Surprise #1: My First REI Paycheck
I received a call from my wife while at work today. She said she checked our mail, and in it was an envelope addressed to me from the RE investor I whom I gave the FSBO information to a while back. I recall when I sent him the information, I specifically said I did not want his $5 referral fee unless the deal closed (and then I would get a minimum of $250). Needless to say, I thought either he was sending me a personal note or he closed the deal and was sending me my proceeds from the deal. I asked my wife to open it up, which she did immediately. She said it was a check for $5. While I am overjoyed that I have finally gotten something for my venture these last 4+ months, I never expected the investor to send me the $5 referral fee (especially, after I told him not to). I figure he did this both as an honest gesture on his part and perhaps to make me keep feeding him deals.
Suprise #2: My Wife
While I still had my wife on the phone, she explained that she went to visit some old neighborhoods around town. She is originally from this area and used to frequent a lot of the neighborhoods in the vicinity as a child/young adult. My curiosity piqeud, and I asked her why she was looking around old neighborhoods. She said she was looking at houses for our venture. A little shocked, I immediately said "Our venture?" With which she replied "Yes." I didn't ask anything more because I was at work, but I plan to really give her a big hug and a long talk this evening as I feel like a yo-yo with her objectives (and nonobjectives) in this REI venture. I would like to think the "paycheck" I received from the investor was motivation for her to look on her own, but she checked the mail after coming back from looking at those old neighborhoods. Slowly, I feel the weight on my shoulders beginning to lift.
Surprise #3: Another Possible FSBO Deal
While scanning through some online FSBO sites at lunch, I came across another possible deal. The owner is asking $115k for a house built in 1979. It's a 3/2 with about 1660sf. Judging by the description, the owner has put a lot of upgrades into the house. I looked up the online county clerk's records and found the owner bought the house in 1990 for - get this - $44,000. It was a VA loan carrying a 9.5% interest rate. I immediately went to BankRate.com to check what the existing balance would be. Running calculations, I figured the balance is about $35k. I haven't ran comps yet, but I think $115k is about right for that kind of house in that area of town. What makes me want to persue this deal is that the owner put the following statement in the online classified:
Willing to Negotiate
I will try to get more information when I call the owner tonight, and see how far down I can get her. With $80k of equity in the property, my adrenalene is really flowing. I don't think she'll go down a whole lot, but having a lot of equity and a small outstanding mortgage certainly opens up a lot of possibilities.
Monday, January 31, 2005
Weekend Happenings
My Objective
After compiling a shortened list of properties from the 350+ my RE agent has given me all week, I decided to go out and look at eight of them. The houses were scattered pretty much all over my farm area, so it took us a good two hours to look at all of them. From the eight we say, only two were private residences - the other six were HUD/VA homes. I'm not yet comfortable dealing with government-controlled properties, mainly because they expect $1,000 for earnest money upfront, and the remainder if you are the winning bidder. While I have access to sizeable cash via my 401k and a HELOC, if necessary, I am hesitant on using it all for a single deal - especially my first. That is why I want to stick with non-government-controlled properties for now.
A Nice Surprise
After telling my wife on Friday what I planned to do on Saturday, she asked if she could come along. While I wasn't shocked, I was a bit surprised she was willing to take a big step in supporting my REI venture. After the property search was over, I could tell she wasn't 100% enthused about the ordeal, but it was a small achievement for me nonetheless. I just keep wishing she had the same excitement as I do, since she has much more time than I to get a lot of things done regarding REI. While I'm working, she could be compiling a list of homes, farming the neighborhoods, making phone calls, handling the paperwork, and so on. As it is, I have to do all those things with the 1-2 hours each weeknight, and a few more hours on the weekend.
Summary of Properties
As I said earlier, 75% of the properties I visited were government-controlled. Of the two that weren't, neither seemed like an ideal candidate (i.e., they were both nice looking, weel kept, no appearance of needing rehab, etc.) - but one never knows. I was planning to submit offers on a total of 18 to my RE agent, but have drastically scaled that back after some more thought. The reason being is I found myself chasing houses instead of owners. Also, I don't want to overwhelm my RE agent with a lot of properties that will probably not amount to anything.
After compiling a shortened list of properties from the 350+ my RE agent has given me all week, I decided to go out and look at eight of them. The houses were scattered pretty much all over my farm area, so it took us a good two hours to look at all of them. From the eight we say, only two were private residences - the other six were HUD/VA homes. I'm not yet comfortable dealing with government-controlled properties, mainly because they expect $1,000 for earnest money upfront, and the remainder if you are the winning bidder. While I have access to sizeable cash via my 401k and a HELOC, if necessary, I am hesitant on using it all for a single deal - especially my first. That is why I want to stick with non-government-controlled properties for now.
A Nice Surprise
After telling my wife on Friday what I planned to do on Saturday, she asked if she could come along. While I wasn't shocked, I was a bit surprised she was willing to take a big step in supporting my REI venture. After the property search was over, I could tell she wasn't 100% enthused about the ordeal, but it was a small achievement for me nonetheless. I just keep wishing she had the same excitement as I do, since she has much more time than I to get a lot of things done regarding REI. While I'm working, she could be compiling a list of homes, farming the neighborhoods, making phone calls, handling the paperwork, and so on. As it is, I have to do all those things with the 1-2 hours each weeknight, and a few more hours on the weekend.
Summary of Properties
As I said earlier, 75% of the properties I visited were government-controlled. Of the two that weren't, neither seemed like an ideal candidate (i.e., they were both nice looking, weel kept, no appearance of needing rehab, etc.) - but one never knows. I was planning to submit offers on a total of 18 to my RE agent, but have drastically scaled that back after some more thought. The reason being is I found myself chasing houses instead of owners. Also, I don't want to overwhelm my RE agent with a lot of properties that will probably not amount to anything.
Friday, January 28, 2005
RealQuest and the FSBO Deal
RealQuest
I went into RealQuest today and my account has expired. Their web site never says how long the free tiral is for (at least, I've never seen it mentioned), so I'm assuming 2-3 weeks or x-many searches. It was a pretty handy tool, once I figured it out. Unfortunately, though, it had some quirks about it - mainly the "fictitious" sales price. Another quirk I had is that it would pull 10+ comps for each property I searched, but only 1-2 would be even in the same general area. And, of those 1-2, none of them would have the information I needed. Usually, I would have to take some sales information from the comps and do more investigating - like clerk records and/or tax records. I figure with an RE agent on my team, I could have her run comps several times a month, as long as I am bringing in deals (hmmmmm).
FSBO Deal
After submitting the information of the FSBO deal to a buyer several weeks ago, I haven't thought any more about it. I never heard back from the investor, so I assumed he looked at the material and thought it was a 'no-deal'. Well, I got an email from him in my box this morning, thanking me for the information and, as he put it, "[exceeding his] expectations on [the] information". He said he would contact the owner and get the ball rolling. I figured the couple of weeks in-between could be lost time. I've heard others say that there is a lot of investors who drag their feet. I can't understand how these people stay afloat in this business!?!? I mean, if I see a worthy candidate, I'd be on that property in a matter of hours - not days or even weeks. But then again, I am not doing this fulltime, and I imagine they have a long list of properties they have to do due diligence on. I sent the investor a reply stating I'd like to meet with him one day soon to touch base (since we've only conversed via email).
I went into RealQuest today and my account has expired. Their web site never says how long the free tiral is for (at least, I've never seen it mentioned), so I'm assuming 2-3 weeks or x-many searches. It was a pretty handy tool, once I figured it out. Unfortunately, though, it had some quirks about it - mainly the "fictitious" sales price. Another quirk I had is that it would pull 10+ comps for each property I searched, but only 1-2 would be even in the same general area. And, of those 1-2, none of them would have the information I needed. Usually, I would have to take some sales information from the comps and do more investigating - like clerk records and/or tax records. I figure with an RE agent on my team, I could have her run comps several times a month, as long as I am bringing in deals (hmmmmm).
