Saturday, December 31, 2005
Thursday, December 29, 2005
Back in Business Again
Whew! What a holiday season I've been having. I have to admit the bulk of my time off has been spent with family matters - mostly getting ourselves prepared for the arrival of the twins.
As far as REI is concerned, I've been doing a lot with any spare minute I have. I've compiled my own lists of homeowners for marketing purposes: out-of-state owners, in-state-out-of-area owners, and regular homeowners. I may - repaeat, may - create a CD with the the most up-to-date tax appraisal information for my county and charge others for it as an aside, but my main goal was to devise an automated way of getting the information myself, AND partitioning it into out-of-state, out-of-area, and regular homeowners for my own use. That was Step #1 of my plan during my vacation.
Step #2 was finding a way to automated as much of my marketing as possible. I had listened to Richard Roop audio CD's for a few weeks before my vacation, and he had a lot of good information. One thing in particular was using usps.com to both create and mail postcards. I completed my initial 5"x7" postcard, and have it ready to send to the people in Step #1 above. It will only cost my $0.29 for each postcard. Since the regular homeowners were whittled down to about 2,000 in my list, I figure that will be about $580 total. Of course, I'l lprobably split the mailing into 4-month chuncks and then repeat the cycle again every 4 months. This will save me in costs, and it will give some repetition as one part of my marketing campaign. I think I can handle $145/month.
Step #3 is cementing both my acquisition and exit strategies. I talked about these extensively before, and I'll reiterate them here. I plan to acquire most of my properties subject-to the existing financing (or, simply, Sub2). I've researched the strategy to death during my time off, and believe I have it down pat (we'll see). As far as an exit strategy, I will do one of three things depending on circumstances at the time: wholesale flip, buy-and-hold (rent), or sell via owner-financing.
Bascially, that's what I've done as far as REI is concerned on my time off thus far. I met with my CPA the other day to drop off the remaining receipts for our business this year. Even without paying property taxes, I'm seeing about an $8k loss, so it hasn't been a good start. She recommended we pay the property taxes next year, since we won't be having a lot of expenses in 2006.
Now to get cracking with the goals for 2006 ...
As far as REI is concerned, I've been doing a lot with any spare minute I have. I've compiled my own lists of homeowners for marketing purposes: out-of-state owners, in-state-out-of-area owners, and regular homeowners. I may - repaeat, may - create a CD with the the most up-to-date tax appraisal information for my county and charge others for it as an aside, but my main goal was to devise an automated way of getting the information myself, AND partitioning it into out-of-state, out-of-area, and regular homeowners for my own use. That was Step #1 of my plan during my vacation.
Step #2 was finding a way to automated as much of my marketing as possible. I had listened to Richard Roop audio CD's for a few weeks before my vacation, and he had a lot of good information. One thing in particular was using usps.com to both create and mail postcards. I completed my initial 5"x7" postcard, and have it ready to send to the people in Step #1 above. It will only cost my $0.29 for each postcard. Since the regular homeowners were whittled down to about 2,000 in my list, I figure that will be about $580 total. Of course, I'l lprobably split the mailing into 4-month chuncks and then repeat the cycle again every 4 months. This will save me in costs, and it will give some repetition as one part of my marketing campaign. I think I can handle $145/month.
Step #3 is cementing both my acquisition and exit strategies. I talked about these extensively before, and I'll reiterate them here. I plan to acquire most of my properties subject-to the existing financing (or, simply, Sub2). I've researched the strategy to death during my time off, and believe I have it down pat (we'll see). As far as an exit strategy, I will do one of three things depending on circumstances at the time: wholesale flip, buy-and-hold (rent), or sell via owner-financing.
Bascially, that's what I've done as far as REI is concerned on my time off thus far. I met with my CPA the other day to drop off the remaining receipts for our business this year. Even without paying property taxes, I'm seeing about an $8k loss, so it hasn't been a good start. She recommended we pay the property taxes next year, since we won't be having a lot of expenses in 2006.
Now to get cracking with the goals for 2006 ...
Sunday, December 18, 2005
Been Busy
I haven't posted in almost a week now, and it's because I've been extrememly busy with business and personal matters. I've been doing serious research into my new niche strategies, and it - along with personal issues - is the reason I haven't posted here. I'll try to catch everyone up on what I've been doing specifically in the near future.
Monday, December 12, 2005
A Weekend of Admin Work
I didn't really do much regarding REI this weekend, except one thing: admin work. Our CPA sent us her accounting data for our business a little over a week ago, but I haven't had time to verify the data. This weekend, I sat down and started going through ALL my records for House #1 and my business in general. When the weekend was finished, all I managed to accomplish was verifying the data for House #1 up to the point we gave the information to our CPA. I really didn't think it would take that long, but I got sidetracked numerous times along the way. I still need to find time to go through records both before our purchase of House #1 and from the time we gave the data to our CPA and now. I'll be on vacation for the remainder of the year, starting this Thursday, so I should have ample time to get that type of stuff done. I've already started making a to-do list for the holiday break, and I'm sure my wife has her own for me as well. We haven't gone on a vacation out-of-country now for over three years. With the twins coming, I kind of doubt we'll go anywhere soon, either. I just have to focus more on the business and stop getting sidetracked with everyday things that take me away from my goals. One of the biggest underlying messages I've been hearing from listening to audio recordings of REI gurus is that the business needs a system on autopilot to continually function. I'm finding that that bit of advice is so crucial. I'm spinning my wheels at times trying to figure a way to market myself, when I chould have it all automated. I've already begun researching systems that will help me in this endeavor, and I'll put several of them to test during my "vacation". I'll also institute a more concrete plan on my goals for each month. Hopefully, the two will coincide, and my business will start churning out deals. Of course, I'm figuring the better part of January and February will be used to help my wife take care of the newborns (and my other daughter) AND for sleep! :-/
Friday, December 09, 2005
Slave to Technology
This post isn't about REI, but how much I realized I am a slave to technology. Wednesday evening, our area got a dumping of precepitation in the form of freezing rain and ice. Since the temps fell into the 20's, it made driving trecherous. On Thursday, the temps didn't get above freezing until mid-afternoon, so I decided to work from home. Unfortunately, this was the same time my cable modem decided to quit working also, so I had no internet access all day. By evening, I found myself climbing the walls wondering what emails I had, what posts I've missed, and so on. I then realized how attached I am to today's technology. I admit I don't have any of the fancy gadgets out today like an iPod, but I am a slave to the internet. How'd I survive back in the 1980's? ;-P
Wednesday, December 07, 2005
Rehab: Got my Bubble burst (twice)
I posted a message in one of my favorite REI web sites regarding the rehab, along with a link to the pictures. When got in this morning, I noticed Steve Cook himself responded with an answer that deflated the wind in my sails about the rehab. He basically said the project would take 4-5 months to complete (yippie!), but would probably cost $100,000 (OUCH!). I thought I was being conservative with my $70k estimate, but the extra $30k would definately leave me with little, if any, profit.
Also, on Monday, I called a friend of my in-laws. Having worked in construction, my in-laws have some contacts in the industry. One of them happens to be a GC. I told him about the property, and gave him a link to the pictures as well. We agreed to meet at the property last night, and he pointed out NUMEROUS things wrong with the place that even I hadn't thought of - the scariest was it could very well be contaminated with mold. He saw signs that it was, but would have to get a mold remediation crew in to be sure. Great. He also said if it was a straight fixer-upper with no structural changes, he would roughly estimate $70k in repairs from what he could tell. If it required replumbing, rerunning electric, reframing, etc., in order to make the structural changes, it could easily run over $100k for this property. And that wasn't including mold remediation and releveling. Ugh. So, it looks like this property was a diamond in the rough that turned out to be glass instead. I guess I could still run through my investor list to see if anyone would be interested, but the margin would be awfully slim.
Back to the drawing board. :-/
Also, on Monday, I called a friend of my in-laws. Having worked in construction, my in-laws have some contacts in the industry. One of them happens to be a GC. I told him about the property, and gave him a link to the pictures as well. We agreed to meet at the property last night, and he pointed out NUMEROUS things wrong with the place that even I hadn't thought of - the scariest was it could very well be contaminated with mold. He saw signs that it was, but would have to get a mold remediation crew in to be sure. Great. He also said if it was a straight fixer-upper with no structural changes, he would roughly estimate $70k in repairs from what he could tell. If it required replumbing, rerunning electric, reframing, etc., in order to make the structural changes, it could easily run over $100k for this property. And that wasn't including mold remediation and releveling. Ugh. So, it looks like this property was a diamond in the rough that turned out to be glass instead. I guess I could still run through my investor list to see if anyone would be interested, but the margin would be awfully slim.
Back to the drawing board. :-/
Tuesday, December 06, 2005
Evaluation Sheet for Rehab
I was monkeying with some figures at lunch today to get a realistic vision of how this rehab would unfold financially. One of the main figures I used was going with the HML I talked about in my previous blog. He charges 14% IO, 5% origination, and $260 doc prep fee. He also requires 12 months hazard/builder's risk insurance, an inspection, and two appraisals (one before the rehab and one after). I can borrow up to 70% ARV, which shouldn't be a problem. So here's what I figured:
Not as much profit as I first thought, but still a lot. I'm guessing at several key figures, mainly the repair costs, insurance, title company fees, property taxes, ARV, and months required to complete the rehab. If I get those figures nailed down, I'd have a lot clearer picture of the end profit. I'd rather be sitting at $75k+ with this scenario as it would give me more wiggle room, but I could certainly live with a $40k+ profit over 6-9 months. ;-)
ARV/Sell Price: $175,000
Loan Costs Other Fees
============================= =============================
Purchase Price .... $ 29,000 Inspection ........ $ 350
Rehab Costs ....... $ 70,000 Appraisal #1 ...... $ 350
Origination Fee ... $ 4,950 Appraisal #2 ...... $ 350
--------- Doc Prep Fee ...... $ 260
Total: $ 103,950 Title Company ..... $ 1,000
Insurance ......... $ 3,000
---------
Total: $ 5,310
Monthly Costs
=============================
Loan Payment ...... $ 1,213
Utilities ......... $ 50
Total: $ 1,263
Total Costs
==============================
Total Buy Costs .... $ 6,960
Inspection
Appraisal #1
Doc Prep Fee
Insurance
Title Company
Total Hold Costs ... $ 7,577
Hold Costs
(for 6 months)
Total Sell Costs ... $ 14,050
Realtor Fee
Title Company
Appraisal #2
Property Taxes
(for 6 months)
---------
Total: $ 28,587
Loan Balance: $ 103,950
---------
Total Payoff: $ 132,537
Total Profit (ARV - Payoff) = $ 42,464
Monday, December 05, 2005
Earth to CPA? And, more thoughts on rehab ...
