This is from my Arizona Republic column, a sad story about an investor who let a small fear lead to a huge loss:
In July 2004 I was working with a potential investor. She was prosperous and well qualified, and she was buying at a time when a nice rental home in the Phoenix area could still throw off a positive cash flow.
We had settled on a newer three-bedroom home in Tolleson, a good rental area with great appreciation potential. We put the house under contract (for $135,000, if you can believe that) and began the inspections.
The sellers were in pre-foreclosure. They hadn’t done a perfect job of maintaining the home, nor had they understood their rights under the builder’s warranty. In all, the repair issues came to around $1,500.
Not tiny, but not huge. Big enough, though:
My buyer canceled the contract. I thought this was a huge mistake, so much so that I offered to pay for the repairs myself. But she was scared enough by the specter of costly repairs that she not only walked away from this house, she fled real-estate investment altogether.
That house is now worth $225,000. She has lost $90,000 — so far — over $1,500 that I would have paid.
There is no way of predicting appreciation, of course, but how long could it have take for that home to buy back $1,500 — even if I hadn’t offered to pay for the repairs myself?
The end of the story: “Fortune – and fortunes – favor the brave.”
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jf.sellsius says:
Fortune & misfortune are neighbors.
September 26, 2006 — 11:00 am