FSBO Deal
After submitting the information of the FSBO deal to a buyer several weeks ago, I haven't thought any more about it. I never heard back from the investor, so I assumed he looked at the material and thought it was a 'no-deal'. Well, I got an email from him in my box this morning, thanking me for the information and, as he put it, "[exceeding his] expectations on [the] information". He said he would contact the owner and get the ball rolling. I figured the couple of weeks in-between could be lost time. I've heard others say that there is a lot of investors who drag their feet. I can't understand how these people stay afloat in this business!?!? I mean, if I see a worthy candidate, I'd be on that property in a matter of hours - not days or even weeks. But then again, I am not doing this fulltime, and I imagine they have a long list of properties they have to do due diligence on. I sent the investor a reply stating I'd like to meet with him one day soon to touch base (since we've only conversed via email).
Wholesaling Course and My Realization
I received Steve Cook's Wholesaling for Quick Cash and Rehabbing for Big Cash this past Wednesday. In the two short days I had time to read it - which was probably three hours total - I am about 75% of the way through the Wholesaling course. It is a very good book, however, I have come to the following realization while reading the material:
I know more than I thought!
What I mean by this statement is that I'd say about 98% of the material I've read thus far, I already knew. Now, some may say that I just wasted my money purchasing these courses, but I disagree. As I said above, the material I've read thus far has been enlightening. Also, I still have 25% more to go in the first course, and haven't even opened the other book yet. From what I've seen by peeking, the remaining 25% of the Wholesaling book is information I don't know (or know very little). Another point that makes my disagree about it being a bad purchase is that it reinstills the fact that I do have enough knowledge to wholesale. For many newbies like me, we are always fearful that our knowledge level is well below that required to make a deal. With this realization, I now have more confidence knowing I can make deals happen. While I thought I had the required knowledge beforehand, after guaging myself with the material in Steve's book, I now know it as fact.
I'm just glas the weekend is almost here, so that I can finish Steve's wholesaling book and get cracking. Now that I can definately be sure I know the basics of Wholesaling, I've beaten down another invisible barrier and can proceed with my venture. I have an RE agent, I've started a buyer's list, I'm getting my marketing material soon, and am slowly convincing my wife that REI is not a passing fancy. All this while working 45-50 hrs/week at my JOB.
Sometimes I can kick myself for not starting this 20 years ago.
I know more than I thought!
What I mean by this statement is that I'd say about 98% of the material I've read thus far, I already knew. Now, some may say that I just wasted my money purchasing these courses, but I disagree. As I said above, the material I've read thus far has been enlightening. Also, I still have 25% more to go in the first course, and haven't even opened the other book yet. From what I've seen by peeking, the remaining 25% of the Wholesaling book is information I don't know (or know very little). Another point that makes my disagree about it being a bad purchase is that it reinstills the fact that I do have enough knowledge to wholesale. For many newbies like me, we are always fearful that our knowledge level is well below that required to make a deal. With this realization, I now have more confidence knowing I can make deals happen. While I thought I had the required knowledge beforehand, after guaging myself with the material in Steve's book, I now know it as fact.
I'm just glas the weekend is almost here, so that I can finish Steve's wholesaling book and get cracking. Now that I can definately be sure I know the basics of Wholesaling, I've beaten down another invisible barrier and can proceed with my venture. I have an RE agent, I've started a buyer's list, I'm getting my marketing material soon, and am slowly convincing my wife that REI is not a passing fancy. All this while working 45-50 hrs/week at my JOB.
Sometimes I can kick myself for not starting this 20 years ago.
Wednesday, January 26, 2005
Odds-n-Ends
RE Agent and the Two Deals
Yesterday afternoon, I got a reply from my RE agent on my tentative offers. I thought she would just pass along my info to the listing agent, the listing agent would pass it along to the sellers, and the sellers would say 'sounds workable' or 'not a chance'. I guess I got a lesson in working with RE agents, instead. It turns out my RE agent was going to write-up a formal offer, and wanted some personal information about me and my spouse. While I can understand this, I was not prepared to do all this for a deal that obviously was not going to happen. I politely responded to retract the offers and dismiss the deal altogether. If it was something I knew could very well happen, I would have persued it, but from what my RE agent told me, the sellers were not motivated and not willing to take seller financing.
Conversion Program
As I mentioned several times before, my RE agent now sends me an aoutmated list of properties each morning that meet my criteria. The listings are in HTML format and are very hard to digest easily. Therefore, yesterday, I wrote a Java program that will parse the file and create a piped-delimited file that I can now import into a spreadsheet program. Surprisingly, it works like a charm. Now I can sort on columns to quickly find properties that may be better than others. From the point of downloading the file to reading it in a spreadsheet program takes only about 2 minutes. Yesterday's property list contained 305 properties, and I would still be looking through the list now with the original HTML file. Unfortunately, this is a tool that only I can use for now, since the raw data is in a proprietary form to begin with.
Yesterday afternoon, I got a reply from my RE agent on my tentative offers. I thought she would just pass along my info to the listing agent, the listing agent would pass it along to the sellers, and the sellers would say 'sounds workable' or 'not a chance'. I guess I got a lesson in working with RE agents, instead. It turns out my RE agent was going to write-up a formal offer, and wanted some personal information about me and my spouse. While I can understand this, I was not prepared to do all this for a deal that obviously was not going to happen. I politely responded to retract the offers and dismiss the deal altogether. If it was something I knew could very well happen, I would have persued it, but from what my RE agent told me, the sellers were not motivated and not willing to take seller financing.
Conversion Program
As I mentioned several times before, my RE agent now sends me an aoutmated list of properties each morning that meet my criteria. The listings are in HTML format and are very hard to digest easily. Therefore, yesterday, I wrote a Java program that will parse the file and create a piped-delimited file that I can now import into a spreadsheet program. Surprisingly, it works like a charm. Now I can sort on columns to quickly find properties that may be better than others. From the point of downloading the file to reading it in a spreadsheet program takes only about 2 minutes. Yesterday's property list contained 305 properties, and I would still be looking through the list now with the original HTML file. Unfortunately, this is a tool that only I can use for now, since the raw data is in a proprietary form to begin with.
Tuesday, January 25, 2005
The 2 Deals Fell Through
I got an email from my RE agent yesterday morning. It turns out the owners of the property are elderly, but are in no hurry to sell. They have already turned down several smaller offers, and my agent said they are not open to seller financing. Both of those options were critical in me making any kid of a deal. Armed with that info, I told my agent it would probably be a waste to tour the properties, since a deal would probably not happen. She also said only one of the two properties were rented out, and the other was vacant. I told her I'd go home and draft some tentative offers she can submit to them, and if they appear interested, I would then tour the properties.
So, I went home and came up with several offers. Since the one property was vacant, I just had one offer for it. I quickly calculated three offers for the rented one. Remember, the list price for each was $69,900, and the FMV for property 'A' was $74k and property 'B' was $78k.
Property 'A' -
Offer: $52,000 (all cash)
Property 'B' -
Offer #1: $52,000 (all cash)
Offer #2: $61,000 ($35k cash, $100/mo for 120 mos, balloon $14k)
Offer #3: $65,000 ($17k cash, $200/mo for 120 mos, balloon $24k)
I stipulated the offers were subject to me getting the necessary financing and did not include repair costs. I doubt any of the offers will go through, but one never knows.
So, I went home and came up with several offers. Since the one property was vacant, I just had one offer for it. I quickly calculated three offers for the rented one. Remember, the list price for each was $69,900, and the FMV for property 'A' was $74k and property 'B' was $78k.
Property 'A' -
Offer: $52,000 (all cash)
Property 'B' -
Offer #1: $52,000 (all cash)
Offer #2: $61,000 ($35k cash, $100/mo for 120 mos, balloon $14k)
Offer #3: $65,000 ($17k cash, $200/mo for 120 mos, balloon $24k)
I stipulated the offers were subject to me getting the necessary financing and did not include repair costs. I doubt any of the offers will go through, but one never knows.
