Time For Another Update

I figure I should throw another update on here to let the world know I'm still alive.

I still don't have House #1 sold or rented, but I'm not too worried after the past week. During that time, I've had a flood of calls about the house - all from potential renters. After telling them my rent price, most of them would answer "We'll get back to you", but some would actually say something along the lines of "Do you have anything else available for $100-$200 cheaper?" Of course, I don't at this time, but now I wish I would have kept House #2 for just this reason. It's almost like someone all at once let the flood gates open for people wanting to rent. I do have two parties who are still interested, and just picked up a lease app from one of them just today.

The other good news is that the loan on House #1 is an option ARM. Now, most people hear the word "ARM" today and get all panicked, but I'm actually GLAD I have an ARM on the property. When I refi'd the house in 2005, the ARM had an interest rate of about 6.5%, which wasn't bad for an investment property. Over those three years, I've watched it steadily climb to over 7.5%, which is one of the reasons we were so hoping to SELL it rather than RENT it again. However, something funny has happened these last few months. In January, I believe the rate was still somewhere in the 7-7.5% range. Then in February, it dropped to 6.75%, and dropped again in March to something like 6.25%. The other day, my wife called me at work to tell me the April statement shows a rate of 5.75%!!! That's even cheaper than our personal property's loan! Of course, I know being an ARM, it won't stay here forever, but with today's headlines about ARM fallouts, I figure it will hover around this area for at least another 9-12 months. The good news in all of this is that the almost 2% drop has increased my cash flow for the property. Add to that we now have the place listed for $100 more than before, and we now have well over $600/mo. cushion to work with. Of course taxes and insurance probably eat about $250-$300 of that, making it more like $350-$400/mo. (yes, there are other intangibles, too).

I know what many people are probably saying now and that's "but your last tenant left at the end of February and it's still empty, so you are LOSING money each month, not gaining it", and they are correct, but not as much as one would think. First, the tenant broke the lease, so I got to keep her deposit. That deposit covered the March payment (and probably most of April's as well). It's not even midway through April, and I have a ton of interested people looking to rent the house. Even if these two prospects don't pan out, I can always drop it down $100, and I'll probably have 2x as many people wanting to rent, so I'm not too concerned with it being empty for too long. Within a month or two, I'd be back to making a profit.

Another Busy Month (And It Ain't Over Yet)

This is one of the biggest reasons I don't post much anymore ... TOO BUSY!

House #1: Lease/Option?

I've had numerous people call and email about House #1 (I have it for sale and rent), but nothing seems to pan out. I even had one lady call me on St. Patrick's Day and we talked for a good 6-7 minutes about the house. The conversation was coming to a (positive) close, when I asked her her name. She said it was "Shamrock" and that her mother's name (who was going to be the actual buyer) was "Irish". She swore up-and-down that it was not a prank, but it was just TOO coincidental. Needless to say, I haven't heard from her since.

During the last couple of weeks, I also had time to repaint the exterior. The home is 3-side hardiplank, so I needed to use almost all of the 5-gallons of paint I bought. Very tiring work, but I finished this past weekend. I must say it looks 100x better now.

The good news is that I have another very interested buyer. I no longer get my hopes up until I get a signed contract, and I'm not about to do the same with this lady (even though she sounds honestly interested). I am to meet her at the house in the next couple of days, so she can view the inside. She said she wants to lease it for AT LEAST a year and then purchase it (depending on how things go in the next year). Before I could mention the words "Rent-to-Own", she did. I haven't told her yet about recent Texas legislation re: L/O's, but I plan to when we meet. I'll probably have her sign a regular 12-month lease and have her sign a 6-month option at the beginning of the lease and at the 6-month time period. The Texas Law stipulates that the contingencies are enforceable for a combined Lease w/Option to Purchase that is more than 180 days (6 months). Therefore, as long as I make the option period only 6-months, I am OK.

