Almost Official - Closing Next Monday

Well, we got word from our agent that the docs have been sent to the Seller to sign-off on, and we should be closing on Monday as planned. There were a LOT of issues between the time we submitted this offer until now that almost sunk this deal. Once I know for sure the house is ours, I'll post all the gorey details of what we went through to get it.

In the meantime, I thought I'd post some pictures of the house for anyone interested.

The first picture shows the front elevation of the house. Since it was a former model home, the builder went all-out with the upgrades - including a hefty amount of landscaping. You can barely make out a little concrete bench in the front near the driveway, but the waterfall is almost completely hidden from the other shrubs:



The next picture is the kitchen. It has dark granite counter tops and stainless steel appliances. When we first decided to make an offer on the home way back in September, we inquired about a lot of the stuff that was still there, like the stainless steel fridge. We found out then it was all included as well:



Next, is a picture of the family room off of the kitchen. The entire first floor is the same tile (except the master bedroom, which is carpet). The stone fireplace was also an upgrade the builder put in (usually there is no fireplace, or something cheesy). Notice the curtains and rods. Like the fridge, these were things that were left behind we get to keep. Also, the back has a long, covered, stained concrete patio that had these drapes hanging all around, which you can make out from the family room window:



The next picture is the game room upstairs. It's actually quite large (26'x16'), and has wood floors. We have no game room in our current home, and use a "spare" bedroom for the kids to play in, so this will be a welcome change:



Off of the other end of the game room is the media room. It has all the connections already, so now we're just going to be on the hook to buy a TV for it:



Next on the list is the master bedroom. The picture doesn't really give it justice, though, as it is really nice. It has French doors leading to the rear patio.



The Master Bath is next. It has some very nice ceramic tile, among other upgrades. The two things we didn't particularly like in the Master Bath were the closet and the shower. The closet is decent, but my wife and I always wanted a large closet. Same with the shower. We have one of those standard, square showers (like this one), instead of an extended shower with a seat. But I'm not complaining (too much).



I have a few pictures of the three secondary bedrooms, but they were all pretty much the same. One of the things we liked about the home was the large secondary bedrooms. The ones in our current home are rather cramped, so this will be a blessing for the kids.

This home was a former model home, and I managed to find some pictures of the home when it was a model. No one has lived in it before, either. The builder sold it to a model home financing company, who has been trying to sell it since earlier this year. Once we close on the home, I'll discuss more about the history and other details. Here are the pictures when it was a model home:


Living Room and Dining Room


Game Room and Media Room


Kitchen and Breakfast Area


Family Room w/Fireplace


Master Bath


Master Bedroom

New Purchase

I haven't posted here in eons, but thought I'd add this post to get people updated. We haven't purchased any additional investment properties due to being busy in other ventures at the moment. However, we ARE in the process of purchasing a new personal residence. What is interesting about the purchase of this property is the backdrop of the real estate meltdown that has and still is occurring in this country.

Texas in general and Austin specifically hasn't seen the drops in market value other parts of the country are experiencing. The main reason for this is that our area never experienced the upshot in home values the prior 5-10 years those other areas experienced, either. It's interesting but most people here were shaking their heads at some of the prices in California and Florida during those "boom" years.

Anyway, back to the point of this post ...

My wife and I have been looking for a new personal home since about May of this year. We came across a 4,000sf foreclosure in a nice neighborhood back in late May, but lost out on it. It only needed some cosmetic work and was being sold for $260,000. It's FMV at the time was around $300-310k. We bid $240k, but got outbid at the last minute by someone for $250k. Between then and late September, we lost out on three other homes - a relocation, an inventory home, and another foreclosure.

Then, my wife came across an absolutely stunning home. It was a former model home in a new and still growing neighborhood. It wasn't a foreclosure, but was still owned by a lender. We found out at the time the home had been sitting since Feb/Mar of this year and was originally listed for $345,000. It had gone through a few price drops during that span and was now listed for $279,000. Even with all the upgrades, location, the size, etc., it was still MUCH too high for us. So, we passed.

About two weeks later, my wife noticed they had dropped the price yet again - to $269k. While the price was still about $30,000 more than we wanted, we put an offer in anyway, figuring the worst they could say is "No" (or maybe "H-ll no!"). So we offered $240k for it and included some contingencies. A few days later, our agent notified us they had countered our offer (shock!). They offered $263k and threw out all of our contingencies. We countered at $250k, hoping they just wanted to get rid of it. No dice. They stuck to their guns as did we and the deal fell through.

Not two weeks later, I noticed they dropped the price down again, which I thought was rather quick. It was now listed at $255k, so we figured we'd re-introduce our last bid of $250k. This time they flat our rejected our offer with no counter. The $250,000 price was our absolute limit, regardless, so we didn't submit another offer.