Monday, January 24, 2005
Goal Update - JOB Retirement Date
I know this may be premature - especially, since I haven't made a successful deal yet - but I am setting in stone a (maximum) date when I will "retire" from my present JOB. Initially, I heard that investing can take 10, 15, 20, or more years before one can get to a point of supporting themselves and their family solely on REI. However, I've heard others say that the process can be much quicker depending on how aggressive you want to be - for example, 1-2 years, and in some instances the time is measured in months. Therefore, I've set my JOB "retirement" date for January 31, 2007 (roughly two years from now). I originally expected it to be realistic 10 years, and then 5 years, and then 2 years from the date of my first successful deal. But I realize that those dates were not aggressive enough.
January 31, 2007
I've made both a mental copy and have plastered the date on everything that I could find.
January 31, 2007
I've made both a mental copy and have plastered the date on everything that I could find.
Preliminary Offers
Over the weekend, I have been running NOI/cashflow calculations on the two properties my RE agent gave me late last week. She sent me a spreadsheet tool called APOD, which helps analyze NOI, cashflow, appreciation, depreciation, taxes, internal rate of return (IRR), etc. for a property. To be honest, the thing is so powerful its overwhelming. There are many things I haven't a clue about with it. I also have a free copy of a NOI/cashflow spreadsheet I got from REIClub that does the same thing. It's a lot less complex and a lot less cumbersome (only one sheet vs. 5 on the APOD tool).
As I probably mentioned in an earlier blog entry, I figured that I would need financing that would not exceed $272/month in order to maintain positive cashflow. What's good about NOI is that once you establish your maximum financing, you can then create infinite options for the deal. Using the maximum of $272/month (per property) and the list price of $69,900 (per property), I can then make offers like these:
Offer #1: All Cash
In order to pay all cash, I would need financing to pay for 100% of the loan(s). Those types of loans usually carry a higher interest rate and some require points. So, I'll estimate 2 points and an interest rate of 7%. Therefore, the maximum cash offer I could allow would be about $37,000 (for each property). I kind of doubt the seller would go from a list of $69,000 to $37,000, but you never know until an offer is made.
Offer #2: Owner-Carry All
If the owner is not motivated to take such a drastic discount on their property, the only other option I would have is to have her carry-back some or all of the financing (with no, or very little, interest). Without actually speaking to her, I don't know what she wants/needs from the sale of these properties. Seperately, I could offer any combination of cash and owner-carry financing - from All Cash to All Owner-carry. I showed the All Cash limitation above, and now I'll show the other extreme.
Since my maximum monthly financing is $272/month, I could then offer to pay the owner $272 (or less) per month for n-months until a point the loan is paid off or to a predetermined point and then offer to pay the balance in a balloon payment. The list price is $69,000, so I'll use that as a basis:
$69,900 / $272 = 257
So, paying $272/month would take 257 months (a little over 21 years) to pay off the $69,900 amount. The seller may be open to this, or they may ask for a yearly interest payment, or they may ask for an earlier payoff date, or they may not be open to any owner-carry financing at all. It is after all just another option. and if nothing works, then I drop it and go on to another deal.
I could offer her $250/month for 10 years with a ballon payment of $39,900 at the end of the term (and hope my REI career takes off to a point that I have $39,900 in cash in 10 years to give her).
Option #3: Mixed Financing
In order to create an option that has some upfront cash for the seller, I would still need to get a loan. I would still need to limit all payouts to $272/month. Therefore, the loan payment and payment directly to the seller could not exceed $272/month in total. For example:
Loan (Cash to Seller): $30,000 @5.25% for 30 years ($165.66/month)
Carry-back Financing: $39,900 ($106.34/month for x-years w/balloon)
These are options I am considering for these properties. Of course, the $69,900 list price is only a basis. When I meet with the agent today and tour the properties, I will need to assess them for repairs, etc. I'll then deduct that amount from the overall price. Also, I've considered that even though the properties have a FMV of $72k-$77k, I will not offer more than 5% less than list, or $66,500, no matter what the properties' condition, financing, etc.
As I probably mentioned in an earlier blog entry, I figured that I would need financing that would not exceed $272/month in order to maintain positive cashflow. What's good about NOI is that once you establish your maximum financing, you can then create infinite options for the deal. Using the maximum of $272/month (per property) and the list price of $69,900 (per property), I can then make offers like these:
Offer #1: All Cash
In order to pay all cash, I would need financing to pay for 100% of the loan(s). Those types of loans usually carry a higher interest rate and some require points. So, I'll estimate 2 points and an interest rate of 7%. Therefore, the maximum cash offer I could allow would be about $37,000 (for each property). I kind of doubt the seller would go from a list of $69,000 to $37,000, but you never know until an offer is made.
Offer #2: Owner-Carry All
If the owner is not motivated to take such a drastic discount on their property, the only other option I would have is to have her carry-back some or all of the financing (with no, or very little, interest). Without actually speaking to her, I don't know what she wants/needs from the sale of these properties. Seperately, I could offer any combination of cash and owner-carry financing - from All Cash to All Owner-carry. I showed the All Cash limitation above, and now I'll show the other extreme.
Since my maximum monthly financing is $272/month, I could then offer to pay the owner $272 (or less) per month for n-months until a point the loan is paid off or to a predetermined point and then offer to pay the balance in a balloon payment. The list price is $69,000, so I'll use that as a basis:
$69,900 / $272 = 257
So, paying $272/month would take 257 months (a little over 21 years) to pay off the $69,900 amount. The seller may be open to this, or they may ask for a yearly interest payment, or they may ask for an earlier payoff date, or they may not be open to any owner-carry financing at all. It is after all just another option. and if nothing works, then I drop it and go on to another deal.
I could offer her $250/month for 10 years with a ballon payment of $39,900 at the end of the term (and hope my REI career takes off to a point that I have $39,900 in cash in 10 years to give her).
Option #3: Mixed Financing
In order to create an option that has some upfront cash for the seller, I would still need to get a loan. I would still need to limit all payouts to $272/month. Therefore, the loan payment and payment directly to the seller could not exceed $272/month in total. For example:
Loan (Cash to Seller): $30,000 @5.25% for 30 years ($165.66/month)
Carry-back Financing: $39,900 ($106.34/month for x-years w/balloon)
These are options I am considering for these properties. Of course, the $69,900 list price is only a basis. When I meet with the agent today and tour the properties, I will need to assess them for repairs, etc. I'll then deduct that amount from the overall price. Also, I've considered that even though the properties have a FMV of $72k-$77k, I will not offer more than 5% less than list, or $66,500, no matter what the properties' condition, financing, etc.
My Wife and I - Different Goals
I had another discussoin last night with my wife about REI, and while the outcome deflated my desire to continue, it hasn't in any way flattened it. Our conversation this time focused on our ideals for my venture (notice its our ideals and my venture). All along, my general goal for doing REI was to invest, make money, reinvest, make more money, reinvest, make even more money, etc., so that in a year (or two or three), I could quit my JOB and concentrate solely on REI. Then I would continue the venture to a point where my passive income from REI would exceed the expenses accrued for my family.
My wife has a different idea.
My wife feels our - our?, I mean my - venture's profits will go toward paying of our debts. In other words, whatever income is produced from REI will go to pay down/off our credit cards balances, my student loan, our car loan, etc. I can understand her thinking as this is how I and everyone else was trained to believe. The only problem I have with her way of thinking is that once things are paid down (or off completely), it is an ever more reason to spend. Unfortunately, she is one of those people who believes that money is for spending - not saving, and definately not investing (that's what my 401k is for, she tell you). And as long as she continues to feel and act this way, I will never reach my two goals (quit my JOB and financial freedom).