CPA
My CPA had called me last Friday about 10 minutes after I left work. She said she wanted to get our input on the data she sent us in early November. Huh?!?! I called my wife later in the morning, and let her handle the communication this time. It turns out the CPA "supposedly" sent us a spreadsheet in early Novemeber via email, but I swear I never saw it. She apologized prfusely to my wife, and said she'd call us for now on after she sends us something to make sure we got it. We still have to give her another boatload of receipts and stuff we found since our last meeting. The CPA called me later and said she resent the spreadsheet, which I verified we got this time. She apologized to me as well, and said she would swing by our place if we wanted to pick up our next batch of receipts. I'm just glad things are back on track now. Glancing over the dpreadsheet, I'm lost trying to interpret it. Accounting was never my forte, and trying to analyze this spreadsheet only enforces this idea. :-/
Rehab
I'm really fighting myself in trying to figure out what to do with this property. The list price of $29,000 makes it one of those deals you only hear about. The problems I'm wrestling with are (1) the units themselves are small - VERY small. I didn't measure while I was there Saturday, but getting the size of the entire property and making a rough guess, I estimated the 2/1's to be about 450-550sfsf and the 1/1's around 250-350sf (yeah, THAT small). I'm wondering if it would be better to convert the place into one 3/2 unit upstairs, and two 3/2 units downstairs. It would definately add to the overall cost, though, but at least the units themselves would be more spacious (about 800-1,000sf each). Reducing it from a 6-unit to a 3-unit might drop the FMV. though, but it could actually make it increase. There is a duplex 4-5 houses down the road going for around $200,000, and the duplex right across the street is in good condition and was assessed this year at $175,000, so I'd still be looking at a FMV of around $200,000+.
The second thing I'm wrestling with is time and money. My wife is not only due in late January, but having twins means she is pretty much restricted to doing NOTHING between now and then. This means I'm in charge of doing almost everything, and having this project added to my workload may mean it'll be sitting a while until can find the time to commit to it. I also have limited funds. I could easily borrow against some equity or my 401k for the $29k, but don't have the money it takes to put $50k, $60k, $70k, or more into the property over the next 3-6 (or more) months. I've been looking into HML's, who offer purchase & rehab packaged deals, but the interest is mind-boggling (14%+ !!!). I may have to bite the bullet with a HML, though, as I will get a nice reward in the end anyway (I hope).
Update:
I guess what I could do is this:
1. Get the propertyunder contract for the $29,000 asking price, so that I now control it.
2. Hire a GC to walk through with me and decide not only how much it would cost to make the repairs, but what repairs to make, and, especially, if it would be wise to convert it from a 6-unit "apartment" to a 3-unit (triplex) - not to mention the code and deed ramifications of doing so.
3. Apply for a loan through a hard money lender (HML). The best I've seen is 14% IO with 5 points. The loan amount can be 65% ARV, which works out very well here (I hope). I could get a $100k loan to cover the acquisition and repairs costs, and use a HELOC or my 401k to repay the HML.
Now to try to solve the time issue. :-(
My CPA had called me last Friday about 10 minutes after I left work. She said she wanted to get our input on the data she sent us in early November. Huh?!?! I called my wife later in the morning, and let her handle the communication this time. It turns out the CPA "supposedly" sent us a spreadsheet in early Novemeber via email, but I swear I never saw it. She apologized prfusely to my wife, and said she'd call us for now on after she sends us something to make sure we got it. We still have to give her another boatload of receipts and stuff we found since our last meeting. The CPA called me later and said she resent the spreadsheet, which I verified we got this time. She apologized to me as well, and said she would swing by our place if we wanted to pick up our next batch of receipts. I'm just glad things are back on track now. Glancing over the dpreadsheet, I'm lost trying to interpret it. Accounting was never my forte, and trying to analyze this spreadsheet only enforces this idea. :-/
Rehab
I'm really fighting myself in trying to figure out what to do with this property. The list price of $29,000 makes it one of those deals you only hear about. The problems I'm wrestling with are (1) the units themselves are small - VERY small. I didn't measure while I was there Saturday, but getting the size of the entire property and making a rough guess, I estimated the 2/1's to be about 450-550sfsf and the 1/1's around 250-350sf (yeah, THAT small). I'm wondering if it would be better to convert the place into one 3/2 unit upstairs, and two 3/2 units downstairs. It would definately add to the overall cost, though, but at least the units themselves would be more spacious (about 800-1,000sf each). Reducing it from a 6-unit to a 3-unit might drop the FMV. though, but it could actually make it increase. There is a duplex 4-5 houses down the road going for around $200,000, and the duplex right across the street is in good condition and was assessed this year at $175,000, so I'd still be looking at a FMV of around $200,000+.
The second thing I'm wrestling with is time and money. My wife is not only due in late January, but having twins means she is pretty much restricted to doing NOTHING between now and then. This means I'm in charge of doing almost everything, and having this project added to my workload may mean it'll be sitting a while until can find the time to commit to it. I also have limited funds. I could easily borrow against some equity or my 401k for the $29k, but don't have the money it takes to put $50k, $60k, $70k, or more into the property over the next 3-6 (or more) months. I've been looking into HML's, who offer purchase & rehab packaged deals, but the interest is mind-boggling (14%+ !!!). I may have to bite the bullet with a HML, though, as I will get a nice reward in the end anyway (I hope).
Update:
I guess what I could do is this:
1. Get the propertyunder contract for the $29,000 asking price, so that I now control it.
2. Hire a GC to walk through with me and decide not only how much it would cost to make the repairs, but what repairs to make, and, especially, if it would be wise to convert it from a 6-unit "apartment" to a 3-unit (triplex) - not to mention the code and deed ramifications of doing so.
3. Apply for a loan through a hard money lender (HML). The best I've seen is 14% IO with 5 points. The loan amount can be 65% ARV, which works out very well here (I hope). I could get a $100k loan to cover the acquisition and repairs costs, and use a HELOC or my 401k to repay the HML.
Now to try to solve the time issue. :-(
Rehabber's Dream again (w/Pictures) - Am I Crazy?!?!
Wow, what an action-packed few days. I finally got hold of the owner Friday evening, and we talked for a while. He told me the house originally belonged to his father, who was a pastor. His father decided to convert the house into multiple units, so that he had steady income for retirement. Shortly before his father passed away three years ago, his father had sold the property to an aspiring rehabber for $85,000 ($10k down, and owner-financed the rest). The property was in terrible shape even then. The man said the new owner was paying regularly, and then just all at once stopped paying, so the mother had to foreclose to get the deed back. It turns out, the rehabber who bought the place got several tenants in before making the place habitable again. The city caught wind of the situation, and kicked everyone out and fined the rehabber. This was last year, and the place has sat empty since then. The owner said that HE had a relative change the price from $45,000 to $29,000, so I got really excited. I asked if I could see the inside the next day, and he gave me the combination to the front door lock, since he was in an accident last year, and is now immobile.
Whe we got there, I started taking a lot of pictures (~125), which I'm still trying to organize. The next door neighbor was in his yard, so my in-laws and I started talking with him. It turns out HE was the one who called the city last year, because raw sewage was running into his yard from the place. He also said the rehabber tried to just paint the place, but it requires a lot more work than that. He even said that he was going to buy the place, but didn't have the money to put into fixing it up. He also said that there were three families living there when the rehabber had the place. All of them were illegal aliens, he thinks. And one family had a small child (5-6 yrsw old). He said one day, the parents were out working and left the child alone. Some teenagers broke in the place and molested the child. How sad. Coincidentally, when my FIL and I went into one of the upstair units, we found a picture of a young boy that was taken in the unit. I'm guessing this was the young boy the neighbor spoke about. Looking at the place, I could only imagine what horror the young kid went through and what emotional damage it caused. The neighbor also mentioned that since it's been empty, druggies and cats use the place now. Wonderful.
After talking to the neighbor for a while and taking a lot of pictures of the outside, we went inside. I thought the outside was in bad shape, but the inside was even worse. The place will probably have to be fully gutted. It smelled of nothing but mildew and urine. All of the upstair windows were either completely gone, or severely damaged. Even the bottom floor windows will all need replaced. I couldn't even begin to describe the place, and it's better to see the pictures to get an idea of how bad the place really is.
Link to Pictures
I had promised the owner I would call him back, but I needed the remainder of Saturday and most of Sunday to let everything sink in. From my quick estimations, I figure the place will need at least $50,000 in repairs, and probably a LOT more. For the outside, it will need a new roof, new siding, windows, general clean-up, utility connections, and so on. I figured roughly $25,000-$30,000 just for the outside. The owner claims soneone releveled the place 25 years ago to try and get the warp out of one of the unit floors, but the leveling didn't fix the warp. Who knows how much it will cost to get that one problem fixed as the warp rises above the floor about 3-4" for about 10'. There are also places in the second floor that require extensive repair to the floors, walls, and ceilings. For the life of me, I cannot imagine ANYONE actually lived in this place for even a day, but my MIL said illegal aliens will stay in places like this just to survive.
