Friday, February 24, 2006
Staged Postcard Mailouts
I am in the process of writing a mailout schedule to numerous subdivisions in my farm area. So far, I have six subdivisions with another two more to go. I've broken down the mailouts monthly and staged them so that 1/4th of each subdivision is covered in each 3-month period. This not only helps get my name out on a periodic basis, but really saves me from having to do bulk mailings 1-2 times a year and having to come up with a lot of money. With the monthly mailouts, I am so far averaging about $23, which is VERY affordable. As I said, though, I still have another two subdivisions to go, and one of those is rather large. Regardless, I don't see myself spending more than about $35/month on my postcard mailouts. Hopefully I can start getting the phone ringing as it has been pretty silent lately.
Argh! My Insurance Company
I really, really, REALLY must find a new insurance carrier for House #1. I just seem to be doing too much of their work. For one, it seems every time my note gets transferred to another lender (this has happened three times now), I get a letter stating they have no record of insurance and will use their own if I do not provide proof within x-number of days. Okay, this may not be the insurance carrier's fault per se, but all this should be handled 'behind the scenes', IMHO. Each time, I must then contact my insurance agent's office and have them call the new lender with the information.
Now, I get a voicemail from my agent's office stating they have not received $76 from the new lender to continue coverage, and the policy will be cancelled on March 5th if payment is not received. I then call the agent's office back and get their voicemail (which is another peeve of mine - they NEVER answer the phone, so I ALWAYS have to leave a message). It turns out my insurance company had it in their records that my coverage is escrowed, so therefore billed the lender. Argh! I told the lady that it isn't - nor ever was - escrowed. She said she will mail me out a bill today, but by the time I get the bill and pay it via snail mail, the policy may be cancelled. She then suggested I call a 1-800 for the insurance company and pay via the phone ASAP to avoid cancellation. Argh! More needless work for me to do.
Maybe I just need more sleep. :-P
Now, I get a voicemail from my agent's office stating they have not received $76 from the new lender to continue coverage, and the policy will be cancelled on March 5th if payment is not received. I then call the agent's office back and get their voicemail (which is another peeve of mine - they NEVER answer the phone, so I ALWAYS have to leave a message). It turns out my insurance company had it in their records that my coverage is escrowed, so therefore billed the lender. Argh! I told the lady that it isn't - nor ever was - escrowed. She said she will mail me out a bill today, but by the time I get the bill and pay it via snail mail, the policy may be cancelled. She then suggested I call a 1-800 for the insurance company and pay via the phone ASAP to avoid cancellation. Argh! More needless work for me to do.
Maybe I just need more sleep. :-P
Travis County to Increase Property Values A LOT
I meant to post this the other day.
I read a story on the front page of the local paper the other day saying that the Travis County (where Austin, TX is located) Tax Assesor will be increasing the property values by an enormous amount next year. I'm going by (failed) memory here, but I believe they said most properties will have their values re-assessed by an average 20% MORE. More expensive homes will see an increase of upwards of 40%!!! This is incredible. Texas, and the I-35 corridor especially, has been under constant news about undervalued property values. I guess the Travis County Tax Assessor has taken notice and appears to single-handidly be making a decision to get "in-line" with the rest of the nation.
Since most of my activity involves Williamson County, I'm anxious to see how (not if, but how) this will affect property values there. I'm guessing the days of "cheap" properties in central Texas are behind us now.
I read a story on the front page of the local paper the other day saying that the Travis County (where Austin, TX is located) Tax Assesor will be increasing the property values by an enormous amount next year. I'm going by (failed) memory here, but I believe they said most properties will have their values re-assessed by an average 20% MORE. More expensive homes will see an increase of upwards of 40%!!! This is incredible. Texas, and the I-35 corridor especially, has been under constant news about undervalued property values. I guess the Travis County Tax Assessor has taken notice and appears to single-handidly be making a decision to get "in-line" with the rest of the nation.
Since most of my activity involves Williamson County, I'm anxious to see how (not if, but how) this will affect property values there. I'm guessing the days of "cheap" properties in central Texas are behind us now.
Status on recent prospects and my CPA
There were two prospective properties I was interested in earlier this week. The first was a deal I passed on early in January, but I decided to go ahead with after doing some more calculating. I still haven't heard back from the owner, so I'm guessing either she is no longer motivated, found another buyer, or is still cotemplating what to do next. I'll send her a follow-up letter next week to make sure.
The other property I was looking out was put on the market one day and was sold the next. It wasn't a great property by any means, but there was some definate profit to be made to someone who knows what they are doing. I'm guessing a savvy investor bought it for less than the asking price.
I met with my CPA after work yesterday to finalize our 2005 taxes. It turns out she did already e-file our return, but said in order for the IRS to initiate the refund, they would need the form she had us sign. So it may be another week or so before we get our refund. I figure about half of the refund will go towards paying down some of our CC debt associated with House #1. The remainder will be split between personal stuff and business marketing. I plan to start sending out postcards on a regular basis to several neighborhoods starting next month. I want the mail-outs to be consistant, too. For instance, I'll hit on-third of a neighborhood once every three months. This will cover the entire neighborhood four times a year, which should get my name out to people. I figure each postcard mail-out will have negligable costs, and those costs can be written off as business expenses anyway.
My only worry is that I won't have the time required to actually go meet with sellers for a while. What free time I have now is used to either sleep or get caught-up with personal matters.
On a side note ... I got in contact with a relative in Indiana. Her husband is a relatively new CPA, and I may try to forge a business relationship with both of them. I've noticed properties in and around where they live are cheaper than down here - at least the distressed ones are. I figure there is an opportunity to get some properties up there and have my relatives living there help me find, acquire, manage, and sell them for me. We'll see.
