| Option 1 | Option 2 | Option 3 | |
|---|---|---|---|
| Accumulated COCR: | 226% | 305% | 559% |
| Accumulated COCR Annualized: | 63% | 78% | 81% |
| Total Equity: | $104,300 | $53,000 | - - - |
| Total Cash & Equity: | $198,800 | $170,500 | - - - |
| Total Accumulated C+E Return: | 586% | 488% | - - - |
| Total Accumulated C+E Return Annualized: | 122% | 108% | - - - |
| Average Monthly Cashflow: | $3,260 | $4,052 | $5,029 |
| Average Yearly Cashflow: | $39,117 | $48,619 | $60,353 |
Friday, March 31, 2006
Final Numbers (Revised)
After realizing I made some miscalculations on my spreadsheet for the six properties I am interested in, I went ahead and fixed the errors, which adjusted my final figures. For whatever reason, I left out the obvious third option: selling ALL six properties using owner financing. So here are the revised figures:
Thursday, March 30, 2006
Final Numbers
After spending just about every free minute I have analyzing the heck outta these 12 properties, I've come to what I hope are two final conclusions. The first option is to buy 6 of the 12 properties, immediately sell 4 of them via owner financing, and keep two as rentals. As I had mentioned before, ALL of the houses currently cashflow negative, so I'd be taking a huge risk that I can sell the 4 properties within a 3-4 month period. If I have to hold onto them longer, I'm in deep doo-doo. However, with all signs pointing to the area appreciating like mad AND the fact we will be heading into the summer in about 2-3 months soon, I'm willing to take the risk. I also read some write-ups on Realtor.com from local agents who say the average time on market now is <60 days, so that's even more good news - and that's the retail market. My second option is to buy just five of the properties, and only keep one as a rental. I'll actaully have a better COCR doing it this way (as well as a smaller risk), but I'll be losing out on a long-term hold.
Here are some numbers for anyone who cares:
Option #1
Initial Investment: $28,000
This will cover all acquisition costs, closing costs, the birddog fee, and carrying costs. If I still have all four of the properties I plan to owner finance still in my pocket after 3 months, I'll need to borrow some money. I seriously doubt this will happen. But even if things get real tight, two of the properties have enough equity that I can wholesale if need be, but this would be my dead-last option.
2+ Year Projection:
Owners of all four properties cash me out. Now, I know this is probably wishful thinking, but with the terms I'll be offering, I should get some eager buyers who would refinance pretty readily.
Total Net Profit after 2+ years: $109,000
Once the owners start cashing me out, I plan to turn right around and pay off the 2nd mortgages on both the rentals. This will reduce my cash reserves by about $34,000, which would still leave me with $75,000 to buy other properties with. The two big reasons for doing this are (1) both properties will then cashflow positive, and (2) it will eliminate the high-interest loans. I may also consider just doing a refi myself, since the LTV should be well below 80% then, however, the current owner has some real good rates on his 1st mortgages: 6.875% and 7.5%. Who knows what the rates will be in two years.
Total COCR: 167.77%
Total COCR Annualized: 52.52%
Total Equity: $104,300
Total Cash+Equity: $179,300
Total Cash+Equity Return: 540.16%
Total Cash+Equity Return Annualized: 121.59%
Option #2
Initial Investment: $27,500
Again, this will cover all acquisition costs, closing costs, the birddog fee, and carrying costs. The costs associated with the additional rental I decided not to get helps me out with the other properties. I could still be in trouble after 4 or so months, but again, I really don't see that happening.
2+ Year Projection:
(Same as with Option #1.)
Total Net Profit after 2+ years: $118,000
Once the owners start cashing me out, I plan to turn right around and pay off the 2nd mortgage on the lone rental I still have. This will reduce my cash reserves by about $17,000, but I will still have a little over $100,000 in reserves. As with Option #1, I may even refinance the rental to pull more cash out for some new deals.
Total COCR: 266.82%
Total COCR Annualized: 74.54%
Total Equity: $53,000
Total Cash+Equity: $154,000
Total Cash+Equity Return: 459.67%
Total Cash+Equity Return Annualized: 109.19%
At this point, I'm strongly leaning toward Option #1. It carries more risk, but the rewards are hard to pass up. Plus, I'll have two rentals cashflowing positive with over 40% equity in each. Not to mention, I'll have just $25k less in my reserves than with the second option. Granted, that could probably be a downpayment on another property, but since I already have one more, it evens out. :-)
Now, I need to go have a chat with a local RE attorney who can set all this up for me. (Yeah, I included attorney fees in both deals - probably not nearly enough, though, I'm afraid.)
Here are some numbers for anyone who cares:
Option #1
Initial Investment: $28,000
This will cover all acquisition costs, closing costs, the birddog fee, and carrying costs. If I still have all four of the properties I plan to owner finance still in my pocket after 3 months, I'll need to borrow some money. I seriously doubt this will happen. But even if things get real tight, two of the properties have enough equity that I can wholesale if need be, but this would be my dead-last option.
2+ Year Projection:
Owners of all four properties cash me out. Now, I know this is probably wishful thinking, but with the terms I'll be offering, I should get some eager buyers who would refinance pretty readily.
Total Net Profit after 2+ years: $109,000
Once the owners start cashing me out, I plan to turn right around and pay off the 2nd mortgages on both the rentals. This will reduce my cash reserves by about $34,000, which would still leave me with $75,000 to buy other properties with. The two big reasons for doing this are (1) both properties will then cashflow positive, and (2) it will eliminate the high-interest loans. I may also consider just doing a refi myself, since the LTV should be well below 80% then, however, the current owner has some real good rates on his 1st mortgages: 6.875% and 7.5%. Who knows what the rates will be in two years.
Total COCR: 167.77%
Total COCR Annualized: 52.52%
Total Equity: $104,300
Total Cash+Equity: $179,300
Total Cash+Equity Return: 540.16%
Total Cash+Equity Return Annualized: 121.59%
Option #2
Initial Investment: $27,500
Again, this will cover all acquisition costs, closing costs, the birddog fee, and carrying costs. The costs associated with the additional rental I decided not to get helps me out with the other properties. I could still be in trouble after 4 or so months, but again, I really don't see that happening.
2+ Year Projection:
(Same as with Option #1.)
Total Net Profit after 2+ years: $118,000
Once the owners start cashing me out, I plan to turn right around and pay off the 2nd mortgage on the lone rental I still have. This will reduce my cash reserves by about $17,000, but I will still have a little over $100,000 in reserves. As with Option #1, I may even refinance the rental to pull more cash out for some new deals.
