Goals: Week of Jun 5-11

Meeting w/Local Attorney/Title Company - Since I am in meetings most of the day, I fired off an email to the attorney's office I spoke about in my preivous post. I briefly told them who I was, what I do, and how they could possibly help me. His office provides both legal assistance and title services, so I (hopefully) won;t have to shop around for both.

Mortgage Broker - I filled out an online loan application for prequalification to the company I discussed in my last post. I specifically told them my background and what I was looking for in a mortgage broker.

Postcard Mailout #2 - At lunch, I went through my DB of homeowners and created a mailout list. I'll submitt he mailout tomorrow and put tomorrow as the "wish" date for the mailout (since it take about 4 days to actually process, this should be ready for the weekend).

Research Properties - Thanks to my creating some much needed programs, I can now find and funnel properties that meet my criteria with a few clicks of the keyboard. I just add my criteria to the programs, and get a report back instantly on any matching properties. Definately saves me a lot of time.

Busy Weekend and Now a Busy Week

Past Weekend
My wife decided to use this past weekend to get caught-up on household chores, so my time spent with REI was minimal, at best. I did manage to do a few things to keep the wheels moving, but certainly not enough to produce any deals.

We've been getting a free monthly "magazine" in the mail the last 6-7 months that talks briefly about happenings in the area. It's actually a good source of information on what things are coming up in the future in the area. The whole 2nd half of the "magazine" is devoted to ads. I was looking through it quickly yesterday and noticed an ad for "Private Capital Funding", so I thought I'd send the guy an email asking more about his services. To my surprise, I got a reply back in just a few hours. Basically, he's a hard money lender that acts as a liason between RE investors and private investors. From what I gather from his email and web site, he lends hard money to RE investors, but gets his funding through private investors. He pockets the difference in interest rates paid by the RE investor and paid to the private investors as well as the points paid by the RE investor. Not a bad way to make additional income. The only issue I had was his terms. I know most HML's have outrageous terms, so I wasn't too surprised: 4-5 points, 14% int rate, 6-12 mo. IO payments. Ouch! He said he can close in 7-10 days, and quicker if need be. I guess if I really, REALLY need the funding I can give him a call.

I found another property that seems to be an REO. I called the listing agent's phone #, but only got his VM. I also sent him an email, but haven't gotten a response back from either. It isn't a fantastic deal, but certainly doable.

I sent an email to my old CPA just to keep in touch. I haven't received a response back from her, either. I guess since last week was a short one due to Memorial Day, a lot of people may have been on vacation. We'll see.

Upcoming Week
I have a busy week ahead both at work and with REI. I was referred by another local REI to an attorney in town that specializes in closing owner financed deals. Whoo-hoo! Now I won't have to worry once I go down that route. I still need to contact him about Sub2 deals to see if he can help me with the front end.

Another thing I need to do is get in touch with a good mortgage broker. The attorney I just mentioned has a web site in which he recommends a certain broker. I need to contact them to see how they can help me (and my future buyers).

I didn't realize it until this past weekend, but I need to get the ball moving on my next postcard mailout. The last one was sent on May 12th, and I want to keep them about a month apart. Since the USPS takes about 4 days to process the order (ok, not USPS's fault, but their processor who takes their time), I need to submit the order NLT tomorrow to get the things out by the weekend. I still need to go through my database and review the candidates for the next mailout. Late last week, I realized I was skipping an entire nieghborhood in my farm area, so I had to add them those homeowners to my DB. That increased the size by 130 entries.

BTW, when I was coming home from work last Friday, I saw "We Buy Houses" bandit signs staples on just about every telephone pole for a mile stretch near my house. I've seen this guy's bandit signs before, so he isn't new. What irritated me was his approach. He just goes hog wild with the signs and staples them willy-nilly on every pole he can. I realize he probably gets a deal or two doing it, but it really is an eyesore and makes the rest of us who use stakes - sparingly - look bad, too. On Sunday, my wife and I had to go out and buy a few things. We passed by that same stretch of road, and not a single sign was hanging, which put a smile on my face.

Why I Do This

Okay, there are a lot of reasons why I got into real estate investing, but once a month I am joyfully reminded of the bigger picture. Yesterday, I received my rent check for June on House #1 for $1,100, which I'll deposit as soon as I write this. My taxes and insurance are NOT escrowed, so that means I'll pocket roughly $400 of positive cashflow this month. Calculating in taxes and insurance, I'll still have positive cashflow (barely), but the good things are (1) the mortgage is getting paid down by my tenants and (2) House #1 is slowly appreciating (about 1.4% since last year, adding another $2k in equity).

Missed Opportunity

About a week ago, I was perusing the HUD foreclosure web site for my area (BidSelect.com), and came across a couple of properties that seemed promising. One was listed for $104,000 and had a FMV of about $118,000-$120,000. Not the best deal in the world, but certainly doable. The owner occupied only period (OOOP) expired at midnight this past Sunday, and I thought maybe it wold be bid up like the rest. Since Monday was a holiday, I saw no action on it. However, I logged onto the site around noon yesterday, and the property was already sold. It only had ONE bid on it and it was for $98k (with a net to HUD of $93k)! I could have shot myself. I guess another lesson learned: don't assume anything. From what I could tell it had no problems and only required minimal cosmetic repairs (<$1,000). Again, it wasn't the best deal out there, and I'm keeping my eye on the second property even more now. It is listed for $105,000 and is worth about $125k. It's in the same neighborhood as House #1, so it would be convenient for me. The OOOP ends this coming Sunday, and I'll have to hook-up with a RE agent in order to submit an offer. I'll also need to get with a mortgage broker beforehand to see what I can qualify for. I figure owning House #1 for over a year now should look favorable on my credit report, but we'll see.

