Crazy Week

Wow. It seems I go weeks without no activity in REI, and then - BAM! - everything falls in my lap at once.

House #1

I talked with the wife again before leaving work last night for 15 minutes. She is a talker. She gave me a sob story of how the IRS intercepted her refund check to pay a debt when she was married before. She claimed she was going to give me the money for a downpayment. About 5 minutes after hanging up with her, I closed my office and she called again. This time I let VM pick it up as I had no intention of listening to her for another 15 minutes. When I talked to her before, I asked for her email address, so I can communicate non-essential things that way. I just don't have the patience to listen to someone whine about their problems again and again and again. Her VM just wanted to confirm my email address as their broker is still not able to send to the email address she has for me. When I got in today, I noticed she sent an email to my address fine, so I'm not sure what the problem is.

Anyway, I talked it more with my wife, and she'd rather sell the place than lease it. I mentioned to her the benefits of having a motivated buyer and doing a lease/option, but she still wasn't keen on the idea. I figured bumping the price up 10% for future market appreciation and then "giving them" a 5% discount. Basically, I'm jacking the price up 5%. I'll also jack the lease price up, but use $100 each month as a rent credit. I'm still trying to find out how to do all this and still not have it impede on Texas law. I may have to do two 6 mo. leases.

House #2

My wife and I looked over the contract, updated the fields we needed to, initialed it, signed it, and I faxed it to my agent first thing this morning. We'll see if the lady counters or rejects the offer. My wife wanted to just take her offer, but I didn't want it to go that easily. My counter is only about $1,750 higher than the woman's offer, which is still a nice buy, IMHO.

Deed Issue

I still have not received a call back from the title company in San Antonio, regarding the problem with the deed on House #2. I called on April 13th and talked to the lady who handles document filing and she said she was currently doing another account and mine would be next. I called again this past Monday and got her VM and left a message. Still no answer. Today, I'm going to call their office and talk to the woman's supervisor as I've been MORE than patient with this. It should have been taken care of months ago, yet I'm still having to follow up on it. My main concern now is that it would delay the closing.

Edit: Well, no sooner than I posted this blog entry I called the title company and asked to talk to a supervisor. I talked to another woman who said they are waiting to hear back from the courthouse. Why they couldn't have called me to let me know the status is beyond me. I told the lady that I would appreciate a call whenever they hear something as I have a potential buyer for the property and I don't want this to delay the closing. I always try to take people for face value, but sometimes I wonder if the squeeky wheel doesn't get the grease in most cases. I'll be checking this bullet item daily for now on.

House 2: Deal Not Dead Yet?

I got a call from the wife of the couple who fell in love with the house over the weekend. It seems that FHA doesn't flat-out disallow 2nd notes, it's more that they have strict guidelines about the purchaser's credit that must be met in order for them to allow a 2nd note to be carried by the seller. One of the stipulations calls for some percentage to be 43% when theirs (or, more specifically, his) is 45%. I'm assuming some debt ratio, but she didn't really clarify. In the meantime, I've already got everything lined up to list the home on the MLS using the flat-fee listing service. I ordered the electronic lockbox and broker's sign today, and they should arrive tomorrow or Thursday. I need to finish the paperwork and get it all faxed to the agent tomorrow, too.

Also, the wife mentioned that her broker said her credit would be in a lot better shape within a year, and with her credit repaired, they could probably qualify for the whole purchase amount. In the meantime, maybe she could LEASE the property from me, and do basically a Lease/Purchase. Unfortunately, Texas all but outlawed L/O's on properties where a mortgage exists, so I have to be careful if I tread down this path. From my nderstanding, L/O's are legal when the property has an underlying Deed of Trust, but the lease term is limited to no more than 180 days (6 mos). I still need to run all this by my wife as she pretty much wrote the whole deal off, but if we can get a nice chunk of change each month while our debt is paid down, it'll all be worth it IF they buy the place next year. I may even have to tell them that in order to do this, I would have to account for market appreciation over the year and jack the option price up a little. We'll see.

Also, I need to update the offer I got and my wife an I need to initial and fax back to the agent first thing tomorrow morning. I'm thinking the people will either accept the new offer or counter again. I have a feeling they won't kill the deal. My agent said they were under contract on a same exact home down the road, but it fell through when the inspection uncovered foundation problems. They also had it appraised, and they are using that appraisal amount for their offer price on this home. I'm not sure if the appraisal accounted for the foundation problems, though.

House 2: Offer Received

I received a formal offer on House #2 from my agent. It's a little lower than I liked, so I countered slightly higher (not a whole lot). Interestingly, I have a $2k bonus in the listing description, yet the contract didn't mention it at all. In fact, there is a section for just that type of thing, but it was filled in with $0.00. My agent said that legally, since it is not mentioned in the contract and that they entered "$0.00" where they should have entered the value, I don't have to pay it, but suggested mentioning it in the "Special Provisions" section as being included in the purchase price. Will talk more about this later.

Also, the contract has the OLD owners name as the sellers. I'm assuming they are using an old tax record to get this info, which is something else I'll talk about later.

No Go On Buyers For House #1

I never got a call from the broker, but the husband called me in the evening to tell me they can't buy the house. His broker emailed him and said FHA will not allow a 2nd note on the house (not sure of the specifics), therefore, they won't be able to buy the house unless I sell it to them for $125k. I told him I never heard of this FHA "rule", but was sorry for them.

More Info On Prospective Buyer For House #1

My tenant was finishing his moving out on Saturday, and called to tell me a couple stopped by and wanted to look at the house. He asked me if it was okay to show them the house, and I said "Yes". A few hours later, I get a call from the lady. She literally talked for a good 5 minutes straight on how this house was their "dream" house, etc. She said they saw the floor plan months ago when looking for a home, and fell in love with it. In that time, they lost out on two other homes with the same floor plan in that neighborhood - one by two hours. She (and her husband) saw my house house and "just had to see if it was the same floor plan." When the tenant let them look inside, they knew they wanted it, and when they saw the huge backyard, they wanted it even more - as the woman said, "we wanted it TODAY - you don't even have to clean up the place!"

Now for the wrench ...

After I let the woman talk, I finally got to bring her down a bit to reality. She mentioned that she had gone through a divorce, and her credit was shot. However, they have been pre-approved for $126,000 using just her husband's credit information. She noticed that my sign had once said "Owner Financing" (I wrote it with permanent marker, but used athletic tape to cover it up - it still bled through a little), and asked if it were possible to carry back a 2nd note for the difference. I told her it was a possibility, but I would need to consult my wife on the idea, and see if it was prudent for me to do so. The lady kept referring to the 2nd note as "short term", but I'm thinking she hasn't really given thought to how much she would be paying each month. We also talked about some other things.

After getting off of the phone, I quickly ran some numbers ...

List Price ..... $142,900
Loan Balance ... $103,750
80% 1st Loan ... $114,320
20% 2nd Loan ... $ 28,580

Now, if they put nothing down (more about this later), I'd get $114,320-$103,750= $10,750 at closing (excluding closing costs). I figure if they don't put any money down, my position would be VERY risky as I'm SOL if the 1st forecloses. Therefore, I'd make sure to at least put a high interest on the 2nd - something like 16%. This would make the monthly payments on a 30yr amortization of $384.

So, $10k at closing (probably more like $8-9k after all the closing costs), and $384/mo cash flow for "n" months. I was also thinking of putting a term of 3-5 years in the contract, so I could get my money sooner. I figure if they refi in 5 years, I would have earned $384.33x12x5= $23,000+ from the cash flow, PLUS the balance of the loan would still be something like $28,000. In essence, I'd make $11,000+$23,000+$28,000= $61,000 altogether from this deal. The part I'm struggling with is them not putting any money into the deal and me being in 2nd position.

I also talked with the husband, and he said they have a friend who their using as their mortgage broker. He started talking in circles about how the guy told them their financing position, and what he could do for them, and so on. He totally lost me - partly because I think he himself didn't understand what the mortgage vroker was saying. I asked him if it were possible for me to talk to his mortgage broker to get a clearer picture of what he was saying, and the man said he could have the broker call me on Monday (today). So we'll see how that conversation goes.

Once I understand what the broker was feeding (er, telling) this guy, I'll have a better understanding on what I can provide these people, if anything. My next step - if it works out - will be to have them sign a contract, put some earnest money down, and start escrow.

House 1: Sold?

Before the tenant has even moved out, I have a couple that want House #1 TODAY. The lady talked my ear off for about 10 minutes about how it's her dream home, etc. Will talk more about this soon.

House 1

After not receiving a call yesterday, I decided to call the tenant first thing when I got a chance today. Fortunately, he called me before I had the chance. According to him, he paid the water bill, but the water company somehow mismanaged the payment and credited the wrong account (or something like that). Anyway, he said he got it straightened out. After we hung up, I called the water company, and sure enough they show it was paid. The tenant also said there was a snafu in the lender's docs that prevented them from closing last Friday, but they are scheduled to close this afternoon. He also said he has the next few days off, and plans to move his stuff the next two days, and get the place cleaned the next day or two, and be completely done by Saturday. I'm not holding my breath, though.

I still need to finish the flat fee MLS forms the broker sent me and fax them back, however, I am waiting until I know for sure the tenant has moved out first and the place is clean before showing it to anyone. He mentioned to me before that the weather stripping on the bottom of the back door desintegrated, so I'll probably have to install another door sweep on it, too. I just hope that's the extent of my repairs.

Tenants

House #2

I read over the credit report for the potential tenant, and I couldn't belive my eyes. This person had page after page of accounts that ALL went to collection. I even saw a couple of vehicle repossessions mixed in-between. Still, I tried to keep an open mind. However, the two things that I just couldn't ignore were (1) the collections/repossessions spanned a period of years (IOW, it wasn't a one-time thing), and (2) the most recent collection was from earlier this year. No thanks! So, I told my agent the person just wasn't a good candidate. Back to square-one.