Total COCR: 266.82%
Total COCR Annualized: 74.54%
Total Equity: $53,000
Total Cash+Equity: $154,000
Total Cash+Equity Return: 459.67%
Total Cash+Equity Return Annualized: 109.19%
At this point, I'm strongly leaning toward Option #1. It carries more risk, but the rewards are hard to pass up. Plus, I'll have two rentals cashflowing positive with over 40% equity in each. Not to mention, I'll have just $25k less in my reserves than with the second option. Granted, that could probably be a downpayment on another property, but since I already have one more, it evens out. :-)
Now, I need to go have a chat with a local RE attorney who can set all this up for me. (Yeah, I included attorney fees in both deals - probably not nearly enough, though, I'm afraid.)
New Homes Starts Surge in Austin
I opened the local paper this morning, and on the front page was the following headline:
New home starts up
63% so far this year
Central Texas builders strain to
keep up with demand despite surge
Needless to say, it looks like the real estate market is already heating up in central Texas. Granted these are new home starts and not existing home sales, but the article mentions that houses are flying off their shelves. I can only imagine the existing homes market here is not falling too far behind. The news is great at this time, since I am trying to formulate a plan for this latest deal.
63% so far this year
Central Texas builders strain to
keep up with demand despite surge
Needless to say, it looks like the real estate market is already heating up in central Texas. Granted these are new home starts and not existing home sales, but the article mentions that houses are flying off their shelves. I can only imagine the existing homes market here is not falling too far behind. The news is great at this time, since I am trying to formulate a plan for this latest deal.
Wednesday, March 29, 2006
An Interesting Conversation
I sent the owner of the 12 properties a rather lengthy and detailed email yesterday morning. In it, I explained to him that I have never done a Sub2 deal before (through it's entirety, anyway), who I was, what my intentions were for both myself and himself, and some other stuff. All day long I kept checking my email, hoping to get a response, but nothing ever came. I thought to myself that that was basically it. He had written me a few times on Monday, saying he would be expecting me to call him Tuesday evening. I figured I would go ahead and give it one more shot.
So, I call him a few minutes past the time he had put in his email, and got his voicemail. I left a short message for him to call me back if he feels like it. About 7-8 minutes later, my cell phone rings, and it's him. He explained to me that he was with someone when I called, and he was trying to end their meeting. I could tell in his voice and in his words that he probably meant it too as he kept apologizing profusely.
What was funny was the fact that I really didn't have an outline as to what I was going to say or how long we would be talking. Most gurus tell you to let the seller do the talking, but at the end of the conversation, I noticed that I had done about 90% of the talking. We talked for a good 50 minutes. He wanted to know exactly what a Sub2 was, how he could be assured I would continue making the payments, and so on. After an hour of pretty much spilling the beans about me, I realized we had developed a great reporte with one another. He said other investors had called and seemed interested, but he could tell immediately that they didn't care about him or his situation - only that he had some properties he needed to get rid of yesterday. With me, though, he said he could sense that I was sincere in helping him, which may very well open more opportunities for me with this deal.
I told him probably 5-6 times in our conversation that in order for me to fully analyze the deal, I would need the info from the PM company. He said that he himself has a hard time getting information from them, but he would try his hardest. I kept saying that I am at a standstill until I can get those figures, and once I do get them, I can start dealing.
All throughout the conversation he kept saying how easy it was to talk with me and how much a blessing it would be to have me take some/all of his properties. I told him upfront, though, that even if the numbers came out great on all the properties, it just wouldn't be feasible for me to take them all. At most, I told him, I could probably only take 6-8 of them. However, I explained to him that I could distribute his information to other local investors with the hope that one of them can take the remaining properties to which he thanked me again profusely.
Now, I need to sit down and rerun all the figures for all the properties and develop exit strategies for each. If I have a few cycles today, I'll post some of the numbers in the hopes of getting some feedback.
We'll see what happens.
So, I call him a few minutes past the time he had put in his email, and got his voicemail. I left a short message for him to call me back if he feels like it. About 7-8 minutes later, my cell phone rings, and it's him. He explained to me that he was with someone when I called, and he was trying to end their meeting. I could tell in his voice and in his words that he probably meant it too as he kept apologizing profusely.
What was funny was the fact that I really didn't have an outline as to what I was going to say or how long we would be talking. Most gurus tell you to let the seller do the talking, but at the end of the conversation, I noticed that I had done about 90% of the talking. We talked for a good 50 minutes. He wanted to know exactly what a Sub2 was, how he could be assured I would continue making the payments, and so on. After an hour of pretty much spilling the beans about me, I realized we had developed a great reporte with one another. He said other investors had called and seemed interested, but he could tell immediately that they didn't care about him or his situation - only that he had some properties he needed to get rid of yesterday. With me, though, he said he could sense that I was sincere in helping him, which may very well open more opportunities for me with this deal.
I told him probably 5-6 times in our conversation that in order for me to fully analyze the deal, I would need the info from the PM company. He said that he himself has a hard time getting information from them, but he would try his hardest. I kept saying that I am at a standstill until I can get those figures, and once I do get them, I can start dealing.
All throughout the conversation he kept saying how easy it was to talk with me and how much a blessing it would be to have me take some/all of his properties. I told him upfront, though, that even if the numbers came out great on all the properties, it just wouldn't be feasible for me to take them all. At most, I told him, I could probably only take 6-8 of them. However, I explained to him that I could distribute his information to other local investors with the hope that one of them can take the remaining properties to which he thanked me again profusely.
Now, I need to sit down and rerun all the figures for all the properties and develop exit strategies for each. If I have a few cycles today, I'll post some of the numbers in the hopes of getting some feedback.
We'll see what happens.
Tuesday, March 28, 2006
The Saga Continues
Well, it seems the email I sent the owner of those 12 properties lit a fire. He has been sending emails left and right now, regarding one thing or another. The one stickler in this whole deal seems to be me wanting to take the properties subject-to the existing loans. He appears to be apprehensive about the whole thing even after I gave him all these assurances. His latest email says he wants a list of clients have already done this for, so that he can feel a little more at ease. He also said he wanted to sign a document that pretty much puts full respnsibility of the loans on me (even though they will stay in his name). Oops!!! For one, I have never done a Sub2 with anyone yet. I came close a few times, but haven't actually done one. Second, while I'm sure his wanting to sign yet another document giving me full responsibility, I really feel uneasy about doing it. Not that I would let the loan payments lapse, but I fear he may trigger something later that will cause the lender to take notice of the whole deal.
So, what I plan to do is write him a detailed email about the whole situation. I told him I'd call tonight, but I want to give him figures in front of his face first to show him the situation in black-n-white. If he still hems-n-haws, I may just end the deal. As John $Cash$ Locke said in one of his teleconferences (paraphrasing), "I am not so desperate for any deal that I will make a bad deal." These properties are NOT the greatest deals I've seen (or even passed on), so having the edge of not wanting to deal is squarely on my shoulders. This may push him a little more into seeing it from my viewpoint, but if not, oh well.