The other property I was looking out was put on the market one day and was sold the next. It wasn't a great property by any means, but there was some definate profit to be made to someone who knows what they are doing. I'm guessing a savvy investor bought it for less than the asking price.
I met with my CPA after work yesterday to finalize our 2005 taxes. It turns out she did already e-file our return, but said in order for the IRS to initiate the refund, they would need the form she had us sign. So it may be another week or so before we get our refund. I figure about half of the refund will go towards paying down some of our CC debt associated with House #1. The remainder will be split between personal stuff and business marketing. I plan to start sending out postcards on a regular basis to several neighborhoods starting next month. I want the mail-outs to be consistant, too. For instance, I'll hit on-third of a neighborhood once every three months. This will cover the entire neighborhood four times a year, which should get my name out to people. I figure each postcard mail-out will have negligable costs, and those costs can be written off as business expenses anyway.
My only worry is that I won't have the time required to actually go meet with sellers for a while. What free time I have now is used to either sleep or get caught-up with personal matters.
On a side note ... I got in contact with a relative in Indiana. Her husband is a relatively new CPA, and I may try to forge a business relationship with both of them. I've noticed properties in and around where they live are cheaper than down here - at least the distressed ones are. I figure there is an opportunity to get some properties up there and have my relatives living there help me find, acquire, manage, and sell them for me. We'll see.
Thursday, February 23, 2006
OT: USB Memory Sticks
I used to use a 128MB memory stick to hold all of my REI information on, but it got filled up quickly. I also housed XAMPPLite on the memory stick to hold all my database files. Everyone so often I would back up the data, and luckily so, because every so often the data would become corrupt. I have since moved up to a 1GB memory stick to hold the information, and still do backups. Today I found out over half the data on my stick was corrupt, and my last backup was over 9 days ago. Ugh! So now I've essentially lost 9 days of data for my business. I'll need to become more attentive on running my backups on a more consitant basis. :-(
Wednesday, February 22, 2006
Two Possible Deals
I have two deals I'm currently working on. The first was the deal I spoke about in my blog entry the other day. I sent the owner a nice letter on how I could help her if she is still wanting to sell. We'll see what happens.
The second deal is something I stumbled upon while going through my daily MLS feeds. It's a home listed as "needing TLC" (which we all know what that means). The listing also says the owner is motivated and to bring all offers. The asking price was low for a comparable house in the neighborhood, which first caught my eye (by about $15,000). I did a preliminary check on my county's online courthouse record site and found the initial loan was for $126k for 20yrs. Doing some quick calculations, I figure what they are asking for is probably the same as the balance now on the loan. I'm not sure where they will be getting the funds to pay the Realtor fees.
I ran the figures into the program I talked about and figured I could net a little over $18k on the deal doing a straight Sub2 with a backend owner-carry finance (and repairs only being negligable - haha). The problem, though, is that it is listed, and we all know how most Realtors react to creative deals. I will no doubt have to go through my own agent to try and strike a possible deal with this one.
The second deal is something I stumbled upon while going through my daily MLS feeds. It's a home listed as "needing TLC" (which we all know what that means). The listing also says the owner is motivated and to bring all offers. The asking price was low for a comparable house in the neighborhood, which first caught my eye (by about $15,000). I did a preliminary check on my county's online courthouse record site and found the initial loan was for $126k for 20yrs. Doing some quick calculations, I figure what they are asking for is probably the same as the balance now on the loan. I'm not sure where they will be getting the funds to pay the Realtor fees.
I ran the figures into the program I talked about and figured I could net a little over $18k on the deal doing a straight Sub2 with a backend owner-carry finance (and repairs only being negligable - haha). The problem, though, is that it is listed, and we all know how most Realtors react to creative deals. I will no doubt have to go through my own agent to try and strike a possible deal with this one.
Tuesday, February 21, 2006
First Call From My Car Signs
I've had my magnetic "WE BUY HOUSES" car signs on my vehicle now for nearly 8 months now with not so much as an inquiry from anyone. Today, though, I got a call from a person who saw my car signs for the first time. Whoo-hoo! However, the bad news is that he wanted to know if I not only buy pier-and-beam style houses (which I don't) AND if I can move it off the land (definately NOT). Oh well, at least I got a call. :-)
Monday, February 20, 2006
Deal or No Deal?
As I said in my previous blog entry, I created a tool to help me evaluate whether a property is a good candidate for taking Sub2 and selling via owner-carry financing. I put the tool through a test with the most recent deal I passed on. The deal was for an SFR that was built in 200. It was a 3/2 with 1500sf, and only required paint and possibly carpet. The owner was willing to let it go for just some "u-haul" money in order for her to get an apartment. The double-edge sword was in the existing financing. It had a 15yr loan vs. the normal 30yr loan, which made the payments a lot higher, so renting it our would mean negative cashflow for a few years. Putting the figures in the tool, though, showed it was an ideal candidate for Sub2 with owner-carry financing:
Deed of Trust: Sep/2003 for $126,500
Loan: 15yr @4.75% (approx)
PITI: $1,500/month
FMV: $120k-$125k
Repairs: $1,250
Marketing: $500
Taxes: $363.59/mo.
Insurance: $54.16/mo.
PMI: $95.18/mo.
For the owner-carry portion, I would sell the house at a slight premium ($129,900) and request at least $5k down (more like $10k) with an interest rate of 9.5% on my 30yr loan. Running all the figures into the tool, I got the following:
So this is a very good deal after all. The ONLY thing that I don't like is the monthly negative cashflow. But this can be offset by asking for a larger downpayment. If I ask for $10,000 down instead of $5,000, I will still make a nice profit AND won't have as much risk:
I checked the courthouse records, and it appears the owner is still living there (although, the online courthouse records are about 2-3 weeks behind in most cases). I've already started drafting the owner a letter, so we'll see what happens. Stay tuned.