House #1

My wife called me yesterday and told me we got a bill in the mail from the water company for this property. It was a notice of past due payment and they were going to shut the water off next week unless it is paid. Hmmmmm. My immediate thought was that the tenant knew he'd be outta the place this week and wouldn't pay the bill, but he also must know I still have his security deposit. I called him earlier, but got his VM and left a short message for him to call me back. If I get no answer, I'll call back again this afternoon. I swung by the place over the weekend to refill the flyer box, and everything looked okay.

Oh, and I got a letter from the HOA for that property saying they issued a warning because the grass was too high. The warning was for April 1st, but the tenant had mowed the place on April 2nd, so I'm sure it's safe to say the matter was dealt with. This HOA sends out three warnings, and if the problem is not dealt with after the 3rd warning, they'll slap a lein on the property.

House 2, Free Credit Report, and Deed

House 2

Well, it turns out one of those two interested parties wants to LEASE the property (not buy it). I was hoping I could just sell the thing and be done with it, but I purposely inflated the lease price just in case someone was willing to lease it. This way it will cover my PITI and I could CF a little. I'll still be in the red for a good while until I can sell it, but now I may just refinance it and reap more CF. Needless to say, I was a bit unprepared to have someone lease it - not to say it's a done deal yet as I still need to review the app and background info on the potential renter.

Free Credit Report

Shaun had a blog entry a while back about getting your annual free credit report (sorry Shaun, I didn't have time to get the actual blod entry). You can get yours at AnnualCreditReport.com as I suggest everyone do. I got mine from all three reporting agencies the other day, and found an error on ALL three! The errors were minor (i.e., open accounts that should have been closed), but it's just an example of needing to review one of the most important financial documents that exists for you on a recurring basis. Also, when I purchased House #2, the broker told me that an account showed a balance of over $10k on it, but also said it showed no delinquencies or late payments, but also no recent payment history. I called the creditor and found out they didn't close the account propertly, but would do so. That was one of the first things I checked on these reports, and sure enough it was taken care of. Now I just need to call those other creditors that have the open accounts which should be closed.

Deed

After not getting a call back from the title company (suprise there, eh?), I called THEM back. The lady said they've been busy and she has my file in queue to review. She said she would call me back once it's "my turn". Joy.

Procrastinating + Assuming = Lost Deal

I have been looking at this one HUD property now for a few months. It's located out-of-state in the same general area I've been talking about. It originally came on the market at around $35,000. What I like about this particular area is that the HUD inspection reports always include a lot of pictures of the property. In my area, the HUD reports have just ONE picture - usually the front. Anyway, it seemed this particular property was probably listed a little high for it's condition and area. It's not like it had a lot of things wrong with it, but did require some work to get it in rentable/saleable shape. The description itself said:

DETERIORATED LEAD-BASED PAINT/ PROPERTY LOCATED IN FLOOD PLAIN / FLOOD INSURANCE MAYBE REQUIRED / PROPERTY LISTED WITH INCREASED SALES COMMISSION OF UP TO 8 PERCENT / REPAIR SUMP PUMP/ PRIVATE SEPTIC SYSTEM.

Again, some work, but not impossible and certainly not a fortune to fix. Over the past couple of months the price dropped from $35,000 to $30,000 to $28,000 and finally to $25,000 with still no takers.

Here is where my thinking went all wrong ...

First, I assumed too much about the property. My major flawed assumption was thinking what HUD does to properties in my area as far as list vs. purchase prices isn't always the same for ALL properties in ALL areas. Therefore, I thought even at $25,000, HUD wouldn't accept anything lower than say $21,000-$22,000. WRONG! My other failure (which coincides with the failed assumption) was sitting on the sidelines just watching the price drop and drop and not do anything about it. Don't call any local agents to inquire on their opinion of it's overall condition; don't get a relative that lives close by to go out and see it; don't do anything but procrastinate.

Well, today I decided to check out the listing again. It had been a little over a week since I last checked the listing, and I wanted to see if they dropped the price further. But it wasn't listed. Interestingly, the HUD processor's web site has a link to view details about properties recently won. Sure enough, the property was taken by someone.

FOR $2,800!!!

No, that has to be a typo, I thought. So, I clicked on the detail link, and much to my shagrin, it was NOT a typo. The person bid $3,000, and their offer was accepted. HUD netted $2,800.

House 2 and Other Stuff

House #2

My agent emailed me recently to say that the house was seen over six times last week alone. She told me moments ago that two of those people (she believes it was from that group of six) have expressed interest in the house. She's not sure exactly what that may mean right now, but I'm just happy that it is generating some interest finally.

BTW, Stanley, I really like your idea. Regardless whether these two prospects go through with the purchase ot not, I am seriously considering implementing your idea. Thanks!

Recruiting?

I've managed to track down some old friends and distant family members, who live out of state, to start the process of indoctrinating them to REI. So far my efforts have been futile (or, I'm probably just not giving them enough time to let the whole thing sink in yet). One person in particular I'd like to get onboard. He is an ex of my sister, but he's always remained a friend of the family. I always considered him one of those intellectual geniuses as he would consistantly beat everyone when it came to trivia-type games - not to mention he's a chemical engineer, etc. In my initial conversation with him, he seemed to already understand a lot of what I was trying to explain with regards to REI, but most of it was new to him. I'm not trying to push him into it, but more get him to understand the pros/cons of doing it and let him decide on his own. We'll see how that goes.

5-unit

I've just about given up on the 5-unit. After looking over more of the figures and calling some more local (to the property) commercial lenders on rates, etc., the overall profit isn't looking attractive enough to go through with the whole deal. If the building were to suffer a bout of repairs and/or the vacancy were to drop, I could easily be seeing red, which would make any prior gains disappear. Not to mention the communication witht he RE agent I'm using has been sketchy at best. I still have two emails and a phone call that have not been answered.

Other Prospects

Lastly, I have found some other apartment complexes that I'm checking into. Preliminary figures have all but ruled out three of them. One of the others has a cap rate of 12%, but also has a list price of almost $700k (it has 33 units with room for 5-6 more). Maybe it's just wishful thinking on my part, but realistically it's WAY out of my purhasing range. The other complex has 9 units and has a cap rate of over 18%. It's also about $550k LESS than the other one, which makes it more inline with my buying criteria. I sent the listing agent an email asking some more questions, and hope to get an answer soon.

House 1

My tenant is supposed to close on his new home tomorrow. According to him, though, he won't be moving out of my rental for another 5-7 days due to work, etc. I've already posted several ads on Craigslist, but have only gotten two calls. I plan to use one of those flat-fee MLS listing services this go'around to see how well it works (I've heard both good and bad things about them). If nothing else, maybe I'll find a broker I can work with on future deals.

House 2 Deed

In late December, I noticed the deed to House #2 was missing the legal description, so I called the title company. Long-story-short, the woman said she would submit a correction to corporate and that it could take "a while". I had completely forgotten about the whole thing until I was looking through my filebox for House #2 the other day and saw the closing docs, which sparked a reminder. The lady I had talked to said they would file an "Exhibit" with the noted corrections to the courthouse. I did a lookup on my county's web site, and sure enough, no "Exhibit" was found. So, I called the title company again, and the receptionist said everyone was out of the office for an all-day meeting. She forward me to the lady's VM and I left her a short, but detailed message about the issue (I also sent the title company an email). Still no call back yet. If nothing today, I'll call again tomorrow. Ah, customer service!

Sub2 to be outlawed in Texas with HB2207!!!

I received word yesterday that a bill is on the table in the Texas legislature that would all but end subject-to investing in Texas. It would still be allowed, but the ramifications of the law would mean the owner of the property in questions would have to get written permission from every leinholder first before a transfer of ownership can take place. Failure to do so would have severe penalites.

Texas HB 2207

Just great. Two years ago our lovable policy-makers here in Texas managed to pass a bill into law that pretty much outlawed lease/options, and now they are trying to do the same with subject-to investing. The key part of the legislation for me was the following text:

[...] the person provides the purchaser and each lienholder a written disclosure statement in at least 12-point type that:
[...]
(4) indicates whether the lienholder has consented to the transfer of the property to the purchaser.

If you are a Texas real estate investor, I urge you to contact your representatives and voice your disapproval of this bill (please use courteous language, though).

Discounted Note Opportunity

I ran across an opportunity that could be lucrative, but all the planets would need to align, etc. It's for a discounted note. Here are the details:

Initial Amount: $120,000
Interest Rate: 6.5%
Term (Months): 60
Monthly Payment: $2,374.94

There are stil 15-16 payments left on the note, so an opportunity to gross almost $38,000. I am thinking of offering $15,000 for the note, but not sure if that will be enough. If so, the ROI could be enormous - especially, if I can get one of those short-term, no interest, credit cards, which I could essentially use for a interest-free loan. Even if I can't go that route, the worst I could do is take out a loan against my 401k, which would still make things attractive. Assuming I can buy the note for $15,000, and the remaining term is 15 months, I can get a 401k loan for one year and pay about $1,317/month. So, I'd be cash flowing to the tune of $1,058/mo for 12 months and $2,375/mo for the last 3 months, for a total of over $19,800 in net profit for 15 months. There would still be some other fees associated with acquiring the note, but I could pay for that out-of-pocket. Even if the out-of-pocket expenses are upwards of $5,000, I'd still have an annualized ROI of 271%.

Again, I hesitate to even talk about the opportunity as there are a lot of things that need to happen in a precise way for all this to work. The first thing is to do more due diligence to make sure everything is correct.