Of course, the first thing people will comprehend from what I've said is that divorce is on the horizon, which I'll respond with a humorous NO. While it is yet another barrier I need to start knocking down, it will not be something that will become a wedge in the marriage. I have slowly taken her from total nonreceptiveness about REI to a level of acceptance. So to will her perception of how the business will be ran. and that is how I am approaching it - as a business. It isn't a paycheck I get from working a JOB. Its a venture on the side whose financials are to be kept seperate from our personal finances (at least for the time being).
Oh how much easier this would be, if only ...
My wife has a different idea.
My wife feels our - our?, I mean my - venture's profits will go toward paying of our debts. In other words, whatever income is produced from REI will go to pay down/off our credit cards balances, my student loan, our car loan, etc. I can understand her thinking as this is how I and everyone else was trained to believe. The only problem I have with her way of thinking is that once things are paid down (or off completely), it is an ever more reason to spend. Unfortunately, she is one of those people who believes that money is for spending - not saving, and definately not investing (that's what my 401k is for, she tell you). And as long as she continues to feel and act this way, I will never reach my two goals (quit my JOB and financial freedom).
Of course, the first thing people will comprehend from what I've said is that divorce is on the horizon, which I'll respond with a humorous NO. While it is yet another barrier I need to start knocking down, it will not be something that will become a wedge in the marriage. I have slowly taken her from total nonreceptiveness about REI to a level of acceptance. So to will her perception of how the business will be ran. and that is how I am approaching it - as a business. It isn't a paycheck I get from working a JOB. Its a venture on the side whose financials are to be kept seperate from our personal finances (at least for the time being).
Oh how much easier this would be, if only ...
Sunday, January 23, 2005
RE Agent and Possible Deals
After a few emails Friday with the RE agent I've been in contact with, she sent me a list of four homes that met the critria I gave her. One was definately out of the question, another was an REO, and the last two piqued my interest. After some document searching, I found the last two were bought together by the same person in 1997. The deed did not mention any loans, so I'm assuming she purchased both homes with cash. However, I did some backtracking and figured with appreciation values, the original price of each of the homes was around $45k. Using interest rates from that time, I figured if she had gotten a mortgage, it would have a balance of ~$40k now. The homes are listed for $69k each, and comps have them at about $77k. The RE agent said both are currently being rented for $700/mo. She didn't have rental history for the homes, but said she would get the info to me on Monday.
I'm really not a fan of landlording - at least, not this early in my REI career. The RE agent gave me a powerful spreadsheet program that analyzes rentals, cashflow, tax considerations, sales forecasts, etc. It's really mind-boggling. I'm used to a 15-line NOI table I got from one of my books, but it pales in comparison to what this spreadsheet can do. Running the NOI, I figured after all operating costs it would require me to get a mortgage of no more than $272/month for EACH property. Running some amortization calculations, I figure the absolute most I could offer would be $50k for each - and that's really stretching it. I'd be more comfortable with $40-45k. And this is if both places require -0- repairs. The good thing is it has renters, but even that information is vague (Are they late? Is their lease about to expire? How well do they take care of the place? Etc.). Questions I'll hopefully get answered Monday.
Another concern is that the RE agent said these properties have been on the market for 60+ days. I'm not sure what the DOM is for the area, but I figure more experienced landlords wold have scooped these properties up by now if they were marginal to good.
While I would like to get the properties, it's the experience dealing with all the facets of the deals that I am most happy doing. I had a good talk with the RE agent, and she understands my intentions as an investor and is happy to work with me. She has already given me vital information from the MLS and will continue to do so. She has also given me a powerful spreadsheet program to analyze rental properties that I can use for future prospects - all for FREE. She also knows people in the industry that I can leverage when the need arrives.
I already consider it a positive week overall, even though I haven't added any $$$ to my coffers yet. :-)
I'm really not a fan of landlording - at least, not this early in my REI career. The RE agent gave me a powerful spreadsheet program that analyzes rentals, cashflow, tax considerations, sales forecasts, etc. It's really mind-boggling. I'm used to a 15-line NOI table I got from one of my books, but it pales in comparison to what this spreadsheet can do. Running the NOI, I figured after all operating costs it would require me to get a mortgage of no more than $272/month for EACH property. Running some amortization calculations, I figure the absolute most I could offer would be $50k for each - and that's really stretching it. I'd be more comfortable with $40-45k. And this is if both places require -0- repairs. The good thing is it has renters, but even that information is vague (Are they late? Is their lease about to expire? How well do they take care of the place? Etc.). Questions I'll hopefully get answered Monday.
Another concern is that the RE agent said these properties have been on the market for 60+ days. I'm not sure what the DOM is for the area, but I figure more experienced landlords wold have scooped these properties up by now if they were marginal to good.
While I would like to get the properties, it's the experience dealing with all the facets of the deals that I am most happy doing. I had a good talk with the RE agent, and she understands my intentions as an investor and is happy to work with me. She has already given me vital information from the MLS and will continue to do so. She has also given me a powerful spreadsheet program to analyze rental properties that I can use for future prospects - all for FREE. She also knows people in the industry that I can leverage when the need arrives.
I already consider it a positive week overall, even though I haven't added any $$$ to my coffers yet. :-)
Friday, January 21, 2005
Venture Costs to Date
Here is how much money I've spent on this venture to date (not including opportunity costs, time, and whatnot):
Now, that seems like a lot of money (and it is to someone who decides not to leverage the opportunities in the material), but I figure with just a single flip I will cover the costs - and then some.
- Retire Young, Retire Rich (Kiyosaki), 17.95
- Cashflow 101 the e-Game (Kiyosaki), $99.00
- Flipping Properties (Bronchick/Dahlstrom), $18.95
- The Weekend Millionaire's Secrets to Investing in Real Estate (Summey/Dawson), $14.95
- Making Big Money Investing in Real Estate (Conti/Finkel), $18.95
- Wholesaling for Quick Cash (Cook) and Rehabbing for Big Cash (Cook), $249.00
Now, that seems like a lot of money (and it is to someone who decides not to leverage the opportunities in the material), but I figure with just a single flip I will cover the costs - and then some.
Dealings with a Local RE Agent
In early January, I used a free online comp service to run comparable sales on two subject properties - the FSBO was one of them. Both times, I received the comps from a local realtor who asked if I needed any further assistance to call her. Now I know from reading the thousands of posts the last few months, RE agents can be both a blessing and proverbial thorn. I still dont' know the outcome of how my business relationship with this RE agent will pan out, but judging by our email dialog, it is already looking good.
I sent her a reply to one of the comps she ran, thanking her for her time and giving her my investor sales pitch at the same time. She responded within a matter of 5 minutes (no joking) with the following:
To be honest, I was caught off-guard. For one, I didn't expect a response so quickly - if at all! Second, she sounded like she was genuinly interested in forming a partnership (not a formal one, of course). I immediately sent her a response of what I was looking for (distressed, abandoned, foreclosures, etc.), characteristics (SFR, 3-4Bd/1-3Ba, 500-2500sf, etc.), and location. Again, within a span of no more than three hours, I received the folling reply:
And, as she promised, I was given a listing of homes that matched my criteria last night in my email. I realize I need to walk on egg shells, because I've heard horror stories from people dealing with RE agents, but then I've heard of people who deal almost exclusively with RE agents for their deals, since they have ready access to the MLS. I'll just have to do what I think is best on a property-by-property basis.
Ever so slowly, I am building a support team.
I sent her a reply to one of the comps she ran, thanking her for her time and giving her my investor sales pitch at the same time. She responded within a matter of 5 minutes (no joking) with the following:
I work with a lender who has great rates for 100% investor loans, interest-only loans, and other methods. I'd be happy to refer him to you. Or are you looking for something that needs only cosmetics? Are you interested in foreclosure properties (longer closing times, etc.)? Specific floorplans (like only 3/2s or duplexes, for example)? Will you be leasing the properties or re-selling? Do you want properties in neighborhoods that have a rental history already? Or properties in neighborhoods that do not traditionally have rental properties? I really need to know your requirements to be of service. Please let me know.