So, what I plan to do is write him a detailed email about the whole situation. I told him I'd call tonight, but I want to give him figures in front of his face first to show him the situation in black-n-white. If he still hems-n-haws, I may just end the deal. As John $Cash$ Locke said in one of his teleconferences (paraphrasing), "I am not so desperate for any deal that I will make a bad deal." These properties are NOT the greatest deals I've seen (or even passed on), so having the edge of not wanting to deal is squarely on my shoulders. This may push him a little more into seeing it from my viewpoint, but if not, oh well.
Monday, March 27, 2006
The Last Straw? (updated)
ARGH! This latest deal is giving me gray hairs on top of my gray hairs.
I called the PM company, thinking they already talked with the owner about my wanting to get information. They didn't. They did answer most of my questions, but in regards to the operating statements from the properties and the rental contracts, I have to wait until they contact the owner to get permission. This really fired me up. So, I am going to write the owner after this post and tell them if they are indeed serious about selling quickly to me or not, so that neither of us are wasting the other's time.
My wife seems to think the owner made up a sob story in order to generate sympathy and have someone buy his properties outright. I am really starting to believe that she is right (or, at least, something similar).
Edit: Here is the email I sent the owner just moments ago ...
Mr. [owner],
I was unable to reach the property management company over the weekend, but called them this morning (Monday). Unfortunately, some of the questions I needed answered required your permission first, which I thought they already had.
Perhaps I'm wrong, and I hope you don't take this negatively, but I get the feeling that maybe you aren't as serious about selling these properties as I had initially thought. Except for the updated figures in the spreadsheet you sent last week, I feel the dialog has mostly been one sided. If you feel I am wasting your time with these properties, please let me know. For now, I'll put the situation on the backburner until I hear from you otherwise.
Thank you.
It'll be interesting to see what he says (if anything).
Edit(2): I received the following reply to my email just now. I'm still a little skeptical, and will wait to hear from the PM company with my outstanding questions.
steve
i apoligize for the lack of cooperation. i do want to work with you and this
is the number one priority for me. please call me at [phone#] if you
have any more questions.
i will call them back today and tell them off.
thanks
I called the PM company, thinking they already talked with the owner about my wanting to get information. They didn't. They did answer most of my questions, but in regards to the operating statements from the properties and the rental contracts, I have to wait until they contact the owner to get permission. This really fired me up. So, I am going to write the owner after this post and tell them if they are indeed serious about selling quickly to me or not, so that neither of us are wasting the other's time.
My wife seems to think the owner made up a sob story in order to generate sympathy and have someone buy his properties outright. I am really starting to believe that she is right (or, at least, something similar).
Edit: Here is the email I sent the owner just moments ago ...
Mr. [owner],
I was unable to reach the property management company over the weekend, but called them this morning (Monday). Unfortunately, some of the questions I needed answered required your permission first, which I thought they already had.
Perhaps I'm wrong, and I hope you don't take this negatively, but I get the feeling that maybe you aren't as serious about selling these properties as I had initially thought. Except for the updated figures in the spreadsheet you sent last week, I feel the dialog has mostly been one sided. If you feel I am wasting your time with these properties, please let me know. For now, I'll put the situation on the backburner until I hear from you otherwise.
Thank you.
It'll be interesting to see what he says (if anything).
Edit(2): I received the following reply to my email just now. I'm still a little skeptical, and will wait to hear from the PM company with my outstanding questions.
steve
i apoligize for the lack of cooperation. i do want to work with you and this
is the number one priority for me. please call me at [phone#] if you
have any more questions.
i will call them back today and tell them off.
thanks
Update and Some Pictures
This owner is really baffling me. After sending him an email with a PDF contract for one of the properties, he sends me a response to one of my EARLIER emails. I really haven't a clue why this person is procrastinating so much, but I'm slowly losing interest in the deals - even though they are good Sub2's with some profit.
On Sunday, my wife and I loaded up the van and the kids and took a drive to see six of the properties. The others are located further away, and none of the kids were very happy with the trip, so we didn't get to see the other six properties. Of the six we saw, four of them have tenants and two are empty. What surprised both of us about the empty houses was the fact that there was no signs in the front yard. You'd think if the owner has an agreement with the PM company, the company would be agressive and put out a "For Lease" sign at the very least. One of the properties was even starting to grow some nasty weeds in the front yard. And that was the only house that had a little window that I could see inside. The other empty house had its blinds drawn shut all around the house.
One thing I've noticed since first being informed about these properties is that I was initially VERY excited about this deal. I'm thinking now since the owner is procrastinating, it has cleared my mind a little to the reality of the situation. IOW, my emotions in this deal have gone from exitement to none-caring. Perhaps this will actually work out best for me in the end.
Here are front elevation shots of the six houses we saw ...
House #1: 2002, 2-story, 2223sf (Rented)
House #2: 2004, 1-story, 1722sf (Rented)
House #3: 2004, 2-story, 2025sf (Rented)
House #4: 2004, 1-story, 1606sf (Empty)
House #5: 2003, 2-story, 2276sf (Rented)
House #6: 2004, 2-story, 2426sf (Empty)
On Sunday, my wife and I loaded up the van and the kids and took a drive to see six of the properties. The others are located further away, and none of the kids were very happy with the trip, so we didn't get to see the other six properties. Of the six we saw, four of them have tenants and two are empty. What surprised both of us about the empty houses was the fact that there was no signs in the front yard. You'd think if the owner has an agreement with the PM company, the company would be agressive and put out a "For Lease" sign at the very least. One of the properties was even starting to grow some nasty weeds in the front yard. And that was the only house that had a little window that I could see inside. The other empty house had its blinds drawn shut all around the house.
One thing I've noticed since first being informed about these properties is that I was initially VERY excited about this deal. I'm thinking now since the owner is procrastinating, it has cleared my mind a little to the reality of the situation. IOW, my emotions in this deal have gone from exitement to none-caring. Perhaps this will actually work out best for me in the end.
Here are front elevation shots of the six houses we saw ...
House #1: 2002, 2-story, 2223sf (Rented)
House #2: 2004, 1-story, 1722sf (Rented)
House #3: 2004, 2-story, 2025sf (Rented)
House #4: 2004, 1-story, 1606sf (Empty)
House #5: 2003, 2-story, 2276sf (Rented)
House #6: 2004, 2-story, 2426sf (Empty)
Friday, March 24, 2006
12 Properties - Do or Die
I have been mulling what to do these last 24 hours regarding those twelve properties. I'm analyzed and re-analyzed them more than I should have, and have narrowed the field down to six properties. With no response from the owner, I've decided to just submit a formal contract offer to him and put the ball in his court. It appears to me that he may be getting other offers, but I really can't tell for sure.