Some News

Website

I updated my web site by reorganizing my pages and adding some dynamic features. The reorg is not really noticed by the user - I just had to get a lot of "band-aided" stuff cleaned-up in the way I had files organized. Also, being that my JOB is in emerging internet techologies and one of the projects I'm on deals with the new buzzword - AJAX (Asynchronous Javascript And XML) - I thought it best to add that feature into my website. Now, when a user clicks on one of the issues they may have on the front page, the data is dynamically added below on the same page, instead of having an annoying pop-up window. Also, since it's AJAX, the request is sent to the server for the specific data, so the entire page doesn't need to reload. Looks a lot appealing (to me, at least).

Tenant

I got a call from my tenant early this morning. I was in the shower at the time, and hadn't noticed the VM until I was leaving for work. It turns out he HAS gotten approved for a loan on a house he and his GF have been looking at, so he plans to move out next month - YIIPPIE! I still need to call him to get all the details, but it looks like I can put that tenant worry behind me sooner than expected, plus get the house on the market (and, hopefully, sold) sooner.

5 Unit

I feel like I'm living in the dark ages, having to communicate with these people out-of-state about the 5-unit. I sent the agent an email early this week, and followed up yesterday with another email (and VM) when I didn't get an answer. I've been running the numbers up/down/left/right and ever where in-between, but the only way I see this deal working is if I can (1) assumet the loan, (2) take the property subject-to the loan, or (3) have the owners take back ALL of the financing. I asked the agent to get me as much info on the owners as possible (if she legally can), so I had a better perspective of what options I can present now. Still no answer.

5 Unit: Offers Rejected

Well, I got a VM from the agent I'm using to get the 5-unit out-of-state. She said my "all cash" offer was $9,000 less than the balance on the mortgage and that the monthly payments on the owner financed offers are all below what the owner's mortgage payments are each month. So, back to the drawing board. At least I got some more information, and it only took me - what? - almost a week to get? The semi-good news is that my agent was told by the listing agent that two of the units could be converted into one unit, thereby, making it a 4-unit and bypassing the commercial requirements. All I'd have to do is open a door that exists between two of the units. LOL! Ugh.

The bane that is House #2

I've already started a list of "lessons learned" for House #2, and it seems the bad luck keeps on a comin'.

I called a carpet cleaning company to come out next weekend to try to get the odor out. It's mild enough to notice, but not over-powering, so I'm thinking a good cleaning is all it needs. This past Friday, I load up the car to go over there and do some yard work. Weeds have started cropping up, and the yard didn't look too good (Tip #1: A nice yard is the first impression a potential buyer sees). My wife had bought some Febreeze to try on the odor, so I took it, too. It took a while to mow and weed eat the place, but the difference is night and day now. Sadly, the houses on both sides still look bad (as does most of the street). Beforehand, I went around and sprayed Febreeze everywhere there was carpet. After finishing the yard work, I went back inside, and could still smell the odor a little. While leaving, I went down the street and noticed a house for sale by owner/agent that has an absolutely horrible weed condition. He has weeds growing in the front yard that must be 3-4' high and at least an inch thick. Good luck with that, dude!

Next day, I decided to stop by the store and pick up some carpet deoderizer and air freshener to see if it would help. I sprinkled the deoderizer ont the entire carpet, and vaccuumed. I also plugged in a few air fresheners and left.

On Sunday, I stopped by the house again. When I opened the door, the odor had been replaced by a nicer smell (at least THAT worked - for the moment, anyway). I then went around the inside checking to make sure everything was okay. I noticed that there were foot prints in the carpet, so an agent must have come by since my last visit. Then I noticed bit of wood lying by the back door and the weather stripping was loose on the bottom of the door itself. When I opened the door, the stripping fell completely off and a bunch more wood peices fell out. I reached my hand under the door and felt nothing but rot. It feels like moisture had gotten into the bottom of the door and it was now rotting away. So now it looks like I may have to buy a whole new back door for this house, too. Great. I may go down to the local rehab store and see if I can get one for cheap.

I also talked about House #1 more with my wife. The renter wants to lease it out for another year once the current lease expires. My wife laughed and said heck no to his idea. She (and I) just want to sell it after his lease expires. So I caleld him back a short time ago and left him a message saying 'sorry!'

Update: I went by the house again to get measurements of the door, and did a little bit more investigating on the door itself. Although it's a little rotten, I don't think the damage is as extensive as I first thought. I then realized that the "weather stripping" is actually called a "door sweep", and replacing it may be all I need to do. So I went to HD afterwards, and picked up a door sweep. It was getting late by then, so I put off installing it until the next day. Hopefully, that will fix the problem. Instead of paying $250+ for a new back door, or even $40 for a rehab replacement I found, I may end up only spending $8+tax.

House #1: Tenant and House #2

House #1: Tenant

So, I get a call at work yesterday from the tenant of House #1 - the same tenant who seems to always have an excuse to get me the rent check a few hours before its late (and was even late the first time). I was in a meeting, so I had to let it go to VM. He just said to "call me back" on the VM, so I thought maybe he found a house and wanted to move out. Unfortunately, it was just the opposite. I called him back and he said that he is having a hard time getting financed (surprise!) and that people are telling him he needs to wait another year or two to improve his credit. Therefore, he asked if at the end of this lease term if he could sign a NEW lease for ONE YEAR. Before I could answer, he said he realized I wanted to sell the house, and if that's still the case he'd understand. I told him my wife and I were deadset on selling it, but I'd talk to her again about it and get back with him. Later, I told my wife, and she said she knew this would happen to the guy based on his dealings with us. We also agreed that regardless of this guy's situation, we would still be selling the house anyway. So, I'll call him later today to tell him the bad news.

House #2

I saw a posting in our local REI club message board about and agent that has a client looking for owner financing in the area where House #2 is located, so I sent her an email with the property's info. She replied back saying the guy has a green card (hmmmm) and is planning to get married soon. Due to a problem (supposedly not his own) about a vehicle getting repo'd last year, his credit stinks. She also said he has steady income and his soon-to-be wife has a steady job, too. I asked her what they could afford per month, and she said $1,000, but didn't say what all that entails. I sent her an email back saying the $1,000 would probably only cover the loan payment, and he/they would need to come up with another $325+ per month for property taxes and insurance. I'm still waiting on an answer.

Also, when I was over at the place last weekend, I noticed weeds starting to crop-up all over the yard, sidewalk, and driveway. My agent mentioned there was an "odor" in the house now, too, which I could smell. It's almost like the warmer weather and stagnant air inside has exacerbated the carpet smell. It isn't heavy, but definately noticeable when you walk in. So, this weekend I need to pull yard duty on the house PLUS try to get the smell nuetralized. I called a carpet cleaning company, too, and set up an appointment for NEXT weekend in case I can't get rid of the smell myself. A coworker suggested just spraying Febreeze in the air and on the carpet, which I may try. I might also try carpet deoderizer and vacuuming, too. We'll see.

5-Unit Update

I've been neck-deep at work, so I've had very little time of late to devote to REI. After putting off running numbers on the 5-unit, I decided to just set everything aside for an hour one day and just do that. I wrote-up three different offers, all of which I doubt will be accepted, but I'm hoping at least the owners will start negotiating. The three offers I presented to my agent were:

Offer #1

All cash offer. The amount is almost $17,000 below the asking price. I did this because my target all-cash offer is actually about $9,000 below asking price. I figure if they shoot it down then I've lost nothing (except a few minutes of my time), but if they counter or accept, the ball is back in my court. The offer will give me an average monthly NOI of about $700. I added a bunch of the usual contingenices, along with the following statement:

Seller Advantages: Total proceeds from sale of property are immediate. No longer burdened with mortgage payments, if applicable. No worries about property management and/or tenants.

Seller Disadvantages: Lump sum payment may include a heavy tax burden. No more income from property. Lower offer.

Offer #2
100% owner financing. Offer price is almost $14,000 higher than the list price. If accepted, the deal should net me almost $400/mo in positive cash flow. As with the Offer #1, I added the usual contingencies, along with the following:

Seller Advantage: No worries about property management and/or tenants. Much higher offer - almost $14,000 more than list price. Steady stream of income. No lump settlement - lower tax burden. No worry that buyer will refinance.

Seller Disadvantages: No more income from property. No immediate lump settlement.

Offer #3
Hybrid financing. I'd put down 20% and have the owner finance the remaining. Offer is about $4,000 higher than the list price. As with Offer #2, the deal would net me an average of almost $400/mo in positive cash flow. Again, I added the following:

Seller Advantages: No worries about property management and/or tenants. Higher offer - almost $4,000 more than list price. Steady stream of income. No lump settlement - lower tax burden. No worry that buyer will refinance.

Seller Disadvantages: No more income from property. No immediate lump settlement.

I told the agent that all the offers were negotiable (and, in fact, short of the owner accepting any of them, I hope they counter). The agent mentioned before the owners were not interested in owner financing, but I wanted to give them a realistic picture of what windfall they can receive by doing it in the hopes they would change their mind. The Seller Advantages/Disadvantages were partly thought-up by me and partly taken from a REI book I have. According to the agent, the owners are elderly and recently moved out-of-state, so I'm hoping by planting a seed of "steady income" in their minds, they'll opt for one of the owner financed routes. But, if not, I made my all-cash offer low enough to leave some negotiating room. We'll see what happens.

BTW, I am still drafting the commercial loan proposal to send to the local bank. The rep told me everything he'd need in order to review. I have all of the information, but I just need to set aside another 60-90 minutes to put it altogether into a nice presentation to send him. If only I had more time ...