To be honest, I was caught off-guard. For one, I didn't expect a response so quickly - if at all! Second, she sounded like she was genuinly interested in forming a partnership (not a formal one, of course). I immediately sent her a response of what I was looking for (distressed, abandoned, foreclosures, etc.), characteristics (SFR, 3-4Bd/1-3Ba, 500-2500sf, etc.), and location. Again, within a span of no more than three hours, I received the folling reply:
I will build this initial search with [locations], 3 bedrooms minimum, and $70,000 maximum. Let me know if it's not pulling enough and we can adjust the price upwards a bit. Foreclosures are usually marketed at the market price according to the listing agent, who performs a CMA, or comparative market analysis, to arrive at a price. But banks who own property, HUD, and the VA will accept lower offers...how much lower depends on how much inventory they have in a market, time on the market, and what they need to net. All different percentages, but a maximum of 93% of list pretty much across the board. HUD homes come out on Friday afternoons, so the listings appear Fridays and Saturday mornings, but they only take bids from owner/occupants the first 10 days, then open them up to investors. Doesn't hurt to identify possible properties during that time and be ready to submit a bid on the 11th day. Let me know what you think after you receive the first search results. Oh, yes, and the mortgage broker I mentioned is [mortgage broker info].
And, as she promised, I was given a listing of homes that matched my criteria last night in my email. I realize I need to walk on egg shells, because I've heard horror stories from people dealing with RE agents, but then I've heard of people who deal almost exclusively with RE agents for their deals, since they have ready access to the MLS. I'll just have to do what I think is best on a property-by-property basis.
Ever so slowly, I am building a support team.
Steve Cook's Course
YEsterday, I posted a small update post on my blog about my dealings trying to get Steve Cook's Wholesaling and Rehabbing courses for a total of $249. Before looking at his newsgroup, I went ahead and just ordered the Wholesaling course for $179+$10S/H. Afterward, I noticed that Steve Cook posted a response in the thread saying I was correct and that for that day only, anyone could get both courses for $249. This put me in a scramble to get my order revised. I got hold of Melanie from his customer service department, and she gladly updated my order.
Now that I have it all straightened out, I came to the realization of something I already had an 'inkling' about: Steve Cook is a man of honesty and integrity. I have seen him and William post on his newsgroup routinely, answering people's questions - even if they have never ordered anything from them (like me). Now, what other guru does that? And this ordeal just solidified my perception of his honesty and integrity. Plus he has a wonderful and personable customer service department.
Even without yet opening his courseware, I can already tell that I will be pleasantly surprised by his professionalism.
Now that I have it all straightened out, I came to the realization of something I already had an 'inkling' about: Steve Cook is a man of honesty and integrity. I have seen him and William post on his newsgroup routinely, answering people's questions - even if they have never ordered anything from them (like me). Now, what other guru does that? And this ordeal just solidified my perception of his honesty and integrity. Plus he has a wonderful and personable customer service department.
Even without yet opening his courseware, I can already tell that I will be pleasantly surprised by his professionalism.
Thursday, January 20, 2005
The Roller Coaster is Going Up
I had a talk last night with my wife about REI. I wanted to get her undivided attention and explain to her (again) what it was I was planning on doing. Of course, having an awake 22-month old pretty much negated the "undivided" part. ;-)
I managed to persuade her to the point of actually going along with my idea. I won't say she is onboard 100%, but she did elicit some positive feedback. One thing she said was she had thought I already started. I told her that in order to start marketing, I would need to purchase some items, such as bandit signs, business cards, magnetic signs for the car, voicemail service, and perhaps another course or two. I didn't mention price, but in my head I was thinking "that'll probably be an easy $1,000 spent."
Given the green light, here is what I plan to do now:
Step #1: I want to buy a top-notch, step-by-step, wholesalers course that will teach all the ins-and-outs about wholesaling. From what I've researched, the best product on the market is Chuck Smith's "Quick Turning Houses for Amazing Profits". However, at $897+tax, it would pretty much wipe me out (and then some) for startup costs. I did a little more digging and found that Steve Cooks "Wholesaling for Quick Cash" is hands-down the best wholesaling course for the money ($179). On his web site, Steve has a link to a limited time sale where you can buy his wholesaling course and get his "Rehabbing for Big Cash" course for a total of $249. Unfortunately, though, the linked page doesn't say anything about the sale. I sent him a message asking if the sale is still valid. If so, I'll get the bundled courses package. Cost: $249+tax
Step #2: Get a toll free voicemail number from Kall8 and set it up for inbound motivated sellers. I can't recall if it allows for multiple mailboxes, but if so, I'll also set up a mailbox for inbound birddogs/investors. Cost: $5 setup + $5/month + 6.9¢/min.
Step #3: Get at least 100 bandit signs made locally. In an earlier post on the subject, I said I would use Super Cheap Signs, and I still will - mainly because they are local, cheap, and my in-laws used them for their business years back. I erred, though, in that their cost is for the bandit signs, only, and doesn't include stakes. I'll have to fork over more for stakes (which I can get at Home Depot). Cost: $99+tax (not sure how much the stakes will cost).
Step #4: Order professional business cards. I haven't researched a good, reliable, and cheap company for biz cards, yet, but I need to ASAP. I think for raised biz cards with printing on both sides will run about $30-$60, but I'm just guessing.
Step #5: Order magnetic signs for the car. Cost: $50+tax
Total: ~$450+tax
We'll see how it goes.
I managed to persuade her to the point of actually going along with my idea. I won't say she is onboard 100%, but she did elicit some positive feedback. One thing she said was she had thought I already started. I told her that in order to start marketing, I would need to purchase some items, such as bandit signs, business cards, magnetic signs for the car, voicemail service, and perhaps another course or two. I didn't mention price, but in my head I was thinking "that'll probably be an easy $1,000 spent."
Given the green light, here is what I plan to do now:
Step #1: I want to buy a top-notch, step-by-step, wholesalers course that will teach all the ins-and-outs about wholesaling. From what I've researched, the best product on the market is Chuck Smith's "Quick Turning Houses for Amazing Profits". However, at $897+tax, it would pretty much wipe me out (and then some) for startup costs. I did a little more digging and found that Steve Cooks "Wholesaling for Quick Cash" is hands-down the best wholesaling course for the money ($179). On his web site, Steve has a link to a limited time sale where you can buy his wholesaling course and get his "Rehabbing for Big Cash" course for a total of $249. Unfortunately, though, the linked page doesn't say anything about the sale. I sent him a message asking if the sale is still valid. If so, I'll get the bundled courses package. Cost: $249+tax
Step #2: Get a toll free voicemail number from Kall8 and set it up for inbound motivated sellers. I can't recall if it allows for multiple mailboxes, but if so, I'll also set up a mailbox for inbound birddogs/investors. Cost: $5 setup + $5/month + 6.9¢/min.
Step #3: Get at least 100 bandit signs made locally. In an earlier post on the subject, I said I would use Super Cheap Signs, and I still will - mainly because they are local, cheap, and my in-laws used them for their business years back. I erred, though, in that their cost is for the bandit signs, only, and doesn't include stakes. I'll have to fork over more for stakes (which I can get at Home Depot). Cost: $99+tax (not sure how much the stakes will cost).
Step #4: Order professional business cards. I haven't researched a good, reliable, and cheap company for biz cards, yet, but I need to ASAP. I think for raised biz cards with printing on both sides will run about $30-$60, but I'm just guessing.
Step #5: Order magnetic signs for the car. Cost: $50+tax
Total: ~$450+tax
We'll see how it goes.