BTW, I got another two calls over the weekend from my postcard mailout earlier in the month. Unfortunately, neither one left a message, tho.

Prosper.com + REI-Exchange = $$$ ???

While perusing the message board in REIClub.com last weekend, I came across a post from someone who was semi-touting a web site called REI-Exchange.com. The concept seems so common sense, I'm wondering why no one has done this before. I won't go into details - mainly, because I'm still sponging information as we speak - but it appears to be a place where RE investors can go to both "buy" and "sell" their real property. Underneath, a person doesn;t actually buy/sell properties in the traditional sense, but they buy/sell shares of the properties. The company, REI Exchange, handles all the management, so investors need only submit their bids on properties they want to buy (or submit offers to sell). Again, I am still trying to understand all the fine print to get a better feel, but my intial findings are pretty exciting.

So, if you have a lot of money sitting around that you would like to park in a financial vehicle that could potentially bring you a good return, this may be the place for you. It appears your mney could be tied-up for a while (6-18 months?), but the returns can be 25%, 50%, 100%, 500%, and more, depending.

And then something hit me ... Why use my money to buy shares and get a nice profit in the backend?

Prosper.com will allow a person to borrow money from other people (instead of a bank). Why couldn't a person get a loan from Prosper.com and then turn right around and buy shares of properties at REI Exchange? Of course your questions are probably the same as mine ... What fees will I incur? How can I guarantee I (my money) will be protected? How can I determine that I can indeed make a profit doing this? Are there any laws preventing this approach? When all is said and done, wold I be better served using the money for something else? And so on ...

If anyone has more time than me and would like to elaborate on their findings, please post them here and/or shoot me an email. From my early research this appears to be a way to reap infinite ROI without rehabbing, talking to Realtors, qualifying at a bank, looking for deals, etc., as everything is pretty much done at a computer screen.

Status of Latest Deal & Mailout, and Some Prospects

Latest Deal
After running the numbers a few more times, I was able to validate my initial concerns for this deal. The numbers were just too tight for anything other than a Sub2. So I called the homeowner back Friday evening and explained to her the situation. I felt in our initial conversation that she didn't seem too motivated even thought she said she would have to be out by the end of the month. Sure enough, I explained to her that the only way I could purchase her property would be to take over her payments. She asked for clarification of what I meant, and I basically told her that the loan would stay in her name. Her immediate response was that she would never do such a thing. I tried persuading her of the consequences, but she held her ground. I thanked her for her time, and wished her the best of luck in selling her property.

Mailout
I'm really disappointed in the response I've gotten on my first postcard mailout last week. So far I have gotten only three calls, however, just one of those left a message. The other two I'm thinking were people who were curious about my ad and/or who had a property they wanted to sell retail. After listening to my voicemail greeting, they probably got the hint that I was not in the retail buying market, and, therefore, never left a message.

Perhaps I'm just being impatient, but I had thought I would have gotten more than just a single call by now. I still plan to do two more mailouts in the next two months, which will pretty much cover my farm area. Hopefully, the exposure will start generating calls, which will turn into a lead or two.

Prospects
My wife has been on a garage sale binge for about two months now. So, we've been getting up early on Saturday mornings and going out for a few hours to garage sales. I hate it because the weekend is about the only time I can sleep in these days. However, I've taken the opportunity to use the time to scout for potential deals. This past weekend was the first time actually found anything promising - actually, THREE properties. After we got home and got settled, I did a little research on the properties. None had any "For Sale" or "For Rent" signs in the yard even though they were in pretty nice neighborhoods, but they just had that 'no one has been living here for a while' look. Two of the three were owned by people who lived out-of-state (California, specifically - hmmmmm). The other was owned by someone who lived on the same street.

Sometime this week, I'll send all three my postcard to see if any would be interested in selling. One of the three was bought a few years back and has a DOT for only $70k, so I'm guessing they put 20-25% down when they bought it. It's worth about $135k right today. PErhaps an equity split?

Numbers on Current Deal

I called the lady back who left me a message yesterday. For whatever reason (I'm guessing being out of practice), my dialog with her sounded like a complete 'noob'. After hanging up, I could've kicked myself if I could with what I said and how I said it. I just kept losing focus on what I would try to say next, and get caught-up in a lot of "uhmmm... let see... uhmmm..." - just totally out of character for me.

But to the real crux of the conversation ...

She said she had her property listed a few months back, but had to list it for a price that was higher than people were willing to pay (her words), because she had to include RE agent/broker fees. Sure enough, I looked back in my database of properties and it was last listed in mid-March for about $5k more than it's worth. I asked her why she was selling and if she needed to sell ASAP or did it matter. She said she is getting married soon, and needs to sell the place before the end of May, since she will be living out-of-state with her soon-to-be husband. I didn't feel like she was REAL motivated, but you never know. However, "end of May" is less than two weeks away, so she could be getting desperate

I had done some research beforehand and saw a DOT dated in 2003 for $112k. She says she bought the place for $113,990, which leads me to believe she only put down about 1.5% at closing for it. It has a 30yr term, but the interest rate is what has me interested in this: 5%!!! I also asked her if the insurance and property taxes were escrowed, which they were. The total monthly payment for everything was $965/month, which was definately attractive. The only worry I had was that the neighborhood is located in a place that has seen stagnant (and even declining) market growth the last few years. But the Austin/RR area as a whole hasn't appreciated much, so I'm not TOO worried.

