I have my work cut out for me, but I’ve renovated property in the past and provided a building is structurally sound most of the renovation is only cosmetic stuff.

I’m a dab hand at most jobs. Its only the fitting of a new central heating boiler, and the fitting of new electrical sockets in the kitchen which will require professional assistance. Fitting a new kitchen and bathroom, replacing the windows and doors, laying flooring, tiling walls etc are things at which I have the skills to achieve a good standard of finish.

Fingers crossed nothing untoward happens between now and the 11th August – and it will be mine.

Seeing as though I’m a blogger – you can expect a good number of updates on this projects progress.

Comments

  1. Good luck with that. I’m impressed with the resolve in the operation. Do you do it up yourself or hire people to do it? Let us know how this goes.

  2. Oooh, I’m excited to follow this project. Wobbly staircase *eek* and all!

    Pays to be nosy, doesn’t it? Well… I guess you’ll have to wait and see!

  3. My friends bought a repo house and it ended up being a bad idea on their part because they’ve been putting way more money into it then they thought they originally had to. =/

  4. Wow! Good luck to you. You’ll have your hands full. But the profit seems huge! My spouse and I bought a few months ago a crack house (we even found lists of what they sold and for how much, and crack pipes), and hired people to fix it up. Everything needed to be fixed and cleaned. It smelled so bad, they had food rotting all over. Anyway, long story short, it looked spotless at the end, and we rented it out (only to find out soon after that the renters refused to pay and we went through a lengthy process of eviction). Now it’s on the market and we’re hoping to at least make a few thousands of dollars profit. Maybe I’ll write about it at some point and post some pictures of how bad it looked.

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  1. […] Since I bought the house repossession last summer lots have things have changed in my life. […]

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