Wednesday, January 19, 2005
The FSBO Deal, Farming, and RealQuest
FSBO Deal
Yesterday, I decided to unload the FSBO deal to another investor. I gave the owner my phone and email address last week, but have not heard back from her. With the tight financials of the deal, and with everything else going on, I thought it was best to let another REI take a crack at it. I sent the investor an email with all the information I had collected on the deal. He says he gives $5 for every quality referral, and $250+ for every referral he closes. I told him since the financials were slim, I'd feel like a thief taking even $5 form him right now, but wouldn't mind a cut if he closes the deal. ;-)
Farming
Like the day before it, yesterday, I went to a couple of housing communities in my farming area to take note of houses for sale, distressed, empty, etc. I found a total of eight properties for sale, and jotted their information down. Of those eight properties, three of the them were empty. Several from the day before were empty as well. I make note of the fact when I get the information as these may be motivated sellers (or, as was the fact on one them the other day, a foreclosure). I had a busy night when I got home, so I didn't have time to research the online county clerk's office yet. I'll try to do that today. It's fascinating the information you find out about people and their properties from public sources. Kind of scary, too. I didn't have any luck, again, finding distressed properties, though.
Realquest
Well, I finally decided to try RealQuest again. In an earlier entry, I stated that I was getting -0- matches no matter what subject rproperty I entered. It turns out that there were default values stored that I didn't even think about checking (i.e., user error). I changed a few criteria, and - BOOM! - got a list of comps. What I found a little unsettling, now, was the comps were not really what I was looking for. The report lists a sell price that, simply put, was not the sell price. For instance, I ran comps on a 2-story house for sale for $130k. Its 2003 assessed value was $141k. The first matching comp showed a house that sold 4 months ago for $175k. Yeah, my adrenaline was in high gear. However, when I did some further researching, I found the house actually sold for $128k. Why the huge difference ($175k vs. $128k), I wondered. Well, it turns out the sell price in the comp report takes into account SEVERAL different criteria, and the actual price it sold for is just one of the criteria. They also use a couple complex mathematical formulae to get their sold price. It may be good for someareas, but this particular house is in a neighborhood where homes are lucky to list for $150k and sell for $130k. So, $175k is definately way out in left field. Its still not a bad tool, but it requires further researching - i.e., due diligence - to arrive at a reasonable FMV price for the subject property.
Yesterday, I decided to unload the FSBO deal to another investor. I gave the owner my phone and email address last week, but have not heard back from her. With the tight financials of the deal, and with everything else going on, I thought it was best to let another REI take a crack at it. I sent the investor an email with all the information I had collected on the deal. He says he gives $5 for every quality referral, and $250+ for every referral he closes. I told him since the financials were slim, I'd feel like a thief taking even $5 form him right now, but wouldn't mind a cut if he closes the deal. ;-)
Farming
Like the day before it, yesterday, I went to a couple of housing communities in my farming area to take note of houses for sale, distressed, empty, etc. I found a total of eight properties for sale, and jotted their information down. Of those eight properties, three of the them were empty. Several from the day before were empty as well. I make note of the fact when I get the information as these may be motivated sellers (or, as was the fact on one them the other day, a foreclosure). I had a busy night when I got home, so I didn't have time to research the online county clerk's office yet. I'll try to do that today. It's fascinating the information you find out about people and their properties from public sources. Kind of scary, too. I didn't have any luck, again, finding distressed properties, though.
Realquest
Well, I finally decided to try RealQuest again. In an earlier entry, I stated that I was getting -0- matches no matter what subject rproperty I entered. It turns out that there were default values stored that I didn't even think about checking (i.e., user error). I changed a few criteria, and - BOOM! - got a list of comps. What I found a little unsettling, now, was the comps were not really what I was looking for. The report lists a sell price that, simply put, was not the sell price. For instance, I ran comps on a 2-story house for sale for $130k. Its 2003 assessed value was $141k. The first matching comp showed a house that sold 4 months ago for $175k. Yeah, my adrenaline was in high gear. However, when I did some further researching, I found the house actually sold for $128k. Why the huge difference ($175k vs. $128k), I wondered. Well, it turns out the sell price in the comp report takes into account SEVERAL different criteria, and the actual price it sold for is just one of the criteria. They also use a couple complex mathematical formulae to get their sold price. It may be good for someareas, but this particular house is in a neighborhood where homes are lucky to list for $150k and sell for $130k. So, $175k is definately way out in left field. Its still not a bad tool, but it requires further researching - i.e., due diligence - to arrive at a reasonable FMV price for the subject property.
Tuesday, January 18, 2005
Perseverance
I definately understand why so many newbie investors quit before even making a single deal. I've labored since last October trying to sponge as much knowledge as I can about REI, and to hopefully take the plunge and start making deals. Its very easy to get side-tracked with work, with family, and with life in general. Several times I've asked myself if it is really worth it. From reading posts by other people who have traded their 9-5 entirely with REI, I know it can be done. But the barriers that seek to hold someone like me down is like a weight on my shoulders. If the collective voice from my friends and family would be words of encouragement and support, I would no doubt already surpassed my first major milestone of making a deal. As it is, my wife has set my venture on a weekly roller coaster ride. One day seemingly a support figure, and the next being a nay-sayer.
On the way home from work late yesterday afternoon, I decided to research a part of my farm area. There are a lot of housing communities in about a 3-mile radius from my house. Houses range from the typical bread-n-butter types to emmaculate mansions. On my ride yesterday, I went through three of the b-n-b communities to start a log on houses for sale and rent. I will continue my research on a couple other communities each noght this week. Every week, I plan to revisit the comunities and make note of new houses for sale/rent, signs of houses being sold, tallies of house prices being reduced, and so on. All to get a better idea on my farm area.
Amazingly, it only took me about 30 mins. to comb all three communities. What I found interesting is there are not as many houses for sale as I thought. I calculated a total of 10 houses in three communities that probably contain 100-150 houses each - easily.
Shortly after arriving home, my wife started asking questions on some flyers I picked up. I told her what I had doen, and her remarks were nonreceptive to say the least. She doesn't keep me from continuing my REI venture at all anymore, but, like last night, she makes it known at times that my efforts are all futile. She interprets my researching and overall effort as a hobby not meant to blossom into a part-time job, and definately not a career. My only hope is that I can persevere and complete a single deal to show that this is not a game I am playing, but rather a signle victory in a string of milestones leading to my ultimate goal - financial freedom.
I can only hope.
On the way home from work late yesterday afternoon, I decided to research a part of my farm area. There are a lot of housing communities in about a 3-mile radius from my house. Houses range from the typical bread-n-butter types to emmaculate mansions. On my ride yesterday, I went through three of the b-n-b communities to start a log on houses for sale and rent. I will continue my research on a couple other communities each noght this week. Every week, I plan to revisit the comunities and make note of new houses for sale/rent, signs of houses being sold, tallies of house prices being reduced, and so on. All to get a better idea on my farm area.
Amazingly, it only took me about 30 mins. to comb all three communities. What I found interesting is there are not as many houses for sale as I thought. I calculated a total of 10 houses in three communities that probably contain 100-150 houses each - easily.
Shortly after arriving home, my wife started asking questions on some flyers I picked up. I told her what I had doen, and her remarks were nonreceptive to say the least. She doesn't keep me from continuing my REI venture at all anymore, but, like last night, she makes it known at times that my efforts are all futile. She interprets my researching and overall effort as a hobby not meant to blossom into a part-time job, and definately not a career. My only hope is that I can persevere and complete a single deal to show that this is not a game I am playing, but rather a signle victory in a string of milestones leading to my ultimate goal - financial freedom.
I can only hope.
Monday, January 17, 2005
Startup Costs
Before spending another dime on this venture, I wanted to get a create a plan on what it is I am wanting to do. I don't want to buy every book, every course, and/or every gizmo on the market today that pertains to REI as I would be broke before even getting started. Here is what I have planned and researched thus far:
Bandit Signs
There are a lot of good sign makers on the internet, however, most of them charge the same price and require shipping costs. The shipping cost alone in most cases is almost a quarter of the overall cost! My father-in-law told me he got his signs locally from Super Cheap Signs. They also have a web site (although, they still charge shipping). Price: I can get 100 signs made for $99.00 + tax, and not have to pay shipping.