TIME

It's bad enough we lost an hour by changing our clocks ahead this past Sunday morning as I don't have enough hours in the day as it is to do everything I need. My JOB is demanding more and more of my time these days due to an ongoing project that is getting a lot of exposure. I haven't been working longer hours, but the hours I do work are 100% used for actual work. I used to take a few breaks during the day to do some REI research, run numbers on houses, answer personal email, etc., but just can't do that now. Even my lunch break has been whittled down to nothing - I eat while I'm doing work for my JOB (usually). As I type this, I'm actually running a couple of builds, and waiting for a coworker to get back to me with an answer. Hopefully, in a week things will slow down a little enough to actually breathe.

And home life is no easier. The twins are starting to walk now, which means they need 100% attention. Before, I could just put them in a playpen and go do some work, but they have smartened-up and realized they'd rather be on the play mats walking around (which means someone has to be there).

It's also spring time (unofficially) here in central Texas and the live oak trees have just about shed all their winter leaves, which means YARD WORK. I have to set aside a full day this weekend (or next) to devote just to cleaning the back yard. I figure the leaves themselves will fill 15-20 bags, easily.

Still, I need to find time to ...

* Run by my CPA's office as my taxes are finished, and they need me to sign the forms for electronic filing (along with paying her for her work).

* Run some hard numbers on that 5-unit. I found some commercial lenders in the same area as the property, but didn't expect their rates to be so high. I still need to figure all my costs and if it still makes sense to buy it.

* Run figures on several properties the other agent I'm working with in that area gave me. She keeps sending my listings for SFR's even though I told her I was only interested in MF properties. However, some of the lsitings she has given me look too good to simply ignore. For example, a 1700sf property located near downtown for $9,000. She said it would be an ideal property to rent out to a business. Another was for $17,000 and the owner has had it listed for over 500 days. No huge repairs are needed (so she says), and it should make a decent rental. There are about 5 others I still ened to look at, too.

* Get my financial portfolio up-to-date to send to those commercial lenders. Unlike residential lenders, the commercial lenders want a more thourough profile of a person's finances, including a personal financial statement. I meant to do this over the weekend, but - you guessed it - NO TIME.

Is that light I see?

... Or a train?

I've been emailing and calling almost everyday in regards to financing the 5-unit complex I'm still looking at. My dilemma is this ... The property falls into "commerical" lending due to it being 5 units or higher. Commerical lending is fickle (I'm finding out) as they have separate requirements for a lot of things. To make matters worse, the 5 unit is so cheap that commerical lenders don't even want to deal with the pain of carrying the note (which I can understand).

After asking around, someone on REIClub.com suggested going to this site to see if there is a lender whose HQ's is located in the general area. I found a couple, but only one was within shouting distance of the actual area I am looking at. So, I called them this morning and talked with a nice lady in the loan department about my situation. The good news is that they CAN help me, but would still need a bunch of paperwork from me in order to secure financing. I asked about business lending and she started on about how the company needed two years of history, blah blah blah. I told her I would be creating the entity now, and that I wished to still get a PG (personal guarantee), but the entity would actually own the property. I'm still not sure if she understood what I was saying after repeating it several times. :(

I gave her the list price of the property and she asked if I'd be putting $$$ down, etc. I told her I could put 10-30% down, but would rather not if at all possible. She said due to the circumstances, they would probably make me put some down (doh! I keep forgetting this is COMMERCIAL property). She then said that due to the loan's low amount, they wouldn't have anything over 10 years (IOW, no 15- or 30-yr rates). These were the rates she quoted me:

* 3/1 ARM @9.75% with 1% annual increases after the 3rd year.

* 5/1 ARM @10.25%

* 10-yr fixed @11.25%

Needless to say I was a bit bummed. I was figuring 9% tops for such a loan and with a term of 15 years. Does this sound plausible to anyone out there that does commercial investing? Again, the loan will be for LESS THAN $50,000, so maybe the higher rates are justifiable to protect their interests.

Edit: I called another one of those banks to probe for better services. The guy I spoke with was pleasant to talk to. I explained my situation to him, and he said there shouldn't be a problem at all getting me a loan. I told him I would probably create a business entity to hold title to that and other properties, but understood that I would still need to PG for the loan. He said it's done all the time and shouldn't be a problem in my case at all. The only drawback I had is that they usually only do these types of loans for VERY short term: THREE years (ARM or fixed). Gulp! I guess there's probably no way around this snag. I asked him what the next step would be, and he said to send him as much financial information on the property as possible, along with my personal financial information. I guess the wheels are in motion now!

5-Unit, PMC #1, and PMC #2

5 Unit

I am still mulling over this property. My realistic figures show I could have a monthly NOI anywhere from about $675 to $850, depending on how I structure things. If I got 100% conventional financing (which may be a stretch), I could get a 30yr note @9% for only $350 or so a month. This would leave me with a minimum of $325/mo in positive CF. But I'm starting to second-guess some of my figures and I really need to get more info on the property itself. The one thing that intimidates me is that it was built in 1900. My version of "old" properties is 1980's, or 1970's at worse. This property predates that by a long shot.

PM Company #1

I finally got a response back again from the man who runs his own PM company in the area the 5 unit is located. He sent me a picture of the two complexes he is selling and the price he wants. Both would be nice buys where I live, but may be a bit overpriced where they are located:

4-plex $119,000

7-unit $239,000

Click on the picture to see a full sized version.

He said he's going to send me more information about the properties, including a pro forma sheet, "soon".

PMC Company #2

Did I finally find a good person to work with? After getting an email from the agent I've been working with on the 5 unit about not finding any PM companies in the area, I did an internet search and found several (which I mentioned before). One of those was PMC #1. The other was a real estate agent. I sent her an email the other day, and we have been conversing like clockwork ever since. I'm getting a better response out of her than I have with ANY agent I've worked with in the past, locally. She is not only a RE agent, but has 10 years of banking experience, land development experience, property management experience, and she says her fiance is the owner of a construction company.

She's already sent me a listing of properties that includes several the other agent there missed. A lot of the properties need work (some need a LOT of work), but I can buy several of these that cash flow out of the box vs. ONE where I live that will be good to CF at all. I'm not getting my hopes up too much as there is still some obstacles to overcome first - mainly financing - but the outlook appears a lot better than it did just a week ago.

Tenant Issues and PM Silence

Tenant

Just as I had thought, it was the 3rd of the month and no rent check was in my hand. I called the tenant up and he said (like he ALWAYS does) that he was JUST getting ready to call me. He said he and his GF were in south Austin looking at houses, and would be back in their rental in the late afternoon or early evening and he could give me the rent check then. He said they'd be out again, but he'd leave the check under the mat. I told him to call me the INSTANT he was back home, and I'd go over.

He also said he wouldn't be buying my home after the lease term was over. He and his GF really liked the place, but it was just too expensive for their budget. (I was thinking, the rent he's NOW paying would be the same, if not more, than the mortgage, taxes, and insurance he'd be paying each month.) He also said that since I was so accomodating on him being late in the past, that he'd go ahead and let me put the "for sale/lease" sign in the yard the beginning of April. (My lease agreement says I can do it 30 days prior to the end of the lease term, which would be May 1st, so this would give me another month.)

I told my wife that since we are having a hard time getting rent checks from this person each month, that maybe we should tell him that if he finds a house sooner, I'll void the remainder of the lease term just to get him out and get the house on the market sooner. She agreed.

Well, I waited by the phone, but got no call that night. The next day, he calls, but I had the cell phone on "quiet" and didn't get to talk to him. He said he left the check under the door mat, but noticed I hadn't gotten it. Hmmmmm - I DID tell him to call me. So, I called him back, left him a VM, and headed over tot he house. Sure enough the check was under the doormat.

Property Management

I wrote in the comments section to Shaun in my last blog post how I managed to find a guy who owns a PM company and may be able to manage any properties I buy in that area. He also said he had two complexes with a total of 11 units he was going to sell, and wanted to know if I was interested. Well, I sent him a reply with some info, and asked him if he could send me as much info about the two complexes that he can, and I'd see if I could purchase them. This was last Wednesday, and I still ahven't heard back from him on anything (managing my properties OR the complexes he wanted to sell). So, starting today, I'll start going fown that list of PM companies in the area and see if they can help me, instead.

No Property Management Company?

After almost a week of not hearing from the agent about the 5-unit complex, she finally called me today. I wasn't able to get to the phone, but she left a VM that essentially said she could not find a property management company local to the 5 unit to manage it for me. She said she talked with other agents in her office, her broker, and even some outside people she knows in the industry, but no one could help. This sucks as I will need someone to professionally manage this complex since it is located out of state. I could leave the guy that's renting the 5th unit in place, but even the agent said he's not really doing any type of management now. That sucks bricks.

Some Updates

House #2

I have been mulling over what to do with this house. It's getting seen, but nobody has made any offers. I was thinking about ripping up the entire carpet and linoleum, and replacing it with ceramic tile and newer (but still cheaper) carpet. My FIL is a retired tile setter, so I wouldn't have to worry about labor costs - plus I've been on enough tile jobs with him to know how to do it anyway. I figure tiling everything except the bedrooms would be around 900-1000sf, and I can get nice tile at Lowes now for $0.78sf. I could lay the carpet myself, since the rooms are rectangular shape (i.e., no curves or corners to work around). It should cost me about $1500-$2500. I was also thinking of throwing in a free appliance or two.

Then this morning I got an email from my agent saying someone is interested in buying the property. They want to see it again, but have their choice down to mine and two others. We'll see.

5-unit Complex

Working with agents back there is S-L-O-W. I send an email, and am lucky if I get a response in 2-3 days. My latest email was asking about PM companies local to the area. The agent said she was going to check with other agents in her office and her broker to see if they have any recommendations. That was two days ago! I guess if you need anything done ASAP, you have to call.