Anyway, here are the numbers ...

Current Loan Balance: $108,000
Interest Rate: 5%
Fair Market Value: $113,000
Repairs: $0 (according to owner)
Monthly PITI: $965
Fair Market Rent: $950-$1,100

Based on the numbers, I would need to take this property Sub2 without question. I don't have the funds available to make a full cash offer, and getting a conventional loan would put me upside down. If she is willing to do a Sub2 purchase, I would estimate about $1,500-$2,000 for closing costs and repairs. Another $2,500-$3,000 for anticipated carrying costs, although, being the summer months, I may be able to rent it faster. A rental analysis shows the neighborhood is mostly inhabited by homeowners, but has a larger than normal rental market (which is good). Running the numbers in my rental spreadsheet, though, shows I'll be cashflowing negative slightly.

I also ran the numbers selling to a buyer with owner financing. The results were a lot better. After two years, I would profit a little over $20k with an annualized 110% ROI. I can definately live with that. :-)

Some calls

I finally started to get a couple of calls from my postcard mailout. Unfortunately, the first person never left a message and the second one doesn't look to good - even if I buy it with $0. Running the numbers, it appears the only way I'd make a profit would be to buy Sub2 with almost no money out-of-pocket, hope there aren't any repairs at all (at least not over $1k), and sell it within three months max via owner financing. Even then I'm only looking at around $12k profit in two years at the very best, which is borderline for me.

Ah, the good ole USPS

You'd think I would have remembered this from the sample I mailed myself a while back ...

I set the "Scheduled Delivery" date for my postcard mailout for last Friday. What the selection should say is "Date you ant us to start processing your order" as that is when the USPS send teh info to their local processor. Of course, MY particular processor takes their sweet time printing the order (how's 3-4 DAYS sound?). So, my plans for getting the postcards in the homeowners' hands over the weekend went out the door. Now they'll be getting them either today (Monday) or tomorrow. Not a huge deal, but still. Argh!

Mailout Scheduled

I uploaded the postcard template and list of addressees to USPS.com and scheduled the mailout for this Friday. I'm hoping for a 3-5% response rate, and at least one good deal from the bunch (more would be better!). We'll see how it goes.

Mailout

After literally months of delays and procrastinating, I am finally ready to do my first postcard mailout. I have it scheduled for tomorrow so that the addressees will recieve them this Friday or Saturday (hopefully). I targeted all homeowners that have leins currently, and/or have had leins in the past. I also targeted those people who have NOD's currently, and/or who have had them in the past. Both those groups comprised of about 41% of the mailout. The remaining 59% were homeowners chosen at random. I created a database that keeps track of all the homeowners, including which ones were sent a postcard and when, etc. I managed to scale back my distribution list so that I can cover everyone in three mailouts. And, while I would like to get 5+ deals out of each mailout, I plan this to be realistically more like 1-2 every three months. I'm hoping to get AT LEAST 3-4 decent deals per year out of these mailouts, and keep 1-2 properties as rentals, 1-2 as owner financing, and 1-2 I'll sell retail. If my expectations aren't met, I'll rethink my delivery content and formatting, and try a different approach.

On a side note ... I logged into my general email account yesterday, and noticed the RE agent I used for House #1 started sending me daily MLS feeds again. I haven't spoken with her since probably last October. She didn't send me a message or call, either, which has me scratching my head as to why she starting resending me these feeds.

It's Been a While

Wow, hard to believe my last post was slightly over two weeks ago. I haven't had much to report, since I've been swamped at work and home. I keep telling myself that I need to stay focused so that I can be financially free and not have to worry (as much) about work, bills, work/family conflicts, etc.

I did get back to my mailout list, which has taken me a few days to revamp. At first, I was going to just do a mailout to every homeowner in my farm area over a stretch of 6 months, but I figured (1) it would still cost me a good amount of money to do and (2) the 6-month gap I'd be hitting the same homeowners is just way too long. Marketing is about getting your name and product in the face of the consumer so they can come to you first with their needs. A better ploy would be to hit the same people on a tighter schedule - like 2-3 months. In order to do this, though, my mailout would have to suffer a bit. It was then that a light bulb when off in my head and I realized I didn't need to be sending postcards out to people I couldn't really afford to help anyway - the high-end properties. So, I queried my mailout list for only those homeowners whose homes were appraised at $125k or below. This reduced my mailout list significantly and allowed me to go from a 6-month cycle to only a 3-month cycle. Sure, I will likely lose out on deals >$125k, but my farm area is so satruated with SFR's <$125k, I don't think the loss will be that huge.

Unfortunately, I had wanted to get this final list completed by Monday or Tuesday of this week, so that the homeowners would get them tomorrow (Friday) or Saturday in time for the weekend. Marketing experts say that sending product advertising to homeowners on the weekend is more effective than on the weekdays (i.e., people tend to have more time to read through the mail). Therefore, I may hold off sending the postcards out until next Monday or Tuesday, however, I doubt it will make THAT much of a difference myself.

Property Tax Assessments to Increase 16%!

I wrote about this back in February, and today's front-page headline in the Austin-American Statesman solidifies the story:

Travis Home Appraisals Balloon 16%
Increase even higher for commercial, multifamily properties;
Williamson homeowners can expect 5-12% rise.

It said the average for Travis County (i.e., Austin) will be 16% from last year, however, homeowners whose values last year were <$400k will likely see rate increases of 14% or less. They also had a graph in the article that showed the average home price in Travis County in 2000 was $153,668. This year, the average has skyrocketed to $236,559 - an increase of almost 54% in five years (or an average of 9% per year). Astounding.

