Here is yet another in a long line of reports suggesting a lot of housing markets in the nation are WAY overvalued (and some even undervalued by a good amount).
The Top-10 Overvalued Markets:
1. Santa Barbara-Santa Maria CA - 86%)
2. Naples FL (72%)
3. Modesto CA (71%)
4. San Diego CA (70%)
5. Stockton CA (64%)
6. Riverside-San Bernardino CA (64%)
7. San Jose CA (61%)
8. Sacramento CA (59%)
9. Vallejo-Fairfield CA (58%)
10. Los Angeles-Anaheim CA (57%)
The Top-10 Undervalued Markets:
1. El Paso TX (-26%)
2. McAllen-Edinburg TX (-21%)
3. Fayetteville NC (-18%)
4. Memphis TN (-18%)
5. Augusta GA (-17%)
6. Little Rock AR (-17%)
7. Pittsburgh PA (-14%)
8. Indianapolis IN (-14%)
9. Dallas TX (-14%)
10. Houston TX (-13%)
It's no real surprise that 9 out-of-the 10 overvalued markets are in California. What is also not surprising for those who've been following the trend is that Texas has 4 out-of-the 10 top undervalued markets, including the top two. Last I heard, the Austin-San Marcos-Round Rock area was about 5-6% undervalued, so we are probably in the top-20 or top-25 undervalued markets. If that wasn't enough to get the swarms of California real estate investors in this state. :-/
Tuesday, January 24, 2006
Monday, January 23, 2006
On Hold
This Wednesday is D-Day (aka, "Delivery-Day"). For about the past month, my wife and I have both expected her to deliver the twins any day now. On Wednesday, my wife is scheduled to deliver, regardless if the twins want to come into this world then or not. :-)
Over the past 2-3 weeks, I've switched gears from concentrating a lot of my free time to REI to concentrating on our soon-to-be arrivals. I have only one bandit sign that is still hanging, and haven't gotten a call since that last deal I talked about a week or so ago. I'll definately be out-of-commission until this time next week, and I fear that it will probably be longer than that. I have a couple of systems in place to keep a small part of my business going, but the major marketing and deal-making parts will definately be put on-hold for a while.
I'll try to post when I can in the next week or two, but I doubt I'll have the time (and what time I do have will be spent on sleeping, I'm sure). ;-)
Happy investing everyone!
Over the past 2-3 weeks, I've switched gears from concentrating a lot of my free time to REI to concentrating on our soon-to-be arrivals. I have only one bandit sign that is still hanging, and haven't gotten a call since that last deal I talked about a week or so ago. I'll definately be out-of-commission until this time next week, and I fear that it will probably be longer than that. I have a couple of systems in place to keep a small part of my business going, but the major marketing and deal-making parts will definately be put on-hold for a while.
I'll try to post when I can in the next week or two, but I doubt I'll have the time (and what time I do have will be spent on sleeping, I'm sure). ;-)
Happy investing everyone!
Tuesday, January 17, 2006
Poised for a Boom
I was watching the local news last night, and they did a short segment on the area housing market. Basically, it was the same old "real estate market is undervalued" mantra, but one thing stuck in my head. The reporter was asking a local Realtor® a few questions, and ended the segment with a question "The bottom line?" to which the Realtor® answered "If you are going to buy a home in central Texas, now is the time." Now this wasn't really news to me or others in the local area, but it did drive home a simple fact: the Texas real estate market is poised for a boom. Appreciation rates have been pretty stagnant the last five years, and only now are seeing positive growth. One local investor I spoke with recently said market appreciation has averaged about 4% since last year, which seemed rather high to me from what I've seen. While I am not big on speculation, I do think that now is the right time to buy real estate in the Austin metroplex. I've seen a lot of growth in the area in the last year, and with the addition of Highway 45 and TX130, things will only get better.
Maybe I shouldn't be passing on some of these deals so quickly. :-/
Maybe I shouldn't be passing on some of these deals so quickly. :-/
Sunday, January 15, 2006
Investor, Recent Deal, and an Old Deal
Well, it turns out this investor I've been talking about recently is very experienced. I did some google searching, and found lots of information about him that definately leads me to believe he has been doing this for some time. While doing this research, I also gave hin the info of the deal I passed by last week. After a day or two, he got back with me and said it wouldn't work for him either. So it's good to know my due diligence resulted in the same conclusions as his: no deal.
I also had some downtime yesterday (while my daughter and wife took a nap) to revisit a deal I passed up last summer. I still don't know why I'm so hung up on this one property - maybe because it makes a good trial to base my figures on??? Anyway, I played with some numbers and figured the most profit I could hope to make from the deal would be $12,000, and this was with a lot of wishful thinking. For example, I would have to sell via owner-carry with an 11% loan. Not sure if that would even be feasible in my market even for people who can't qualify conventionally. during the two year loan term (it has a balloon at the end), I could either invest the monthly CF elsewhere or reinvest it in the form of added principle payments. It turns out, by reinvesting the monthly payments, I would pocket an additional $1,000 after two years in debt paydown / equity buildup. Again, there were just a lot of uncertainties, though, that could really put a dent in the net profit that I would need to iron out first. Still it really exercised my brain in owner-carry financing.