The properties themselves are really hard to guage as far as profit. Only one of the six I plan to make an offer on is empty - all the others have tenants. The lone empty property turns out to be the best as far as a Sub2 w/owner financing. Based on the property's financials, if I spent $1,000 in repairs (it was built in 2004, so shouldn't need much) and hold it for 3.5 months, I could make $15,000 on a deposit, about $270/month CF from the loan difference, and pocket close to $22k on the backend for a nice $43k profit. But all this is wishful thinking for now. Time to send the owner the paperwork to see if this is going to be a deal or not.
The properties themselves are really hard to guage as far as profit. Only one of the six I plan to make an offer on is empty - all the others have tenants. The lone empty property turns out to be the best as far as a Sub2 w/owner financing. Based on the property's financials, if I spent $1,000 in repairs (it was built in 2004, so shouldn't need much) and hold it for 3.5 months, I could make $15,000 on a deposit, about $270/month CF from the loan difference, and pocket close to $22k on the backend for a nice $43k profit. But all this is wishful thinking for now. Time to send the owner the paperwork to see if this is going to be a deal or not.
Thursday, March 23, 2006
12 Properties - The Plot Thickens
All last night, I kept checking my email, hoping that the owner of those 12 properties would respond. But I never got anything. So, I went ahead and called him, using the number the birddog gave me. The good news was I got hold of him and he (and his situation) seemed legit. He had another commitment at the time I called, though, so I didn't get to talk long. He did seem rather relieved to hear from someone who was willing to help him. From our ever-so-brief talk (it lasted about 5 mins), I managed to get some information, though. He asked me to send him specific questions in an email, and he would answer them as soon as he could. He also said he would call me today sometime to talk more.
After talking to him, my mind just went into overdrive. For the remainder of the night, and each time my wife and I got up to feed the twins, I did nothing but think and think and think about these 12 properties. I finally reached a consensus that instead of narrowing my choices to only 4 properties (and then only 2 of those), I am actually going to try and get ALL TWELVE. I will still do my due diligence (and do a second and third time for good measure), so I'm not saying I'll get all twelve, but I'm not going to limit myself just because most are out of my farm area. One huge reason was that from all the supporting data I've gotten over the last 6 months suggests that property values will be increasing in central Texas - in some cases, by a LOT. Now, I'm not one to speculate, and I'm not going to do so this time, but having that extra bit of knowledge may influence my decision of whether to go or no-go with any/all of the properties.
My only barrier now is time. I'll need a LOT of time to gather info on all these properties and make a precise analytical result on whether I can do them. There are numerous unknowns at this time that I hope to get answers on from the owner, mainly about the rents: amounts and terms. I'll also have to no doubt take out a pretty big loan from my 401(k) for holding/acquisition costs - something my wife has already vehemantly said "NO" to before.
Edit: I got an email from the owner a short time ago with only some of the information I requested. He asked that I contact the property management company for some of the other info (i.e., lease dates, PM contract). Some of the other information I requested was just flat-out ignored. One thing he didn't respond to yet was my repeated request that I would have to take these properties Sub2 and if he was okay with me doing so. I'm guessing his refusal to answer the question but continued dialog with me can be substituted for "Yes", although, it would still be nice if he would say so. :-)
Based on the data I got so far, I was able to make a pretty good ballpark estimate on six of the properties. Taking the properties Sub2 and selling via owner financing would give me the following projected net profit figures:
The other properties are harder to figure out since I am trying to formulate market conditions in areas I have no clue about.
I am a littl euneasy about Properties #3 and #4. I set a minimum profit of $15,000 for each property I purchase for now on, and those two fall below that criteria. If they make-or-break the entire deal, I'll take them, otherewise I'll probably pass on them.
After talking to him, my mind just went into overdrive. For the remainder of the night, and each time my wife and I got up to feed the twins, I did nothing but think and think and think about these 12 properties. I finally reached a consensus that instead of narrowing my choices to only 4 properties (and then only 2 of those), I am actually going to try and get ALL TWELVE. I will still do my due diligence (and do a second and third time for good measure), so I'm not saying I'll get all twelve, but I'm not going to limit myself just because most are out of my farm area. One huge reason was that from all the supporting data I've gotten over the last 6 months suggests that property values will be increasing in central Texas - in some cases, by a LOT. Now, I'm not one to speculate, and I'm not going to do so this time, but having that extra bit of knowledge may influence my decision of whether to go or no-go with any/all of the properties.
My only barrier now is time. I'll need a LOT of time to gather info on all these properties and make a precise analytical result on whether I can do them. There are numerous unknowns at this time that I hope to get answers on from the owner, mainly about the rents: amounts and terms. I'll also have to no doubt take out a pretty big loan from my 401(k) for holding/acquisition costs - something my wife has already vehemantly said "NO" to before.
Edit: I got an email from the owner a short time ago with only some of the information I requested. He asked that I contact the property management company for some of the other info (i.e., lease dates, PM contract). Some of the other information I requested was just flat-out ignored. One thing he didn't respond to yet was my repeated request that I would have to take these properties Sub2 and if he was okay with me doing so. I'm guessing his refusal to answer the question but continued dialog with me can be substituted for "Yes", although, it would still be nice if he would say so. :-)
Based on the data I got so far, I was able to make a pretty good ballpark estimate on six of the properties. Taking the properties Sub2 and selling via owner financing would give me the following projected net profit figures:
Property #1: $ 20,413.37
Property #2: $ 38,267.80
Property #3: $ 12,399.41
Property #4: $ 11,350.98
Property #5: $ 22,130.99
Property #6: $ 42,806.97
------------ ------------
TOTAL $ 147,369.52
The other properties are harder to figure out since I am trying to formulate market conditions in areas I have no clue about.
I am a littl euneasy about Properties #3 and #4. I set a minimum profit of $15,000 for each property I purchase for now on, and those two fall below that criteria. If they make-or-break the entire deal, I'll take them, otherewise I'll probably pass on them.
Wednesday, March 22, 2006
New Real Estate Market Indicator?
I read this article moments ago and thought it was worth sharing to the RE community. It appears that there will soon be a vehicle that insitutional investors can use to guage a real estate market's trend - tradable futures and options. I'm guessing once it rolls out, it will only include larger metropolitan areas, but very interesting nonetheless. Now investors - REAL ESTATE investors - will have another tool they can use to guage their market.
Revised and New Tools
I managed to revise the Sub2/Owner Carry Financing Tool to allow for multiple loans (and to fix some nasty Javascript bugs). I also created a suite of Amortization Tools. You can usually find similar tools on the web somewhere, but I seem to always need them and forget where to find them. This way I will always have a link. I've never found a web-based calculator that finds the interest rate or term, so these are handy additions. Try 'em out!