Deed of Trust: Sep/2003 for $126,500
Loan: 15yr @4.75% (approx)
PITI: $1,500/month
FMV: $120k-$125k
Repairs: $1,250
Marketing: $500
Taxes: $363.59/mo.
Insurance: $54.16/mo.
PMI: $95.18/mo.
For the owner-carry portion, I would sell the house at a slight premium ($129,900) and request at least $5k down (more like $10k) with an interest rate of 9.5% on my 30yr loan. Running all the figures into the tool, I got the following:
Original Loan New Loan
------------------------- ------------------------------
Amount ..... $ 126,500.00 Amount .......... $ 124,900.00
Rate ....... 4.75% Rate ............ 9.50%
Months ..... 180 Months .......... 360
PMI ........ $ 95.18 Term (Mos.) ..... 24
Payment .... $ 983.96 Payment ......... $ 1,050.23
Acquisition/Holding Costs Other
------------------------- ------------------------------
Taxes ...... $ 363.59 Months to Sub2 ... 30
Insurance .. $ 54.16 Months to Hold ... 3
Repairs .... $ 1,250.00 Downpayment ...... 5,000.00
Marketing .. $ 500.00
Other ...... $ 2,500.00
Original Loan Balance - At Acquisition ........ $ 111,139.43
Original Loan Balance - End of Hold ........... $ 109,500.86
Original Loan Balance - End of Contract ....... $ 95,669.14
New Loan Balance - End of Contract ............ $ 123,283.11
Monthly Cashflow .............................. $ 28.91-
Profit Recapture
---------------------------------------
Downpayment .............. $ 5,000.00
Monthly Cashflow ......... $ 693.84-
Holding Cost ............. $ 8,740.67-
Difference From Loans .... $ 27,613.97
------------
TOTAL: $ 23,084.28
So this is a very good deal after all. The ONLY thing that I don't like is the monthly negative cashflow. But this can be offset by asking for a larger downpayment. If I ask for $10,000 down instead of $5,000, I will still make a nice profit AND won't have as much risk:
Original Loan New Loan
------------------------- ------------------------------
Amount ..... $ 126,500.00 Amount .......... $ 119,900.00
Rate ....... 4.75% Rate ............ 9.50%
Months ..... 180 Months .......... 360
PMI ........ $ 95.18 Term (Mos.) ..... 24
Payment .... $ 983.96 Payment ......... $ 1,008.18
Acquisition/Holding Costs Other
------------------------- ------------------------------
Taxes ...... $ 363.59 Months to Sub2 ... 30
Insurance .. $ 54.16 Months to Hold ... 3
Repairs .... $ 1,250.00 Downpayment ...... 10,000.00
Marketing .. $ 500.00
Other ...... $ 2,500.00
Original Loan Balance - At Acquisition ........ $ 111,139.43
Original Loan Balance - End of Hold ........... $ 109,500.86
Original Loan Balance - End of Contract ....... $ 95,669.14
New Loan Balance - End of Contract ............ $ 118,348.03
Monthly Cashflow .............................. $ 70.96-
Profit Recapture
---------------------------------------
Downpayment .............. $ 10,000.00
Monthly Cashflow ......... $ 1,703.04-
Holding Cost ............. $ 8,740.67-
Difference From Loans .... $ 22,678.89
------------
TOTAL: $ 22,140.00
I checked the courthouse records, and it appears the owner is still living there (although, the online courthouse records are about 2-3 weeks behind in most cases). I've already started drafting the owner a letter, so we'll see what happens. Stay tuned.
Getting back into the swing of things
Caring for a couple of newborns is tough. Once you've gotten used to the sleep deprivation (hint: you never REALLY get used to not having enough sleep), you must then contend with the reality that everything else in the world is put on the backburner. One "luxary" my employer has for new dads is the fact they give you two weeks of paid leave (on top of any other vacation/personal days you accrue). I not only took those two weeks off, but also took an additional two weeks of vacation.
Even though 99% of my time off was spent caring for the the newborn twins in one capacity or another, I still managed to squeeze in a little time for REI. One major accomplishment was getting ALL of my tax documentation to our CPA. She said she'll e-file it (more on that in a minute), and we should get our refund in 7-10 business days. Since I have a lot of supporting documentation to include, she said she'll need to file a "paper" version as well later. I also spent some time writing a program to calculate whether a property is a good candidate for a Sub2/Owner-Financing. After doing so, I recalculated the most recent deal I turned down, and realized it was probablya good deal after all (I'll talk more about this in a separate post).
Now back to the CPA ...
My wife and I are considering using another CPA in the future. The one we currently have is okay, but we both notice she doesn't have a good track record of returning emails/voicemails in a timely fashion. We also notice several miscommunications in our dealings with her. As far as the poor response level, we can go literally days (and one time almost a week) without hearing back from her. In a professional business, this is totally unacceptable. As far as the miscommunication goes, the latest fiasco involved the e-filing. She had sent me an email early last week saying she only needed my bank info to send out the e-file. I called her up, and gave her the info. Several days passed, and I sent her a follow-up email to confirm the e-file was sent. After three days of no response, I finally got an email saying we need to sign an authorization form for the e-file. Huh?!?! All she said she needed was my bank info in order to "press the button for the e-file." Stuff like that is what I mean by miscommunication. Two reasons we got her were (1) she was close by, and (2) she seemed to understand REI as it relates to accounting needs. Time to shop around.