I also had some downtime yesterday (while my daughter and wife took a nap) to revisit a deal I passed up last summer. I still don't know why I'm so hung up on this one property - maybe because it makes a good trial to base my figures on??? Anyway, I played with some numbers and figured the most profit I could hope to make from the deal would be $12,000, and this was with a lot of wishful thinking. For example, I would have to sell via owner-carry with an 11% loan. Not sure if that would even be feasible in my market even for people who can't qualify conventionally. during the two year loan term (it has a balloon at the end), I could either invest the monthly CF elsewhere or reinvest it in the form of added principle payments. It turns out, by reinvesting the monthly payments, I would pocket an additional $1,000 after two years in debt paydown / equity buildup. Again, there were just a lot of uncertainties, though, that could really put a dent in the net profit that I would need to iron out first. Still it really exercised my brain in owner-carry financing.
Friday, January 13, 2006
Experienced Investor?
Recently, I met a local investor online at one of the REI web sites I frequent. The person seems very knowledgeable with REI, and I felt he would be a great person to not only learn from, but to flip deals to that I don't want. In reading both his direct emails to me and posts on the message board, I got the feeling he has done many deals in his career. He said his strategies are to buy Sub2 and sell via owner-carry financing, which is EXACTLY what I want to do.
The other day, I was looking at our county's courthouse records and an idea hit me. I thought "why don't I look up the entire history of all courthouse records with this person's name to see how many and what type of deals he has done." When I did a search of all records - not just real estate - from 1983 to the present under this person's name, I got only two records: the first one is where he submitted an assumed name (DBA) and the second was a personal residence. I tried his name and DBA for both grantor and grantee, but same thing - the ONLY real estate records that came back involved his lone personal residence.
My first thought was that maybe he hides the transactions in a land trust, but I remembered in one of our conversations that he specifically said he doesn't use land trusts. I guess two other alternatives would be that (1) he has never done any transactions in the county in which he lives (doubtful), and/or (2) he owns a corporation (that was created outside this county) that buys the properties (very possible).
I really believe he is a genuine RE investor from the way he talks, but I'll tread softly until I know how much real-life (and not book-smarts) he has regarding RE investing.
The other day, I was looking at our county's courthouse records and an idea hit me. I thought "why don't I look up the entire history of all courthouse records with this person's name to see how many and what type of deals he has done." When I did a search of all records - not just real estate - from 1983 to the present under this person's name, I got only two records: the first one is where he submitted an assumed name (DBA) and the second was a personal residence. I tried his name and DBA for both grantor and grantee, but same thing - the ONLY real estate records that came back involved his lone personal residence.
My first thought was that maybe he hides the transactions in a land trust, but I remembered in one of our conversations that he specifically said he doesn't use land trusts. I guess two other alternatives would be that (1) he has never done any transactions in the county in which he lives (doubtful), and/or (2) he owns a corporation (that was created outside this county) that buys the properties (very possible).
I really believe he is a genuine RE investor from the way he talks, but I'll tread softly until I know how much real-life (and not book-smarts) he has regarding RE investing.
OT: Healthcare Sucks Today!
I'm going to go against the grain here a little and post something that has very little to do with RE investing - healthcare in the United States today. Now this is only my opinion from my own personal experience - others may very well have a differing viewpoint.
As most of my readers know by now, my wife is expecting twins any day now, so we've really had to deal with the medical industry pretty close the last 9+ months. Much of what I have to comment about in this blog entry deals with the healthcare we've (well, really she) has received in that timeframe.
There are two major issues I have with healthcare (costs and quality of service), and they are so closely related to one another that it boils down to really one problem: money. To digress a bit, when I was talking with our CPA at our last meeting, we got on the subject of healthcare. I work in a Fortune 500 company that is global and is pretty solid by most standards. I still have to pay a pretty good chunk each month towards my medical, dental, and vision plans. Up until a few years ago, I would pay a modest co-pay each time I visited a healthcare provider on top of the monthly payments. Any overages above 10% were paid by my insurance company. Sice then, my coverage has morphed into me paying about 3x more a month, and my co-pay is now a straight percentage (which is usually a lot higher than with the old way). When talking with my CPA, I learned I actually have it pretty damned good. She was saying her and her husband (who is a teacher) pay over $600 a month for BASIC medical-only coverage. I about fainted! Besides education (especially for college), medicine has got to be the fastest growing industry out there in terms of costs.
But that's just one issues.