Follow-up On Latest Leads
I received an email from the birddog about the most recent deals. He sent me a copy of an email he received from the owner in which the owner pretty much spills his guts about the whole situation. It turns out he is a doctor who was told that investing in central Texas was a good option a couple of years back (which it was and still is). Unfortunately, he didn't do his due diligence and never dreamt the property taxes were so high here. Therefore, he's been running cashflow negative since day one, and time has slowly taken it's toll on his finances. I can just imagine being cashflow negative to the average tune of $300 on 12 properties for almost 3 years now. I'd be wiped out, too. The birddog gave me his info (I already had his name and address, but the birddog gave me his email address and phone number). I didn't get the email until I got into work, so I can't call him yet. As an alternative, I sent him an email with my info and for him to call/email me ASAP so that I can try to help. Part of me is a little uneasy about the situation, but being a little cautious is a good thing. I'll hopefully get to see how bad a shape this guy is in soon, and whether I can swing any deals.
BTW, three of the four properties in my farm area already have tenants. One is empty (I'm guessing from the info I got). Unfortunately, even from the owner's email, it sounds like he's still cashflowing pretty bad. I just need to find out how much the rents are, how long the contracts are for, how behind the owner is, and so on in order to get a clearer picture of the situation.
My exit strategy would be to let the leases run their course and then sell the properties via owner financing. I would like to keep at least one for long-term growth, even if it cashflows negative at the onset. I can always refi later with better terms.
Edit: Here is the email I sent to the owner ...
Mr. [owner's name],
I was referred to you by a gentleman in Austin, TX, who said you are in need of getting rid of some properties. I am a real estate investor who buys properties in this area. I read your story, and I am heartbroken that your life has taken a turn for the worse - financially as well as physically and emotionally. With God's help, you will pull through this.
The information he gave me was enough to build a good financial picture of your properties, but in order to get a complete picture, I would need more information. Looking over the financials I have, it appears the properties are cashflowing negative by $200-$400, depending. I don't have the rent amounts, but rental comps in the area support my figures.
The existing loans on the properties make buying conventionally out of the question. I would not only be cashflowing negative, but also be upside-down on the properties - IOW, owing more than they are worth. As an investor, you can understand that this does not make sound business sense for me. However, depending on concrete financial data, I can still take ownership of your properties subject-to the existing loans. What this means is that the loans will stay in your name, but I will make the payments each month. This benefits you in two major ways. First, barring any underlying title issues, we can close on the properties in a matter of days. Yes, THAT quickly. With a conventional loan, we'd have to wait 30-45 days for the lender to get all the paperwork submitted. Second, since I will be making the payments on time every month, and since the loans will stay in your name, your credit goes from being bruised to being repaired. I cannot guarantee when I will sell the properties once I take ownership, but since I make my profit selling, I can assure you I will be diligent about trying to sell them quickly.
If this sounds like an avenue you would like to pursue further, please reply to my email with as much information on the four properties in [location] as possible, including, but not limited to, lease amounts, when the lease contracts end, any stipulations in the lease I should be aware of, if you are behind in any of the loans, and, if so, by how much, and if the lenders have already started the foreclosure process. Again, I am a real estate investor, but I first like to think of myself as someone who can help people like yourself overcome their real estate problems.
You can visit my web site at [web site] for more information about our services. You can also contact me via this email address. Or, you can call me direct at [phone#] anytime. Do not procrastinate - contact me TODAY.
BTW, three of the four properties in my farm area already have tenants. One is empty (I'm guessing from the info I got). Unfortunately, even from the owner's email, it sounds like he's still cashflowing pretty bad. I just need to find out how much the rents are, how long the contracts are for, how behind the owner is, and so on in order to get a clearer picture of the situation.
My exit strategy would be to let the leases run their course and then sell the properties via owner financing. I would like to keep at least one for long-term growth, even if it cashflows negative at the onset. I can always refi later with better terms.
Edit: Here is the email I sent to the owner ...
Mr. [owner's name],
I was referred to you by a gentleman in Austin, TX, who said you are in need of getting rid of some properties. I am a real estate investor who buys properties in this area. I read your story, and I am heartbroken that your life has taken a turn for the worse - financially as well as physically and emotionally. With God's help, you will pull through this.
The information he gave me was enough to build a good financial picture of your properties, but in order to get a complete picture, I would need more information. Looking over the financials I have, it appears the properties are cashflowing negative by $200-$400, depending. I don't have the rent amounts, but rental comps in the area support my figures.
The existing loans on the properties make buying conventionally out of the question. I would not only be cashflowing negative, but also be upside-down on the properties - IOW, owing more than they are worth. As an investor, you can understand that this does not make sound business sense for me. However, depending on concrete financial data, I can still take ownership of your properties subject-to the existing loans. What this means is that the loans will stay in your name, but I will make the payments each month. This benefits you in two major ways. First, barring any underlying title issues, we can close on the properties in a matter of days. Yes, THAT quickly. With a conventional loan, we'd have to wait 30-45 days for the lender to get all the paperwork submitted. Second, since I will be making the payments on time every month, and since the loans will stay in your name, your credit goes from being bruised to being repaired. I cannot guarantee when I will sell the properties once I take ownership, but since I make my profit selling, I can assure you I will be diligent about trying to sell them quickly.
If this sounds like an avenue you would like to pursue further, please reply to my email with as much information on the four properties in [location] as possible, including, but not limited to, lease amounts, when the lease contracts end, any stipulations in the lease I should be aware of, if you are behind in any of the loans, and, if so, by how much, and if the lenders have already started the foreclosure process. Again, I am a real estate investor, but I first like to think of myself as someone who can help people like yourself overcome their real estate problems.
You can visit my web site at [web site] for more information about our services. You can also contact me via this email address. Or, you can call me direct at [phone#] anytime. Do not procrastinate - contact me TODAY.
Tuesday, March 21, 2006
A Birddog Sends Me a Boatload of Deals
The birddog who sent me info on this deal sent me an email last night regarding 12 possible properties from the same owner. It appears the owner - who is from California, I might add - went on a buying spree in 2003 and 2004 in the area and bought these 12 properties. He's now fallen on hard financial times and needs to get the unloaded. Of the 12 properties, though, only four were in my farm area. The others were located in far south and west Austin.
The birddog did a nice job of analyzing the properties, too. He sent me a spreadsheet with the property specifications and the financials - loan amounts, interest rates, etc. I still did my own research to verify the information AND to make sure there were no problems. It turns out the info the birddog sent was about 99% correct, and the properties don't appear to have any liens slapped on them, which was good news. Unfortunately, after doing some due diligence with the financials, all four of the properties would be alligators going the buy-n-hold route - even if I took them Sub2. The cashflow goes from a high of -$340/month to a low of -$176/month.