Voicemail Service
Everyone I talk to seems to recommend Kall8 for their voicemail service. Price: Their basic toll free service costs only $2.00 to setup, $2.00 per month, and 6.9¢/minute.
Magnetic Car Signs
Super Cheap Signs also makes these signs, too. Again, they are about the same in price as most competitors, but the bonus is they are local. Price: For about $50.00, I can get a nice pair.
Comparable Sales
I signed up with RealQuest's free trial offer. From what I've seen, it looks very nice. My only problem with their system is I have not been able to produce any matching comps. Everytime I enter a subject property, I get back -0- comparable properties. I sent an email to their customer service asking if this was a limitation of the Free Trial offer, or if there were indeed no matches. I have yet to get a response. Kind of deflates my enthusiasm toward their customer service. I've heard about a few other sites, and I may try them also. I just want something that will give me 5-10 comps for every search at a reasonable price. Price: RealQuest charges $3.50 for every comp search (whether or not they charge if no data is returned remains to be seen).
Cell Phone (optional)
I don't really need a cell phone yet, but I have already started investigating which phones and services are the most economical. All of the larger carriers give employees of my company a discount, but I have to really research to determine the best price model for my venture. Price: TBD.
Preforeclosure List (optional)
I have a links to a couple pre-foreclosure mailing lists. I'm not sure how good or reliable they are, but I'll need to do some investigating to find out later (probably after I get a deal or two?). Price: One site has the list for $35.00/month, but its the only price I'cve gotten so far. Not sure if that is good, bad, or average.
Business Cards
I need to get some business cards made. I've already been asked by a couple people if I had any (after giving my sales pitch). This should be a top-3 priority on my list right now. I haven't investigated prices yet.
Postcards (optional)
I will start getting these made when I start marketing to prople in default. Therefore, getting the postcards will coincide with me getting one or more preforeclosure lists. I've heard some people to it themselves, but the ink cost alone must be eating into their profits. I think I'd opt to get a bulk rate at a local ma-n-pa print operation (as opposed to some big name printing company). Price: TBD
Newspaper / Greensheet
I probably won't spend much money on marketing to newspaper and greensheet readers initially. I'll wait until I get a couple or few deals done before spending money on these avenues. Price: TBD
Additional Courses
I want to get some additional courses, so I can avoid any newbie mistakes. I heard Steve Cook and William Tingle both have a couple of excellent courses. I also heard Jeff Beaubien has a good Lease/Option course. Here are the prices currently:
Wholesaling for Quick Cash & Rehabbing for Quick Cash, by S. Cook, $249.00
The "Ultimate" Sub2 Guidebook, by W. Tingle, $227.00
The "Ultimate" Marketing Guidebook, by W. Tingle, $424.00
The Lease Purchase Handbook, by Jeff Beaubien, $147.00
Total: $1,047 + tax
Kind of steep for my blood right now. Maybe if I was signle and didn't have to worry about living on rice and water for a week or two, but I have a family to consider. I figure I'll get Steve Cook's $249 package first, and go from there. All I need to do is get one decent deal under my belt, and I'll buy the whole lot of them. :-)
TOTAL
Initially, I just want to put up bandit signs and have response system in place so sellers can leave a message. Therefore, my initial costs will only be:
Bandit Signs: $99.00 (+ tax)
Voicemail: $4.00 (+ 6.9¢/min)
Total = About $115
If this generates just one deal, then I'll pick up the marketing immediately.
Bandit Signs
There are a lot of good sign makers on the internet, however, most of them charge the same price and require shipping costs. The shipping cost alone in most cases is almost a quarter of the overall cost! My father-in-law told me he got his signs locally from Super Cheap Signs. They also have a web site (although, they still charge shipping). Price: I can get 100 signs made for $99.00 + tax, and not have to pay shipping.
Voicemail Service
Everyone I talk to seems to recommend Kall8 for their voicemail service. Price: Their basic toll free service costs only $2.00 to setup, $2.00 per month, and 6.9¢/minute.
Magnetic Car Signs
Super Cheap Signs also makes these signs, too. Again, they are about the same in price as most competitors, but the bonus is they are local. Price: For about $50.00, I can get a nice pair.
Comparable Sales
I signed up with RealQuest's free trial offer. From what I've seen, it looks very nice. My only problem with their system is I have not been able to produce any matching comps. Everytime I enter a subject property, I get back -0- comparable properties. I sent an email to their customer service asking if this was a limitation of the Free Trial offer, or if there were indeed no matches. I have yet to get a response. Kind of deflates my enthusiasm toward their customer service. I've heard about a few other sites, and I may try them also. I just want something that will give me 5-10 comps for every search at a reasonable price. Price: RealQuest charges $3.50 for every comp search (whether or not they charge if no data is returned remains to be seen).
Cell Phone (optional)
I don't really need a cell phone yet, but I have already started investigating which phones and services are the most economical. All of the larger carriers give employees of my company a discount, but I have to really research to determine the best price model for my venture. Price: TBD.
Preforeclosure List (optional)
I have a links to a couple pre-foreclosure mailing lists. I'm not sure how good or reliable they are, but I'll need to do some investigating to find out later (probably after I get a deal or two?). Price: One site has the list for $35.00/month, but its the only price I'cve gotten so far. Not sure if that is good, bad, or average.
Business Cards
I need to get some business cards made. I've already been asked by a couple people if I had any (after giving my sales pitch). This should be a top-3 priority on my list right now. I haven't investigated prices yet.
Postcards (optional)
I will start getting these made when I start marketing to prople in default. Therefore, getting the postcards will coincide with me getting one or more preforeclosure lists. I've heard some people to it themselves, but the ink cost alone must be eating into their profits. I think I'd opt to get a bulk rate at a local ma-n-pa print operation (as opposed to some big name printing company). Price: TBD
Newspaper / Greensheet
I probably won't spend much money on marketing to newspaper and greensheet readers initially. I'll wait until I get a couple or few deals done before spending money on these avenues. Price: TBD
Additional Courses
I want to get some additional courses, so I can avoid any newbie mistakes. I heard Steve Cook and William Tingle both have a couple of excellent courses. I also heard Jeff Beaubien has a good Lease/Option course. Here are the prices currently:
Wholesaling for Quick Cash & Rehabbing for Quick Cash, by S. Cook, $249.00
The "Ultimate" Sub2 Guidebook, by W. Tingle, $227.00
The "Ultimate" Marketing Guidebook, by W. Tingle, $424.00
The Lease Purchase Handbook, by Jeff Beaubien, $147.00
Total: $1,047 + tax
Kind of steep for my blood right now. Maybe if I was signle and didn't have to worry about living on rice and water for a week or two, but I have a family to consider. I figure I'll get Steve Cook's $249 package first, and go from there. All I need to do is get one decent deal under my belt, and I'll buy the whole lot of them. :-)
TOTAL
Initially, I just want to put up bandit signs and have response system in place so sellers can leave a message. Therefore, my initial costs will only be:
Bandit Signs: $99.00 (+ tax)
Voicemail: $4.00 (+ 6.9¢/min)
Total = About $115
If this generates just one deal, then I'll pick up the marketing immediately.
Friday, January 14, 2005
Some ramblings
Owner response
I received an email from the owner yesterday. Unfortunately, it was in response to the first email I sent her and not the second. It almost appears that she either doesn't get the emails until a day later, or doesn't access her email system every day. I logged on this morning, and there was still no response to the second email I sent her - the one with my proposals. But as I said before, I'm not wasting anymore time on this one, unless I get some positive response from her. She has my email address, my phone number, and my proposals. If I get a negative response from her or no response at all over the weekend, I'll send the info to another local RE investor.
Coincidentally, last night I slept better than I had since I was off for the holidays.
Is my wife onboard?