Also worth noting is that the big news in Texas politics right now is the Governors plan to reduce homeowner property taxes statewide. This - along with school financing - has been a hot topic for the past several years. The Governors plan, though, will only reduce the homeowners bill by some meager amount (i.e., <10%, if I recall), so any gains made by the passing of Rick Perry's plan will be more than offset by the rising appraisal values this year.

Of course the bad news is that if you own property in Travis and/or Williamson counties, expect sticker shock when you open your tax bill for this year in the coming weeks. Likewise, I expect to start seeing an increase in foreclosures - or, at least, more tax leins. Texas is already the leading state in foreclosures, and I believe it will only increase more with all these happenings.

Stay tuned.

Edit: Bah! I found the story on A-AS's website after posting this, so everyone can read the bad/good news. You can read the story here (note: you will need to remove all cookies from www.statesman.com in order to read this story.)

Falling Behind

My wife said something to me yesterday that really got me thinking. She said that this Saturday will be one year since we closed on House #1.

Later, I recanted what she had said and reflected on what I had accomplished in the last year regarding REI. The result? I haven't done enough to keep the business moving forward. Yes, I managed to get tenants in House #1 that provide us with a little positive cashflow each month. Yes, I would go out and hang bandit signs up every Friday night (or Saturday morning). Yes, I'd get calls (albeit, few and far between) and talk to a wide range of sellers, which produced no deals. It's not that I haven't done anything, it's just that my efforts have not produced anything. So, for a full year now, I've gotten -0- deals, and tat has to change.

I've decided that in order to get the ball rolling, I need to be more proactive. I've slacked off almost totally in marketing, and sat spinning my wheels on that 12-property "deal" that never materialized. In order to move my business forward, I need to not only elevate my marketing, but also introduce systems that will enable me to turnover deals more quickly.

After talking with my wife, briefly, about this over the past weekend, these are my new to-do items:

Create an LLC - My wife and I agreed that "MNS Real Estate Solutions" is a bit ... I don't know how to say it, really ... complex? long? Just not right. We have decided on a different name, but I'll need to contact my CPA to get the thing set up. I've also been doing some reading of late on various REI message boards, and am split between using land trusts or not. For legal purposes, I've heard they are better for Sub2 as they do not violate the federal law that gives lenders the option of calling a loan due (i.e., the Due-on-Sale clause). However, they also seem like an extra layer of complexity. The jury is still out on using them or not for now. I also read that people prefer setting up an LLC for each individual property they have. For instance, if a property has an address of 123 Main St., they'll create an LLC called 123 Main, LLC (or similar derivative). This can get costly (Texas now charges $300 to set up an LLC, plus the $50+ my CPA will add), but probably just peanuts in the whole scheme of things. Also, in Texas, the state charges a franchise tax on LLC's with over $150k(?) in assets (or is it revenue? or profit?). Therefore, having individual ones may make even more sense in my case.

House #1 in Land Trust? - As I just mentioned, I'm still weighing the pros and cons of using land trusts. What I may end up doing is moving ownership of House #1 into a land trust for practice. I'd get a competant RE attorney to do this for me (read: $$$), and eventually have our new LLC as the beneficiary. If it isn't too much of a headache, I'll probably start using land trusts for now on. We'll see.

Marketing - Wow, where has the time gone. Back in late February, I created a list of targeted homeowners to do mailouts. I had fully intended to start my mailouts starting March 1st. Geez Luoise. Here it is nearing the end of April, and I haven't done a thing. Instead of going back and updating the lists, I'll just use what I had before and start mailing out my postcards. I may not send out as much as I had initially wanted due to various reasons (cost and some areas are depreciating in value), but I'll still reach a good many people each month, hopefully. It's a numbers game, and I'll see what kind of response rate I'll get with the first mailout. If it's low, I'll mail more out - if it's high, I'll cut back some.

Personal Issues - The main reason my business has suffered is because of personal issues. Mainly the twins. My wife and I had such high hopes on using my bonus and tax refund for investment purposes, but that has fallen throught he floor. Neither of us could even comprehend late last year how much the two newborns would cost as as far as medical bills. Holy cow. It has not only taken my bonus and our tax refund, but also some savings to pay for all these bills. I am truly baffled as to how people who have newborns and make half as much money as us do it. They must have to make monthly payments, like a mortgage, or something. IMHO, either the loss of foreign investments or higher health costs (or both) will eventually do this country in.

Networking - I managed to meet with the birddog, who gave me the lead on those 12 properties, last week for lunch. Turns out he his a 23yr-old recent college graduate who works right across the street from me. He seems to have his head on straight and knows exactly what he wants to do with his life: invest in real estate. He also came from San Antonio a few years ago, and has strong REI connections there, so not only can he be an asset for me finding properties, but he also has some conections I may be able to use as well. We agreed to meet for lunch every few weeks to touch base. I also met another investor online who lives/works in Fort Worth, but has family and REI connections in my area. He also gave me some names of other investors he knows and said we should all meet for lunch one day. Besides marketing, my weakest pipeline right now in my business is networking. Hopefully, I can start building up a good list of contacts that I can fall back on if I ever need.