Like I said, the inside will need to be almost completely gutted and redone. I figure I'd have to get plumbers and electricians in just to make sure those things are up to code. Some of the places I was actually afraid to step for fear of falling through, so I'm guessing a lot of reframing will have to occur to support the place better. Almost all the cabinets in the baths and kitchens will need replaced as will the sinks, toilets, and tubs. I'd also have to get new appliances for all the units. Two other major quirks are the heating and A/C. The place has no central heat/AC - cooling is by window A/C units, and heating ... well ... it looks like half the units have wall heaters and the others have nothing but a gas outake. That would have to be another hurdle to cross.
So you can see how extensive this project would be. I think my $50,000 repair estimate is actually too low given all the work involved, and NOT including any surprises along the way. Perhaps $80,000 would be a better estimate. As I said before, comps are next to impossible, but I'm figuring about $175k-$250k, and perhaps more. Me being low on cash reserves as it is decided to see if the owner would strike a deal. I would offer him MORE than his asking price, however, my concession would be a low downpayment and finance the remainder.
So, I call the owner on Sunday evening, and I start fluffing my side up in the hopes that he will see my viewpoint and go along with owner-financing the place. I thank him for giving us the combination so we could see the inside. I then tell him the inside was in a lot worse shape than I even imagined. I also tell him we found out about the city kicking the people out and almost condemning the place. I then ask him if he could be flexible in his sell price. He tells me he's already dropped the price a lot from $45,000, and the price it is now ($29,000) is how much the land itself is worth. Seeing that he won't budge in his list price, I then ask him if he'd be willing to have me give him a low downpayment and finance the rest for 2-3 years with a balloon at the end, since I'll need a lot more money now to make repairs. He balked almost instantly and said he has other people interested (hmmmm). I then started closing the conversation. I thanked him for his hospitality the last few days, and told him I completely understood his position. I then wished him luck trying to find a buyer and if he didn't have any success, I would always be interested (a huge gamble on my part). He then asked me if he were willing to do owner-financing, how much the monthly payments would be. I slipped here, and should have just told him it would be negotiable, but, instead, told him probably $150-$250/month. He then thanked me, and we traded niceties to each other and parted ways.
Whe we got there, I started taking a lot of pictures (~125), which I'm still trying to organize. The next door neighbor was in his yard, so my in-laws and I started talking with him. It turns out HE was the one who called the city last year, because raw sewage was running into his yard from the place. He also said the rehabber tried to just paint the place, but it requires a lot more work than that. He even said that he was going to buy the place, but didn't have the money to put into fixing it up. He also said that there were three families living there when the rehabber had the place. All of them were illegal aliens, he thinks. And one family had a small child (5-6 yrsw old). He said one day, the parents were out working and left the child alone. Some teenagers broke in the place and molested the child. How sad. Coincidentally, when my FIL and I went into one of the upstair units, we found a picture of a young boy that was taken in the unit. I'm guessing this was the young boy the neighbor spoke about. Looking at the place, I could only imagine what horror the young kid went through and what emotional damage it caused. The neighbor also mentioned that since it's been empty, druggies and cats use the place now. Wonderful.
After talking to the neighbor for a while and taking a lot of pictures of the outside, we went inside. I thought the outside was in bad shape, but the inside was even worse. The place will probably have to be fully gutted. It smelled of nothing but mildew and urine. All of the upstair windows were either completely gone, or severely damaged. Even the bottom floor windows will all need replaced. I couldn't even begin to describe the place, and it's better to see the pictures to get an idea of how bad the place really is.
Link to Pictures
I had promised the owner I would call him back, but I needed the remainder of Saturday and most of Sunday to let everything sink in. From my quick estimations, I figure the place will need at least $50,000 in repairs, and probably a LOT more. For the outside, it will need a new roof, new siding, windows, general clean-up, utility connections, and so on. I figured roughly $25,000-$30,000 just for the outside. The owner claims soneone releveled the place 25 years ago to try and get the warp out of one of the unit floors, but the leveling didn't fix the warp. Who knows how much it will cost to get that one problem fixed as the warp rises above the floor about 3-4" for about 10'. There are also places in the second floor that require extensive repair to the floors, walls, and ceilings. For the life of me, I cannot imagine ANYONE actually lived in this place for even a day, but my MIL said illegal aliens will stay in places like this just to survive.
Like I said, the inside will need to be almost completely gutted and redone. I figure I'd have to get plumbers and electricians in just to make sure those things are up to code. Some of the places I was actually afraid to step for fear of falling through, so I'm guessing a lot of reframing will have to occur to support the place better. Almost all the cabinets in the baths and kitchens will need replaced as will the sinks, toilets, and tubs. I'd also have to get new appliances for all the units. Two other major quirks are the heating and A/C. The place has no central heat/AC - cooling is by window A/C units, and heating ... well ... it looks like half the units have wall heaters and the others have nothing but a gas outake. That would have to be another hurdle to cross.
So you can see how extensive this project would be. I think my $50,000 repair estimate is actually too low given all the work involved, and NOT including any surprises along the way. Perhaps $80,000 would be a better estimate. As I said before, comps are next to impossible, but I'm figuring about $175k-$250k, and perhaps more. Me being low on cash reserves as it is decided to see if the owner would strike a deal. I would offer him MORE than his asking price, however, my concession would be a low downpayment and finance the remainder.
So, I call the owner on Sunday evening, and I start fluffing my side up in the hopes that he will see my viewpoint and go along with owner-financing the place. I thank him for giving us the combination so we could see the inside. I then tell him the inside was in a lot worse shape than I even imagined. I also tell him we found out about the city kicking the people out and almost condemning the place. I then ask him if he could be flexible in his sell price. He tells me he's already dropped the price a lot from $45,000, and the price it is now ($29,000) is how much the land itself is worth. Seeing that he won't budge in his list price, I then ask him if he'd be willing to have me give him a low downpayment and finance the rest for 2-3 years with a balloon at the end, since I'll need a lot more money now to make repairs. He balked almost instantly and said he has other people interested (hmmmm). I then started closing the conversation. I thanked him for his hospitality the last few days, and told him I completely understood his position. I then wished him luck trying to find a buyer and if he didn't have any success, I would always be interested (a huge gamble on my part). He then asked me if he were willing to do owner-financing, how much the monthly payments would be. I slipped here, and should have just told him it would be negotiable, but, instead, told him probably $150-$250/month. He then thanked me, and we traded niceties to each other and parted ways.
Friday, December 02, 2005
A Rehabber's Dream, and My Fake Ad
Rehabber's Dream
I was really beginning to wonder if having my in-laws do some mundane tasks for me in regards to my REI venture was such a good idea. At first, they were spending hours on end scouring neighborhoods, looking for abandoned properties. They would get all excited when they found one. Unfortunately, though, all the properties they found were ones that had already been foreclosed. Earlier this week, I told them that I really appreciated their help (and I do), but those types of houses are available on the internet. I also told them that what I meant by "abandoned" was houses that were empty, and/or look like no one had been living there for a while, but did not have any signs in the windows and/or any "For Sale/Rent" signs in the yard. I thought I had burst thier bubble. I understand the adrenaline rush when you find an empty property, but you learn over time that most have already gone through the foreclosure process, are available on the internet, and 99.9% of other investors know about it.
Then yesterday, my FIL told me about a multi-unit property for sale he came across from a friend. It has 8 units, and the owner wants only $50,000! Of course, I then started getting excited. I got some more information, and then decided to go out to look at the property. My wife wanted to see, too, as did my in-laws, so we just piled up the van and made an outing of it.
When we found the property, I understood why the owner had such a low price for an 8-unit apartment. It has two floors, and ALL the windows on the second floor are gone. The siding needs completely replaced around the whole building as does the roof. Peeking in the windows (at least the ones I could peek in), it looks like some of the ceilings are in bad shape. The walls looked intact, but the floors need replaced as well. The gas and electric meters were missing as was the city water intake meter, but my FIL said the utility people probably took them out and will install new ones at the owner's request (for free???). There was trash in the front and back yards as well as some of the rooms, but not a huge amount. It had a nice-sized back yard (~0.25 acres, I would guess), which my FIL said would mostly need to be a parking lot for the tenants. I would guess about $10k-$15k worth of repairs just on the outside. If the rooms I couldn't see were the same as the ones I could see, I would say about another $15k-$20k in repairs were needed inside. Add to those figures new appliances, and I would give the total repair estimate a conservative price of about $40k.
We then ate out, and returned back home. I immediately started getting comps for the place, but it is unusual as there are no other 8-unit apartment buildings within earshot of this property - let alone that have sold in the past 6-12 months. I did find some other multi-units in the area that have sold recently, and would estimate this property - when fixed - would fetch a price tag of around $250k-$300k. So, $50k to buy, $40k for repairs, another $10k for miscellaneous, and even if I sold it for $200k (which is VERY conservative), I'd still make $100k. The only problem is I have never done anything more than a very minor rehab, so I'm clueless how to go about doing something this big. The money looks VERY attractive, but I might get it under contract and then just assign it to another investor skilled in major rehabs for a nice assignment fee ($10k-$15k?).