My problem now, though, is fiancing. Being that it's 5 units, it is considered multi-family/commercial, which has it's own quirks. Also, since the price is so cheap, a lot of lenders won't touch it. I've asked around and some people have loans for these types of properties, but want some higher-than-normal rates (9%+). I figure if I can get House #2 sold real soon, I could use the proceeds to hep pay for the 5 unit. Even if I take ot a loan against my retirement, I'd still be a little short. I already asked if the owners would take back some/all of the financing to which the response was "no" (I even said I could pay them MORE than their asking price, but they still balked). I guess if worse comes to worse, I'll refinance House #1 to make-up the difference, but I'd rather just get a single mortgage to cover the whole thing.

5-Unit Update

I got a response from the listing agent about the 5-unit I talked about a couple of posts back. It turns out the 5th unit IS occupied - by the "property manager", who pays NO rent. That's all I know for now, so I have no earthly idea what all this "property manager" does. I figure if they are getting FREE rent (and utilities?), they'd better be handling just about everything, including paying ALL the bills, collecting ALL the rent, handling ALL the maintenance, and just sending the owner a check and summary report each month. Something tells me this isn't the case, but it could be.

Anyway, based on all the information the agent sent me, including the insurance, taxes, and utilities paid last year, along with the rent amounts, I figure this property would have an NOI in the neighborhood of $10k/year. Doesn't sound like a lot, but this place is pretty cheap which makes the debt service pretty low. I figure I could CF about $300/mo, minimum, at the beginning and upwards of $700/mo later based on the type of debt service I'll sock into it. Still a lot of investigating to do before I get my hopes up, though.

Who said deals under $15k don't exist?

2/1 for $15,000	3/2 for $14,900	2/1 for $12,000
4/1 for $9,900	3/1 for $9,900	3/1 for $5,900

BTW, the last property sits on 1.5 acres of land. I can only imagine what the inside must look like. :-O

A diamond inthe rough, or just broken glass?

I finally got an response back from one of the agents I sent an email to in the last week. Shes aid that they've encountered very harsh weather the last couple of weeks, which has almost shut down their area. That's saying a lot since that area is used to inclimate weather year after year. I'm guessing that is one of the reasons (if not THE reason) I'm getting poor responses.

Anyway, I inquired about a certain multi-family property that seemed to sound almost too good to be true. The agent didn't answer ANY of my questions, but rather sent me a brochure on the property. Here is a picture of the property. If you click on the picture it will open up the actual "brochure" I received on the property (I blotted out location information, though):



Some of the data on the brochure came out choppy, but basically the numbers are as follows:

5-unit
List Price: $49,500
Unit-1: $275/mo. (leased)
Unit-2: $355/mo. (leased)
Unit-3: $348/mo. (leased)
Unit-4: $350/mo. (leased)
Unit-5: ?????
Taxes (2006): $409.50
Year Built: 1900

Some of the questions I had for the agent were the occupancy rate, typical insurance premium, why the owner is selling, if the owner was willing to carry back any/all financing, if there was any deferred maintenance, and several other questions. Needless to say, NONE of those questions were answered (fully). A couple of other concerns I have are the age (built in 1900), the yearly water & electric costs (since I'll pay it), and what about Unit-5?

Cold Emailing

With what free time I have, I've been shooting emails off to a bunch of different brokers and agents, regarding properties they have listed that may be worth looking into more. I've noticed that for every 10 (or maybe more) emails I send out, I get one back. Most of the time the property is already under contract (even though it still shows up as "Active" on their web site). What I am disappointed about is the agent I spoke with on the phone a couple of weeks ago. I sent her three emails the first week and I sent her a follow-up earlier this week, but still no response. How do these people stay in business? If I got an inquisitive (and potential) buyer, I'd at least follow-up, if nothing else. I sent one broker and email asking her about a listing, and at least she responded to it - she said it was currently under contract. I sent her a response asking her to let me know if any properties that meet my criteria become available. No response. Geesh! I'm REALLY thinking maybe I should become a real estate agent, work under the tutolage of a broker for two years (one of Texas' requirements), get my broker's license, and open my own shop. :-/

Section 8 Paperwork

I received the Section 8 paperwork from my local housing authority the other day, but didn't have time to go through it until last night. Wow! They sure insepct a lot stuff. No wonder people say their inspections are tough to pass. After reading the entire checklist of items they inspect and to what degree, I believe House #2 MAY fail on several accounts. First, they say the flooring must be safe and free of any hazards that may cause a person to trip. While the flooring in House #2 is safe by my standards, the Section 8 inspector MAY fail it due to the carpet needing stretching in a couple of areas. It's not THAT bad at all, but just a slight indication of the carpet needing stretched may be all the inspector needs to fail me. Second, it says the property must be free of insect and vermin infestation. Again, I'm not sure how stiff the inspector would be as this property seems to attract a lot of spiders - although, it's less now that I sprayed. Lastly, there were several "fist-sized" holes in the garage drywall I never repaired. I figure the cost-benefit just wasn't there to fix them, and they aren't that bad at all. I guess if it ever came down to being the definitive factor, I'd just cover them with something permanent.

The Light Bulb

I remember when the light bulb when off over my head after reading Kiyosaki's Retire Young, Retire Rich. It's like a whole new world opened up for me and I felt both exhiliration for the new opportunities and disappointment that I wasted a good part of my life living within my comfort zone. I guess it's one of those things that some people "get" and others just don't (or won't).

I had lunch yesterday with the co-worker I spoke about recently, who was told he is getting laid off. I decided beforehand that I wouldn't mention any REI or related stuff unless he brought the subject up. I had done so on previous meetings with him, and the whole concept appeared to go through one ear and out the other.

So, I basically spent the first part of our lunch listening to his current life story and what transpired to get him laid off. Basically, he said that he was set up (and knew it) from the beginning by his management. They put him on a project that was destined to fail, and he knew it from the beginning. However, his management chain assured him he had nothing to worry about and they would support him. Well, 6 months later, the project came crashing down, and he was left holding the bag. Now, he says, management is treating the failure as HIS failure, and are - as he put it - lying through their teeth now about all those upfront promises (I guess it's one of those times where promises should be put in writing to CYA). And on and on he went.

The conversation then migrated to his divorce last year and how he just paid his ex-wife the last of the money he owed her for half the house, etc. Doing so left him with -$0- in liquid assets with only his home being anything of worth. I struggled to keep my mouth shut, believe me.

Then after talking almost non-stop for 30-40 minutes, he asked how I was doing, how my family was doing, and if I was still doing this real estate "thing". I couldn't restrain myself any longer, and out blurted a 15-20 minute presentation on REI once again, only this time I included some other points like expanding your comfort zone, taking risks, and basically telling him this may be a blessing in disguise for him. I told him that his $250,000 house was completely paid off, and he was sitting on a gold mine. But he'd have to act quickly while he still has a job in order to tap into the equity and do something with it. I also mentioned how he could sell the house and buy 2-4 more with it and get MORE cash each month by doing so. I aso told him he could sell his house with owner financing and get an almost guaranteed $2000-$3000 month from it. And on and on.

At first, he seemed interested, but I could see as I was talking that the invisible force of staying in his comfort zone was slowly muffling his ears. Undoubtedly, most of what I said must have sounded like a late-night infomercial to him, and within an hour after our conversation, disgarded. I also sent him some links to a few of my favorite REI web sites, but I'm thinking that email will sit or get deleted as if it were spam.

I guess some people fail to realize the opportunities that exist for them, but it takes THEM to capitalize on them. I figure I'll get an email in a year or two from him, saying he got a job as a manager at a Home Depot or something. :-(

Sounds of Silence

Hmmmmm. When I talked to the agent out-of-state last week, I had the feeling she would send me a list and treat it as a viable relationship. I guess I realized it wasn't going to be all roses when it took her two days to get me the initial listing of properties. I then sent her THREE emails in response to the listing. That was last Thursday and I still ahven't gotten a response. Keep in mind it was her suggestion about communicating via email, unless something urgent came up that required immediate communication.

Anyway, there were two properties on her list that passed my initial test (which I wrote about in my last blog entry), plus another one that may be worth checking into more. I sent her some questions regarding each of them, but have gotten nothing. True, it could be she is gathering all the information and will send it in a single email, but I thought I'd at least get a response like "I'll get back to you" or something.

Possible Deal

I started getting feeds from the agent I wrote about recently, and may have a possible deal. It's not a diamond-in-the-rough by any means, but could CF nicely if the numbers work. It's a duplex located withing a stone's throw from a college (actually, right across the street). It is fully occupied and the description says the owner has an additional house for $40,000 (it doesn't say if it's next door, next city, or next state - I'm guessing it's close by, tho). It also says there were new appliances and A/C work done. Here are the numbers:

Gross Potential Rent ..... $ 20,400
Vacancy Loss (2mos) ...... $  3,400
Gross Potential Income:    $ 17,000

Management (10%) ......... $  2,040
Maintenance (5%) ......... $  1,020
Insurance ................ $  1,278
Property Taxes ........... $  1,420
Other (3%) ............... $    612
Gross Operating Expenses:  $  6,370

Net Operating Income ..... $ 10,630

If I can get the owner to take back some or all of the financing, I should be able to CF positive about $150-200/mo. on it, but that's a big "if". I may also be able to buy the additional house and lower the overall price in the package deal (another big "if"). I sent the agent an email asking her several questions regarding the properties, so we'll see what happens. If it requires me to put down money and get conventional financing, I doubt I would break even each month.

Edit: Found another deal in about the same location as the one above, but it's just an SFR. It says the owner will consider any offer, and says the property will be sold in "as-is" condition. I emailed the agent to see why they're selling, if they are interested in providing financing, if there was any major things wrong with it, could I have more pictures of the inside and out, etc. We'll see.

You're Fired!