Foreclosure fraud a growing threat

I read the following article (note: you'll need to remove the cookies from www.statesman.com in order to view it more than one time) the other day in the local newspaper about foreclosure fraud. Specifically, it talks about homeowners that are behind on their mortgage payments, seek help from strangers who claim they can help, and then get scammed. Basically, it's the same old article that paints real estate investing as an industry full of scammers. While I think it is prudent homeowners should know about these things, I hate it when they only give ONE side - the BAD side - of the story.

Unfortunately, the BAD side of the story is the one that gets magnified by the media (heck, who wants to hear about someone actually helping his fellow man anyway?). Here is one troubling paragraph that has me a bit peeved and worried at the same time:

Across the country, law enforcement officials also are grappling with increasing numbers of foreclosure fraud cases. Colorado's attorney general, John Suthers, is pushing a law that would tighten rules for brokers after a rash of scams in that state. Minnesota passed new rules in 2004, Maryland in 2005.

I knew about Maryland's recent legislation that puts a stranglehold on wholesalers, but didn't know about Minnesota's law(s). Here in Texas, lobbying groups are hitting elected officials hard, and are the main reason Lease Options were outlawed here starting last year.

It's truly unfortunate.

BTW, I urge all real estate investors to join their state REI associations. It's only through numbers are we able to have a voice. Individual letters and emails to our elected officials go unanswered for the most part - especially against existing, strongly-funded lobbying groups. We need the power that state- and national-level groups can give all of us.

Commerical Land?

I drive by this small strip of frontage land that is mixed use every day going to and coming from work. There are about 10 lots - some with single business buildings, and a few with residential housing units. The single business buildings are all rented out, and usually the business only lasts a year or two, before you see a "For Rent" on the property again. about 4-5 moonths ago, I noticed the two residential properties had an agent's "For Sale" sign in the yard. The buildings were in bad, but livable shape, and I never really thought much more about them. About a month ago, I'd say, I noticed an auction sign in the front of the properties. Again, I thought nothing about it. Within the last couple of weeks, I've noticed a hand-made "For Sale" sign in the front yard. At first, the sign said "$205,000", and then "$198,000", and kept dropping. Driving home yesterday, I noticed the price had dropped to $169,000", which finally caught my attention.

I did some research and found out that the property consists of 4 total lots - three of which front the main road, and one is to the rear of one of the others. This has really piqued my interest now as the zoning for the property is Real/Commercial. Like I said earlier, the buildings themselves are in bad shape, and I would definately tear them down if I were to ever buy the package deal. This led me to research the value on the land itself. It turns out that all four lots, collectively, were assessed at $204,000 (with the lot in the rear being the least valuable, of course). My initial thought was to buy the land, tear down the 2-3 buildings, put in a small office complex (1- or 2-story) with 5-15 "units" total, and rent the space out.

At this point, I would still need to find out who the owner was and if I could first negotiate th terms and/or price to help accomodate my future plans. I would also need to find out if the zoning would allow for what I would want to do. On top of all that, I would also need to find out how much demolition would cost as well as the costs involved to make the necessary improvements (i.e., water/sewer lines, other utilities, actual building costs, etc.).

The lots are in a prime location not too far from a brand new major shopping complex, which would make them ideal for this situation. I'd just need to do a lot more research before jumping in, though. What I'd like to be able to do is try to buy the land with great initial terms that graduate with time, or cut the owner in on some of the future profits.

Lot's to think about.

OT: Managing Blog Feeds

I stumbled across a great RSS/Atom feed reader called Sage an extension exclusively for the Mozilla Firefox web browser. It allows you to click a button, and instantly see which blogs you are watching have gotten updated (along with viewing the content). Since my area's REI club has a group account on Yahoo!, I can also view updates to the message board there as well. Pretty neat! Saves me the trouble of going to each web site independently and looking to see what content has been updated. The only drawback I see at the moment is the fact it doesn't view a blog as being updated when new comments are added.

Real Estate Trends

I was perusing a REI message board recently, and came across the following report which tries to show what real estate markets have done and will do ...

http://www.pmigroup.com/lenders/eret.html

Mums The Word

Well, it looks as though this latest deal isn't going to happen. Yesterday morning, I sent the owner a detailed list of questions I needed answered ASAP. Here it is Wednesday morning, and I haven't gotten anything from him. That's not to say he won't send me an email at the 11th hour, but I'm about a hair's width away from not doing the deal no matter what happens now. On to the next one ...

12, 8, 6, ... 4?, 3?, 2?, 1?, none?

In the wake of events these last 24 hours, I decided to cut down on the number of properties I would take (IF I end up taking any of them) from this latest deal. While the initial quantity really attracted my interest, I quickly realized it would not be feasible to take all 12 properties. After that, I narrowed the list from 12 to 8. Even then, I would be taking on a huge amount of debt (and risk) even though I would conceivable make a nice profit in the end. However, given the circumstances and more analysis, even the 8 properties wouldn't work for me. So, I then tried 6 properties, and again even though they produced nice income at the end, the risk, time, and upfront debt was just too much resources to endure at this time. Plus, given the procrastination and non-disclosure of required information from the seller, I have narrowed the list down even further: 4 properties. The four properties in question would collectively give me an average $3,500/mo cashflow (after enduring some upfront risk/debt) over the course the properties would be owned and/or controlled by me. It was after making this analysis that I decided to just go ahead and break the 4 properties down to 3, then 2, and finally 1. The following table shows the resultant figures of my analysis if I were to keep just the best property, then the two best properties, then the top-3 properties, and finally all four properties:

	Keep 1	Keep 2(a)	Keep 2(b)	Keep 3	Keep 4
Initial Investment	$8,750	$13,750	$17,500	$22,000	$29,500
Net Profit	$49,024	$91,769	$78,603	$121,982	$143,647
COCR:	460%	567%	349%	454%	387%
COCR Annualized	115%	74%	95%	65%	59%
Average Cashflow (Monthly)	$1,816	$2,238	$2,911	$2,975	$3,504
Average Cashflow (Yearly)	$21,789	$26,859	$34,934	$35,702	$42,043

Looking over the figures, I am leaning towards just keeping the one property, or the two properties under the heading "Keep 2b". These appear to give me the best bang for the buck in the shortest time possible. Now, will I even get any of them is the question. :-|

Unbelievable

That's what came out of my mouth when I opened my email this morning and read a response from the owner of the 12 properties. In it, he asked for two things: proof that I have the financial means to pay for the carrying costs on his properties, and his wanting a clause in the agreements I sent that protect him financially in case I default on my end by not paying his mortgages, taxes, etc. That was it.

WTH?!?!?!

Where is the information I've been waiting for for over a week now? Where is the specific information I requested regarding exactly what he pays each month and to whom? Where is the information from his property management company about the leases and when they expire? ARGH!!!!

I then took a 20 minute recess from the whole situation to calm down, and wrote him back. I included a screen shot of my 401(k) and checking account (minus any account details), showing my ability to more than cover the carrying costs on at least six of his properties for several months. I also told him that I have been waiting - patiently - for well over a week now on information from his end, which I need in order to accurately diagnose which properties, if any, I can purchase from him. In addition, I asked him what specific clause he would like for me to include in the agreements that would satisfy him. And, lastly, I told him that my Wed deadline is still in affect, and that if I did not have the information I needed by the EOB on Wed, I would have no other choice but to pass on the deal.

Am I being too forgiving here? :-)

An Exercise in Futility

I have just about given up on this latest deal involving the 12 properties. Last Friday, I went ahead and emailed the owner contracts on two of the 12 properties. I told him to contact me ASAP once he decides what he wants to do. Here it is Monday morning, and not a peep from him.

Originally, I had sent him a contract giving him a 3-day window to respond. During that brief window is when we talked with one another on the phone, and I thought for sure he would have not thought twice about signing over the properties to me. I then revised the contract and added an additional one for another of his properties, thinking that I'd get some kind of response Friday evening at the latest, but nothing.

Maybe I'm just being impatient, but I seriously doubt it. My gut feel says he either has/had another offer he is considering, or his whole situation is a fantasy he concocted in order to get someone to buy his properties for retail price. Regardless, I've put the rest of my business on hold since I first heard about this deal on March 20th, and I can't afford to spend any more time on it.

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:

	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

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.)

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.

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.

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.

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

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)

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.

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:

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.

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.

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.

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.

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

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.

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.

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:

1. 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.
2. 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.
3. 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.

So total startup costs: ~$51 (+tax). Not too shabby. I'll also spend about $115/month for my postcard mailouts, and I'll need to set up and appointment with a RE attorney to make sure I have all my bases covered, so there will be other recurring costs. I'll try to get the toll free number and web site started today.

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). :-)

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.

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:

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

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:

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

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.

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. :-(

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.

Staged Postcard Mailouts

I am in the process of writing a mailout schedule to numerous subdivisions in my farm area. So far, I have six subdivisions with another two more to go. I've broken down the mailouts monthly and staged them so that 1/4th of each subdivision is covered in each 3-month period. This not only helps get my name out on a periodic basis, but really saves me from having to do bulk mailings 1-2 times a year and having to come up with a lot of money. With the monthly mailouts, I am so far averaging about $23, which is VERY affordable. As I said, though, I still have another two subdivisions to go, and one of those is rather large. Regardless, I don't see myself spending more than about $35/month on my postcard mailouts. Hopefully I can start getting the phone ringing as it has been pretty silent lately.

Argh! My Insurance Company

I really, really, REALLY must find a new insurance carrier for House #1. I just seem to be doing too much of their work. For one, it seems every time my note gets transferred to another lender (this has happened three times now), I get a letter stating they have no record of insurance and will use their own if I do not provide proof within x-number of days. Okay, this may not be the insurance carrier's fault per se, but all this should be handled 'behind the scenes', IMHO. Each time, I must then contact my insurance agent's office and have them call the new lender with the information.

Now, I get a voicemail from my agent's office stating they have not received $76 from the new lender to continue coverage, and the policy will be cancelled on March 5th if payment is not received. I then call the agent's office back and get their voicemail (which is another peeve of mine - they NEVER answer the phone, so I ALWAYS have to leave a message). It turns out my insurance company had it in their records that my coverage is escrowed, so therefore billed the lender. Argh! I told the lady that it isn't - nor ever was - escrowed. She said she will mail me out a bill today, but by the time I get the bill and pay it via snail mail, the policy may be cancelled. She then suggested I call a 1-800 for the insurance company and pay via the phone ASAP to avoid cancellation. Argh! More needless work for me to do.

Maybe I just need more sleep. :-P

Travis County to Increase Property Values A LOT

I meant to post this the other day.

I read a story on the front page of the local paper the other day saying that the Travis County (where Austin, TX is located) Tax Assesor will be increasing the property values by an enormous amount next year. I'm going by (failed) memory here, but I believe they said most properties will have their values re-assessed by an average 20% MORE. More expensive homes will see an increase of upwards of 40%!!! This is incredible. Texas, and the I-35 corridor especially, has been under constant news about undervalued property values. I guess the Travis County Tax Assessor has taken notice and appears to single-handidly be making a decision to get "in-line" with the rest of the nation.