The other issue I have is with the quality of service. Now, before anyone jumps on my back about who is to blame: doctors, administrators, insurance companies, etc., I want to say that my sister is a physician and I've had countless talks with her about this point-blank. The thing is it doesn't matter who is to blame - what matters is there is a serious problem with quality of service today and it seems no one who can do anything about it really gives a damn. What happens is that doctors are coupled with insurance companies due to the differing medical plans patients have. They have to hire complete staff in order to handle all the insurance claims and general paperwork. This cuts into their bottom line, so they need to see more and more patients - usually overbooking their day. This causes both poor quality of service, since they get behind due to longer-than-expected visits, emergencies, etc. Who is ultimately put on backburner in all this is the patient themself, though. And, again, I have firsthand knowledge, especially over these last 9+ months.
Thus we're paying more-and-more money for less-and-less quality of service. Point the finger to whomever you feel is to blame, but I think we can all admit there is a definate problem today in the healthcare industry.
My most recent examples?
1. We went to see my wife's OB/GYN for a scheduled appointment. We rushed to get there on time, since it's a 20 mile drive one-way, and the office has a 15 min past your appointment time limit or they will reschedule you. We sit in the waiting room for a good 30 mins before they call us back. The nurse then does vitals on my wife, and tells us we have to wait for the doctor, who is running behind. An hour - yes, hour - later, we see the doctor. My wife brings a VHS tape so they can videotape the sonogram. They have only allowed us to tape the sono a few times as they are usually in too much of a rush. Bingo! Same thing today. The doctor is behind and does what she needs to do and leaves. Total time with patient: 10 mins. My wife had some questions, also, but my doctor said she could only answer a couple of them, and to have my wife talk to the physician assistant with other questions.
2. My wife also sees another doctor about her pregnancy (lon story). just about the same thing there, too. Rush to get there, wait for a while, and feel like we are being put through a speedy buffet line when we do get to see the doctor.
Okay, now back to the real intention of this blog ...
As most of my readers know by now, my wife is expecting twins any day now, so we've really had to deal with the medical industry pretty close the last 9+ months. Much of what I have to comment about in this blog entry deals with the healthcare we've (well, really she) has received in that timeframe.
There are two major issues I have with healthcare (costs and quality of service), and they are so closely related to one another that it boils down to really one problem: money. To digress a bit, when I was talking with our CPA at our last meeting, we got on the subject of healthcare. I work in a Fortune 500 company that is global and is pretty solid by most standards. I still have to pay a pretty good chunk each month towards my medical, dental, and vision plans. Up until a few years ago, I would pay a modest co-pay each time I visited a healthcare provider on top of the monthly payments. Any overages above 10% were paid by my insurance company. Sice then, my coverage has morphed into me paying about 3x more a month, and my co-pay is now a straight percentage (which is usually a lot higher than with the old way). When talking with my CPA, I learned I actually have it pretty damned good. She was saying her and her husband (who is a teacher) pay over $600 a month for BASIC medical-only coverage. I about fainted! Besides education (especially for college), medicine has got to be the fastest growing industry out there in terms of costs.
But that's just one issues.
The other issue I have is with the quality of service. Now, before anyone jumps on my back about who is to blame: doctors, administrators, insurance companies, etc., I want to say that my sister is a physician and I've had countless talks with her about this point-blank. The thing is it doesn't matter who is to blame - what matters is there is a serious problem with quality of service today and it seems no one who can do anything about it really gives a damn. What happens is that doctors are coupled with insurance companies due to the differing medical plans patients have. They have to hire complete staff in order to handle all the insurance claims and general paperwork. This cuts into their bottom line, so they need to see more and more patients - usually overbooking their day. This causes both poor quality of service, since they get behind due to longer-than-expected visits, emergencies, etc. Who is ultimately put on backburner in all this is the patient themself, though. And, again, I have firsthand knowledge, especially over these last 9+ months.
Thus we're paying more-and-more money for less-and-less quality of service. Point the finger to whomever you feel is to blame, but I think we can all admit there is a definate problem today in the healthcare industry.
My most recent examples?
1. We went to see my wife's OB/GYN for a scheduled appointment. We rushed to get there on time, since it's a 20 mile drive one-way, and the office has a 15 min past your appointment time limit or they will reschedule you. We sit in the waiting room for a good 30 mins before they call us back. The nurse then does vitals on my wife, and tells us we have to wait for the doctor, who is running behind. An hour - yes, hour - later, we see the doctor. My wife brings a VHS tape so they can videotape the sonogram. They have only allowed us to tape the sono a few times as they are usually in too much of a rush. Bingo! Same thing today. The doctor is behind and does what she needs to do and leaves. Total time with patient: 10 mins. My wife had some questions, also, but my doctor said she could only answer a couple of them, and to have my wife talk to the physician assistant with other questions.
2. My wife also sees another doctor about her pregnancy (lon story). just about the same thing there, too. Rush to get there, wait for a while, and feel like we are being put through a speedy buffet line when we do get to see the doctor.
Okay, now back to the real intention of this blog ...