Ok, not ME (thank goodness - at least, not yet). A friend and coworker whom I posted about here a few times IM'd me yesterday to say he got his proverbial pink slip. I haven't spoken with him in probably 6-7 months, but I knew he had changed management chains during that time. He didn't give me the details, but just to say after 28 years of loyal, dedicated service to the company, they decided to lay him off 2 years shy of our company's term for retirement.

If that wasn't bad enough, he went through a divorce last year, which left him flat broke. Well, almost, anyway. He doesn't have any more liquid assets, but I think he still has the house.

Anyway, this should be a wake-up call to most people who still rely on their JOBs for a future paycheck and security. This ain't your parent's world anymore. What's sad about this guy's predicament is that he his not young (late 40's), so finding another JOB in his field of work will be hard - let alone finding one with comparable pay. And worse still is the fact that I talked to him numerous times about investing in real estate to help facilitate his income now, and provide income later when he is no longer working. My advice, unfortunately, went on deaf ears.

We plan to meet for lunch next week, which I'm sure will be a one-sided conversation (his) about what he plans to do. I have a feeling if I mention REI again, it will (again) be put on deaf ears. He says the company will give him a "see ya" bonus with the kick out the door, which he says equates to 3 months of salary, but that won't be paying any bills 6 months from now.

Section 8?

Over at the The Landlord Blog, Anesia had a recent post about her troubles with Section 8. If you recall, I wrote in my blog several weeks ago about my agent's broker telling me that the housing authority in a nearby town handles Section 8 for the city both my properties are in. I hadn't followed up with her advice, but I decided to call them today and get some info. The gentleman said he would send me some literature on the process, but told me the whole process is pretty simple. He then went on to explain it to me over the phone. He asked some questions about the property (House #2), and said their cap for it would be about $1,240/mo. Of course, my eyes lit up - that is until he said that the price includes a utility allowance of around $256/mo. He then said that it would depend on the renter's income level (they would pay up to 30%) and some other things, but it could be lower.

As you can see, I'm fishing the idea of holding House #2 as a rental. I already have it listed for lease, too, but wanted it to sell more than lease. I'm still running some numbers, but if I can get it refinanced, I may - just may - be able to CF positive as a rental. The problem again, though, is the need for cash. I'm about $8k in the red on this house, too, so it would take a significant amount of time to make that up even with $100-200 in positive CF each month. I could do a cash-out refi, but I think the amount needed to get me back in the black + closing costs would put me back in the red each month. Plus, it goes against my goals for this year, which is something I want to protect.

Anyway, even if it doesn;t work out for this property, I can at least start the ball rolling (education-wise) on future properties.

4-plex and a Phone Call

Regarding the properties I found recently out-of-state, I decided to finally give the agent who had the 4-plex listed a call at lunch today. No one but the secretary was in the office, so she transferred me to their other office, and I spoke with a nice lady. She said the 4-plex I wrote about a few posts back was currently under contract, unfortunately. Rats! But, we got to talking for a few minutes about other things. I told her I was originally from the area, went to school close by, etc., and small talk like that. I asked if she could email me any properties she finds on the MLS (or otherwise) that were multi-family under $500,000. She said she'd be happy to do it. So, now I have a real estate contact, who can send me prospective properties in that area, saving me the burden of doing manual searches myself. Whoo-hoo! I guess that's one manual labor item I can take off my list now. :-)

Reality Check

I usually avoid posting about actual numbers in my posts from my properties, but thought I'd buck the trend this time to show any prospective RE investors how realistic owning a property can be. I have figures from House #1 in various folders in the file box specifically for it (BTW, it took be an entire weekend over the holidays to get everything filed correctly for both houses - something I kept putting off). This past weekend, I decided to gather every piece of paper that was a debt or an income for the house, along with the date, and put it in a spreadsheet. I actually kept better records the first year I owned the property - I had everything in a spreadsheet, along with a full description of the item. I just needed to add last year's items and this year's. Before, I had some things for the CPA in her folders, some things for tenents in their folders, etc.

Well, the bottom line is I am still in the red on this house. I knew I was before I had even started this project, but I wanted to see just exactly how much in the red I was. It turns out my estimation of $10,000 wasn't too far off. After everything - and I do mean EVERYTHING - was accounted for, I am in the hole on House #1 a grand total of: $10,362.

Now, before I get a lot of flame mail from other investors telling me what a piss-poor investor I am, I wanted to add two things ... First, I have not included any tax write-offs associated with House #1 in this bottom-line figure. Without pulling my 1040 (and associated schedules) from last year's filing and getting my stuff to the CPA and having her get my stuff for this year's filing, I don't have a clue as to what the numbers will be. I am guessing that I could probably deduct another $4,000-$7,000 from that $10,362 figure, but that's just a top-of-my-head guess. Second, as much as it pains me, I plan to sell the property this summer. I made an offer to my tenant already, but something tells me he won't buy it (Hmmmm - I wonder why?). If he does (for the price I quoted him), I'd make about $34,000 at the closing table. Other deductions and additions would put the final net profit figure at about $23-25k for House #2. BUT, the price I quoted him was really a bargain for the house this coming summer (especially with news of how hot the central Texas market is getting). I figure I could realistically add another $3-8k on top of that quoted figure, putting my net profit around $30k. Again, this doesn;t figure tax deductions (or even capital gains hits from selling it).

The ROI is a little harder to pinpoint as my cash out-of-pocket has really yo-yo'd month-to-month for the time I owned it. Costs before getting a tenant in the property was about $8,000, but it has risen as high as $12,000 last year, so I'm not really sure what figures to use and the time period to calculate the ROI.

As far as House #2 goes, it's slowly getting to be a pain. If I sold it TODAY, I'd still make about $10k after everything is counted (except income tax deductions, etc). But, I'm figuring a Feb or even March close now, which would dent my profit by a couple $1,000. Still, my goals this year are to buy/sell several more homes and only make about $8-10k profit at a minimum, so I'm not panicking. This - along with my House #1 sell - should pay off some debt plus give me cash reserves to buy other properties that will cash flow nicely.

Central Texas RE Market Booming

I read this article in Sunday's AAS paper, and a mortgage broker sent me the link to the online copy of it (note: the link sets some cookies that only allows you to view it once - you can delete all the www.statesman.com cookies or use another browser/computer to view it again). Basically, it shows how well central Texas did last year in the RE market and how things are poised to boom (which most of already knew anyway).

What I found ironic about the article is that they start off talking about the very city I am investing in: Hutto. It had an astounding 60%+ sales increase from 2005 to 2006 (although it only appreciated 3.9% during that time frame). As the story points out, many developments have been made and are in the works to make this area appreciate rapidly. Just 3-5 years ago, it was a quiet little town with almost no retail shopping and only a few subdivisions. Now it has a large retail strip center, Home Depot, several restaurants (fast food and sit down), and some major players coming to the area in the next year or two (HEB, Holiday Inn, Lowes).

If I thought the competition was tough before, I ain't see nothing yet.

Pet Peeve #2753

Email.

I wrote about this a couple years ago, too. Why do people have email addresses for the public to send them questions, comments, suggestions, etc., WHEN THEY DON'T EVEN RESPOND WHEN YOU SEND THEM ONE! It just irks me that in this day and age of technological advances, people are so quick to jump on the "latest and greatest" must have gadget and then they don't even use it.

I sent FOUR emails to FOUR different brokers/agents on Sunday and another email to another broker yesterday, regarding the properties I found. I didn't use a "Contact Us" online form, but actually dug for their direct email address. (Actually, I did try to send one email that way, but their stupid online form kept crashing internally every time I'd hit the Submit button.)

It's the dead of winter in WV right now, so I know these people aren't busy as all get out. Stranded and unable to get to their email? Possible, but in this era of "on demand" everything, I think they'd find a way to communicate.

I guess I'll have to do it the old fashion way - call them.

I prefer emailing over phone, though, mainly because with a phone call the person is obligated to drop what they are doing and listen to what you have to say (IOW, do a brain switch). With email, they can set aside a part of their day to devote themselves solely to answering emails (IOW, when they want - not when the other side wants). Oh well.

Another Prospect

I found this 4-plex while perusing the area I was talking about in my last post. As with the other properties, I emailed the listing agent to get more info. However, using the numbers from the listing, I arrived at the following numbers:

Gross Rental Income ...... $ 21,060
Vacancy Loss (2mos) ...... $  2,106
Gross Potential Income:    $ 17,550

Management (10%) ......... $  2,106
Maintenance (15%) ........ $  3,159
Taxes .................... $    990
Insurance ................ $  1,485
Other (5%) ............... $  1,053
Gross Operating Expenses:  $  8,793

Net Operating Income ..... $  8,757

I bumped up the maintenance due to my not knowing the full condition of the property. According to the listing, it is fully occupied, so I figure it is at least in livable condition. Taxes and insurance were a guess (I asked the listing agent for that info as well). So, I tried to be on the high-side of realistic calculations.

I figure if I can get the owner to take back some or even all of the financing, I should only have a total debt service of about $7k/yr. This should net me about $2,000/yr in pretax income. This is located in a state that has an income tax, so I'd need to find the ramifications of that as well.

BTW, it's located a half-block from a local college.

Out-of-state Investing

Like Shaun, I have been seriously considering investing out-of-state. Actually, I've been looking ever since I started REI, but haven't been really serious about it - until now. There are several reasons why I'm taking a stab at it now - mainly, because competition is getting really tough in my area from other investors (mainly California investors who are uprooting to "the next big thing"), but also becuase where I'm looking at is a place I know like the back of my hand. Instead of trying to find diamonds-in-the-rough (exclusively) in my area, I'll be looking for investment opporutinities that many would find ... well ... boring. Yet, if it cash flows nicely, who cares!