Even though 99% of my time off was spent caring for the the newborn twins in one capacity or another, I still managed to squeeze in a little time for REI. One major accomplishment was getting ALL of my tax documentation to our CPA. She said she'll e-file it (more on that in a minute), and we should get our refund in 7-10 business days. Since I have a lot of supporting documentation to include, she said she'll need to file a "paper" version as well later. I also spent some time writing a program to calculate whether a property is a good candidate for a Sub2/Owner-Financing. After doing so, I recalculated the most recent deal I turned down, and realized it was probablya good deal after all (I'll talk more about this in a separate post).
Now back to the CPA ...
My wife and I are considering using another CPA in the future. The one we currently have is okay, but we both notice she doesn't have a good track record of returning emails/voicemails in a timely fashion. We also notice several miscommunications in our dealings with her. As far as the poor response level, we can go literally days (and one time almost a week) without hearing back from her. In a professional business, this is totally unacceptable. As far as the miscommunication goes, the latest fiasco involved the e-filing. She had sent me an email early last week saying she only needed my bank info to send out the e-file. I called her up, and gave her the info. Several days passed, and I sent her a follow-up email to confirm the e-file was sent. After three days of no response, I finally got an email saying we need to sign an authorization form for the e-file. Huh?!?! All she said she needed was my bank info in order to "press the button for the e-file." Stuff like that is what I mean by miscommunication. Two reasons we got her were (1) she was close by, and (2) she seemed to understand REI as it relates to accounting needs. Time to shop around.
Saturday, February 11, 2006
OT: I'm Back
Wow. Hard to believe it's been almost three weeks since my last entry. I've been extremely busy with our newest additions. The twins arrived on 1/24. They weighed 6 lbs. 5 oz. and 7 lbs. 4 oz. - no wonder my wife was in such a miserable condition the last month of her pregnancy!
I remember the sleep deprivation I had after my daughter was born and it seems to be even worse with the twins. They seem to have a conspiracy against us at times as one will be fast asleep and the other is up crying. I think the most we've slept in any 24hr. period since their birth has been 5 hours - with an average of about 4 hours. Somehow, I've gotten used to the little amount of sleep (I don't know how, though).
As far as REI goes, I've still managed to keep parts of my business going. I have an automated system that queries daily MLS listings and produces a report. It will also flag any properties that meet my strict criteria as potential leads. So far, I've only gotten one property to meet my strict crteria and it was purchased the day iot came on the MLS.
I also gathered all my tax documentation for 2005 and will be giving it all to my CPA to process and file. I am lost in all the IRS jargon, so I'll let my CPA prepare and file my personal return this year. Based on my expenses/income from our business and my 2004 return, she estimates we'll get back a sizeable amount. I certainly hope so.
I remember the sleep deprivation I had after my daughter was born and it seems to be even worse with the twins. They seem to have a conspiracy against us at times as one will be fast asleep and the other is up crying. I think the most we've slept in any 24hr. period since their birth has been 5 hours - with an average of about 4 hours. Somehow, I've gotten used to the little amount of sleep (I don't know how, though).
As far as REI goes, I've still managed to keep parts of my business going. I have an automated system that queries daily MLS listings and produces a report. It will also flag any properties that meet my strict criteria as potential leads. So far, I've only gotten one property to meet my strict crteria and it was purchased the day iot came on the MLS.
I also gathered all my tax documentation for 2005 and will be giving it all to my CPA to process and file. I am lost in all the IRS jargon, so I'll let my CPA prepare and file my personal return this year. Based on my expenses/income from our business and my 2004 return, she estimates we'll get back a sizeable amount. I certainly hope so.
Tuesday, January 24, 2006
Home prices even more overvalued
Here is yet another in a long line of reports suggesting a lot of housing markets in the nation are WAY overvalued (and some even undervalued by a good amount).
The Top-10 Overvalued Markets:
1. Santa Barbara-Santa Maria CA - 86%)
2. Naples FL (72%)
3. Modesto CA (71%)
4. San Diego CA (70%)
5. Stockton CA (64%)
6. Riverside-San Bernardino CA (64%)
7. San Jose CA (61%)
8. Sacramento CA (59%)
9. Vallejo-Fairfield CA (58%)
10. Los Angeles-Anaheim CA (57%)
The Top-10 Undervalued Markets:
1. El Paso TX (-26%)
2. McAllen-Edinburg TX (-21%)
3. Fayetteville NC (-18%)
4. Memphis TN (-18%)
5. Augusta GA (-17%)
6. Little Rock AR (-17%)
7. Pittsburgh PA (-14%)
8. Indianapolis IN (-14%)
9. Dallas TX (-14%)
10. Houston TX (-13%)
It's no real surprise that 9 out-of-the 10 overvalued markets are in California. What is also not surprising for those who've been following the trend is that Texas has 4 out-of-the 10 top undervalued markets, including the top two. Last I heard, the Austin-San Marcos-Round Rock area was about 5-6% undervalued, so we are probably in the top-20 or top-25 undervalued markets. If that wasn't enough to get the swarms of California real estate investors in this state. :-/
The Top-10 Overvalued Markets:
1. Santa Barbara-Santa Maria CA - 86%)
2. Naples FL (72%)
3. Modesto CA (71%)
4. San Diego CA (70%)
5. Stockton CA (64%)
6. Riverside-San Bernardino CA (64%)
7. San Jose CA (61%)
8. Sacramento CA (59%)
9. Vallejo-Fairfield CA (58%)
10. Los Angeles-Anaheim CA (57%)
The Top-10 Undervalued Markets:
1. El Paso TX (-26%)
2. McAllen-Edinburg TX (-21%)
3. Fayetteville NC (-18%)
4. Memphis TN (-18%)
5. Augusta GA (-17%)
6. Little Rock AR (-17%)
7. Pittsburgh PA (-14%)
8. Indianapolis IN (-14%)
9. Dallas TX (-14%)
10. Houston TX (-13%)
It's no real surprise that 9 out-of-the 10 overvalued markets are in California. What is also not surprising for those who've been following the trend is that Texas has 4 out-of-the 10 top undervalued markets, including the top two. Last I heard, the Austin-San Marcos-Round Rock area was about 5-6% undervalued, so we are probably in the top-20 or top-25 undervalued markets. If that wasn't enough to get the swarms of California real estate investors in this state. :-/
Monday, January 23, 2006
On Hold
This Wednesday is D-Day (aka, "Delivery-Day"). For about the past month, my wife and I have both expected her to deliver the twins any day now. On Wednesday, my wife is scheduled to deliver, regardless if the twins want to come into this world then or not. :-)
Over the past 2-3 weeks, I've switched gears from concentrating a lot of my free time to REI to concentrating on our soon-to-be arrivals. I have only one bandit sign that is still hanging, and haven't gotten a call since that last deal I talked about a week or so ago. I'll definately be out-of-commission until this time next week, and I fear that it will probably be longer than that. I have a couple of systems in place to keep a small part of my business going, but the major marketing and deal-making parts will definately be put on-hold for a while.