Business Ideas

I finally had enough seeing my ideas on a scrap of paper instead of on a store shelf, so I decided to be a little more proactive. I put some "feelers" out and am starting to get some positive feedback. One of the things I found out is that I can license my ideas, instead of going traditional route of bringing my idea to market by myself. Basically, I submit what is known as a Provisional Patent Application (PPA), which protects my idea for up to 12 months. I then license my idea to a manufacturer who will take the idea to market (i.e., manufacturing and distribution). They make money off of my idea, while I get a percentage of the sales (along with an upfront fee). Just one of the things I'm considering.

Update on House #1

After work yesterday, I met the husband to exchange checks and termination forms. He gave me the correct ones this time, so at least I made $100 for my efforts the past two weeks.

Right after that, I went home, changed, loaded up the car, and headed to House #1 to see what the deal is with the "mold" the lady's mother had mentioned. I also brought along a bottle of Tilex just in case. I get there and I can somewhat understand the lady's mentioning of the "mold", although, it was green spots and not black as she had told my wife. As I mentioned before, central Texas is known for it's high mold count. Just about anything that doesn't see constant sunlight will have mold growing on it. The thing about this type of mold is it usually just an eyesore and not a health hazard (i.e., it's not toxic). I get the bleach/soap solution ready and start scrubbing. About 2 minutes into it, I say "Screw this!" and get the bottle of Tilex and start spraying. Almost instantly the mold is gone. So, me being lazy, I decided to just spray the spots of mold instead of burning some calories. After about 10 minutes, I get a water hose, spray it off, and all is done. I'm still going to paint the exterior, though, as it has become weathered and could really use it. I figure the $100 I got from the couple will pay for the paint, and I should be done before the weekend (I hope).

Buyers who have a relative in RE

I briefly talked about the potential buyer for House #1. It turns out that her mother is a "retired" RE agent from out of state (IOW, she didn't have her license in Texas). The buyer told me this early on and in the back of my head I knew it would come back to haunt the deal - and it did. In the 2-3 weeks since the couple first "fell in love" with the house, I must have showed it to them at least three times, maybe four.

Well, last Friday we were to meet at the house and sign the contract. I get there and the wife has the contract and EMD waiting (the husband is not with her as he had another commitment all weekend). The bad thing, though, was that it was all filled out wrong and she was missing an addendum. So, I made the necessary corrections, and told her that she would need her husband to initial the corrections or redo the contract and have them both sign. Of course that meant at least another day of waiting.

Saturday, I realize my foolishness and call the wife to tell her that she will need to put down an option fee in order to hold the property in the meantime. She says that she is on her way out of town and won't be back until Sunday evening. I tell her that she has no interest in the property yet and that if someone else wants to buy it then I'll have no other choice but to accept their contract. She says if that's the case then there is nothing she can do to prevent it at the time.

On Monday, I haven't heard from either of them. I got picked for jury selection, so had to spend most of my time Monday in court. During a break, I called the title company to reassure myself of what all wee need to do to start escrow. On another break, I call the wife back, but get her VM, so I leave a message. About an hour later, I get a call back, but can't answer it since I'm in court. On the next break I answer the VM, and it's some man saying he's the buyer's father. He says that he wants to ask some questions about the house and to see if we will negotiate the price. WTF?!?! With hardly any time to talk, I call my wife and tell her to call back and see what the deal is. We had already negotiated a price that both of us agreed to.

A little while later I get in touch with my wife and she says the couple decided not to buy the house. It turns out the buyer's mother (the 'retired' RE agent) really influenced the couple enough so they backed out of the deal. My wife said she talked to the father first and told him we were all set to sign a contract but the buyer didn't fill it out correctly, but that the price was already set. She then talked to the mother who told my wife that it was overpriced and there was mold on the outside of the house. She then talked to the buyer who told my wife that they found cheaper houses in the area, and that this property was "too high" for them as they wanted to make some improvements later (totally opposite excitement from when I met with her).

It's apparant from backtracking the 3-4 days prior that the parents really got to the couple. I'm not sure if the mother told the buyer to intentionally fill out the contract wrong just to stall a little while she had time to look at the place (and the prices around the area, etc). Either way, we were both pissed as we feel we were conned by this couple - maybe not intentionally, but who knows. Of course, we learned a HUGE lesson in this process, which we will definitely not repeat.