Three properties I found already include the following:

• A mobile home park for $60,000. Granted, it only has three MH's (which are included in the purchase price), but the rents equate to almost $1,000/mo. I sent the listing broker an email over the weekend, asking for more info. If I can get the seller to take back some/all of the financing, I could possibly CF a few $100's each month on it. A lot of if's for this one, and I still need to run hard numbers.
• Fourplex for $120,000. Completely renovated and new everything, almost. The proforma shows an NOI of >$15k/yr, with a pretax CF of $7k/yr (based on their hypothetical financing model). I emailed the listing agent on this one as well, and asked about owner financing (which the ad says the owner is willing to do).
• 8-unit Apartment Complex for $180,000. Lots of upgrades recently as well. Currently 100% occpied with a monthly gross rent of $2600. Again, I emailed the listing agent about owner financing. Plus, I still ened to run hard numbers on it.

So some opporunities for decent CF on these three. I figure the three together could provide approximately $1,000/mo. CF, but, again, I need to run some serious calculations on them. If the owners are flexible then I won't have to worry about qualifying for a conventional loan, either, which will definately help.

House #2: Lots of visitors, but no offers

My agent emailed me yesterday to say the place was viewed another 4 times this week already, but still no offers. She did say someone gave her a verbal offer of $98,000, which was laughable (I'm guessing another investor). I emailed her today and told her to drop the price $2,000 to see if anyone bites. If no offers in the next two weeks, I'll have to think of something else.

RE Attorney

It's funny how things sometimes happen without much effort put in place.

I mentioned in a recent post about calling a local RE attorney to see what services they could offer me as far as owner financing properties and acquiring properties subject-to the existing financing. You may recall the attorney's rep told me they handle owner financed closings, but they don't do Sub2 closings, which was a little disappointing.

Well, I had also posted a message on one of the REI boards I frequent back in December about owner financing, etc. A responder there had sent me a private message last night, which I didn't respond to because they left a similar response on the message boards themselves. So, I responded to them on the message board. About an hour later, I get a private email from a local RE attorney who says he can also help me with owner financed closings. I emailed him back asking for his services and asked if he could also handle Sub2 closings. He responds with a list of things he can do and what he charges. He also says he can do Sub2 closings for me, AND he can service the new loan (i.e., have the buyer pay him, and he pays my original loan company, pays himself a small fee , and then gets my my share). He also asks for a fee when the buyer sales/refinances (10% of the equity spread), which I didn't particularly like, but it's not a huge amount. I told him I'd have to get back with him, since I'd have to look over the numbers first.

So, a small fee upfront, a fee to service the loan, and a backend fee. I didn't ask him if he had a specific timeline for his loans, but I'm sure that works into the equation, too. It all sounds good that he can provide a one-stop shop for all my needs, but I don't want to get mired in fees, either.

(Slightly) OT: Corporate Employee Ratings

Ah, it's that time of year again. Time to update and submit my yearly "How I walked on water" report to my management to see what kind of bonus I'll receive (if any). I imagine almost all medium and large businesses have some sort of employee rating system that defines - or, at least, suggests - how well the employee did the preceding year to help the company. I had to do it in the military every year, and I have to do it each year for my current company. While syntactically different, they are semantically the same.

For my current company, we have to write a summary in the 1st quarter of each year of what all we plan to do to help the company for the rest of the year. At the end of the calendar year, we then submit a follow-up to what we planned to do and basically tell management how we should be the next CEO. I understand the purpose of such a rating system (mainly to CYA of the corporation itself), but after having lived through so many of these things, they are to me essentially a huge waste.

Case in point: this past year.

Without devulging the details of my company's rating system, I'll just say that your management - after going through all the strenious work of reading your input, their own input, etc. - give you a 1-5 number with "5" being "your fired!" and "1" being "he/she really DOES walk on water". In my almost 10 years with this company, I have never gotten a "1" (or "5" or "4"). What I find not only in my company, but in other company's is a lot has to do with corporate politics and what is referred to as the "buddy system".

A rating of "3" in our system basically means you did what was expected - nothing more, nothing less. A "2" means you went above what was expected. I got a "2" a few times early on, but have since always gotten a "3", which I thought was needed in some years, but not last year. Last year, I really busted my chops and got things done - usually far ahead of schedule. In fact, I received not one, not two, but THREE commendations (a formal award a fellow employee can give someone) for helping out people outside my area. My reward? another "3" rating.

That really rubbed me raw, but what really angers me is that management doesn't even follow the mandated rating system the way they are supposed to. You see, you aren't rated against other people in your area, per se, but are rated against others at the same level as yourself. I think I mentioned that I work alongside people with Ph.D.'s and such. I am just about the only person at my level working in my organization (they have formal levels here, which begin at "6" - I am a "7" and most of the people I work with are "9's" and "10's" with a couple of "8's" in the mix). So, instead of rating me against other "6's", I feel - (and maybe I'm wrong) - that I am getting rated next to those people higher up. Of course, when I mention this to management, my assertions are met with denial.

Of course, I can always hope in lieu of a good bonus, I'll get a promotion! ..... Okay, you can quit laughing now.

But then that's the life of a corporate drone. Just another reason to get out of the "rat race".

Some Stuff

Like Trisha, we had a terrible ice storm rumble through central Texas earlier this week that literally shut down the entire region. I had to work from home for 2.5 days as south Texas has no real way of dealing with such inclimate weather (except throwing down some sand). Even so, I've been too busy to write in my blog, so I figure I'll submit some updates now while I have the chance ...

Tenant

I went with Shaun's advice and printed out all the forms needed for the tenant's girlfriend to stay at the place legally. I then went over to the property, and, of course, no one was home. I prepared for such a thing, so I stuffed all the documents in a manila envelope, sealed it, wrote a note on the front and wedged it in the door. I told him to have his GF sign the paperwork (I notated where on the forms themselves), and to return the forms to me when he pays me on the 19th. Well, today is the 19th and - surprise! - I haven't heard a peep from him about the forms or the moeny he still owes me, although, I haven't checked the mail today yet. If I don't see anything in the mail box when I get home, I'll be giving him a call.

Update: I talked to the tenant a little bit ago and he said he was getting the check as we spoke (he just wanted to make sure of the amount). I told him I could come by after work this evening and pick it up, which he OK'd. He also said that his GF would not be staying in the house full time. Matter of fact, she was currently under lease at an apartment, so she would have to stay there fulltime until her lease was up. He said he just wanted to give me heads-up that she would be staying at his place from time-to-time.

House #2

Hmmmmm. I haven't heard from my RE agent in probably two weeks, so I thought I'd shoot her an email to check up. She said the house was shown six times since Jan 6th, including yesterday, which kind of surprised me. I figure 3-4 of those days no one went out there due to the icey conditions, so that means about 6 people in 8-9 days. Not bad. I had thought about adding a $2,000 buyer's agent bonus to the listing to get more traffic, but recended after hearing that bit of good news.

Missed REI Club Meetings

I completely missed both REI club meetings this month. I knew about the first one, but had to work late and just didn't feel like going. The second one I thought was next Thursday, but it was actually last night - that was the one I really wanted to attend as it is more geared toward networking (the other is more about speakers and sales pitches). :-(

Book

This is definately going slower than even I thought it would, although, I have slowly evolved the material into something a bot more to my liking. I'm sure before the thing is finished (IF it's ever finished), it probably wil undergo several more changes. Once I get it it to something worth bragging about (haha), I'll discuss more what it's about. The other book idea is on hold indefinately. I just need about two weeks of complete isolation, and I'd probably get 990 of the 1,000 thinks on my to-do list completed. Oh well.

RE Attorney and Tenant

Talk w/RE Attorney

I traded emails last year with a rep for a local real estate attorney, trying to get a meeting set up. Something would always seem to come up, and I never did get a chance to talk with him. Well, yesterday I had a few minutes to burn, so I called him again. This time I was able to talk directly with the person I needed to. I was fully expecting to say, "Hi - can I set up a time to come in and talk to you about your services and how they may be able to help me?" - instead I got what amounted to a sales pitch. I mean the guy just started and wouldn't stop about everything he could do for me. The only time I could get a word in edge-wise is when he asked me a question. This didn't come across too well for me, but listening to what he could do was a bit uplifting.

Basically, he said that due to the legislation Texas passed in late 2005 that made L/O's all but illegal, it narrowed down the options for investors to basically owner financing the property (which is what I wanted to do in the first place). He said his office can handle all the paperwork and once he got my and my buyer's info, closing should occur within a week - two at the most. I had expected to pay around $2,000 for closing costs, but he said my only costs would be $1,500 (he said the buyer would pay $1,500, also). Not bad, I suppose. I figure once I do an owner finance deal through his office (or maybe two), I'll have the info needed to do them on my own (via a title company) for less.

I then asked if his office handled subject-to closings. His exact quote was "Subject-to's work in California, but not in Texas." Needless to say I was a bit put off by his response as people do them here all the time. And, he was supposedly a RE attorney many investors recommend. So, I may go with him if I can't find someone else, but I still need to call another attorney who I know handles subject-to closings AND owner financed closings. Although, I would need to see what he charges, too.

Tenant

I got an email from the tenant yesterday - the first one ever. He basically apologized, profusely (again), and said he was so thankful I (and my wife) let him pay late (even though he paid the late fees). He said it would never ever happen again (we'll see), and he will have the remainder of the deposit on the day we agreed. Oh, and he said he wanted to know if I had a problem with his girlfriend staying with him. Ugh. So, I responded with a few bullet items with the first couple regarding other things I wanted to clear-up first. I then told him that I wouldn't have a problem with another person staying there, but she would need to fill out a lease app first - even if she wasn't going to contribute financially to the rent each month.

Judging by how slow he does things, I am going to go over there after work today and drop off the app in person and tell him he has 24 hrs to get it back to me.