I'll try to post when I can in the next week or two, but I doubt I'll have the time (and what time I do have will be spent on sleeping, I'm sure). ;-)
Happy investing everyone!
Over the past 2-3 weeks, I've switched gears from concentrating a lot of my free time to REI to concentrating on our soon-to-be arrivals. I have only one bandit sign that is still hanging, and haven't gotten a call since that last deal I talked about a week or so ago. I'll definately be out-of-commission until this time next week, and I fear that it will probably be longer than that. I have a couple of systems in place to keep a small part of my business going, but the major marketing and deal-making parts will definately be put on-hold for a while.
I'll try to post when I can in the next week or two, but I doubt I'll have the time (and what time I do have will be spent on sleeping, I'm sure). ;-)
Happy investing everyone!
Tuesday, January 17, 2006
Poised for a Boom
I was watching the local news last night, and they did a short segment on the area housing market. Basically, it was the same old "real estate market is undervalued" mantra, but one thing stuck in my head. The reporter was asking a local Realtor® a few questions, and ended the segment with a question "The bottom line?" to which the Realtor® answered "If you are going to buy a home in central Texas, now is the time." Now this wasn't really news to me or others in the local area, but it did drive home a simple fact: the Texas real estate market is poised for a boom. Appreciation rates have been pretty stagnant the last five years, and only now are seeing positive growth. One local investor I spoke with recently said market appreciation has averaged about 4% since last year, which seemed rather high to me from what I've seen. While I am not big on speculation, I do think that now is the right time to buy real estate in the Austin metroplex. I've seen a lot of growth in the area in the last year, and with the addition of Highway 45 and TX130, things will only get better.
Maybe I shouldn't be passing on some of these deals so quickly. :-/
Maybe I shouldn't be passing on some of these deals so quickly. :-/
Sunday, January 15, 2006
Investor, Recent Deal, and an Old Deal
Well, it turns out this investor I've been talking about recently is very experienced. I did some google searching, and found lots of information about him that definately leads me to believe he has been doing this for some time. While doing this research, I also gave hin the info of the deal I passed by last week. After a day or two, he got back with me and said it wouldn't work for him either. So it's good to know my due diligence resulted in the same conclusions as his: no deal.
I also had some downtime yesterday (while my daughter and wife took a nap) to revisit a deal I passed up last summer. I still don't know why I'm so hung up on this one property - maybe because it makes a good trial to base my figures on??? Anyway, I played with some numbers and figured the most profit I could hope to make from the deal would be $12,000, and this was with a lot of wishful thinking. For example, I would have to sell via owner-carry with an 11% loan. Not sure if that would even be feasible in my market even for people who can't qualify conventionally. during the two year loan term (it has a balloon at the end), I could either invest the monthly CF elsewhere or reinvest it in the form of added principle payments. It turns out, by reinvesting the monthly payments, I would pocket an additional $1,000 after two years in debt paydown / equity buildup. Again, there were just a lot of uncertainties, though, that could really put a dent in the net profit that I would need to iron out first. Still it really exercised my brain in owner-carry financing.
I also had some downtime yesterday (while my daughter and wife took a nap) to revisit a deal I passed up last summer. I still don't know why I'm so hung up on this one property - maybe because it makes a good trial to base my figures on??? Anyway, I played with some numbers and figured the most profit I could hope to make from the deal would be $12,000, and this was with a lot of wishful thinking. For example, I would have to sell via owner-carry with an 11% loan. Not sure if that would even be feasible in my market even for people who can't qualify conventionally. during the two year loan term (it has a balloon at the end), I could either invest the monthly CF elsewhere or reinvest it in the form of added principle payments. It turns out, by reinvesting the monthly payments, I would pocket an additional $1,000 after two years in debt paydown / equity buildup. Again, there were just a lot of uncertainties, though, that could really put a dent in the net profit that I would need to iron out first. Still it really exercised my brain in owner-carry financing.
Friday, January 13, 2006
Experienced Investor?
Recently, I met a local investor online at one of the REI web sites I frequent. The person seems very knowledgeable with REI, and I felt he would be a great person to not only learn from, but to flip deals to that I don't want. In reading both his direct emails to me and posts on the message board, I got the feeling he has done many deals in his career. He said his strategies are to buy Sub2 and sell via owner-carry financing, which is EXACTLY what I want to do.
The other day, I was looking at our county's courthouse records and an idea hit me. I thought "why don't I look up the entire history of all courthouse records with this person's name to see how many and what type of deals he has done." When I did a search of all records - not just real estate - from 1983 to the present under this person's name, I got only two records: the first one is where he submitted an assumed name (DBA) and the second was a personal residence. I tried his name and DBA for both grantor and grantee, but same thing - the ONLY real estate records that came back involved his lone personal residence.