The funny thing is the buyer told us that she would still give us the $100 option fee, and she put it along with a termination letter under the door mat. When I got it, I realized that on the check AND on the form, the buyers put "May 10, 2008" instead of "March 10, 2008". I'm supposed to meet the husband tonight to get a corrected copy of both, but not sure if he'll even show up.

Lessons learned? (1) Don't get hopes up even if the buyer seems overly excited about buying a property, since nothing matters until closing, (2) make sure ALL parties are present when filling out a contract as it leaves things "dangling", and (3) if the buyer is an agent, or has a relative that is an agent, understand that headaches will probably ensue.

While I was at the house, I looked around and noticed a few small patches of green, which could be surface mold, which can easily be removed with a bleach/soap solution. It's not like it was toxic mold. In central Texas this stuff grows just about anywhere that the sun doesn't hit. As far as overpriced, I did a check from a postcard I received from my agent showing market trend analysis for the subdivision. House #1 IS one of the highest-priced homes in the subdivision, but (1) it's right inline as far as price-per-sf, and (2) it has features most homes in the subdivision DON'T have, like stunning views in the back, no neighbors in the rear, and the largest 1-story floor plan.

The good that came out of this is that I plan to clean the few "mold" spots on the outside wall and repaint the entire outside. I'm also thinking about raising the price afterward and offer a $2k bonus to the buyer at closing. Additionally, I may spend about $30-$50 on some colorful flowers for the front to make it even more attractive.

Update

It's been a wild and crazy February and March looks like it will be no different ...

House #1: Tenant

This is a long story, and I don't have the time to write every detail. Basically, she wanted out, we had her sign a letter stating some conditions to break the lease, she signed it, she then reneged on it, the old lease went in affect, and she abandoned the place. A few days later, we get a letter from her basically saying she DIDN'T abandon the place, and if we try to contact her she'll sick her attorney on us for harrassment, etc. LOL!

House #1: On the Market

I put House #1 back on the market after tenant bolted. Thankfully, she didn't do any damage to the place, but it still needed about 5-6 hours of cleaning, which I finished over the weekend. We put it for both sale and rent to capture both audiences.

House #1: Prospective Buyer

Not two days after putting the signs in the yard, I got a couple interested in buying the place. The wife fell in love with the views and large backyard (which is what I try to emphasize in my marketing). I showed them the inside of the house and they wanted it even more. All this while I was still only about 1/4 way through cleaning the place. I called the wife last night and she says she and her husband were filling out a contract offer as we spoke. I'm going to try to meet them either tonight or tomorrow night to iron out the details. They said they aren't using an agent, and neither am I, so I'll save over $8,000 in commission fees, which I MAY use as leverage in the negotiations.

The Big Why?

This is the thing I'm really trying to find now. For the last 3-4 years, I've always had a notion of why I want to do REI, but never had a vision of it. I think this is the piece I've been missing (and it's a REALLY BIG piece). I got the book Getting Things Done by David Allen, and it has really opened my eyes on a few things I've been seriously neglecting. I'm only about 1/3 of the way through and I'm already feeling a since of change - upliftedness - in my psyche. A lot of things are going to happen in the next 30-45 days (I hope) and these changes will lead to bigger, and, perhaps, better things in my life.

Hiatus

I have been contemplating whether to continue this blog or not for some time now, and I think what I've decided is to just go on hiatus for a while (maybe even permanently). I am finding myself being pulled in about 10 different directions and just need some time to really gather my thoughts and see what path I need to go down. Work at my JOB was hectic last year, but slowed down over the holidays. Unfortunately (or fortunately), our project is slated for even more work the first half of this year, which means less "free" time at work to get anything done. My kids are at the age now where they are demanding more of my time to play, and read, and ask 100's of questions, so I need to spend more of my "free" time at home with them. And, instead of becoming a master of one, I feel myself becoming a 'jack of all trades' - or, more appropriately, thinking of numerous business ideas, but failing to execute any of them.