I also called the contact number, but got a voicemail. I left a short message with my name and number. When I got up this morning, I noticed the person called me back after I had gone to bed, but didn't leave a message. Guess I'll be playing phone tag with him/her today. :-)
Fake Ad
Okay, call me bad. As people who have been reading my blog recently may realize, I have gone on a tear lately about buying houses Sub2 and selling using seller-financing. I also included a real-life example property and how I would have made a decent profit over a couple of years. Well, on Wednesday night, I decided to up the figures a bit to make the profit even more attractive. On Thursday, I then put a fake ad on Craigslist to see if anyone would be interested. Last night I checked my voicemail and email, but didn't get a response. This morning, I noticed someone sent me an email who are really interested in the property. Most of my fake ad was centered around the seller-financing part - I didn't really go into detail about the property itself (no pictures, no size, not even an address - just the year it was built, beds/baths, and the neighborhood). Talk about a pleasant surprise! Here were the figures I used for the list price and seller-financing:
Update:
I emailed back the person who showed interest in the property in my fake ad. I basically told him it was under contract, but I'd let him know if the deal falls through (yes, I feel like a clod for doing this now). I also told the person I am working another deal, and asked if he would be interested in it (might as well pull the lie out further). :-(
I also called the guy back at lunch about the 8-unit apartment. And, again, I got his voicemail. This time I told him to call me between 4pm and 9pm today so that we could talk about the property.
I was really beginning to wonder if having my in-laws do some mundane tasks for me in regards to my REI venture was such a good idea. At first, they were spending hours on end scouring neighborhoods, looking for abandoned properties. They would get all excited when they found one. Unfortunately, though, all the properties they found were ones that had already been foreclosed. Earlier this week, I told them that I really appreciated their help (and I do), but those types of houses are available on the internet. I also told them that what I meant by "abandoned" was houses that were empty, and/or look like no one had been living there for a while, but did not have any signs in the windows and/or any "For Sale/Rent" signs in the yard. I thought I had burst thier bubble. I understand the adrenaline rush when you find an empty property, but you learn over time that most have already gone through the foreclosure process, are available on the internet, and 99.9% of other investors know about it.
Then yesterday, my FIL told me about a multi-unit property for sale he came across from a friend. It has 8 units, and the owner wants only $50,000! Of course, I then started getting excited. I got some more information, and then decided to go out to look at the property. My wife wanted to see, too, as did my in-laws, so we just piled up the van and made an outing of it.
When we found the property, I understood why the owner had such a low price for an 8-unit apartment. It has two floors, and ALL the windows on the second floor are gone. The siding needs completely replaced around the whole building as does the roof. Peeking in the windows (at least the ones I could peek in), it looks like some of the ceilings are in bad shape. The walls looked intact, but the floors need replaced as well. The gas and electric meters were missing as was the city water intake meter, but my FIL said the utility people probably took them out and will install new ones at the owner's request (for free???). There was trash in the front and back yards as well as some of the rooms, but not a huge amount. It had a nice-sized back yard (~0.25 acres, I would guess), which my FIL said would mostly need to be a parking lot for the tenants. I would guess about $10k-$15k worth of repairs just on the outside. If the rooms I couldn't see were the same as the ones I could see, I would say about another $15k-$20k in repairs were needed inside. Add to those figures new appliances, and I would give the total repair estimate a conservative price of about $40k.
We then ate out, and returned back home. I immediately started getting comps for the place, but it is unusual as there are no other 8-unit apartment buildings within earshot of this property - let alone that have sold in the past 6-12 months. I did find some other multi-units in the area that have sold recently, and would estimate this property - when fixed - would fetch a price tag of around $250k-$300k. So, $50k to buy, $40k for repairs, another $10k for miscellaneous, and even if I sold it for $200k (which is VERY conservative), I'd still make $100k. The only problem is I have never done anything more than a very minor rehab, so I'm clueless how to go about doing something this big. The money looks VERY attractive, but I might get it under contract and then just assign it to another investor skilled in major rehabs for a nice assignment fee ($10k-$15k?).
I also called the contact number, but got a voicemail. I left a short message with my name and number. When I got up this morning, I noticed the person called me back after I had gone to bed, but didn't leave a message. Guess I'll be playing phone tag with him/her today. :-)
Fake Ad
Okay, call me bad. As people who have been reading my blog recently may realize, I have gone on a tear lately about buying houses Sub2 and selling using seller-financing. I also included a real-life example property and how I would have made a decent profit over a couple of years. Well, on Wednesday night, I decided to up the figures a bit to make the profit even more attractive. On Thursday, I then put a fake ad on Craigslist to see if anyone would be interested. Last night I checked my voicemail and email, but didn't get a response. This morning, I noticed someone sent me an email who are really interested in the property. Most of my fake ad was centered around the seller-financing part - I didn't really go into detail about the property itself (no pictures, no size, not even an address - just the year it was built, beds/baths, and the neighborhood). Talk about a pleasant surprise! Here were the figures I used for the list price and seller-financing:
Not bad for a property that was slightly upside-down! Of course, even though there is still a 5-figure profit, it's still a little bit less than I would be comfortable with - especially being my first seller-financing one. There are some hiden costs and hidden revenue streams not accounted for, like CPA charges for dealing with 1099's, and business write-offs associated with the deal as well as the potential risks involved (i.e., original note holder calls the loan due or I need to foreclose on the new owner). I'm looking more for properties that I could swing for $20k minimum profit to safeguard my interests. I'll still persue this one, as it could very well turn out to be even more profitable, but this was more to see if I could get a bite off of a realistic deal.
Existing Loan Amount ....... $ 88,500
Existing Loan Int Rate ..... 7.25%
Existing Loan Payment ...... $ 603.73
Existing Loan Begin Date ... Aug/2004
Existing Loan Balance (as of Dec/2005) ... $ 87,267.87
Existing Loan Balance (as of Mar/2006) ... $ 87,037.03
Existing Loan Balance (as of Mar/2008) ... $ 85,032.18
2005 Assessed Value ... $ 88,900
My Comp Value ......... $ 85,000
Repairs ............... $ 1,000
Other Buy Costs ....... $ 1,500
Seller Purchase Price .... $ 99,000
Seller Down Payment ...... $ 5,000
Seller Financed Amount ... $ 94,000
Seller Interest Rate ..... 9.00%
Seller Interest Term ..... 30yr w/2yr balloon
Seller Loan Start Date ... Mar/2006
Seller Monthly Payment ... $ 756.35
My Monthly Cashflow ...... $ 152.62
Seller Loan Balance (as of Mar/2008) ... $ 92,655.35
Profit when Seller Refinances in 2 years:
Seller Loan Balance [ $ 92,655.35 ] -
Existing Loan Balance [ $ 85,032.18 ] -
Repairs [ $ 1,000.00 ] -
Buy Costs [ $ 1,500.00 ] +
Seller Downpayment [ $ 5,000.00 ] +
Monthly CF x 24 mos [ $ 3,662.88 ] =
--------------------------------------
$ 13,786.05
Update:
I emailed back the person who showed interest in the property in my fake ad. I basically told him it was under contract, but I'd let him know if the deal falls through (yes, I feel like a clod for doing this now). I also told the person I am working another deal, and asked if he would be interested in it (might as well pull the lie out further). :-(
I also called the guy back at lunch about the 8-unit apartment. And, again, I got his voicemail. This time I told him to call me between 4pm and 9pm today so that we could talk about the property.
Tuesday, November 29, 2005
Issues Regarding Sub2 and Seller-Financing
Even though I seem to talk a lot about Sub2's and seller-financing, I'll honestly admit I haven't done either one yet (although it's not because of lack of trying!). There are a few issues that I still have with both. I'm seriously thinking of scheduling some time with a very prominent real estate attorney in Austin to get feedback on what I need to do to protect myself and my potential buyers/sellers when doing a acquiring properties Sub2 and using seller-financing as an exit strategy.
Some of the issues I have are ...
Insurance - On a Sub2, I've heard differing views. William Tingle suggests leaving the existing insruance alone and getting a new policy. This will add to the monthly costs, but won't cause any ruffles with the lender when trying to adjust the existing insurance policy. I've heard other people say just add you (or your entity) as "additionally insured" to the existing policy. When sold via seller-financing, John Locke suggests converting your insurance policy into a landlord policy. He also says to have the new owner get liability insurance as well as content insurance. Definately would like clarification on which is the best way to go for both Sub2 and seller financing.
Property Taxes - With Sub2's, I'm not worried so much. If escrowed, the escrow company will pay the taxes at the end of the year automatically. If not escrowed, the owner on record (i.e., ME) will get mailed the bill. My conern is really about the new buyer, although, things should still go along as normal. Just want clarification from someone who knows precisely.
Interest - Aside from the insurance issue, this is one of my biggest concerns. If taken Sub2, one of the first things you do is make yourself POA (Power of Attorney) for the property. This gives you legal power to conduct legal matters for the property. You should also submit a change of address form via the old owner to the existing lender, so that year-end 1099's come to you and not the old owner, since you are now the owner and are qualified to take the interest deductions. However, what exactly happens if I turn around and seleer-finance the property? I now of a wrap that includes payments (with interest) to an existing loan and payments (with interest) to the new owner. Can someone say HELP! :-)
I guess I should really get these and other matters cleared up sooner rather than later!
BTW, I got in touch with a lender today who I will work with on a couple of properties right now. I came to me as a referral from my agent, so we'll see how it works out.
Some of the issues I have are ...
Insurance - On a Sub2, I've heard differing views. William Tingle suggests leaving the existing insruance alone and getting a new policy. This will add to the monthly costs, but won't cause any ruffles with the lender when trying to adjust the existing insurance policy. I've heard other people say just add you (or your entity) as "additionally insured" to the existing policy. When sold via seller-financing, John Locke suggests converting your insurance policy into a landlord policy. He also says to have the new owner get liability insurance as well as content insurance. Definately would like clarification on which is the best way to go for both Sub2 and seller financing.
Property Taxes - With Sub2's, I'm not worried so much. If escrowed, the escrow company will pay the taxes at the end of the year automatically. If not escrowed, the owner on record (i.e., ME) will get mailed the bill. My conern is really about the new buyer, although, things should still go along as normal. Just want clarification from someone who knows precisely.