My first thought was that maybe he hides the transactions in a land trust, but I remembered in one of our conversations that he specifically said he doesn't use land trusts. I guess two other alternatives would be that (1) he has never done any transactions in the county in which he lives (doubtful), and/or (2) he owns a corporation (that was created outside this county) that buys the properties (very possible).
I really believe he is a genuine RE investor from the way he talks, but I'll tread softly until I know how much real-life (and not book-smarts) he has regarding RE investing.
The other day, I was looking at our county's courthouse records and an idea hit me. I thought "why don't I look up the entire history of all courthouse records with this person's name to see how many and what type of deals he has done." When I did a search of all records - not just real estate - from 1983 to the present under this person's name, I got only two records: the first one is where he submitted an assumed name (DBA) and the second was a personal residence. I tried his name and DBA for both grantor and grantee, but same thing - the ONLY real estate records that came back involved his lone personal residence.
My first thought was that maybe he hides the transactions in a land trust, but I remembered in one of our conversations that he specifically said he doesn't use land trusts. I guess two other alternatives would be that (1) he has never done any transactions in the county in which he lives (doubtful), and/or (2) he owns a corporation (that was created outside this county) that buys the properties (very possible).
I really believe he is a genuine RE investor from the way he talks, but I'll tread softly until I know how much real-life (and not book-smarts) he has regarding RE investing.
OT: Healthcare Sucks Today!
I'm going to go against the grain here a little and post something that has very little to do with RE investing - healthcare in the United States today. Now this is only my opinion from my own personal experience - others may very well have a differing viewpoint.
As most of my readers know by now, my wife is expecting twins any day now, so we've really had to deal with the medical industry pretty close the last 9+ months. Much of what I have to comment about in this blog entry deals with the healthcare we've (well, really she) has received in that timeframe.
There are two major issues I have with healthcare (costs and quality of service), and they are so closely related to one another that it boils down to really one problem: money. To digress a bit, when I was talking with our CPA at our last meeting, we got on the subject of healthcare. I work in a Fortune 500 company that is global and is pretty solid by most standards. I still have to pay a pretty good chunk each month towards my medical, dental, and vision plans. Up until a few years ago, I would pay a modest co-pay each time I visited a healthcare provider on top of the monthly payments. Any overages above 10% were paid by my insurance company. Sice then, my coverage has morphed into me paying about 3x more a month, and my co-pay is now a straight percentage (which is usually a lot higher than with the old way). When talking with my CPA, I learned I actually have it pretty damned good. She was saying her and her husband (who is a teacher) pay over $600 a month for BASIC medical-only coverage. I about fainted! Besides education (especially for college), medicine has got to be the fastest growing industry out there in terms of costs.
But that's just one issues.
The other issue I have is with the quality of service. Now, before anyone jumps on my back about who is to blame: doctors, administrators, insurance companies, etc., I want to say that my sister is a physician and I've had countless talks with her about this point-blank. The thing is it doesn't matter who is to blame - what matters is there is a serious problem with quality of service today and it seems no one who can do anything about it really gives a damn. What happens is that doctors are coupled with insurance companies due to the differing medical plans patients have. They have to hire complete staff in order to handle all the insurance claims and general paperwork. This cuts into their bottom line, so they need to see more and more patients - usually overbooking their day. This causes both poor quality of service, since they get behind due to longer-than-expected visits, emergencies, etc. Who is ultimately put on backburner in all this is the patient themself, though. And, again, I have firsthand knowledge, especially over these last 9+ months.
Thus we're paying more-and-more money for less-and-less quality of service. Point the finger to whomever you feel is to blame, but I think we can all admit there is a definate problem today in the healthcare industry.
My most recent examples?
1. We went to see my wife's OB/GYN for a scheduled appointment. We rushed to get there on time, since it's a 20 mile drive one-way, and the office has a 15 min past your appointment time limit or they will reschedule you. We sit in the waiting room for a good 30 mins before they call us back. The nurse then does vitals on my wife, and tells us we have to wait for the doctor, who is running behind. An hour - yes, hour - later, we see the doctor. My wife brings a VHS tape so they can videotape the sonogram. They have only allowed us to tape the sono a few times as they are usually in too much of a rush. Bingo! Same thing today. The doctor is behind and does what she needs to do and leaves. Total time with patient: 10 mins. My wife had some questions, also, but my doctor said she could only answer a couple of them, and to have my wife talk to the physician assistant with other questions.
2. My wife also sees another doctor about her pregnancy (lon story). just about the same thing there, too. Rush to get there, wait for a while, and feel like we are being put through a speedy buffet line when we do get to see the doctor.
Okay, now back to the real intention of this blog ...
As most of my readers know by now, my wife is expecting twins any day now, so we've really had to deal with the medical industry pretty close the last 9+ months. Much of what I have to comment about in this blog entry deals with the healthcare we've (well, really she) has received in that timeframe.
There are two major issues I have with healthcare (costs and quality of service), and they are so closely related to one another that it boils down to really one problem: money. To digress a bit, when I was talking with our CPA at our last meeting, we got on the subject of healthcare. I work in a Fortune 500 company that is global and is pretty solid by most standards. I still have to pay a pretty good chunk each month towards my medical, dental, and vision plans. Up until a few years ago, I would pay a modest co-pay each time I visited a healthcare provider on top of the monthly payments. Any overages above 10% were paid by my insurance company. Sice then, my coverage has morphed into me paying about 3x more a month, and my co-pay is now a straight percentage (which is usually a lot higher than with the old way). When talking with my CPA, I learned I actually have it pretty damned good. She was saying her and her husband (who is a teacher) pay over $600 a month for BASIC medical-only coverage. I about fainted! Besides education (especially for college), medicine has got to be the fastest growing industry out there in terms of costs.