Since most of my activity involves Williamson County, I'm anxious to see how (not if, but how) this will affect property values there. I'm guessing the days of "cheap" properties in central Texas are behind us now.

Status on recent prospects and my CPA

There were two prospective properties I was interested in earlier this week. The first was a deal I passed on early in January, but I decided to go ahead with after doing some more calculating. I still haven't heard back from the owner, so I'm guessing either she is no longer motivated, found another buyer, or is still cotemplating what to do next. I'll send her a follow-up letter next week to make sure.

The other property I was looking out was put on the market one day and was sold the next. It wasn't a great property by any means, but there was some definate profit to be made to someone who knows what they are doing. I'm guessing a savvy investor bought it for less than the asking price.

I met with my CPA after work yesterday to finalize our 2005 taxes. It turns out she did already e-file our return, but said in order for the IRS to initiate the refund, they would need the form she had us sign. So it may be another week or so before we get our refund. I figure about half of the refund will go towards paying down some of our CC debt associated with House #1. The remainder will be split between personal stuff and business marketing. I plan to start sending out postcards on a regular basis to several neighborhoods starting next month. I want the mail-outs to be consistant, too. For instance, I'll hit on-third of a neighborhood once every three months. This will cover the entire neighborhood four times a year, which should get my name out to people. I figure each postcard mail-out will have negligable costs, and those costs can be written off as business expenses anyway.

My only worry is that I won't have the time required to actually go meet with sellers for a while. What free time I have now is used to either sleep or get caught-up with personal matters.

On a side note ... I got in contact with a relative in Indiana. Her husband is a relatively new CPA, and I may try to forge a business relationship with both of them. I've noticed properties in and around where they live are cheaper than down here - at least the distressed ones are. I figure there is an opportunity to get some properties up there and have my relatives living there help me find, acquire, manage, and sell them for me. We'll see.

OT: USB Memory Sticks

I used to use a 128MB memory stick to hold all of my REI information on, but it got filled up quickly. I also housed XAMPPLite on the memory stick to hold all my database files. Everyone so often I would back up the data, and luckily so, because every so often the data would become corrupt. I have since moved up to a 1GB memory stick to hold the information, and still do backups. Today I found out over half the data on my stick was corrupt, and my last backup was over 9 days ago. Ugh! So now I've essentially lost 9 days of data for my business. I'll need to become more attentive on running my backups on a more consitant basis. :-(

Two Possible Deals

I have two deals I'm currently working on. The first was the deal I spoke about in my blog entry the other day. I sent the owner a nice letter on how I could help her if she is still wanting to sell. We'll see what happens.

The second deal is something I stumbled upon while going through my daily MLS feeds. It's a home listed as "needing TLC" (which we all know what that means). The listing also says the owner is motivated and to bring all offers. The asking price was low for a comparable house in the neighborhood, which first caught my eye (by about $15,000). I did a preliminary check on my county's online courthouse record site and found the initial loan was for $126k for 20yrs. Doing some quick calculations, I figure what they are asking for is probably the same as the balance now on the loan. I'm not sure where they will be getting the funds to pay the Realtor fees.

I ran the figures into the program I talked about and figured I could net a little over $18k on the deal doing a straight Sub2 with a backend owner-carry finance (and repairs only being negligable - haha). The problem, though, is that it is listed, and we all know how most Realtors react to creative deals. I will no doubt have to go through my own agent to try and strike a possible deal with this one.

First Call From My Car Signs

I've had my magnetic "WE BUY HOUSES" car signs on my vehicle now for nearly 8 months now with not so much as an inquiry from anyone. Today, though, I got a call from a person who saw my car signs for the first time. Whoo-hoo! However, the bad news is that he wanted to know if I not only buy pier-and-beam style houses (which I don't) AND if I can move it off the land (definately NOT). Oh well, at least I got a call. :-)

Deal or No Deal?

As I said in my previous blog entry, I created a tool to help me evaluate whether a property is a good candidate for taking Sub2 and selling via owner-carry financing. I put the tool through a test with the most recent deal I passed on. The deal was for an SFR that was built in 200. It was a 3/2 with 1500sf, and only required paint and possibly carpet. The owner was willing to let it go for just some "u-haul" money in order for her to get an apartment. The double-edge sword was in the existing financing. It had a 15yr loan vs. the normal 30yr loan, which made the payments a lot higher, so renting it our would mean negative cashflow for a few years. Putting the figures in the tool, though, showed it was an ideal candidate for Sub2 with owner-carry financing:

Deed of Trust: Sep/2003 for $126,500
Loan: 15yr @4.75% (approx)
PITI: $1,500/month
FMV: $120k-$125k
Repairs: $1,250
Marketing: $500
Taxes: $363.59/mo.
Insurance: $54.16/mo.
PMI: $95.18/mo.

