Latest Acquisition & Analysis - Hummingbird

Quality Rental in St. Louis

Here is the latest Undoor acquisition, details, and analysis!

Deal Highlights

• Buy & Hold Single Family - 3 bed - 2 bath - 1,040 sqft - roofstock.com listing

• Purchase Price: $107,600

• Appraised: $118,500

• Projected Monthly cash-flow: $298

• Projected Cash on cash: 11%

Deal Details

View the full analysis here. (Use code UNDOOR when signing up for dealcheck.io to get 20% off!)

This was not the smoothest transaction we’ve had. More on that in a bit.

First, why this property caught our eye as a potential deal?

The first thing we saw was the list price. It was listed for a price that seemed relatively (for this crazy market) low compared to other similar properties.

We liked the fact that it was a tenant-occupied property with a housing voucher (section 8) tenant. We have been looking to help a broader tenant pool as well as “diversify” a bit by adding some section 8 to our portfolio. More importantly, we noticed the property was currently renting for $1,075 and knew that 2022 housing authority rates for a property like this is $1,225. The lease renews in 4 months. This is important because we should be able to work with the housing authority to get to section 8 market rents without impacting the tenant too much.

Doing our due diligence, we liked the fact that most of the big systems were no more than 3 years old. That is the roof, AC, furnace, water heater.

We also noticed that this property was acquired a year prior by an out-of-state investor for close to what they were currently listing it for. That smells like motivation to me. (Or trouble… we shall see.)

Now, why was this not the smoothest transaction ever? I am not entirely sure. Probably several things.

First, despite going through many pleasant and successful transactions with roofstock.com, this was not the same. Communications were slow and far in between. I didn’t always get responses to my emails. I was ping-ponged between several people and only really was able to get traction when I called. To be fair, a large chunk of this transaction was over the holidays, so maybe everyone was out.

Second, the seller. The seller initially verbally accepted our offer minutes after we extended it. It then took them almost 3 weeks to actually sign the purchase and sale agreement…

Now that the inspection period can start, we head into that. The inspections get postponed several times “because the tenant was ill”, or the “inspector had COVID”, or “the seller did not reply to an ask”. We finally get the inspection done, wait for the report. The report shows that only the common areas were inspected because the tenant had sleeping children in the bedrooms and would not grant access… Of course, we immediately communicate that we do not want to proceed with this transaction until we can get the entire property fully inspected. After several delays, we finally get the final and complete report that does not show anything major that we were not aware of.

Based on the report findings, we go back to the seller with an ask for remediations which they agree to verbally on the spot.

Now comes the time to sign the amendment to the purchase and sale agreement for the remediations and the seller disappears again for several days. And when they come back, they tell us they changed their minds and did not want to remediate anymore and would offer a fraction of the remediation costs in seller credits at close.

In the meantime, we had received the appraisal showing it was appraised at nearly $11,0000 above our current agreed purchase price.

So, we decide to counter asking for the full price needed for repairs. It goes back and forth a few times but we do not budge. The seller finally agrees.

Success.

Wait.

The morning we’re supposed to close, the seller comes back to us saying they are now trying to recoup $182 in utilities they paid instead of the tenant. It started another round of emails, title company freaking out, banks asking what is going on, etc. That delayed closing by another 4 days.

We finally closed this morning, 10 weeks after our offer was verbally accepted.

On to the next one.

What We Learned From This Deal

• Everything above...

• It is a people business, it all depends on the actions of every person involved.

• Despite being at all-time lows, looking at your market daily leads you to motivated sellers. Even on the MLS.

Detailed Property Analysis

Hummingbird - Click on the image for the detailed report.

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