This one got away from us. We waited to get started with this project, which is a nice house in north Austin that had been on the market for a long time, since November 2016. The IRS hurries for no one, and the house had a tax lien on it, which we wrote about recently. Finally that was taken care of and we had the closing scheduled. All seemed well. Carol and Russell were looking forward to moving in and working on the house.
Then, through no fault of ours, the Lakeland closing got delayed to be the day AFTER this one was scheduled. We’d planned to use the proceeds from Lakeland to pay for the Kerrville Folkways house. So, that set off a mad scramble for funding, a thing we’re sure many of our fellow investors will find familiar. We thought we had arranged for bank funding, but somehow didn’t convey that to the sellers, who were still expecting cash. Everyone was making calls to our bank, who, being a small-town bank, weren’t open very much, and weren’t sure they could quickly re-write all the documents. We asked to close on Friday. After all, we had granted the sellers multiple extensions of their closing because of the IRS. You’d think they could wait a couple of days for paperwork.
But no, instead they returned our earnest money and canceled the contract. I guess someone else could pay that very day. Nice folks, huh? Sometimes it doesn’t pay to be patient, I guess. We should have just told them to go jump in the lake months ago, but it was such a great location!
Real estate investing is full of ups and downs, wins and losses. We will move on, knowing that we now have the chance to find another place to work on, and Carol and Russell can find another nice place to live and fix up. When one door closes, another one opens up, and whatever other truisms are appropriate.
Below are some of our earlier thoughts and plans for the property.
Our Original Plan
There are enough issues with this house that it was not selling in the retail market–some plumbing issues, mainly. So, we are getting it for a good price before it wanders off to foreclosure. That’s what took all the time. The IRS was in no hurry to let us know what it would take to release its lien on the property, so we had to play a waiting game. That’s fine. The neighborhood comps have been growing while we wait.
We finally got some news in May, 2017. It’s not the greatest, but at least there is movement. The selling agent finally sent an email to Carol that explained what the IRS came up with. Hooray for them! It turns out that there is close to $4,000 more owed to the IRS than our current offer. And the owners for some governmental reason, are not allowed to contribute this money. It looked like we would have to do it, or the house would toddle off to foreclosure, where it would languish even longer.
Well, what should we do about this, we wondered? It didn’t take long to come to the conclusion that, even with the difficulties, the house will be a good deal. Of course, even with us doing it, the house is not an easy one. I guess that’s why it’s our project! It’s one sad house.
Carol and Russell originally were going to buy it themselves to be a homestead flip, but since it didn’t qualify for VA financing, and we couldn’t include the renovation in our other option, we decided it will be a Hermit Haus project instead. Hoping we can soon bring the house back to its former glory as one of the nicest houses in a very desirable neighborhood in north Austin.
At least this way the seller will not have a foreclosure on their record, and they will not have to pay the additional money just to get out of the lien. That’s what we want, for all parties involved to feel like they are getting what they want.
Onward to closing and then renovation!
It’s a “rockin'” house for two reasons: first, it’s sitting on one of our local karst formations, so the back yard is pretty much all limestone, and there’s a cool rock patio in front; second, the street is named after a local folk festival in nearby Kerrville. And we’re hoping to totally rock the renovation.
Our Original Exit Strategy
We know you want to know what the exit strategy is for this house. Well, we plan to fix it up and then sell it right over to our colleagues, Russell and Carol. The house is five minutes from Russ’s work, and is exactly what they’ve been looking for since they sold their previous “homestead flip” house. When this is done, Sue Ann and Lee, the Hermit’s Rest team, will be able to rent out the main Villa Park house for lovely income. Look forward to a longer and more detailed post from Russell on what exactly constitutes the homestead flip, which we’ll link here.
The good news about the house is that it was obviously one of the nicest homes in the neighborhood when it was built. There are some pretty impressive 80s features, such as mauve counters, white and gold shower knobs (wish I’d gotten a better picture of those), plush carpets (which are now all buckled up), and some fine but a bit old appliances. Each of the nice-sized bedrooms has a large walk-in closet. That’s such a great feature. The master bath is a bit crazy, so that’s going to be a fun challenge for our design team!
In addition, there’s a little office in what was once one of the garage bays, and a nice work area. The lot, as you can see in the pictures, is surrounded by beautiful mature trees, and all those rocks make it really low maintenance. I can see why our colleagues didn’t want to sell this one to anyone else.
Carol’s still working on her renovation plan, but I’m pretty sure it involves knocking down a kitchen wall, a complete revamp of the kooky master bathroom, and some beautiful new floors that are not carpeted.
Of course, we will still be working hard to keep the renovation on budget and on time. We will share updates on the progress, including a Facebook Live video tour or two, so if you are not a fan of our Facebook page, you may want to head over there and sign up.