I really can't guage my wife these days when it comes to my REI venture. At the beginning, she was not only unreceptive, but would try to tell me how much a waste of time it was, and so on. Now, she seems to really be opening up to the idea. I made mention last night how I needed to get some bandit signs made, a voicemail number, and a cell phone to 'step it up a notch'. Her response was why I just don't get magnetic signs for the car. I was speachless - not only because she hasn't been very receptive to the idea, but my advertising would be going on our car (we actually have a minivan, too, which she drives exclusively now - the car is mainly for me to go to-and-from work).
Interestingly, though, she feels bandit signs are not a good idea. Why? Because she is afraid we will be fined by the city, since they have an ordinance against putting them up. I told her that I would only put them out on weekends (and take them down by Sunday evening), and the number on the signs would be hard to trace back to me anyway.
So, now I need to order some bandit signs, research magnetic sign makers (and get a pair), order voicemail service (btw, Kall8 has the best prices I've seen for what you get), and get a cell phone. I'm lagging behind a little in my goals I laid out in my first few blogs, but I have excelled in other ways. I'm still hoping to make at least three deals by the end of the year.
I received an email from the owner yesterday. Unfortunately, it was in response to the first email I sent her and not the second. It almost appears that she either doesn't get the emails until a day later, or doesn't access her email system every day. I logged on this morning, and there was still no response to the second email I sent her - the one with my proposals. But as I said before, I'm not wasting anymore time on this one, unless I get some positive response from her. She has my email address, my phone number, and my proposals. If I get a negative response from her or no response at all over the weekend, I'll send the info to another local RE investor.
Coincidentally, last night I slept better than I had since I was off for the holidays.
Is my wife onboard?
I really can't guage my wife these days when it comes to my REI venture. At the beginning, she was not only unreceptive, but would try to tell me how much a waste of time it was, and so on. Now, she seems to really be opening up to the idea. I made mention last night how I needed to get some bandit signs made, a voicemail number, and a cell phone to 'step it up a notch'. Her response was why I just don't get magnetic signs for the car. I was speachless - not only because she hasn't been very receptive to the idea, but my advertising would be going on our car (we actually have a minivan, too, which she drives exclusively now - the car is mainly for me to go to-and-from work).
Interestingly, though, she feels bandit signs are not a good idea. Why? Because she is afraid we will be fined by the city, since they have an ordinance against putting them up. I told her that I would only put them out on weekends (and take them down by Sunday evening), and the number on the signs would be hard to trace back to me anyway.
So, now I need to order some bandit signs, research magnetic sign makers (and get a pair), order voicemail service (btw, Kall8 has the best prices I've seen for what you get), and get a cell phone. I'm lagging behind a little in my goals I laid out in my first few blogs, but I have excelled in other ways. I'm still hoping to make at least three deals by the end of the year.
Thursday, January 13, 2005
My Proposals for FSBO Deal
After mulling somemore over this FSBO deal, I decided to cut the chord now - almost.
My wife informed me that we had an engagement tonight that would take me away from talking with the seller. I wanted this to be the absolute last day I would deal with this particular deal, unless I could get some interest from the owner. So, I decided to do the one thing an REI shouldn't ... make a faceless and voiceless proposal. I decided to just write the owner with several proposals.
To recap the situation, the asking price was $96,000. Comps turned out $100k-$110k for the house. I used the median price of $105k. I would guesstimate repairs at $2k tops (if what I've been told is true). So here is what we have so far:
MAO = ARV*70% - repairs
MAO = 105000*.7 - 2,000
MAO = $72,000
So I would need the owner to sell it to me for $72k just to break even. In an earlier blog, I wrote how I found two mortgages on the property from mid-2000. Using some amortization calculations, I figured AT WORSE the outstanding balances to total $89k. If she paid the loans down more, then it would be less. Therefore the deal is already upside down by $17k.
Option #1: I explained that to make it an all cash deal and for me to close quickly, I would need to pay no more than $70k for the place (leaving me with a $2k profit - ugh). If that was not an option then ...
Option #2: Rent the place from her for long term (I didn't specify the term).
Option #3: As added incentive, I could have the option to purchase it from her anytime during the term of the lease. Essentially, I offered her a Lease/Purchase without calling it one.
I stressed that I would need information on the existing financials in place in order to work any deal with her (other than an all-cash deal).
I really don't see any deal happening myself. The financials are too thin, and there doesn't seem to be any strong motivation on the owner's part. For example, I sent the owner an email last night after trying to contact her unsuccessfully, and have yet to receive a response. Couple that with the owner's sister thinking her sister would NOT come down on price, and I'm better off just severing the chord with this one.
If something does develop, though, I'll definately mention it here.
My wife informed me that we had an engagement tonight that would take me away from talking with the seller. I wanted this to be the absolute last day I would deal with this particular deal, unless I could get some interest from the owner. So, I decided to do the one thing an REI shouldn't ... make a faceless and voiceless proposal. I decided to just write the owner with several proposals.
To recap the situation, the asking price was $96,000. Comps turned out $100k-$110k for the house. I used the median price of $105k. I would guesstimate repairs at $2k tops (if what I've been told is true). So here is what we have so far:
MAO = ARV*70% - repairs
MAO = 105000*.7 - 2,000
MAO = $72,000
So I would need the owner to sell it to me for $72k just to break even. In an earlier blog, I wrote how I found two mortgages on the property from mid-2000. Using some amortization calculations, I figured AT WORSE the outstanding balances to total $89k. If she paid the loans down more, then it would be less. Therefore the deal is already upside down by $17k.
Option #1: I explained that to make it an all cash deal and for me to close quickly, I would need to pay no more than $70k for the place (leaving me with a $2k profit - ugh). If that was not an option then ...
Option #2: Rent the place from her for long term (I didn't specify the term).
Option #3: As added incentive, I could have the option to purchase it from her anytime during the term of the lease. Essentially, I offered her a Lease/Purchase without calling it one.
I stressed that I would need information on the existing financials in place in order to work any deal with her (other than an all-cash deal).
I really don't see any deal happening myself. The financials are too thin, and there doesn't seem to be any strong motivation on the owner's part. For example, I sent the owner an email last night after trying to contact her unsuccessfully, and have yet to receive a response. Couple that with the owner's sister thinking her sister would NOT come down on price, and I'm better off just severing the chord with this one.
If something does develop, though, I'll definately mention it here.
A Realization from the FSBO Deal
Well, I called the number the owner's sister gave me, and it just rang and rang. I tried again a little later, and the same thing. After trying the second time, I sent the owner a polite email telling them I would try calling this evening (Thursday). My wife and I are expecting some furniture to come in today, so we were busy last night moving things around to get ready for the delivery.
While getting ready for bed, I had an epiphany about this first deal. What I realized was it was taking a lot of my resources away from other REI stuff. IOW, I have basically put everything related to REI on hold because of this one property. I have analyzed the hell out of it, tried getting in contact with the owner several times, I have even written down an outline to use when talking to the owner. I decided that I was going to do 1-3 more things with this property and then move on:
1. I will try contacting the owner tonight and make my offer. If I am unable to contact her (again) then ...
2. I will send the owner an email outlining my offer, along with several options available for her. If I get no response then ...
3. I will contact another RE investor on my list, and hand the information over to them to handle. If they have more success, good for them (and good for me, because they will give me $250 at a minimum if they close).
In the meantime, since I've put my venture on hold with this one property, I will continue with REI where I left off.
While getting ready for bed, I had an epiphany about this first deal. What I realized was it was taking a lot of my resources away from other REI stuff. IOW, I have basically put everything related to REI on hold because of this one property. I have analyzed the hell out of it, tried getting in contact with the owner several times, I have even written down an outline to use when talking to the owner. I decided that I was going to do 1-3 more things with this property and then move on:
1. I will try contacting the owner tonight and make my offer. If I am unable to contact her (again) then ...
2. I will send the owner an email outlining my offer, along with several options available for her. If I get no response then ...
3. I will contact another RE investor on my list, and hand the information over to them to handle. If they have more success, good for them (and good for me, because they will give me $250 at a minimum if they close).
In the meantime, since I've put my venture on hold with this one property, I will continue with REI where I left off.
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