But that's just one issues.
The other issue I have is with the quality of service. Now, before anyone jumps on my back about who is to blame: doctors, administrators, insurance companies, etc., I want to say that my sister is a physician and I've had countless talks with her about this point-blank. The thing is it doesn't matter who is to blame - what matters is there is a serious problem with quality of service today and it seems no one who can do anything about it really gives a damn. What happens is that doctors are coupled with insurance companies due to the differing medical plans patients have. They have to hire complete staff in order to handle all the insurance claims and general paperwork. This cuts into their bottom line, so they need to see more and more patients - usually overbooking their day. This causes both poor quality of service, since they get behind due to longer-than-expected visits, emergencies, etc. Who is ultimately put on backburner in all this is the patient themself, though. And, again, I have firsthand knowledge, especially over these last 9+ months.
Thus we're paying more-and-more money for less-and-less quality of service. Point the finger to whomever you feel is to blame, but I think we can all admit there is a definate problem today in the healthcare industry.
My most recent examples?
1. We went to see my wife's OB/GYN for a scheduled appointment. We rushed to get there on time, since it's a 20 mile drive one-way, and the office has a 15 min past your appointment time limit or they will reschedule you. We sit in the waiting room for a good 30 mins before they call us back. The nurse then does vitals on my wife, and tells us we have to wait for the doctor, who is running behind. An hour - yes, hour - later, we see the doctor. My wife brings a VHS tape so they can videotape the sonogram. They have only allowed us to tape the sono a few times as they are usually in too much of a rush. Bingo! Same thing today. The doctor is behind and does what she needs to do and leaves. Total time with patient: 10 mins. My wife had some questions, also, but my doctor said she could only answer a couple of them, and to have my wife talk to the physician assistant with other questions.
2. My wife also sees another doctor about her pregnancy (lon story). just about the same thing there, too. Rush to get there, wait for a while, and feel like we are being put through a speedy buffet line when we do get to see the doctor.
Okay, now back to the real intention of this blog ...
Sunday, January 08, 2006
Duplexes For Sale
I've covered the story of the following duplexes before in some earlier blog entries. I thought I'd show everyone the exact properties I was talking about. I guess my "instinct" about these properties may have bee justified as they are STILL for sale - even after several price drops. One, in fact, was off the market for a short period, but is back on. The area isn't what I would call very nice at all. I recall in Bronchick's Flipping Properties that one criteria for a property would be if you would feel safe in the area at night. Simply put, I wouldn't!
Property #1
Property #2
Property #3
Property #4
Property #5
Property #1
Property #2
Property #3
Property #4
Property #5
Friday, January 06, 2006
Sub2's Illegal?
Wow. Nothing amazes me more than people who are in the real estate profession everyday, and know less than I do about stuff. So, I finally got a call back from the title agency I called the other day. I had asked three detailed questions, and the lady answered all three. Here is basically what I asked and the response I got from the lady at the title company, who was forwarding the answers from her "veteran" closer:
Q: Does your company do double-closings?
A: Yes. Just make sure all the paperwork is squared away before hand, etc., etc.,
Q: Does your company handle closings with seller financing involved, and what documents will you need from me and my buyer?
A: Yes, we do closings involving seller financing. She wasn't sure what documents I was talking about, though, so that answer is still in limbo.
But the kicker was my third question ...
Q: Does your company handle closings where the buyer is taking the property subject-to the existing financing? Keep in mind, when I asked this question, I had to explain the difference between "subject-to" and "assumption".
A: No, we don't do those types of closings. In fact, those types of transactions are illegal in the state of Texas. Huh?!?! I didn't say anything after that point except "Thank you for getting back to me."
Okay, not only are subject-to deals NOT illegal in the state of Texas (or any other state, that I know of), but they happen all the time - every day. There is even a line on the HUD-1 settlement statement specifically dealing with subject-to financing (Line #503, I believe). Now, the lender CAN call a loan taken Sub2 due at their descretion, but there is ABSOLUTELY NOTHING ILLEGAL ABOUT IT.
The lady asked if I'd like to come ina talk face-to-face with them further to which I said 'yes', but that 'I would call them'. Ugh.
Q: Does your company do double-closings?
A: Yes. Just make sure all the paperwork is squared away before hand, etc., etc.,
Q: Does your company handle closings with seller financing involved, and what documents will you need from me and my buyer?
A: Yes, we do closings involving seller financing. She wasn't sure what documents I was talking about, though, so that answer is still in limbo.
But the kicker was my third question ...
Q: Does your company handle closings where the buyer is taking the property subject-to the existing financing? Keep in mind, when I asked this question, I had to explain the difference between "subject-to" and "assumption".
A: No, we don't do those types of closings. In fact, those types of transactions are illegal in the state of Texas. Huh?!?! I didn't say anything after that point except "Thank you for getting back to me."
Okay, not only are subject-to deals NOT illegal in the state of Texas (or any other state, that I know of), but they happen all the time - every day. There is even a line on the HUD-1 settlement statement specifically dealing with subject-to financing (Line #503, I believe). Now, the lender CAN call a loan taken Sub2 due at their descretion, but there is ABSOLUTELY NOTHING ILLEGAL ABOUT IT.
The lady asked if I'd like to come ina talk face-to-face with them further to which I said 'yes', but that 'I would call them'. Ugh.
Hard to say "No Thanks"
This most recent deal was really an act of not taking a property emotionally for me. I tried just about every scenario imaginable to make this deal work, but the numbers would always come up negative for me. Straight rent, owner-carry, refi, you name it, and I tried it. The problem is that the 15yr existing note just elevates the monthly payment so much that everything I've tried to do creatively just wouldn't work. I thought maybe taking Sub2, renting it out for going rental price, and refinancing in a year to a 30yr note would enable to at least make a profit on the backend, but even that went south - quickly.