Interest - Aside from the insurance issue, this is one of my biggest concerns. If taken Sub2, one of the first things you do is make yourself POA (Power of Attorney) for the property. This gives you legal power to conduct legal matters for the property. You should also submit a change of address form via the old owner to the existing lender, so that year-end 1099's come to you and not the old owner, since you are now the owner and are qualified to take the interest deductions. However, what exactly happens if I turn around and seleer-finance the property? I now of a wrap that includes payments (with interest) to an existing loan and payments (with interest) to the new owner. Can someone say HELP! :-)
I guess I should really get these and other matters cleared up sooner rather than later!
BTW, I got in touch with a lender today who I will work with on a couple of properties right now. I came to me as a referral from my agent, so we'll see how it works out.
Lead #2 from my In-law Birddogs
My in-laws went out for a second day yesterday to look for abandoned/vacant properties. When they got home, they said they only found one property that seemed like it may be a good lead. Interestingly enough, this house was one they were going to purchase several years ago themselves for their own house. At that time, the listing agent told them the house had a price tag of $99k, but was worth a lot more since it was a foreclosure that needed a few repairs (<$1k). My in-laws signed the paperwork and were within a week of closing, when it was finally disclosed to them by ANOTHER agent that the property had a $17k+ IRS tax lien attached to it. The deal fell through, and my in-laws - acting on a suggestion by others - files a grievance with the Texas Real Estate Commission against the listing agent for not disclosing this lien beforehand. Well, time passed, and they and us forgot all about the property.
After they brought it to my attention again last night, I sat down and started doing some investigative work. It turns out the $17k+ IRS lien has stayed with the property, and, as such, nobody has touched it. In August of this year, an affadavit was filed by a representative of the IRS discharging the $17k+ lien. They didn't discharge the entire amount, but reduced it significantly. It's now only $2,660. There were some other documents filed back around the time my in-laws were persuing the property that seem confusing. For instance, their was a Trustee Deed to Wells Fargo created for $107k, and then an order filed almost immediately afterward that rescended the Trustee Deed. Intertwined in all that were some affadavits that really didn't seem to say much about anything! Also, my in-laws said a Realtor's sign was in the yard, so I figure it must be listed. However, I didn't see it in my daily automated lists from my agent or on Realtor.com. Strange (unless the sign was just put up yesterday). I sent my agent an email asking her to investigate further for me. Comps has the place around $120k, so it might be workable.
After they brought it to my attention again last night, I sat down and started doing some investigative work. It turns out the $17k+ IRS lien has stayed with the property, and, as such, nobody has touched it. In August of this year, an affadavit was filed by a representative of the IRS discharging the $17k+ lien. They didn't discharge the entire amount, but reduced it significantly. It's now only $2,660. There were some other documents filed back around the time my in-laws were persuing the property that seem confusing. For instance, their was a Trustee Deed to Wells Fargo created for $107k, and then an order filed almost immediately afterward that rescended the Trustee Deed. Intertwined in all that were some affadavits that really didn't seem to say much about anything! Also, my in-laws said a Realtor's sign was in the yard, so I figure it must be listed. However, I didn't see it in my daily automated lists from my agent or on Realtor.com. Strange (unless the sign was just put up yesterday). I sent my agent an email asking her to investigate further for me. Comps has the place around $120k, so it might be workable.
Monday, November 28, 2005
My Presentation and the Power of NMD
My Presentation
I have been constantly hinting to my in-laws about them helping me out with our REI biz and making more money in a shorter amount of time and with less stress and physical labor than what they are doing now. The day after Thanksgiving, it finally must have hit them. They both quit their part time jobs at a local retailer. I then gave them both (and my wife) a 2-hour presentation on REI. I had given them a presentation almost a year ago, but I was very rusty, having only known about REI myself for only a couple of months. This time, I had the presentation fined-turned, and was able to answer the objections clearly andpositively. They both (as well as my wife) came away with a whole new vision of what it was I am trying to do. Matter of fact, the next day, my wife and I had to run some errands (okay, she calls them errands - I call them being drug to the stores to go shopping, unwillingly). During the time we were out (and even a couple of hours past that), my in-laws were scouring a couple of neighborhoods looking for vacant houses that met my criteria. In the 2-3 neighborhoods they visited, they found one. It just so happens this particular property was one that the owner called me about a couple of months ago. He was the investor who had a house on a L/O in which the tenants decided not to exercise the option and were going to leave at the end of their lease term (which was at the end of September, I believe). Evidentally, he wasn't able to unload it to anybody, and now it's sitting vacant. My in-laws also said they were going out today to go look at more neighborhoods. They also started giving me marketing ideas, like handing out flyers at flea markets, making Spanish-only ads in circulars, etc. Looks like I've finally got them hooked on REI. ;-)
The Power of No Money Down
We've all heard the benefits of acquiring properties with no money down. IOW, purchasing properties with other people's money (OPM), whether that means 100% financing or taking a property Sub2 or some other fashion. But I really never grasped the power that no money down can have for a seller. I've only looked at it through the buyer's position. What I realized over the Thanksgiving holiday was that there is a huge advantage of selling a property with no money down via seller financing.
I'm not really sure if the bandit signs I see sometimes that say "$0 Down - $xxx/month!" are the same thing I am referring to, but I'm guessing they just might be. Using the same real-life example I explained here, I'll show how one can buy a property with little or no equity, sell it for no money down, and STILL make a profit. Recall the numbers were as follows:
Existing Loan Balance: $87,500
Needed Repairs: $1,000
After Repaired Value: $87,500 (ie, no equity)
Since the owner wanted out with no consideration, I could have bought the house with no money down. In reality, though, I would have still paid for a title search, a house inspection, and probably a termite inspection. These would have cost me around $750-$1,000 total. So, no money down would have really meant about $1,000 out-of-pocket. So, I'm out $1,000 at the beginning. I then spend another $100-$500 on marketing the house, while I make the $1,000 in repairs. Max amount of money spent: $2,500. Since the owner financing market casts a bigger net than the traditional financing route, my days on market will be less and my prospective buyer pool will be more. Therefore, I'll figure three months max in holding costs: $1,000 x 3 = $3,000. Now, my total out-of-pocket expenses are: $5,500.
I could sell as in my previous example for $94,900 with $5,000 and the remaining $89,900 payable with a 30yr note @9.125% loan with a 2yr balloon and a 1yr prepay penalty (to cover the prepay penalty on the existing loan). This will have netted me the following:
$5,000 downpayment +
$127.73/mo cashflow x 24 months +
$88,645.57 (buyer's loan balance) -
$85,210.54 (existing loan balance) -
$5,500 (my out-of-pocket costs) =
$6,000.55
A little thin for my blood, but a profit none-the-less (although the ROI is only 9.1% over a span of 27 months, which is pretty lousy).
To get more interested buyers to purchase the property, I could instead use a no money down technique. Interestingly enough, marketing the home with no money down has a big advantage over asking for money down. Of course, the risks are higher the buyer may not live up to his/her bargain, since they have very little risk involved themselves. By asking for no money down, you are providing more options to the buyer. And, as I've said before, and cannot be stressed enough, when you have more options to give to a buyer (or seller), you have leverage. With a no money down deal, though, there must be a trade-off. The buyer cannot expect to "get it all" in a deal with no risk involved. Therefore, you can structure the deal by implanting the risk in the terms: a higher purchase price, a higher interest rate, or both.
Imagine the example above if I were to increase the purchase price from $94,900 to $99,900. Not only would I get the $5,000 difference from the price increase, but I would also make more money from how the deal is amortized. Financing $99,900 increases the monthly cashflow from $127.73/mo to $209.89. Also, the equity difference at the end of the term would be greater. Whereas with $89,900, the loan balance was $88,645.57, the $99,900 loan will have a balance of $98,507.42. This translates to a profit of:
$0 (downpayment) +
$209.89/mo cashflow x 24 months +
$98,507.42 (buyer's loan balance) -
$85,210.54 (existing loan balance) -
$5,500 (my out-of-pocket expenses) =
$12,834.24
So, instead of making just the $5,000 price increase as additional profit, making the total profit $11,000.55, we've added another $1,833.69 in addition to it. Now my ROI is 133.35% over 27 months, which is lot more feasible.
And this was just by increasing the purchase price by $5,000!
Imagine if I decided to also bump the interest rate by 0.5% to 1.0%. ;-)
And, remember, this was a deal that had $0 equity. Imagine if you have a property with 10%, 20%, 30%, or more equity alread in it!
I have been constantly hinting to my in-laws about them helping me out with our REI biz and making more money in a shorter amount of time and with less stress and physical labor than what they are doing now. The day after Thanksgiving, it finally must have hit them. They both quit their part time jobs at a local retailer. I then gave them both (and my wife) a 2-hour presentation on REI. I had given them a presentation almost a year ago, but I was very rusty, having only known about REI myself for only a couple of months. This time, I had the presentation fined-turned, and was able to answer the objections clearly andpositively. They both (as well as my wife) came away with a whole new vision of what it was I am trying to do. Matter of fact, the next day, my wife and I had to run some errands (okay, she calls them errands - I call them being drug to the stores to go shopping, unwillingly). During the time we were out (and even a couple of hours past that), my in-laws were scouring a couple of neighborhoods looking for vacant houses that met my criteria. In the 2-3 neighborhoods they visited, they found one. It just so happens this particular property was one that the owner called me about a couple of months ago. He was the investor who had a house on a L/O in which the tenants decided not to exercise the option and were going to leave at the end of their lease term (which was at the end of September, I believe). Evidentally, he wasn't able to unload it to anybody, and now it's sitting vacant. My in-laws also said they were going out today to go look at more neighborhoods. They also started giving me marketing ideas, like handing out flyers at flea markets, making Spanish-only ads in circulars, etc. Looks like I've finally got them hooked on REI. ;-)
The Power of No Money Down
We've all heard the benefits of acquiring properties with no money down. IOW, purchasing properties with other people's money (OPM), whether that means 100% financing or taking a property Sub2 or some other fashion. But I really never grasped the power that no money down can have for a seller. I've only looked at it through the buyer's position. What I realized over the Thanksgiving holiday was that there is a huge advantage of selling a property with no money down via seller financing.