I read an article in the local Sunday paper last week about a guy who wrote a book, appropriately titled "Getting Things Done". Supposedly, he has a revolutionary way of prioritizing your life in order to not only excel, but to provide more time to enjoy the things that matter most. I'm going to order the book ASAP as it is exactly what I need. I also got in touch with the seasoned RE investor who pitched at the investor's meeting I went to last week. Hopefully, we can meet one day this week or next so that I can pick his brains a little on how he "made it" - not so much in the technical sense, but in the organizational sense. I'm also trying to figure out the BEST business idea from the lot I have and running with it.

So, lots of things on my plate this year, and not a whole lot of time to devote to my blog. It's been a joyous, and sometime turbulent, 3+ years writing hear, but I just feel I need to close a chapter in my life and open another book. I thank everyone for helping me by giving worthwhile advice over the years, and I wish those same people all the best in their endeavors. My email account will still be active and I will continue to read messages there every day, so don't hesitate to write.

Best of luck to everyone!

Investor's Meeting

I went to my first meeting with the investor's group I talked about here. I have to say I wish I had known about this group long before now. Not only are the meetings and membership FREE, but they also served free food and drinks at the meeting. You can't beat that! I told a friend of mine, who is also a RE investor, about this meeting a couple weeks ago, and he also made it there.

The group's moderator started the meeting by showing a slide of the night's discussion topics. The only downside (if you want to call it that) about the group is that it focuses on all kinds of investing - mostly stock and options trading. So the meeting was about 95% about the moderator's activities since the last meeting (earlier this month). The very last part of the meeting was a presentation by a seasoned RE investor, who was going to talk about the Austin RE market. The moderator had the RE investor and another gentlemen stand up as they were two of the "big" players in the group. According to the moderator, the RE investing had been doing flips and what-not since right after high school. I kid you not, he looked about my age or older, which tells me he's been doing this a LONG time. Unfortunately, the moderator's presentation dragged on and I had to cut out before listening to the RE investor's presentation.

Anyway, the moderator does nothing but trade stocks and options (and only a very small bit of RE investing). As he was going through his presentation I was dumbfounded at how much knowledge this guy had. He was throwing up articles and charts and graphs and so on and talking terms I've never heard of before. The two things that really caught my eyes and ears was the level at which this guy "plays". He brought up one slide that showed a single stock he'd bought and sold in which he made $10,000 in less than a day. He's not a day trader, according to him, but just happened to get in on a stock whose company was getting bought out later that day. In-between his Greek terminology, he mentioned that he bought five blocks of 500 shares each of the stock, which on the chart was trading at about $20/share. That equates to $50,000 to me and this is just one of gazillion stocks he owns.

Another thing I liked about the guy is he really knew what he was talking about when it came to fundamentals. He had articles and reports and so on from analysts and who knows who supporting his decisions. But he was also humble about it and made sure we knew that he DID have down days/weeks, too.

A couple of things I wrote down that he mentioned in particular had to do with some of his plays. Disclaimer: I am NOT giving any advice here - only what this guy had mentioned. Basically, he started getting heavy into shipping companies recently. Not air freight companies, but companies who ship large items over the water. He had put up a chart on the group's site a couple of weeks ago, and mentioned that even during the time he posted the chart until the meeting last night, several of the stocks had already jumped another 20% (and this was already on top of having big gains before). He also said that grain ETF's, like DBA and RJA are looking good.

The reason? China.

China is supposedly becoming a HUGE consumer and the demand for commodities is growing exponentially in the country. This, according to him, was the reason he got into the shipping stocks and the reason they have risen when most of the market is falling. Again, there were a lot of articles and charts and what-not he put up to support all this assumptions, but just him showing the charts on many of the stocks and their performance the last few weeks was enough telling for me.

His big prognostication is that beef will be HUGE the second half of the year. He even had an article showing a press release from Tyson in which they said that the demand is going through the roof and prices will raise accordingly. Another article showed that the people in China will be the main influence as they are showing no resistance to already growing prices there and the demand is actually seen as growing.

All-in-all is quite interesting to see how this guy goes through his daily routines of getting up early, investigating resources on the web and other places, looks at financials, etc., and makes his calls. He has no formal job - just plays the market (and does it well). I was definitely impressed.