Sunday, January 08, 2006
Duplexes For Sale
I've covered the story of the following duplexes before in some earlier blog entries. I thought I'd show everyone the exact properties I was talking about. I guess my "instinct" about these properties may have bee justified as they are STILL for sale - even after several price drops. One, in fact, was off the market for a short period, but is back on. The area isn't what I would call very nice at all. I recall in Bronchick's Flipping Properties that one criteria for a property would be if you would feel safe in the area at night. Simply put, I wouldn't!
Property #1
Property #2
Property #3
Property #4
Property #5
Property #1
Property #2
Property #3
Property #4
Property #5
Friday, January 06, 2006
Sub2's Illegal?
Wow. Nothing amazes me more than people who are in the real estate profession everyday, and know less than I do about stuff. So, I finally got a call back from the title agency I called the other day. I had asked three detailed questions, and the lady answered all three. Here is basically what I asked and the response I got from the lady at the title company, who was forwarding the answers from her "veteran" closer:
Q: Does your company do double-closings?
A: Yes. Just make sure all the paperwork is squared away before hand, etc., etc.,
Q: Does your company handle closings with seller financing involved, and what documents will you need from me and my buyer?
A: Yes, we do closings involving seller financing. She wasn't sure what documents I was talking about, though, so that answer is still in limbo.
But the kicker was my third question ...
Q: Does your company handle closings where the buyer is taking the property subject-to the existing financing? Keep in mind, when I asked this question, I had to explain the difference between "subject-to" and "assumption".
A: No, we don't do those types of closings. In fact, those types of transactions are illegal in the state of Texas. Huh?!?! I didn't say anything after that point except "Thank you for getting back to me."
Okay, not only are subject-to deals NOT illegal in the state of Texas (or any other state, that I know of), but they happen all the time - every day. There is even a line on the HUD-1 settlement statement specifically dealing with subject-to financing (Line #503, I believe). Now, the lender CAN call a loan taken Sub2 due at their descretion, but there is ABSOLUTELY NOTHING ILLEGAL ABOUT IT.
The lady asked if I'd like to come ina talk face-to-face with them further to which I said 'yes', but that 'I would call them'. Ugh.
Q: Does your company do double-closings?
A: Yes. Just make sure all the paperwork is squared away before hand, etc., etc.,
Q: Does your company handle closings with seller financing involved, and what documents will you need from me and my buyer?
A: Yes, we do closings involving seller financing. She wasn't sure what documents I was talking about, though, so that answer is still in limbo.
But the kicker was my third question ...
Q: Does your company handle closings where the buyer is taking the property subject-to the existing financing? Keep in mind, when I asked this question, I had to explain the difference between "subject-to" and "assumption".
A: No, we don't do those types of closings. In fact, those types of transactions are illegal in the state of Texas. Huh?!?! I didn't say anything after that point except "Thank you for getting back to me."
Okay, not only are subject-to deals NOT illegal in the state of Texas (or any other state, that I know of), but they happen all the time - every day. There is even a line on the HUD-1 settlement statement specifically dealing with subject-to financing (Line #503, I believe). Now, the lender CAN call a loan taken Sub2 due at their descretion, but there is ABSOLUTELY NOTHING ILLEGAL ABOUT IT.
The lady asked if I'd like to come ina talk face-to-face with them further to which I said 'yes', but that 'I would call them'. Ugh.
Hard to say "No Thanks"
This most recent deal was really an act of not taking a property emotionally for me. I tried just about every scenario imaginable to make this deal work, but the numbers would always come up negative for me. Straight rent, owner-carry, refi, you name it, and I tried it. The problem is that the 15yr existing note just elevates the monthly payment so much that everything I've tried to do creatively just wouldn't work. I thought maybe taking Sub2, renting it out for going rental price, and refinancing in a year to a 30yr note would enable to at least make a profit on the backend, but even that went south - quickly.
I finally called the owner last night as promised and explained to her that the financials just didn't work out for me. I told her that I knew other investors that MAY be interested, but I couldn't promise her anything. She thanked me for at least trying, and I felt so bad, I told her that if it came down to crunch time and she absolutely HAD to sell it to please call me and I'd do whatever I could to help her out - even if it meant a loss for me (I couldn't believe I said this). She just sounded so kind in her communication with me in both phone conversations that I knew she would be easy to work with.
I'll try to fish her property to some local investors to see if anyone with strong cash reserves can help her out. I hope for her sake they can, but we'll see. Dang!
I finally called the owner last night as promised and explained to her that the financials just didn't work out for me. I told her that I knew other investors that MAY be interested, but I couldn't promise her anything. She thanked me for at least trying, and I felt so bad, I told her that if it came down to crunch time and she absolutely HAD to sell it to please call me and I'd do whatever I could to help her out - even if it meant a loss for me (I couldn't believe I said this). She just sounded so kind in her communication with me in both phone conversations that I knew she would be easy to work with.
I'll try to fish her property to some local investors to see if anyone with strong cash reserves can help her out. I hope for her sake they can, but we'll see. Dang!