I'm not really sure if the bandit signs I see sometimes that say "$0 Down - $xxx/month!" are the same thing I am referring to, but I'm guessing they just might be. Using the same real-life example I explained here, I'll show how one can buy a property with little or no equity, sell it for no money down, and STILL make a profit. Recall the numbers were as follows:
Existing Loan Balance: $87,500
Needed Repairs: $1,000
After Repaired Value: $87,500 (ie, no equity)
Since the owner wanted out with no consideration, I could have bought the house with no money down. In reality, though, I would have still paid for a title search, a house inspection, and probably a termite inspection. These would have cost me around $750-$1,000 total. So, no money down would have really meant about $1,000 out-of-pocket. So, I'm out $1,000 at the beginning. I then spend another $100-$500 on marketing the house, while I make the $1,000 in repairs. Max amount of money spent: $2,500. Since the owner financing market casts a bigger net than the traditional financing route, my days on market will be less and my prospective buyer pool will be more. Therefore, I'll figure three months max in holding costs: $1,000 x 3 = $3,000. Now, my total out-of-pocket expenses are: $5,500.
I could sell as in my previous example for $94,900 with $5,000 and the remaining $89,900 payable with a 30yr note @9.125% loan with a 2yr balloon and a 1yr prepay penalty (to cover the prepay penalty on the existing loan). This will have netted me the following:
$5,000 downpayment +
$127.73/mo cashflow x 24 months +
$88,645.57 (buyer's loan balance) -
$85,210.54 (existing loan balance) -
$5,500 (my out-of-pocket costs) =
$6,000.55
A little thin for my blood, but a profit none-the-less (although the ROI is only 9.1% over a span of 27 months, which is pretty lousy).
To get more interested buyers to purchase the property, I could instead use a no money down technique. Interestingly enough, marketing the home with no money down has a big advantage over asking for money down. Of course, the risks are higher the buyer may not live up to his/her bargain, since they have very little risk involved themselves. By asking for no money down, you are providing more options to the buyer. And, as I've said before, and cannot be stressed enough, when you have more options to give to a buyer (or seller), you have leverage. With a no money down deal, though, there must be a trade-off. The buyer cannot expect to "get it all" in a deal with no risk involved. Therefore, you can structure the deal by implanting the risk in the terms: a higher purchase price, a higher interest rate, or both.
Imagine the example above if I were to increase the purchase price from $94,900 to $99,900. Not only would I get the $5,000 difference from the price increase, but I would also make more money from how the deal is amortized. Financing $99,900 increases the monthly cashflow from $127.73/mo to $209.89. Also, the equity difference at the end of the term would be greater. Whereas with $89,900, the loan balance was $88,645.57, the $99,900 loan will have a balance of $98,507.42. This translates to a profit of:
$0 (downpayment) +
$209.89/mo cashflow x 24 months +
$98,507.42 (buyer's loan balance) -
$85,210.54 (existing loan balance) -
$5,500 (my out-of-pocket expenses) =
$12,834.24
So, instead of making just the $5,000 price increase as additional profit, making the total profit $11,000.55, we've added another $1,833.69 in addition to it. Now my ROI is 133.35% over 27 months, which is lot more feasible.
And this was just by increasing the purchase price by $5,000!
Imagine if I decided to also bump the interest rate by 0.5% to 1.0%. ;-)
And, remember, this was a deal that had $0 equity. Imagine if you have a property with 10%, 20%, 30%, or more equity alread in it!
Wednesday, November 23, 2005
Beaten to the Punch
How ironic! I get home from work yesterday, and what do I find in my mail box? A postcard from an investor using almost the exact same layout I was going to use. Talk about freaky coincidence, especially given my recent enlightenment into changing my REI focus. I'm not sure how wide a geographic area this person's postcard reached, but this was definately one time where procrastination may have cost me a deal. I'd better start cracking on my marketing plan ASAP!
Tuesday, November 22, 2005
Better Focus: An Example
In my previous blog entry, I explained how I was now going to concentrate on acquiring properties Sub2 and either rent them out or sell via seller-financing. The following is a true-life example on why this is so powerful. You might recall that my very first "deal" from my bandit signs was from a person who wanted me to take over their property with no consideration. The post is here. At the time, my focus was more on buy-n-hold, and if that wasn't possible, flip via a RE agent. Looking back, this would have been a good candidate for seller-financing. Here were the figures:
Description: 1997, 3/2, 1,100sf
Repairs: ~$1,000
ARV: $87,500
Existing Loan: ~$87,500 balance with 2yr lock @7.25% and 2yr prepay penalty
As you can see, I would be negative right off the bat going the retail flip via RE agent route. After commissions, closing costs, and whatnot, I'd be in the hole big time. Buying to hold and rent would have been equally a disaster. However, with seller-financing, I could turn this bad deal into a good deal. Since we are selling without using traditional financing, the pool of buyers is a lot bigger. People who have bruised credit and couldn't qualify, or even people with good credit, but who have just moved or gotten a new job, are excellent candidates. Since you are able to offer the buyer the incentive of not having to go through traditional financing, the terms are now flexible in your favor. In this particular case, I could add a premium to both the sale price and the financing. For example, the ARV is around $87,500. I could boost this figure up to around $94,900 - about an 8.5% increase. For terms, I could offer 2% or more above the going rates. Since the underlying loan has a 7.25% rate, I'd boost the rate to about 8.5-9.5%, so that I can add monthly cashflow. Also, depending on the situation - and because I'm the "lender" - I can ask for a 2yr balloon, 5 yr balloon, 15yr w/no balloon, or whatever. Since this particular property has an adjustable rate based on the LIBOR, I'd like to add a balloon of no more than two years. I'd also like to add at least a one year prepay penalty of my own to recapture any money in case the new owner decides to turn around and refinance. Therefore, my terms would look like this:
Sale Price: $94,900
Downpayment: $5,000
Loan Amount: $89,900
Loan Terms: 9.125% w/2yr balloon and 1yr prepay penalty
I'd gather $5,000 up front to use on other properties, marketing, or whatever. Since the existing loan has a current monthly payment of $603.73 and the new loan term to my buyer has a monthly cost of $731.46, I'll be making about $127/mo in positive cashflow. True, I'll lose out on the interest rate reduction and other tax benefits that go along with owning the property, but this is about turning a property that originally had no promise into something that cashflows! Plus, in two years when the owners refinance, I'll get a nice check for the equity difference (~$3,500). So, in two years, my net profit would be:
$5,000 downpayment +
$3,500 equity check +
$127/mo for 24 months =
$11,565 !!!
For a deal that had no promise!
Now, of course, there are a few drawbacks to doing this. For instance, what if the buyer doesn't live up to their agreement, and you have to foreclose? Or, what happens if the buyer quits paying? Or, a miriad of other scenarios. I figure it might happen, but if you carefully screen your buyers, it should lessen the chances a great deal.
Description: 1997, 3/2, 1,100sf
Repairs: ~$1,000
ARV: $87,500
Existing Loan: ~$87,500 balance with 2yr lock @7.25% and 2yr prepay penalty
As you can see, I would be negative right off the bat going the retail flip via RE agent route. After commissions, closing costs, and whatnot, I'd be in the hole big time. Buying to hold and rent would have been equally a disaster. However, with seller-financing, I could turn this bad deal into a good deal. Since we are selling without using traditional financing, the pool of buyers is a lot bigger. People who have bruised credit and couldn't qualify, or even people with good credit, but who have just moved or gotten a new job, are excellent candidates. Since you are able to offer the buyer the incentive of not having to go through traditional financing, the terms are now flexible in your favor. In this particular case, I could add a premium to both the sale price and the financing. For example, the ARV is around $87,500. I could boost this figure up to around $94,900 - about an 8.5% increase. For terms, I could offer 2% or more above the going rates. Since the underlying loan has a 7.25% rate, I'd boost the rate to about 8.5-9.5%, so that I can add monthly cashflow. Also, depending on the situation - and because I'm the "lender" - I can ask for a 2yr balloon, 5 yr balloon, 15yr w/no balloon, or whatever. Since this particular property has an adjustable rate based on the LIBOR, I'd like to add a balloon of no more than two years. I'd also like to add at least a one year prepay penalty of my own to recapture any money in case the new owner decides to turn around and refinance. Therefore, my terms would look like this:
Sale Price: $94,900
Downpayment: $5,000
Loan Amount: $89,900
Loan Terms: 9.125% w/2yr balloon and 1yr prepay penalty
I'd gather $5,000 up front to use on other properties, marketing, or whatever. Since the existing loan has a current monthly payment of $603.73 and the new loan term to my buyer has a monthly cost of $731.46, I'll be making about $127/mo in positive cashflow. True, I'll lose out on the interest rate reduction and other tax benefits that go along with owning the property, but this is about turning a property that originally had no promise into something that cashflows! Plus, in two years when the owners refinance, I'll get a nice check for the equity difference (~$3,500). So, in two years, my net profit would be:
$5,000 downpayment +
$3,500 equity check +
$127/mo for 24 months =
$11,565 !!!
For a deal that had no promise!