Tenant (again)

Hmmmmm. I remember giving the tenant to House #1 a form with all the utilities and phone numbers, so that he could get everything setup. He did tell me that he set up the gas, and I transferred the water accoutn myself. Also, a few days after he moved in, the electric company sent me a bill up to the time he moved in, so that account was transferred, too. That only left one more mandatory utility he had to set up: the sewer.

In my city, the sewer, garbage, and water are all paid through one bill to the city. House #1 resides in another town where everything is split out. Sewer is maintained by the city and water is supplied by a MUD (municipal utility district). The MUD and the city have an agreement that if the user does not open a sewer account, they'll turn off the water. Anyway, when I spoke to the tenant last Friday, he said he "believed" he set up the sewer account, but wasn't 100% sure. Of course, to me that meant "no", so I called the city today to verify. Interestingly enough, they showed it as having NO ownership. IOW, when the old tenants left, they marked them off of the account, but never put me back on! After getting that straightened out, the lady said she was going to send a letter to the tenant telling them they have three days to connect service or they'll stop the water. She also said she'd backtrack the bill to start on Dec 9th (the day I told her he moved in, which he did).

Since I used -0- gallons of water in-between, she said I won't be charged anything. Whew! Some of these utility companies charge monthly fees regardless of use, so I was surprised.

If memory serves me correctly, the city charges a $100 deposit for sewer. Anyone want to bet I get an excuse on the 19th regarding the security/pet deposit the tenant is supposed to give me?

Tenant Update

So, I get off work a little after 5pm last night and was just getting ready to call the tenant to tell him I'm on my way over, wen suddenly my cell phone rings. It's the tenant. After formal introductions, he tells me that he can't get me the check that evening as he promised. His excuse this time was he just now got to the bank and the lobby was closed. I asked if the drive-thru was open and he said he went through it, but the teller said she couldn't process the transaction to get him the cashier's check. I let out a frustrated laugh and told him he was already on thin ice being late one day, but now two? I also told him that this should have been his first priority of the day, and not something that he put off until the end of the day. He asked if he could bring the check by my workplace first thing in the morning. I work about 13 miles from where I live and it's probably a good 18-20 miles from House #1. I told him that he was quickly running out of favors, but I'd let him give me the check in the morning. However, if he had another excuse - even if it WAS valid - I would have no other choice but to take the next step (I didn't mention "eviction", but I think he got the message).

When I got home and told my wife, she was livid. Her patience fuse is about 1/100th the length of mine, so she basically hit the ceiling when I told her. Immediately, she said to start the eviction. After talking with her more, she settled down somewhat, but I became angrier about the whole situation. So, I called tenant to give him another blunt warning. Of course, I got his VM. I left him a stern message stating about the situation and told him that when he gets the check tomorrow to be sure to add TWO days of late fees to it (he was legally two days late at 7:00pm last night and I called shortly after that).

Well, the next morning I hadn't heard from him, so I wasn't sure if he got my message. I figure if he didn't (or did and said he didn't), I would tell him he would need to get the check in the CORRECT amount or I wouldn't accept it. In our conversation after work yesterday, I told him to meet me at a convenience store near where I work between 10-11am and no later, and to call me when he gets there. About 9:45am, I get a call from him. He's all apologetic, and says he has the check with the full amount. I tell him to meet me at the place we agreed to at 10am. I jump into my car shortly after, and sure enough, he's there. We make small talk, he hands me the cashier's check for the full amount, and we part ways. I told him this was the last time he was to be late , as I was finished with favors and excuses. Based on his demeanor, I have a feeling he either understands the consequences now, or is so used to screwing people over like this that he know how to act like it. Time will tell. At least I got a valid check for the full amount (plus late fees). Right after our meeting, I deposited the check and headed back to work.

We'll see what happens on the 19th and the beginning of each month. I'm not holding my breath, tho.

Tenant Problems Already

Well, maybe anon was right about this tenant. Either that or the tenant just needs a dose of reality. I mentioned several times before here how I STILL have not received the Inventory and Condition form from the tenant. I told him when we signed the paperwork that I only give tenants a week to fill it out and return it to me. This way, in case they damage the place and say it was already like that, I have proof to the contrary. Of course, I always make it a point now to take a bunch of pictures of the place before renting it out. Not sure it would hold up in court, but it sure wouldn't hurt.

Anyway, on 12/27/06, I called the tenant to reiterate my need to have the form returned. He said due to the holidays, he misplaced the form and gave me a verbal "ok" that the place was in good condition. I told him that wasn't good enough, and said I could get him another copy. The next day, I emailed him the copy (he requested emailing it, since he works rotating shifts). As of yesterday, I still hadn't gotten any response. Yesterday was also the last day for him to pay rent without being charged a late fee. So, I sent him an email both about the form (again) and the fact it was the last day for him to pay rent without being charged a late fee. The 7:00pm deadline came and went without any response.

This morning I called him and he answered almost immediately. I asked him about the form and if he realized rent was now late. He said he was going to send the rent out yesterday, but lost the Lease Agreement (now he lost TWO documents) which has the address to mail the rent checks. I told him if he has my phone number, which he said he does. I asked him why he didn't call me then. He said he was starting to do that right when I called - hence the quick answer on the phone. I told him since it was the first full month's rent, I'll wave the initial late fee but ONLY if he can get me the check today. He said today was his day off and he can either drop it off to me or I can swing by. I told him I'd swing by after work (this will give me a chance to see the inside of the property, too). I also plan to give him another copy of the Lease Agreement.

Lastly, he said that due to the high deposits the utility companies charged him, he wouldn't have the other half of the security deposit until two more weeks. I told him all these excuses weren't looking favorably and I hope this would not become a trend as this would be the absolute last time I would do him any favors. So I told him he had until the 20th to give me the remaining deposit.

I realize I should be more strict, but I'll give him the benefit of the doubt this time. If I don't have the form and/or check tonight then the proverbial $%@& will hit the fan. I've already read-up on Texas law regarding evictions, so I know what I can and cannot do just in case.

2007 Goals

I scribbled a lot of these down before the holiday season, but have not had the time to sit down and think really hard about my financial goals for 2007, so some of these may not happen and others not listed may happen. I tried to be as realistic as possible given my current position with family, work, and things I know will occur this year both within and outside of my hands.

Write a book - I actually have an idea for two books, but I know my time alloted for penmanship will be as rare as hen's teeth. I've scribbled notes down for one of the books on various peices of paper, so I'll try to gather those notes and add some more substance to create a book. I don't think it will be a full-fledged book like many you see at B&N - in fact, it will probably be an eBook distributed electronically.

Sell House #1 and House #2 - I think these were foregone conclusions, but thought I'd add them anyway. I have excellent credit 750+, but my debt-to-income (DTI) ratio stinks. Selling both homes will bring my DTI to something much more attractive. It will hurt seeing both houses gone in more ways than one, but in the long run, I think it will be for the best. This way I will be able to qualify for better loan rates on future homes purchased conventionally.

Buy-n-Hold 2 Homes - Now that I have a firmer grasp on HUD foreclosures, I'll be more savvy in my buying strategy. This will narrow down my already narrow criteria, so I doubt I'll buy more than two HUD homes. If I manage to get three (or more) - all the better. But I want to be realistic in my goals.

Buy-n-Sell 2 Homes - In order to reduce my out-of-pocket expenses buying conventionally (both with closing costs and down payments), I want to buy and sell at least two homes for pure cash reserves. I'm not sure exactly how these homes will be purchased yet, but I want to set a goal for buying and selling at least two for at least $20,000 net profit (total). At this point I want to get more into note holding (see below), so perhaps one or all of these types of sales will be seller financed deals.

Learn more about Land Trusts - I've always been intrigued by land trusts, and want to talk to a competent RE attorney more about them to see if they would be worth doing.

Learn more about Note Buying/Selling - As mentioned earlier, I want to get more involved in paper assets - specifically, the buying and selling of RE notes. I believe there is good cash flow to be made in holding and selling notes - both from my own acquisitions and from just note buying/selling itself. I understand there may be some restrictions without being licensed, so I'll need to talk with people who do this.

Create a Functional Buy/Sell System - My marketing initiative in the middle of last year flopped big time. At the time, I just decided to trash the idea indefinately, which ended up being the rest of the year. Looking back, I now see where I could have made a lot of improvements to the marketing. I've almost completed my new marketing plan, which I hope will get my phone ringing a lot more this year with motivated sellers. Instead of just sending bland postcards out to select individuals and mentioning my phone number and web site name, I'll add much more pizazz to the marketing and make it more persistent. I've included a monthly budget, which I hope I can maintain. If I start getting solid leads, I may have to revise some of my other goals. :-)

Network More - I need to branch out and get my name out there to people - not just motivated sellers, but other investors and professionals in the business (i.e., agents, brokers, attornies). One way I plan to do this is to join both my local REI clubs. I may not go to every meeting, but hopefully I can go enough times to become a noticeable to other people. Already, I plan to meet with two RE brokers this month.

Get my RE License? - I'm really debating this one. The one hurdle I had was getting confirmation that I can still buy HUD foreclosures being an agent. I received an email from my HUD processor before the holidays that said it was possible, so that cleared the way. Now, I'm just wondering how I'll fit the study time in my already overbooked schedule. More importantly, I need to really see how advantageous getting my license will be. For now, I can see absolutely no downfall.

And, finally ...

Create at least One Business - I talked briefly with my CPA last week about this. She said she would have to review my goals, financial position, etc., and see what business model would work for each of my situations. She said an LLC would probably work for buy-n-holds, but would need more info regarding my note buying/selling, property management, and other ventures. I guess as the need arises, I'll be talking with her a lot more about it. I'm not going to go hog-wild and say I'll create three businesses, if I really don't need them. However, given my uneasiness about holding properties in my name, I will definately create at least one LLC to hold the two properties I plan to keep as rentals this year.