Thursday, January 05, 2006
Another Deal
As I said in my previous blog entry, I got a call from a lady wanting to sell her house. My guesstimations were pretty much on spot (actually, a little higher, except I didn't factor in PMI in the loan). After talking with the lady, I found out both her and her sister bought the place, and her sister moved out last month to her own place. The lady said she can't continue staying there, since the payments are too high for just her. I told her I was an investor, and couldn't buy houses at retail price. She said that she didn't want any money for the property - she just wants to get rid of it. I figured the balance on her loan was around $113,500, and was surprised when she said it was currently $111,700. The deal will be very slim no matter what exit strategy I employ. I would almost have to take over her payments as a conventional loan would cost me $$$, especially, since the LTV is so high (~90%). I guessed she was paying about $1,386/mo (PITI), and she confirmed she is paying $1,400/mo.
So, what to do ... what to do ... I want this property badly for three main reasons:
1. It's a 15yr loan. This means the equity build-up and debt pay-down will occur a LOT faster than with a 30yr loan. It also means the payments will be higher, too, which is part of the problem I'm having on an exit strategy.
2. Based on the date of the loan, the fact it's only 15yrs, the monthly payments, taxes, insurance, and PMI, I figured the interest rate is <5% (actually, I figured 4.75%). With that kind of interest rate, it makes #1 above a lot more attractive.
3. It has about $15k-$20k of equity. Percentage-wise this isn't good ($112k/$128k = 88%), but the equity amount is still nice - especially given #1 and #2 above as it will only go down quicker.
The problem being a straight rental is this ... Rents in the area range from $950-$1200, with comps of $1,000 closer to this property. I could rent it out with a higher price tag, but it may sit longer, too - negating my efforts. At $1,000/mo, I'd have negative cashflow to the tune of $400/mo. Ouch! The good news is the property is located to a new university extension, so I could cater the property to students, since it has 4 bedrooms and 2 baths.
Another thing I could do is sell via owner-financing. I really need to see a lawyer about this first, though, as I still have some reservations about it - especially since it will have an underlying loan that could be called by the lender (this sense of fear is exacerbated knowing the original loan only had a 4.75% interest rate). If I did this, I could sell it for $135k or so. Even at that amount, I'd still have to ask for a high downpayment ($10k or so) and/or a very high interest rate (10% or so) on the new note.
The good news in all this is that (1) I still need to see if the lady is willing to let me take over the payments, and (2) she said she doesn't necessarily have to sell quickly (I specifically asked her if she needed to sell within a few days or could wait for 30-45 days, if need be, and she said she could wait). So I could realistically sign a contract for a 30-45 day close, which would give me more time to arive at a decision.
So, what to do ... what to do ... I want this property badly for three main reasons:
1. It's a 15yr loan. This means the equity build-up and debt pay-down will occur a LOT faster than with a 30yr loan. It also means the payments will be higher, too, which is part of the problem I'm having on an exit strategy.
2. Based on the date of the loan, the fact it's only 15yrs, the monthly payments, taxes, insurance, and PMI, I figured the interest rate is <5% (actually, I figured 4.75%). With that kind of interest rate, it makes #1 above a lot more attractive.
3. It has about $15k-$20k of equity. Percentage-wise this isn't good ($112k/$128k = 88%), but the equity amount is still nice - especially given #1 and #2 above as it will only go down quicker.
The problem being a straight rental is this ... Rents in the area range from $950-$1200, with comps of $1,000 closer to this property. I could rent it out with a higher price tag, but it may sit longer, too - negating my efforts. At $1,000/mo, I'd have negative cashflow to the tune of $400/mo. Ouch! The good news is the property is located to a new university extension, so I could cater the property to students, since it has 4 bedrooms and 2 baths.
Another thing I could do is sell via owner-financing. I really need to see a lawyer about this first, though, as I still have some reservations about it - especially since it will have an underlying loan that could be called by the lender (this sense of fear is exacerbated knowing the original loan only had a 4.75% interest rate). If I did this, I could sell it for $135k or so. Even at that amount, I'd still have to ask for a high downpayment ($10k or so) and/or a very high interest rate (10% or so) on the new note.
The good news in all this is that (1) I still need to see if the lady is willing to let me take over the payments, and (2) she said she doesn't necessarily have to sell quickly (I specifically asked her if she needed to sell within a few days or could wait for 30-45 days, if need be, and she said she could wait). So I could realistically sign a contract for a 30-45 day close, which would give me more time to arive at a decision.