I then decided to run the financials through my Sub2/OCF tool, but the tool only supports single mortgages (work item). Each of these properties carries two loans, so I had to do it manually. From my analysis, only two of the four properties would make ideal candidates. The other two properties are "iffy" in that the subdivision they are both in has seen depreciating market values the last couple of years. I figure the area will start appreciating the next couple of years, but I'd hate to guess and put myself at risk.
For the first property, I determined it I could make a profit of at least $20,000 (and probably a few thousand more). The second property was slightly better with an estimated profit of $25,000 (or more). The two "iffy" properties would net me $15,000 each, BUT that's if the area appreciates at least 3.5%/year over the next couple of years. Seeing as how two properties would put a dent in my wallet already, I figure the risk and upfront costs just wouldn't make those two worthwhile. As it is, I figure even if I take the first two properties Sub2, I'd still need to fork over $12k in holding and acquisition costs. Once I get buyers in, though, that expense should turn into a nice $8-12k initial profit. I'd also experience a total of about $520/month positive cashflow from the loan differences, and then get a nice payday when the buyers refi the loans in two years of about $11k each.
Of course, I immediately replied to the birddog to get me in touch with the owner (it appears from some of the info he had). I'll need to take some of my profit and use it to pay the birddog, too. If he keeps sending me deals like these, we will definately have a good partnership.
The birddog did a nice job of analyzing the properties, too. He sent me a spreadsheet with the property specifications and the financials - loan amounts, interest rates, etc. I still did my own research to verify the information AND to make sure there were no problems. It turns out the info the birddog sent was about 99% correct, and the properties don't appear to have any liens slapped on them, which was good news. Unfortunately, after doing some due diligence with the financials, all four of the properties would be alligators going the buy-n-hold route - even if I took them Sub2. The cashflow goes from a high of -$340/month to a low of -$176/month.
I then decided to run the financials through my Sub2/OCF tool, but the tool only supports single mortgages (work item). Each of these properties carries two loans, so I had to do it manually. From my analysis, only two of the four properties would make ideal candidates. The other two properties are "iffy" in that the subdivision they are both in has seen depreciating market values the last couple of years. I figure the area will start appreciating the next couple of years, but I'd hate to guess and put myself at risk.
For the first property, I determined it I could make a profit of at least $20,000 (and probably a few thousand more). The second property was slightly better with an estimated profit of $25,000 (or more). The two "iffy" properties would net me $15,000 each, BUT that's if the area appreciates at least 3.5%/year over the next couple of years. Seeing as how two properties would put a dent in my wallet already, I figure the risk and upfront costs just wouldn't make those two worthwhile. As it is, I figure even if I take the first two properties Sub2, I'd still need to fork over $12k in holding and acquisition costs. Once I get buyers in, though, that expense should turn into a nice $8-12k initial profit. I'd also experience a total of about $520/month positive cashflow from the loan differences, and then get a nice payday when the buyers refi the loans in two years of about $11k each.
Of course, I immediately replied to the birddog to get me in touch with the owner (it appears from some of the info he had). I'll need to take some of my profit and use it to pay the birddog, too. If he keeps sending me deals like these, we will definately have a good partnership.
Thursday, March 16, 2006
Website Finished!
I finally completed the last of the work items I had for my website, so it should be fully functional now. My next order of business is recording my voicemail message, and I'll be set to mailout my postcards!
100 Fastest Growing Counties of 2005
Is your's listed?
My county, Williamson County, TX, came in at #45 with a increase of 4.8%. I have a gut feeling that for 2006, and, especially, 2007, the numbers will be much steeper, too.
My county, Williamson County, TX, came in at #45 with a increase of 4.8%. I have a gut feeling that for 2006, and, especially, 2007, the numbers will be much steeper, too.
Tuesday, March 14, 2006
Website Updates
Here is how my time is prioritized at the moment:
1. Family (when at home), otherwise, work.
2. Sleep/Eat
3. Other
I'll tell you right ow that #3 is almost non-existent. What little time I have is almost 100% devoted to #1 and #2. Forunately for me, the project I was on at work started winding down recently, and I've had a lot of extra time, so I've spent my breaks and lunch time updating my web site. I haven't landed the updates to the actual web site, but I'll try to do it this week some time.
Things I've done since the web site went live:
1. Completed all "popups".
2. Completed content for all pages (except "About Us").
The issue I need resolved before landing the updates is to create a MySQL database. My subscription gives me 10 databases, but I only need one to house two tables. Without the database set up, the "Buy Yur House" section is broken, since it relies on the two tables to function. Originally, I was going to house all images within the DB itself, but that got rather cumbersome. So now I just house the images in the filesystem and reference the relative paths in one of the tables. I think in the interim, I'll just cut-n-paste the static content from some samples I have to illusterate what it would look like.
I also need to create three PHP files to handle form submission. One will be when a user requests more information on a listed property. The second will be when they want to contact "me" in general. The third is a monster. It's a large form the user fills out in detail about a property they want to sell me.
Lastly, I need to get my banner professionally revised. The logo now looks pretty ... uhm ... dull.
Hopefully, all this will be done soon. Now, time to go to sleep (or was it work? or was it to feed the twins? or was it to eat?). :-P
1. Family (when at home), otherwise, work.
2. Sleep/Eat
3. Other
I'll tell you right ow that #3 is almost non-existent. What little time I have is almost 100% devoted to #1 and #2. Forunately for me, the project I was on at work started winding down recently, and I've had a lot of extra time, so I've spent my breaks and lunch time updating my web site. I haven't landed the updates to the actual web site, but I'll try to do it this week some time.
Things I've done since the web site went live:
1. Completed all "popups".
2. Completed content for all pages (except "About Us").
The issue I need resolved before landing the updates is to create a MySQL database. My subscription gives me 10 databases, but I only need one to house two tables. Without the database set up, the "Buy Yur House" section is broken, since it relies on the two tables to function. Originally, I was going to house all images within the DB itself, but that got rather cumbersome. So now I just house the images in the filesystem and reference the relative paths in one of the tables. I think in the interim, I'll just cut-n-paste the static content from some samples I have to illusterate what it would look like.
I also need to create three PHP files to handle form submission. One will be when a user requests more information on a listed property. The second will be when they want to contact "me" in general. The third is a monster. It's a large form the user fills out in detail about a property they want to sell me.
Lastly, I need to get my banner professionally revised. The logo now looks pretty ... uhm ... dull.