Now, of course, there are a few drawbacks to doing this. For instance, what if the buyer doesn't live up to their agreement, and you have to foreclose? Or, what happens if the buyer quits paying? Or, a miriad of other scenarios. I figure it might happen, but if you carefully screen your buyers, it should lessen the chances a great deal.
Better Focus
In this post, I talked about the FREE audio recordings available at REIClub.com. I've been listening to them every day to/from work, and they've actaully opened my eyes to a lot of things - mainly how marketing is key to the business. I won't say I hadn't known this before, but listening to these tapes, the underlining message in all is that without marketing, you have no deals. And my marketing just plain sucks. The second message I'm getting from each of these tapes is to choose only one or two niche strategies, and focus all your energy on becoming an expert in them. What I've realized is that I'm spending too much effort in trying to learn the whole industry, when I should be focusing in on only 1-2 strategies. In essence, my thinking beforehand was becoming a "jack of all trades, and a master of none", when it should have been the opposite. Therefore, I've taken the last few days to really focus on what kind of strategies I want to do, given my time, my financial resources, state laws, and so on, and choose one or two from the list. In doing so, I've narrowed my list down to one main buy strategy and two main sell strategies (although there are derivatives of each).
Buying Strategy
I've always fancied Subject-to (Sub2) real estate investing. While it may require cash out-of-pocket at times, it is truly one of the best ways to get into a property with practically no money down. There are many other upsides as well, for example quick closing, no banks, more flexibility, easier marketing, and so on. I'll still be looking at other properties from my agent, my main focus now will be on acquiring Sub2 properties almost exclusively.
It's interesting, because I have William Tingle's Sub2 course, and he follows his own ideaology of Subject-to investing. I recently listened to John Locke's audio tape regarding Sub2 investing, and while he uses Sub2 investing, his ideaology is a little different. For example, William Tingle suggests using Land Trusts for anonymity, while John Locke says he's never used one before. Just little things like that which make their approaches slightly different.
Exit Strategy #1
Since Lease/Options have just about been outlawed in the great state of Texas, I have to find an alternative. Cash For Deed was basically outlawed in 2001(?) here as well. That basically cuts off two good exit strategies from the list. One of my mid-term goals is to acquire enough properties so that my cashflow is $15,000/month. This will require that I acquire many properties and hold them for both cashflow and equity build-up. Therefore, straight renting will be my first exit strategy. In doing so, I have to make sure the NOI, coupled with the debt service, cashflows positive.
Exit Strategy #2
The second exit strategy I'll implore is for generating cash reserves. Again, Lease/Options are basically illegal in Texas now, so I'll need a way to flip the properties retail. At first, I thought about just using an agent to sell the properties, thereby freeing some time for myself. However, the more I read about seller-financing, the more intrigued I am about the benefits. I'm not saying I won't use a RE agent, but my main exit strategy focus will be on seller-financing.
Summary
There you have it ... My new focus in REI. Again, while these strategies will be my main focus, they won't be my only focus. However, I'm not going to be spending a whole lot of my time on other strategies. I guess, if I see a property or someone brings it to my attention, then I'll take a look, but I'm not going to be actively looking for properties anymore. In fact, it will be just the opposite ... the properties will be looking for me. ;-)
Again, marketing is the lifeblood of any business, and REI is no exception. Therefore, my first order of business now is developing a good marketing plan and executing it. I have a lot of ideas scribbled down and still in my head. I'll take the Thanksgiving break to sit down and really devise a strategy to take my marketing to a higher level.
Stay tuned.
Buying Strategy
I've always fancied Subject-to (Sub2) real estate investing. While it may require cash out-of-pocket at times, it is truly one of the best ways to get into a property with practically no money down. There are many other upsides as well, for example quick closing, no banks, more flexibility, easier marketing, and so on. I'll still be looking at other properties from my agent, my main focus now will be on acquiring Sub2 properties almost exclusively.
It's interesting, because I have William Tingle's Sub2 course, and he follows his own ideaology of Subject-to investing. I recently listened to John Locke's audio tape regarding Sub2 investing, and while he uses Sub2 investing, his ideaology is a little different. For example, William Tingle suggests using Land Trusts for anonymity, while John Locke says he's never used one before. Just little things like that which make their approaches slightly different.
Exit Strategy #1
Since Lease/Options have just about been outlawed in the great state of Texas, I have to find an alternative. Cash For Deed was basically outlawed in 2001(?) here as well. That basically cuts off two good exit strategies from the list. One of my mid-term goals is to acquire enough properties so that my cashflow is $15,000/month. This will require that I acquire many properties and hold them for both cashflow and equity build-up. Therefore, straight renting will be my first exit strategy. In doing so, I have to make sure the NOI, coupled with the debt service, cashflows positive.
Exit Strategy #2
The second exit strategy I'll implore is for generating cash reserves. Again, Lease/Options are basically illegal in Texas now, so I'll need a way to flip the properties retail. At first, I thought about just using an agent to sell the properties, thereby freeing some time for myself. However, the more I read about seller-financing, the more intrigued I am about the benefits. I'm not saying I won't use a RE agent, but my main exit strategy focus will be on seller-financing.
Summary
There you have it ... My new focus in REI. Again, while these strategies will be my main focus, they won't be my only focus. However, I'm not going to be spending a whole lot of my time on other strategies. I guess, if I see a property or someone brings it to my attention, then I'll take a look, but I'm not going to be actively looking for properties anymore. In fact, it will be just the opposite ... the properties will be looking for me. ;-)
Again, marketing is the lifeblood of any business, and REI is no exception. Therefore, my first order of business now is developing a good marketing plan and executing it. I have a lot of ideas scribbled down and still in my head. I'll take the Thanksgiving break to sit down and really devise a strategy to take my marketing to a higher level.
Stay tuned.
Monday, November 21, 2005
Busy Weekend
Prospects
I've been trading emails with the RE agent I met a couple of weeks ago about some prospects. One in particular has really whet my appetite. Unfortunately, through my procrastination, I have not followed up on any of my lender leads to get a pre-approval letter, which my agent says I'll need in order to submit my offer. So today, I need to call back one or two of the lender leads and get the ball rolling on trying to get financed. I have a bad feeling my current debt load may become an issue, though, but we'll see. I'm looking to get the property at about 71% FMV, or less.
I also took time over the weekend to go to another nearby town and look at some properties. (Martin, if you're reading, you'll probably know what I'm talking about.) There are about 5-6 vacant duplexes in a rough part of the town. I went by there Saturday to look at them, because they are going pretty cheap ($45k-$60k/each duplex). When I got there, I see why they are moving very much. The street they are on is probably a "2" in Steve Cook's rating system ("1" is complete war zone, and "10" is millionaire-like). There are a couple of duplexes aside from the ones I went to see that are totally trashed. I recall reading from Bronchick's Flipping Properties that a good guage to use when looking at prospects is to ask yourself whether you would feel comfortable in the neighborhood at night. Simply put, I wouldn't with these. I did take some pictures, but I doubt I'll even submit any offers let alone try to buy them. Just not my criteria.
I also found a HUD f/c that in the same city that is in the OOO period. It was for $45k, so I thought I'd check it out. It's kind of in a rural location, and the area seems a little run down. The property itself is in serious need of repair. I figure $20k to bring it to livable standards, and probably more. I'll have to pass on it as well.
Anyone seen my CPA?
When my wife and I met with the CPA last month, she told us it wouldn't take her long to get the stuff entered, and she'd get back to us. Well, it's been over a month now, and we haven't heard a peep from her. In the meantime, we were to gather a few more things for the CPA, which we put off until this weekend. I dug up some more receipts from materials I used to fix House #1. We also started brainstorming on stuff that neither of us had thought about deducting before. For instance, I use my personal laptop to do a lot of searches and what-not, so we dug up that receipt. We also use my wife's computer and printer for the business - got that receipt. We also bought a Canon SLR Digital Rebel last year that I use to take pictures - another receipt. I've purchased several books, the Cashflow 101 game, two REI courses, business cards, and on and on. More receipts. It became like a game - who can think up the next deductible business item. Now we have even more for the CPA - whenever she decides to get back with us.
I've been trading emails with the RE agent I met a couple of weeks ago about some prospects. One in particular has really whet my appetite. Unfortunately, through my procrastination, I have not followed up on any of my lender leads to get a pre-approval letter, which my agent says I'll need in order to submit my offer. So today, I need to call back one or two of the lender leads and get the ball rolling on trying to get financed. I have a bad feeling my current debt load may become an issue, though, but we'll see. I'm looking to get the property at about 71% FMV, or less.
I also took time over the weekend to go to another nearby town and look at some properties. (Martin, if you're reading, you'll probably know what I'm talking about.) There are about 5-6 vacant duplexes in a rough part of the town. I went by there Saturday to look at them, because they are going pretty cheap ($45k-$60k/each duplex). When I got there, I see why they are moving very much. The street they are on is probably a "2" in Steve Cook's rating system ("1" is complete war zone, and "10" is millionaire-like). There are a couple of duplexes aside from the ones I went to see that are totally trashed. I recall reading from Bronchick's Flipping Properties that a good guage to use when looking at prospects is to ask yourself whether you would feel comfortable in the neighborhood at night. Simply put, I wouldn't with these. I did take some pictures, but I doubt I'll even submit any offers let alone try to buy them. Just not my criteria.
I also found a HUD f/c that in the same city that is in the OOO period. It was for $45k, so I thought I'd check it out. It's kind of in a rural location, and the area seems a little run down. The property itself is in serious need of repair. I figure $20k to bring it to livable standards, and probably more. I'll have to pass on it as well.
Anyone seen my CPA?