Wednesday, January 04, 2006
Wow - What a difference a day makes
I drug myself into work yesterday after being on vacation for a little over 19 days. I was feeling a bit down as I really hadn't done much to help my REI career over that time, and knew my free time would again be cut short soon with the arrival of my wife's and my twins. By the time I went to bed last night, however, several things happened to me regarding REI that really lifted my spirits:
Tenants - We hadn't received the January rent check from the tenants yet, and our lease agreement stipulates it is due no later than the 3rd of each month at 5:00pm. It wasn't like the tenants to be late paying, so I blamed it on the holidays. Sure enough, when I got home, the rent check was in the mailbox. Whew! I would have hate calling them to sort that mess out. Another thing in our lease agreement is that they are to give us 30 days written notice if they plan to move out. To digress, they signed a 6-month lease that is renewable month-to-month unless WE or THEY give the other party 30-days written notice. We hadn't received anything from them, so I called them last night to touch base. After informal chit-chat, I reminded them about the stipulation in the lease agreement. They said they were aware of it, and - get this - asked me if they could stay for a few more months. I replied, "Sure. That is your option", while dancing happily on the other end. As I said before, they have been EXCEPTIONAL tenants, and I would have hate seeing them go. What I really like, too, is the fact that I'll be getting more rent checks for a while. If they do decide to bail in the April/May/June, this will be excellent as it heads into the prime renting months anyway.
Title Company - One of my goals that I have REALLY procrastinated on doing is calling title companies to see how their services can help me in my venture. Over the holidays, I posted a request for recommendations for title companies on the local REI club message board. I hadn't gotten a response, so I never thought anything more about it (okay, I got sidetracked on other stuff). Yesterday, I get a call from a lady who works for a local title company, saying a gentleman gave her my name/number and said I was looking for a title company to help me. I waited until I got home and called her back. Turns out she heads the marketing portion of the title company, and wasn't the exact person I needed to speak with. I gave her some questions, and she said she would forward them to their head closing agent, who would call me back. She also asked if I could come in to talk, which I said "yes", but it wouldn't be until this Friday or next Monday (I got too many meetings scheduled at work on Wed and Thu). Since this was a referral from someone who saw my message in the REI club message board, I feel confident they work with investors, and can help me.
Possible Deal - I also got a call from an owner who wants to sell their house. Again, they left a message, and while their voice and demeanor didn't sound like someone who was motivated, they did give me enough information to figure out their history. When I got home, I ran some numbers and found the following:
Description: Built in 2000, 1500sf
Deed of Trust: 09/23/2003 for $126,520 (15yr note)
Comps: $125,000 - $130,000 (depending on # of bedrooms, etc.)
After doing some more digging, I figured their current situation looks similar to this (based on a loan for $126,520 @6% for 15yrs):
Loan Balance: $113,500
Loan Payment: $1,070/mo.
Taxes: $263/mo.
Insurance: $53/mo.
Total Monthly Debt: $1,386/mo.
That's probably a little too high to rent out, but I could still get it and sell via owner-financing for a nice profit:
Purchase Price: $135,000
Interest Rate: 9% (30yr)
Downpayment: $7,000
Cashflow/Month: $16
The monthly cashflow is out of the range I'd like ($200 min), but the fact that the existing note is for 15 years means the debt paydown will occur more quickly, leaving me more backend profit. After two years, I could be looking at:
Downpayment: $7,000
Cashflow (Total): $384
Equity Balance: $132,980 - $99,600 = $33,380
Total Profit: $40,764
Of course, that doesn't account for acquisition costs (~$2,000), holding costs (~$4,000), and repairs ($0?). All told, I could still be looking at $30,000 in profit, minimum, in two years. Of course, I have to see what the seller's needs are first. :-)
Another Deal - I have another deal in the works, which I want to keep mum about right now. If things work out, I may reveal some of the details, but we'll see.
Birddogs/Investors - I've been in touch with a couple of birddogs and two investors that work my area. Both birddogs are new to REI, so I'll have to "mold" them into my criteria. The investors appear to be both knowledgeable and easy to work with (first impression). One of them even owns a coffee house in a nearby town.
CPA - I faxed our CPA a copy of our 2004 tax returns (she said she needed them to better understand our financial history for tax purposes), more mileage info, and the total of our water/sewer bills for 2005 (part of the home deduction write-off).
All-in-all it was a very uplifting day for me. I just hope things pan out today, and I can close a lot of these open items. Stay tuned!
Tenants - We hadn't received the January rent check from the tenants yet, and our lease agreement stipulates it is due no later than the 3rd of each month at 5:00pm. It wasn't like the tenants to be late paying, so I blamed it on the holidays. Sure enough, when I got home, the rent check was in the mailbox. Whew! I would have hate calling them to sort that mess out. Another thing in our lease agreement is that they are to give us 30 days written notice if they plan to move out. To digress, they signed a 6-month lease that is renewable month-to-month unless WE or THEY give the other party 30-days written notice. We hadn't received anything from them, so I called them last night to touch base. After informal chit-chat, I reminded them about the stipulation in the lease agreement. They said they were aware of it, and - get this - asked me if they could stay for a few more months. I replied, "Sure. That is your option", while dancing happily on the other end. As I said before, they have been EXCEPTIONAL tenants, and I would have hate seeing them go. What I really like, too, is the fact that I'll be getting more rent checks for a while. If they do decide to bail in the April/May/June, this will be excellent as it heads into the prime renting months anyway.