For the owner-carry portion, I would sell the house at a slight premium ($129,900) and request at least $5k down (more like $10k) with an interest rate of 9.5% on my 30yr loan. Running all the figures into the tool, I got the following:

Original Loan                 New Loan
-------------------------     ------------------------------
Amount ..... $ 126,500.00     Amount .......... $ 124,900.00
Rate .......         4.75%    Rate ............         9.50%
Months .....          180     Months ..........          360
PMI ........ $      95.18     Term (Mos.) .....           24
Payment .... $     983.96     Payment ......... $   1,050.23

Acquisition/Holding Costs     Other
-------------------------     ------------------------------
Taxes ...... $     363.59     Months to Sub2 ...          30
Insurance .. $      54.16     Months to Hold ...           3
Repairs .... $   1,250.00     Downpayment ......    5,000.00
Marketing .. $     500.00
Other ...... $   2,500.00

Original Loan Balance - At Acquisition ........ $ 111,139.43
Original Loan Balance - End of Hold ........... $ 109,500.86
Original Loan Balance - End of Contract ....... $  95,669.14

New Loan Balance - End of Contract ............ $ 123,283.11

Monthly Cashflow .............................. $      28.91-

Profit Recapture
---------------------------------------
Downpayment .............. $   5,000.00
Monthly Cashflow ......... $     693.84-
Holding Cost ............. $   8,740.67-
Difference From Loans .... $  27,613.97
                           ------------
                    TOTAL: $  23,084.28

So this is a very good deal after all. The ONLY thing that I don't like is the monthly negative cashflow. But this can be offset by asking for a larger downpayment. If I ask for $10,000 down instead of $5,000, I will still make a nice profit AND won't have as much risk:

Original Loan                 New Loan
-------------------------     ------------------------------
Amount ..... $ 126,500.00     Amount .......... $ 119,900.00
Rate .......         4.75%    Rate ............         9.50%
Months .....          180     Months ..........          360
PMI ........ $      95.18     Term (Mos.) .....           24
Payment .... $     983.96     Payment ......... $   1,008.18

Acquisition/Holding Costs     Other
-------------------------     ------------------------------
Taxes ...... $     363.59     Months to Sub2 ...          30
Insurance .. $      54.16     Months to Hold ...           3
Repairs .... $   1,250.00     Downpayment ......   10,000.00
Marketing .. $     500.00
Other ...... $   2,500.00

Original Loan Balance - At Acquisition ........ $ 111,139.43
Original Loan Balance - End of Hold ........... $ 109,500.86
Original Loan Balance - End of Contract ....... $  95,669.14

New Loan Balance - End of Contract ............ $ 118,348.03

Monthly Cashflow .............................. $      70.96-

Profit Recapture
---------------------------------------
Downpayment .............. $  10,000.00
Monthly Cashflow ......... $   1,703.04-
Holding Cost ............. $   8,740.67-
Difference From Loans .... $  22,678.89
                           ------------
                    TOTAL: $  22,140.00

I checked the courthouse records, and it appears the owner is still living there (although, the online courthouse records are about 2-3 weeks behind in most cases). I've already started drafting the owner a letter, so we'll see what happens. Stay tuned.

Getting back into the swing of things

Caring for a couple of newborns is tough. Once you've gotten used to the sleep deprivation (hint: you never REALLY get used to not having enough sleep), you must then contend with the reality that everything else in the world is put on the backburner. One "luxary" my employer has for new dads is the fact they give you two weeks of paid leave (on top of any other vacation/personal days you accrue). I not only took those two weeks off, but also took an additional two weeks of vacation.

Even though 99% of my time off was spent caring for the the newborn twins in one capacity or another, I still managed to squeeze in a little time for REI. One major accomplishment was getting ALL of my tax documentation to our CPA. She said she'll e-file it (more on that in a minute), and we should get our refund in 7-10 business days. Since I have a lot of supporting documentation to include, she said she'll need to file a "paper" version as well later. I also spent some time writing a program to calculate whether a property is a good candidate for a Sub2/Owner-Financing. After doing so, I recalculated the most recent deal I turned down, and realized it was probablya good deal after all (I'll talk more about this in a separate post).

Now back to the CPA ...

My wife and I are considering using another CPA in the future. The one we currently have is okay, but we both notice she doesn't have a good track record of returning emails/voicemails in a timely fashion. We also notice several miscommunications in our dealings with her. As far as the poor response level, we can go literally days (and one time almost a week) without hearing back from her. In a professional business, this is totally unacceptable. As far as the miscommunication goes, the latest fiasco involved the e-filing. She had sent me an email early last week saying she only needed my bank info to send out the e-file. I called her up, and gave her the info. Several days passed, and I sent her a follow-up email to confirm the e-file was sent. After three days of no response, I finally got an email saying we need to sign an authorization form for the e-file. Huh?!?! All she said she needed was my bank info in order to "press the button for the e-file." Stuff like that is what I mean by miscommunication. Two reasons we got her were (1) she was close by, and (2) she seemed to understand REI as it relates to accounting needs. Time to shop around.

OT: I'm Back

Wow. Hard to believe it's been almost three weeks since my last entry. I've been extremely busy with our newest additions. The twins arrived on 1/24. They weighed 6 lbs. 5 oz. and 7 lbs. 4 oz. - no wonder my wife was in such a miserable condition the last month of her pregnancy!

I remember the sleep deprivation I had after my daughter was born and it seems to be even worse with the twins. They seem to have a conspiracy against us at times as one will be fast asleep and the other is up crying. I think the most we've slept in any 24hr. period since their birth has been 5 hours - with an average of about 4 hours. Somehow, I've gotten used to the little amount of sleep (I don't know how, though).

As far as REI goes, I've still managed to keep parts of my business going. I have an automated system that queries daily MLS listings and produces a report. It will also flag any properties that meet my strict criteria as potential leads. So far, I've only gotten one property to meet my strict crteria and it was purchased the day iot came on the MLS.

I also gathered all my tax documentation for 2005 and will be giving it all to my CPA to process and file. I am lost in all the IRS jargon, so I'll let my CPA prepare and file my personal return this year. Based on my expenses/income from our business and my 2004 return, she estimates we'll get back a sizeable amount. I certainly hope so.