Hopefully, all this will be done soon. Now, time to go to sleep (or was it work? or was it to feed the twins? or was it to eat?). :-P
Monday, March 13, 2006
Perils in Buying Online Real Estate
I came across this article today, which basically says that the recent real estate boom has caused unethical people to gather money from unsuspecting buyers (mainly novice real estate investors). Usually, the seller will post a listing on a reputable site, like eBay, but give false information. The buyer thinks they are getting a bargain, but, in fact, are getting taken to the cleaners instead.
While I feel bad for these people who have been taken advantage of, the first rule in this business is to do your due dilignence! Evidentally, these people saw dollar signs and forgot to check if the listings were even real.
What really gets me is that these people would put down large amounts of money for something they (or someone they can trust) have not even laid their eyes on. Dumb - very dumb.
While I feel bad for these people who have been taken advantage of, the first rule in this business is to do your due dilignence! Evidentally, these people saw dollar signs and forgot to check if the listings were even real.
What really gets me is that these people would put down large amounts of money for something they (or someone they can trust) have not even laid their eyes on. Dumb - very dumb.
Wednesday, March 08, 2006
Website is Live!
I went ahead and created an account at GoDaddy.com. Since I already had the majority of my web site already written, I waited a few hours until my account went live to upload the content. Well, I just finished uploading my content and my web site is now live on the internet.
You can view it at http://mnsres.com!
As always, let me know what you think.
Disclaimer: Some portions of the web site are still under construction, and you may receive incomplete content or an error message.
You can view it at http://mnsres.com!
As always, let me know what you think.
Disclaimer: Some portions of the web site are still under construction, and you may receive incomplete content or an error message.
USPS Postcard Mailouts are S-L-O-W
I figured it would take a few days to get a sample postcard I submitted at usps.com, but it's almost been a full week now! I submitted the order last Thursday. Last Friday, I get an email saying it's in production. Last Saturday, I get an email saying my order was completed and being sent to my local post office for delivery. I checked the mail yesterday (Tuesday), and I STILL hadn't gotten it! Maybe it's because I only submitted one postcard? Maybe because I am a new customer? Maybe if I submit 300+ like I plan to do, it will be faster? Anyone know if it generally takes them a week (or longer) to send the postcards out from start-to-finish? I guess I'm just too impatient.
Decisions, Decisions
House #1
I got a call from my tenants last night regarding them getting some of my mail. Specifically, it was all from my insurance underwriter. Argh! I apologized to the lady and told her I could meet her this weekend to pick it up. In the mean time, I'll call the insurance office and try to get them straightened out to where I REALLY live. I then asked her if everything was going alright to which she replied they finally purchased some land. I knew the day would come, but it was disheartening all the same. It won't be long now until I lose these great tenants. I figure it will still be a while before they get their house built, so I'll still have some rent checks coming in for a few months.
After chit-chatting a little longer, I hung up and told my wife the news. She still wants to rent the place out even after they leave, but I'm also considering on doing an owner finance sale. I quickly ran the numbers and figured I could profit $45-50k in two years, however, with recent news of an impending boom in central Texas, I may hold off. I think I'll just take my wife's advice and continue renting the place out. My only hope is I find someone as great as these current tenants have been.
Business Items
I swear I've been REALLY dragging my feet getting my systems in place. I've researched things for my marketing until I'm blue in the face. I've finally decided on the following items:
I got a call from my tenants last night regarding them getting some of my mail. Specifically, it was all from my insurance underwriter. Argh! I apologized to the lady and told her I could meet her this weekend to pick it up. In the mean time, I'll call the insurance office and try to get them straightened out to where I REALLY live. I then asked her if everything was going alright to which she replied they finally purchased some land. I knew the day would come, but it was disheartening all the same. It won't be long now until I lose these great tenants. I figure it will still be a while before they get their house built, so I'll still have some rent checks coming in for a few months.
After chit-chatting a little longer, I hung up and told my wife the news. She still wants to rent the place out even after they leave, but I'm also considering on doing an owner finance sale. I quickly ran the numbers and figured I could profit $45-50k in two years, however, with recent news of an impending boom in central Texas, I may hold off. I think I'll just take my wife's advice and continue renting the place out. My only hope is I find someone as great as these current tenants have been.
Business Items
I swear I've been REALLY dragging my feet getting my systems in place. I've researched things for my marketing until I'm blue in the face. I've finally decided on the following items:
- Toll-free Number - I have a cell phone used primarily for business, but I want a 1st-line of defense to incoming calls, and use my cell phone for other business matters. So, I've decided to get a toll-free number that will have a nice greeting and allow the caller to leave their information, or to call my cell phone if they want me to come over NOW. I narrowed down the choices to Freedom Voice and Kall8. I think Freedom Voice offers more for the money, but I don't need a lot of bells-n-whistles, so I'm thinking of going with Kall8. Cost: $5/setup, $5/month, 6.9 cents/min, for a repeating 1-866 number.
- P.O. Box - I'll get one of these, so that I don't expose my home address on any marketing material. It just so happens my in-laws already have one that they rarely use, and said I was more than welcome to use it until I get my entity established and get my own. I figure the main thing people will want to know are my phone number and web site address, anyway. Cost: $0.
- Web Site - I have known for a while that GoDaddy.com is one of the cheapest ISP's out there, and I can't find anyone else to host my stuff cheaper for what I need (just HTML & PHP hosting). I also have a great web site name in mind that's available. Cost: $39.12 for 1yr hosting and
$8.95$1.95 for domain setup.
Monday, March 06, 2006
Web-based Sub2 w/OCF Estimation Tool
Originally, I wrote a program that takes user input and displays what estimated profit there is in a subject-to deal that is sold using owner-carry financing. I then converted it into a spreadsheet format. Now I converted it into a web-based form that anyone can use. It uses Javascript and CSS (both of which, I admit, I'm not very savvy with). I can't guarantee it is 100% accurate, and I know for a fact it doesn;t have a lot of error checking, so user beware!
The form is located here.
Be aware that the text input boxes shaded in light gray are REQUIRED items, and the darker shaded input boxes are computed fields that are read only. Let me know what you think (good and bad). :-)
The form is located here.
Be aware that the text input boxes shaded in light gray are REQUIRED items, and the darker shaded input boxes are computed fields that are read only. Let me know what you think (good and bad). :-)
New Birddog - New Deal - Same Result
I got a couple of emails over the weekend regarding REI. All but one were people who got my name from a message board somewhere wanting answers to questions. The other individual said he is a newbie in my area, and had a deal for me. After asking him for more info (note: all I need is a person's address, and I practically know everything about them regarding their property), he sent me the info and said he didn't want to do the deal, but would like to learn how I did it.