Title Company - One of my goals that I have REALLY procrastinated on doing is calling title companies to see how their services can help me in my venture. Over the holidays, I posted a request for recommendations for title companies on the local REI club message board. I hadn't gotten a response, so I never thought anything more about it (okay, I got sidetracked on other stuff). Yesterday, I get a call from a lady who works for a local title company, saying a gentleman gave her my name/number and said I was looking for a title company to help me. I waited until I got home and called her back. Turns out she heads the marketing portion of the title company, and wasn't the exact person I needed to speak with. I gave her some questions, and she said she would forward them to their head closing agent, who would call me back. She also asked if I could come in to talk, which I said "yes", but it wouldn't be until this Friday or next Monday (I got too many meetings scheduled at work on Wed and Thu). Since this was a referral from someone who saw my message in the REI club message board, I feel confident they work with investors, and can help me.
Possible Deal - I also got a call from an owner who wants to sell their house. Again, they left a message, and while their voice and demeanor didn't sound like someone who was motivated, they did give me enough information to figure out their history. When I got home, I ran some numbers and found the following:
Description: Built in 2000, 1500sf
Deed of Trust: 09/23/2003 for $126,520 (15yr note)
Comps: $125,000 - $130,000 (depending on # of bedrooms, etc.)
After doing some more digging, I figured their current situation looks similar to this (based on a loan for $126,520 @6% for 15yrs):
Loan Balance: $113,500
Loan Payment: $1,070/mo.
Taxes: $263/mo.
Insurance: $53/mo.
Total Monthly Debt: $1,386/mo.
That's probably a little too high to rent out, but I could still get it and sell via owner-financing for a nice profit:
Purchase Price: $135,000
Interest Rate: 9% (30yr)
Downpayment: $7,000
Cashflow/Month: $16
The monthly cashflow is out of the range I'd like ($200 min), but the fact that the existing note is for 15 years means the debt paydown will occur more quickly, leaving me more backend profit. After two years, I could be looking at:
Downpayment: $7,000
Cashflow (Total): $384
Equity Balance: $132,980 - $99,600 = $33,380
Total Profit: $40,764
Of course, that doesn't account for acquisition costs (~$2,000), holding costs (~$4,000), and repairs ($0?). All told, I could still be looking at $30,000 in profit, minimum, in two years. Of course, I have to see what the seller's needs are first. :-)
Another Deal - I have another deal in the works, which I want to keep mum about right now. If things work out, I may reveal some of the details, but we'll see.
Birddogs/Investors - I've been in touch with a couple of birddogs and two investors that work my area. Both birddogs are new to REI, so I'll have to "mold" them into my criteria. The investors appear to be both knowledgeable and easy to work with (first impression). One of them even owns a coffee house in a nearby town.
CPA - I faxed our CPA a copy of our 2004 tax returns (she said she needed them to better understand our financial history for tax purposes), more mileage info, and the total of our water/sewer bills for 2005 (part of the home deduction write-off).
All-in-all it was a very uplifting day for me. I just hope things pan out today, and I can close a lot of these open items. Stay tuned!
Tuesday, January 03, 2006
Some 2006 REI Goals
Here are a few of my short-term and long-term goals for 2006 regarding REI. I have to admit that I'm not sure if some of these can be attained in the timeframe I've given them due to the soon-to-be arrival of our twins, but I'll revise them if needed later ...
Web Site - One huge goal of mine in the next 1-3 months is to create a web site that people can use to correspond with me and to know what I'm all about. As I start accumulating deals to offer end-buyers, I'll also post the details of the properties there, too. I'll try to keep the web site professional, but also simplistic. I've seen a lot of RE investor web sites that are full of distracting images, fonts, and whatever else. I really like Bginvestor's web site as it is clean, professional, and to the point without all that annoying eye candy.
24hr Voicemail Service - I have a cell phone I use mainly for business, but I just have a basic greeting and my voicemail. I'll probably keep my cell phone, but I want to have a 24hr recorded voicemail that can handle multiple mailboxes for my business. I'll also use a professional to say the message, so it sounds better (i.e., my voice is terrible on the phone). Another advantage will be for bilingual and even Spanish-speaking ONLY homeowners as I will have a separate line for them to listen to.
Monthly Deals - While having monetary goals is essential, I want to mimic Richard Roop's advice of looking more at the number of quality deals you get each month. If you get make an effort to tailor your marketing and other strategies in attaining a certain number of deals each month, the money will come right along with it. By year's end, I want to be in the position of making at least one quality deal a month. If I can get one quality deal per month by year's end, it will give me about $5k-$8k/month on average in cashflow. This would allow me to sustain my family in the interim in case I lose my JOB, which is one of my ultimate goals for the end of the year.
I have a slew of other goals with their own milestones, but those three were the my main short- and long-term goals for the year. As things progress throghout the year, I'll add/revise the goals. Happy investing!