When my wife and I met with the CPA last month, she told us it wouldn't take her long to get the stuff entered, and she'd get back to us. Well, it's been over a month now, and we haven't heard a peep from her. In the meantime, we were to gather a few more things for the CPA, which we put off until this weekend. I dug up some more receipts from materials I used to fix House #1. We also started brainstorming on stuff that neither of us had thought about deducting before. For instance, I use my personal laptop to do a lot of searches and what-not, so we dug up that receipt. We also use my wife's computer and printer for the business - got that receipt. We also bought a Canon SLR Digital Rebel last year that I use to take pictures - another receipt. I've purchased several books, the Cashflow 101 game, two REI courses, business cards, and on and on. More receipts. It became like a game - who can think up the next deductible business item. Now we have even more for the CPA - whenever she decides to get back with us.
Thursday, November 17, 2005
Softening RE Market and My Take
I saw the following article on CNN's web site that talks about how the RE market is starting to slow due to rising interest rates (among other things). I won't deny the market is slowing, and would probably attest it has actually been going down already in some areas of the country. However, there are areas that are also seeing an increase still as well.
I also read a quite interesting opinion from someone on REIClub.com regarding the pending doom-n-gloom in the RE market, and why he feels it may just be a load of bull. You can read his/her response here (scroll down to the first response by "DFWHoldings" and his/her follow-up response two messages down from that one).
This actually got me thinking about strategies to use in a market where interest rates are increasing and, likewise, housing starts/resales are slowing. Most any RE investor will tell you when rates rise, people tend to not buy houses as much (common sense). What this typically means is that people renting houses increases. Simple economics will tell you that since demand is now high for rentals, so too will the lease rates. This is all very well and good if you already own rental properties, but what happens to investors who need to buy some first? Unfortunately, rising interest rates will push a lot of investors out of the market, since they will rely on conventional loans to finance their property. True, but rates (at least for now) will still be a lot lower than with most ahrd money lenders (HML). For retail flippers, this is still good news. But for those wanting to buy and hold in order to catch the high demand for rentals, this could be bad (not will be, but could be).
But think for a moment at the cycle we are going through, provided all this is true. Rental prices are going up, which plays into the buy-and-hold strategy. Interest rates are going up, which can work against the strategy. However, in the last 4-5 years, interest rates were at their one of their lowest periods in history. This created a boom of new homeowners capitalizing on the lower interest rates. True, many jumped on the ARM train, trying to get an even lower rate, but I'm willing to bet most opted for long-term rates at still low values. So we have a population of homeowners who have existing mortgages with low interest rates. We also have increasing rent prices and increasing interest rates. If this doesn't smell like a right time to get in the Sub2 market, nothing does. Let me show this with an example ...
John Doe bought a nice house in 2002 with a 30yr conventional loan at 5.25% interest. He had to put down $15k in order to get the house. It's now 2006 and due to poor management of personal funds, a death in the family, a divorce, or what have you, poor John Doe is in a pickle. He is two months behind on his mortgage payment and sees no way out. He needs to sell NOW - not next month or two or three when the RE agent can get his house sold, but NOW. You come in, bring his mortgage current, give him some "walking" money, and add a nice house to your inventory. Of course, this is a simplistic example, but you get my viewpoint, I hope. You can then try to sell it on the retail market, or put it on the rental market. Of course the old due-on-sale (DOS) problem is ever looming, and with interest rates rising, banks are more entertained to the idea of calling the loans due. That's a chance almost any Sub2 investor takes regardless of the market. Some banks will do it, most won't. If they do, you can then refinance, and hope your monthly CF doesn't take too bad of a hit, or sell the property (which can be hard in a depressed market). These are things to also consider in making your final judgement on an individual piece of property.
I also read a quite interesting opinion from someone on REIClub.com regarding the pending doom-n-gloom in the RE market, and why he feels it may just be a load of bull. You can read his/her response here (scroll down to the first response by "DFWHoldings" and his/her follow-up response two messages down from that one).
This actually got me thinking about strategies to use in a market where interest rates are increasing and, likewise, housing starts/resales are slowing. Most any RE investor will tell you when rates rise, people tend to not buy houses as much (common sense). What this typically means is that people renting houses increases. Simple economics will tell you that since demand is now high for rentals, so too will the lease rates. This is all very well and good if you already own rental properties, but what happens to investors who need to buy some first? Unfortunately, rising interest rates will push a lot of investors out of the market, since they will rely on conventional loans to finance their property. True, but rates (at least for now) will still be a lot lower than with most ahrd money lenders (HML). For retail flippers, this is still good news. But for those wanting to buy and hold in order to catch the high demand for rentals, this could be bad (not will be, but could be).
But think for a moment at the cycle we are going through, provided all this is true. Rental prices are going up, which plays into the buy-and-hold strategy. Interest rates are going up, which can work against the strategy. However, in the last 4-5 years, interest rates were at their one of their lowest periods in history. This created a boom of new homeowners capitalizing on the lower interest rates. True, many jumped on the ARM train, trying to get an even lower rate, but I'm willing to bet most opted for long-term rates at still low values. So we have a population of homeowners who have existing mortgages with low interest rates. We also have increasing rent prices and increasing interest rates. If this doesn't smell like a right time to get in the Sub2 market, nothing does. Let me show this with an example ...
John Doe bought a nice house in 2002 with a 30yr conventional loan at 5.25% interest. He had to put down $15k in order to get the house. It's now 2006 and due to poor management of personal funds, a death in the family, a divorce, or what have you, poor John Doe is in a pickle. He is two months behind on his mortgage payment and sees no way out. He needs to sell NOW - not next month or two or three when the RE agent can get his house sold, but NOW. You come in, bring his mortgage current, give him some "walking" money, and add a nice house to your inventory. Of course, this is a simplistic example, but you get my viewpoint, I hope. You can then try to sell it on the retail market, or put it on the rental market. Of course the old due-on-sale (DOS) problem is ever looming, and with interest rates rising, banks are more entertained to the idea of calling the loans due. That's a chance almost any Sub2 investor takes regardless of the market. Some banks will do it, most won't. If they do, you can then refinance, and hope your monthly CF doesn't take too bad of a hit, or sell the property (which can be hard in a depressed market). These are things to also consider in making your final judgement on an individual piece of property.
Don't Ignore the Simple Things
Just about everyone that has gotten into the REI business has bought at least one book, one tape, one course, and/or has been to one seminar. I've noticed that once I've gotten my feet wet in this industry, my thirst for learning has slowly been decreasing. I have been reading a few books I have over again, and realized that my REI education is not getting anywhere fast. I'm a member over at REIClub.com, and they routinely have guest speakers talk about their expertise in REI. It's a live phone conferencem, which is recorded and made available for free afterward. I've never actually called during the live broadcast, but always download the segments afterward. Unfortunately, that's as far as it's gotten. The other day, I decided to actually burn the MP3 recordings to CD so that I could listen to them on the way to/from my JOB. My car stereo doesn't play MP3's, so I had to convert them to raw audio, using an open source program called Audacity. I started listening to them on the way into work yesterday, and have already received little marketing tidbits from one recording that I may try. I figure I'm doing nothing but listening to classic rock on the way to/from my JOB each weekday, I might as well get some more REI education while I'm at it.
You can find the free audio downloads here (a little over midway down the page).
Enjoy!
You can find the free audio downloads here (a little over midway down the page).
Enjoy!
Monday, November 14, 2005
A Change Is Needed
I'm really starting to understand what Simon & Garfunkel meant by "people hearing without listening in their song Sounds of Silence.
Let me digress a bit ...
Last week, both my wife's parents (who are newly retired), applied for and got jobs at a local retail store chain. After probing my wife and them about it, the only reasoning I could get is they just "wanted to do it, since retirement was boring. I figure there is more to it, but I'm not one to pry too much. I mentioned to my MIL that she could make a LOT more money doing things for me as far as REI is concerned, with the possibility of making more in a single deal than what they could make in a year working laborously at the retail store. When I told her that, my wife had overheard, and almost at the same time, they both said "How?" I guess everything I've been doing and telling them to this point hasn't clicked yet with them. It's as if they've been hearing me, but not listening.
So, I told them both that I would put together a more organized presentation, and present it to them tonight. I hope beyond hope that both of them will "listen" this time. In brief, I told my MIL that she and my FIL could do a lot of work that I cannot do while at my JOB, like looking at houses, researching records at the courthouse, distributing marketing material, and even talking to sellers. This would be a huge boost in my overall efforts, and they would be justly rewarded for it. Plus, they wouldn't have to be doing near-minimum wage, laborous work.
I guess what really surprised me most of all about this whole dialog was the fact that my wife still hasn't gotten it. I guess I must've been doing something wrong this year in not communicating REI well to her. :-(
Let me digress a bit ...
Last week, both my wife's parents (who are newly retired), applied for and got jobs at a local retail store chain. After probing my wife and them about it, the only reasoning I could get is they just "wanted to do it, since retirement was boring. I figure there is more to it, but I'm not one to pry too much. I mentioned to my MIL that she could make a LOT more money doing things for me as far as REI is concerned, with the possibility of making more in a single deal than what they could make in a year working laborously at the retail store. When I told her that, my wife had overheard, and almost at the same time, they both said "How?" I guess everything I've been doing and telling them to this point hasn't clicked yet with them. It's as if they've been hearing me, but not listening.
So, I told them both that I would put together a more organized presentation, and present it to them tonight. I hope beyond hope that both of them will "listen" this time. In brief, I told my MIL that she and my FIL could do a lot of work that I cannot do while at my JOB, like looking at houses, researching records at the courthouse, distributing marketing material, and even talking to sellers. This would be a huge boost in my overall efforts, and they would be justly rewarded for it. Plus, they wouldn't have to be doing near-minimum wage, laborous work.
I guess what really surprised me most of all about this whole dialog was the fact that my wife still hasn't gotten it. I guess I must've been doing something wrong this year in not communicating REI well to her. :-(
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