I spent about 15 mins researching the property's info online, and determined it wasn't much of a deal. The birddog said he is meeting with the owner this week to get more info, but that the owner just wanted out of the property - no consideration whatsoever. It turns out, though, his property isn't a candidate for ANYTHING. Not a rental. Not a w/s flip. Not a retial flip. Not even an owner-carry financing deal. I determined the MOST profit that could be made from the house would be to wrap it with my own note and add a premium on the price and interest rate. Even then, I'd be looking at only $6,000 for TWO years worth of work and risk. No thanks.
I gave him a detailed response and told him to let me know if he had anything else. We'll see.
I spent about 15 mins researching the property's info online, and determined it wasn't much of a deal. The birddog said he is meeting with the owner this week to get more info, but that the owner just wanted out of the property - no consideration whatsoever. It turns out, though, his property isn't a candidate for ANYTHING. Not a rental. Not a w/s flip. Not a retial flip. Not even an owner-carry financing deal. I determined the MOST profit that could be made from the house would be to wrap it with my own note and add a premium on the price and interest rate. Even then, I'd be looking at only $6,000 for TWO years worth of work and risk. No thanks.
I gave him a detailed response and told him to let me know if he had anything else. We'll see.
Friday, March 03, 2006
Postcard Mailout Details
I finished researching the courthouse records for the subdivisions I will be targeting with my postcards. All-in-all the entire process took me about 2 hrs. I had a lot of automated processes in place that eliminated most of the tedious work. I also learned more about real estate records in the state of Texas that will help me down the road. Here were the statistics on the subdivisions:
My first mailout will hit those properties that have existing leins as this may be homeowners who are just starting to get into trouble. The remainder of the mailouts will be all evenly divided and distributed so that every homeowner is mailed a postcard every four months. Therefore, my mailouts will look like this:
Sub Total Foreclosed Valid Properties
# Properties Properties Properties w/Lien(s)
=== ========== ========== ========== ==========
1 208 2 83 1
2 228 4 87 8
3 433 6 345 15
4 163 0 50 0
5 113 0 85 0
6 438 10 268 22
7 402 0 314 40
8 541 5 288 16
========== ========== ========== ==========
2,526 27 1,520 102
So I'll be averaging around $115/mo for my postcard mailouts. It's a little higher than I had wanted, but will more than pay for itself with just one solid deal. I'll keep a record of the number of calls I get and deals I make, so that I can tweak the marketing a bit to suit my needs. I hope to generate at least 10-30 calls a month, and make at least one deal every other month, but I'll have to see. I'm also going to start a flyer and door hanger campaign to those same subdivisions on a periodic basis as well as others.
Mo S1 S2 S3 S4 S5 S6 S7 S8 Ttl Cost
== == == == == == == == == === ========
1 21 22 87 13 22 67 79 72 383 $ 115.93
2 21 22 86 13 21 67 79 72 381 $ 115.33
3 21 22 86 12 21 67 78 72 379 $ 114.72
4 20 21 86 12 21 67 78 72 377 $ 114.12
Thursday, March 02, 2006
A $20,000+ Lesson
Once you are in this business long enough, I'm sure you will have a story of the proverbial big fish that got away. Unfortunately, mine has already happened.
I posted in detail recently about a deal that I initially passed on, but decided later it would be a good fit for a Sub2/Owner-Finance. Even then, I sat on my hands for a few days before taking any action. Well, my ignorance and procrastination paid off: the property was sold on the retail market recently - to someone else! I don't know for how much, nor does it matter. What matters is by not jumping in immediately and picking up the deal, I essentially "lost" over $20,000.
Let this be a lesson to every newbie and seasoned RE investor alike - next to fear and time, procrastination is your biggest obstacle. If you find a deal, make it happen. Don't sit on the sidelines doing other things. It's too easy to NOT do something than to DO IT.
This is one lesson I'll forever remind myself about. :-(
I posted in detail recently about a deal that I initially passed on, but decided later it would be a good fit for a Sub2/Owner-Finance. Even then, I sat on my hands for a few days before taking any action. Well, my ignorance and procrastination paid off: the property was sold on the retail market recently - to someone else! I don't know for how much, nor does it matter. What matters is by not jumping in immediately and picking up the deal, I essentially "lost" over $20,000.
Let this be a lesson to every newbie and seasoned RE investor alike - next to fear and time, procrastination is your biggest obstacle. If you find a deal, make it happen. Don't sit on the sidelines doing other things. It's too easy to NOT do something than to DO IT.
This is one lesson I'll forever remind myself about. :-(
Wednesday, March 01, 2006
Research
Richard Roop, the REI marketing genius, says that the best list to have is one that you make yourself. Interestingly, while building my postcard mailout list, I'm finding this to be true. I have been scouring the online courthouse records of properties in eight subdivisions I will be targeting. Most of my research is automated, so it doesn't take me that long. So far, I have processed 6-of-the-8 subdivisions and found a total of 15 foreclosures since last fall alone - 15! This is astounding. My initial thought was "what if I could have intervened into these homeowners' lives before their property got to the point of foreclosure?" Fifteen! From a total of about 1,000 properties.
Also, I came across a couple of properties that are on the brink of preforeclosure. In Texas, they don't file a Lis Pidens, per se, but I've learned how to scout properties that are prime candidates for pre-preforeclosures - that is, properties where the homeowner is just starting to get into trouble. I'll send out letter to those particular homeowners today.
As far as the postcard mailout goes, I goofed a little (ok, a LOT) in my initial cost estimations. It turns out I was blanketing each homeowner once a year, when I really wanted to hit each one every 3-4 months on a continuous basis. Right now, my list includes almost 1,000 homeowners with another 500-700 to go. Breaking this down into 3-month intervals will have me sending out around 500-600 postcards every month, which will cost me anywhere from $150-$180/month. That's a lot different than the $35/month I was originally thinking. I'd like to keep it at 3-month intervals so that my name and message become 'branded' into people's minds. If I only do it once or twice a year, people will easily forget me and my message.
Also, I came across a couple of properties that are on the brink of preforeclosure. In Texas, they don't file a Lis Pidens, per se, but I've learned how to scout properties that are prime candidates for pre-preforeclosures - that is, properties where the homeowner is just starting to get into trouble. I'll send out letter to those particular homeowners today.
As far as the postcard mailout goes, I goofed a little (ok, a LOT) in my initial cost estimations. It turns out I was blanketing each homeowner once a year, when I really wanted to hit each one every 3-4 months on a continuous basis. Right now, my list includes almost 1,000 homeowners with another 500-700 to go. Breaking this down into 3-month intervals will have me sending out around 500-600 postcards every month, which will cost me anywhere from $150-$180/month. That's a lot different than the $35/month I was originally thinking. I'd like to keep it at 3-month intervals so that my name and message become 'branded' into people's minds. If I only do it once or twice a year, people will easily forget me and my message.
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