Web Site - One huge goal of mine in the next 1-3 months is to create a web site that people can use to correspond with me and to know what I'm all about. As I start accumulating deals to offer end-buyers, I'll also post the details of the properties there, too. I'll try to keep the web site professional, but also simplistic. I've seen a lot of RE investor web sites that are full of distracting images, fonts, and whatever else. I really like Bginvestor's web site as it is clean, professional, and to the point without all that annoying eye candy.
24hr Voicemail Service - I have a cell phone I use mainly for business, but I just have a basic greeting and my voicemail. I'll probably keep my cell phone, but I want to have a 24hr recorded voicemail that can handle multiple mailboxes for my business. I'll also use a professional to say the message, so it sounds better (i.e., my voice is terrible on the phone). Another advantage will be for bilingual and even Spanish-speaking ONLY homeowners as I will have a separate line for them to listen to.
Monthly Deals - While having monetary goals is essential, I want to mimic Richard Roop's advice of looking more at the number of quality deals you get each month. If you get make an effort to tailor your marketing and other strategies in attaining a certain number of deals each month, the money will come right along with it. By year's end, I want to be in the position of making at least one quality deal a month. If I can get one quality deal per month by year's end, it will give me about $5k-$8k/month on average in cashflow. This would allow me to sustain my family in the interim in case I lose my JOB, which is one of my ultimate goals for the end of the year.
I have a slew of other goals with their own milestones, but those three were the my main short- and long-term goals for the year. As things progress throghout the year, I'll add/revise the goals. Happy investing!
Just when things were ramping-up
Wow. That was a very quick 19+ days of vacation. While I wouldn't say I hate my JOB, I do hate the fact that I have to do the daily commutes, work the 40+ hr/week JOB, and have to rely on keeping my skills current to get a bonus, raise, or even to keep my JOB. Coming into work this morning was hard - very hard. I had a lot of expectations about my vacation beforehand, but I let the holidays and personal projects take up the majority of my time, which I guess isn't really all that bad. I had really wanted to do at least one deal before coming back to work, but even when I found time for REI, I never seemed to devote enough energy to finding any deals.
Result?
I'm basically back to square one. I did use a lot of my time gaining information about Sub2 deals and seller financing, though, so it wasn't all a waste. I really feel more knowledgeable in those areas, but I still need to set aside time to talk to a competant RE attorney to make sure my documents are in order and I do things correctly. Another 'to-do' item is to call some local title companies to get feedback on their sevices and see if they can help me in various ways.
However, nothing is going to be as much a barrier in my life as when the twins arrive sometime in the next few weeks. A lot of my time on vacation was spent caring for our almost 3-yr old daughter as my wife is almost 35 weeks now and can do almost nothing. Our daughter is a handful, and with two newborns, free time will be - as my mother used to say - as rare as hen's teeth. I am in no means going to just give in and put REI on hold indefinately, but I don't want to go the other extreme and say things will be the same as before, either. While I really like to be self-emplyed and even own my own self-sustaining business one day, I have to admit one of the perks of my company is they give their male employees two weeks of paid time off when their spouses give birth. I seriously doubt, though, that any of that time off will be used for REI, but I'll try my damnest to put forth the effort. :-)
I've started writing my goals for the new year, and one of them is to be in the position by year's end to have enough cashflow + reserves in place to at least be able to sustain my family, if the threat of losing my JOB ever becomes a reality. Early on in my REI career (okay, early last year), I had said I wanted to quit by Jan/2007. While that is still an attainable goal of mine, I thought it best to provide a addendum for at least being able to sustain myself outside of my JOB.
Now to find the time ...
Result?
I'm basically back to square one. I did use a lot of my time gaining information about Sub2 deals and seller financing, though, so it wasn't all a waste. I really feel more knowledgeable in those areas, but I still need to set aside time to talk to a competant RE attorney to make sure my documents are in order and I do things correctly. Another 'to-do' item is to call some local title companies to get feedback on their sevices and see if they can help me in various ways.
However, nothing is going to be as much a barrier in my life as when the twins arrive sometime in the next few weeks. A lot of my time on vacation was spent caring for our almost 3-yr old daughter as my wife is almost 35 weeks now and can do almost nothing. Our daughter is a handful, and with two newborns, free time will be - as my mother used to say - as rare as hen's teeth. I am in no means going to just give in and put REI on hold indefinately, but I don't want to go the other extreme and say things will be the same as before, either. While I really like to be self-emplyed and even own my own self-sustaining business one day, I have to admit one of the perks of my company is they give their male employees two weeks of paid time off when their spouses give birth. I seriously doubt, though, that any of that time off will be used for REI, but I'll try my damnest to put forth the effort. :-)
I've started writing my goals for the new year, and one of them is to be in the position by year's end to have enough cashflow + reserves in place to at least be able to sustain my family, if the threat of losing my JOB ever becomes a reality. Early on in my REI career (okay, early last year), I had said I wanted to quit by Jan/2007. While that is still an attainable goal of mine, I thought it best to provide a addendum for at least being able to sustain myself outside of my JOB.
Now to find the time ...
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