I finally called the owner last night as promised and explained to her that the financials just didn't work out for me. I told her that I knew other investors that MAY be interested, but I couldn't promise her anything. She thanked me for at least trying, and I felt so bad, I told her that if it came down to crunch time and she absolutely HAD to sell it to please call me and I'd do whatever I could to help her out - even if it meant a loss for me (I couldn't believe I said this). She just sounded so kind in her communication with me in both phone conversations that I knew she would be easy to work with.
I'll try to fish her property to some local investors to see if anyone with strong cash reserves can help her out. I hope for her sake they can, but we'll see. Dang!
I finally called the owner last night as promised and explained to her that the financials just didn't work out for me. I told her that I knew other investors that MAY be interested, but I couldn't promise her anything. She thanked me for at least trying, and I felt so bad, I told her that if it came down to crunch time and she absolutely HAD to sell it to please call me and I'd do whatever I could to help her out - even if it meant a loss for me (I couldn't believe I said this). She just sounded so kind in her communication with me in both phone conversations that I knew she would be easy to work with.
I'll try to fish her property to some local investors to see if anyone with strong cash reserves can help her out. I hope for her sake they can, but we'll see. Dang!
Thursday, January 05, 2006
Another Deal
As I said in my previous blog entry, I got a call from a lady wanting to sell her house. My guesstimations were pretty much on spot (actually, a little higher, except I didn't factor in PMI in the loan). After talking with the lady, I found out both her and her sister bought the place, and her sister moved out last month to her own place. The lady said she can't continue staying there, since the payments are too high for just her. I told her I was an investor, and couldn't buy houses at retail price. She said that she didn't want any money for the property - she just wants to get rid of it. I figured the balance on her loan was around $113,500, and was surprised when she said it was currently $111,700. The deal will be very slim no matter what exit strategy I employ. I would almost have to take over her payments as a conventional loan would cost me $$$, especially, since the LTV is so high (~90%). I guessed she was paying about $1,386/mo (PITI), and she confirmed she is paying $1,400/mo.
So, what to do ... what to do ... I want this property badly for three main reasons:
1. It's a 15yr loan. This means the equity build-up and debt pay-down will occur a LOT faster than with a 30yr loan. It also means the payments will be higher, too, which is part of the problem I'm having on an exit strategy.
2. Based on the date of the loan, the fact it's only 15yrs, the monthly payments, taxes, insurance, and PMI, I figured the interest rate is <5% (actually, I figured 4.75%). With that kind of interest rate, it makes #1 above a lot more attractive.
3. It has about $15k-$20k of equity. Percentage-wise this isn't good ($112k/$128k = 88%), but the equity amount is still nice - especially given #1 and #2 above as it will only go down quicker.
The problem being a straight rental is this ... Rents in the area range from $950-$1200, with comps of $1,000 closer to this property. I could rent it out with a higher price tag, but it may sit longer, too - negating my efforts. At $1,000/mo, I'd have negative cashflow to the tune of $400/mo. Ouch! The good news is the property is located to a new university extension, so I could cater the property to students, since it has 4 bedrooms and 2 baths.
Another thing I could do is sell via owner-financing. I really need to see a lawyer about this first, though, as I still have some reservations about it - especially since it will have an underlying loan that could be called by the lender (this sense of fear is exacerbated knowing the original loan only had a 4.75% interest rate). If I did this, I could sell it for $135k or so. Even at that amount, I'd still have to ask for a high downpayment ($10k or so) and/or a very high interest rate (10% or so) on the new note.
The good news in all this is that (1) I still need to see if the lady is willing to let me take over the payments, and (2) she said she doesn't necessarily have to sell quickly (I specifically asked her if she needed to sell within a few days or could wait for 30-45 days, if need be, and she said she could wait). So I could realistically sign a contract for a 30-45 day close, which would give me more time to arive at a decision.
So, what to do ... what to do ... I want this property badly for three main reasons:
1. It's a 15yr loan. This means the equity build-up and debt pay-down will occur a LOT faster than with a 30yr loan. It also means the payments will be higher, too, which is part of the problem I'm having on an exit strategy.
2. Based on the date of the loan, the fact it's only 15yrs, the monthly payments, taxes, insurance, and PMI, I figured the interest rate is <5% (actually, I figured 4.75%). With that kind of interest rate, it makes #1 above a lot more attractive.
3. It has about $15k-$20k of equity. Percentage-wise this isn't good ($112k/$128k = 88%), but the equity amount is still nice - especially given #1 and #2 above as it will only go down quicker.
The problem being a straight rental is this ... Rents in the area range from $950-$1200, with comps of $1,000 closer to this property. I could rent it out with a higher price tag, but it may sit longer, too - negating my efforts. At $1,000/mo, I'd have negative cashflow to the tune of $400/mo. Ouch! The good news is the property is located to a new university extension, so I could cater the property to students, since it has 4 bedrooms and 2 baths.
Another thing I could do is sell via owner-financing. I really need to see a lawyer about this first, though, as I still have some reservations about it - especially since it will have an underlying loan that could be called by the lender (this sense of fear is exacerbated knowing the original loan only had a 4.75% interest rate). If I did this, I could sell it for $135k or so. Even at that amount, I'd still have to ask for a high downpayment ($10k or so) and/or a very high interest rate (10% or so) on the new note.
The good news in all this is that (1) I still need to see if the lady is willing to let me take over the payments, and (2) she said she doesn't necessarily have to sell quickly (I specifically asked her if she needed to sell within a few days or could wait for 30-45 days, if need be, and she said she could wait). So I could realistically sign a contract for a 30-45 day close, which would give me more time to arive at a decision.
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