We still kept an eye on the house, hoping with the "bad" season coming upon the market (i.e., the holidays) and such the Seller would lower their price again. We were both thinking this would happen in December at the earliest, and more likely not until January. However, two weeks to the day our last offer was rejected, my wife called me at work to tell me the price of the house had dropped by over $15k!!! I had just looked at the MLS the night before and it still had the old price, so they must have just dropped the price. We immediately notified our agent and submitted an offer for $240,000. A few days later we were told our offer was accepted!!!

Looking back on this deal, it doesn't take a rocket scientist to see the Seller lost a good chunk of change by not taking our earlier offer of $250,000. Not only did they lose $10,000 in the purchase of the home, but also a month's worth of holding costs (I'm guessing at least $1k).

During this time of dealing with the Seller we did a lot of research on the area, including home prices. We figure the original list price of $345,000 was laughable right now - even with a home like this all decked out with upgrades galore. However, as I mentioned earlier, our market hasn't taken a huge hit like most, so a FMV price of $300-$315k is probably more like it for this specific house. Even the builder is selling the same floor plan at a BASE price of $290k.

At the moment we are still waiting on our loan to be approved, so I can't say the house is a done deal. But I just wanted to share how in this climate there are MANY deals to be had for those that are patient and STICK TO THEIR CRITERIA. Don't become a motivated buyer - even if it's for you personal home.

Wow - Two posts in one month!

Just wanted to give an update on House #1. I had a repairman go over there to check out the range, and it turned out to be a faulty switch. So he replaced it and they now have a fully-working range. I picked up a garbage disposal Saturday and went with my FIL to replace it yesterday (Sunday). thinking it would be a 30-60 min job. It turned out taking a full 2hrs to finish as the old disposal was an absolute pain to get out. It's as if they hammered the #$%! thing in. But we got it replaced, and all is working. So, I have two happy tenants again.

Also, as expected, my very lowball offer for the REO we were hoping to get for our personal residence was flat-out rejected with no counter. Matter of fact, the listing agent told my agent that the Seller refused to even negotiate at that low of a price. LMAO! Gotta love it.

Lastly, I'm working on moving my blog to a new location. It will be my actual domain, so I'm trying to work out all the kinks first. Once it's all up, I'll write a post here on the URL.

Belated Post

Wow. I can't believe I've been away from this blog for over two months now. A lot of things have happened during that period, too - probably too much to list. I finally got a tenant in House #1 back in May. They seem very good. They have told me on numerous occasions they want to purchase the property within the next 6-12 months. I'm not holding my breath as I've heard that line several times, but it'd be nice if they did. After getting settled in, though, they told me the garbage disposal is broke and the range is not working. I have a guy going over there today to figure out what is wrong with the range (hopefully, the last tenant didn't do anything on her way out and it will need replaced). I'm going to use another guy to replace the garbage disposal. I'd do it myself, but I've learned my time is more valuable to me these days (plus, if I screw it up it could end up costing me more $$$).

My wife and I put a bid in for a bank foreclosure. We bid $100,000 less than FMV (and about $60k less than list price), thus we figure our bid will be flat-out rejected, or, at best, countered. It doesn't need a lot of work, but has sat vacant since last November, so things may have broken due to not being used. It'll definitely need new paint and several light fixtures. We also want to put wood & tile flooring on the 1st level, redo the front landscaping, add crown moulding, and 100's of other small/medium projects. Afterwards, I plan to get it re-appraised and get a HELOC to pull out the cash we've spent on it. Since I was in the military many years ago, I qualify for a VA loan, which is the route we are going, therefore, %0 out-of-pocket costs (excluding CC's) on the purchase.

Time For Another Update

I figure I should throw another update on here to let the world know I'm still alive.

I still don't have House #1 sold or rented, but I'm not too worried after the past week. During that time, I've had a flood of calls about the house - all from potential renters. After telling them my rent price, most of them would answer "We'll get back to you", but some would actually say something along the lines of "Do you have anything else available for $100-$200 cheaper?" Of course, I don't at this time, but now I wish I would have kept House #2 for just this reason. It's almost like someone all at once let the flood gates open for people wanting to rent. I do have two parties who are still interested, and just picked up a lease app from one of them just today.

The other good news is that the loan on House #1 is an option ARM. Now, most people hear the word "ARM" today and get all panicked, but I'm actually GLAD I have an ARM on the property. When I refi'd the house in 2005, the ARM had an interest rate of about 6.5%, which wasn't bad for an investment property. Over those three years, I've watched it steadily climb to over 7.5%, which is one of the reasons we were so hoping to SELL it rather than RENT it again. However, something funny has happened these last few months. In January, I believe the rate was still somewhere in the 7-7.5% range. Then in February, it dropped to 6.75%, and dropped again in March to something like 6.25%. The other day, my wife called me at work to tell me the April statement shows a rate of 5.75%!!! That's even cheaper than our personal property's loan! Of course, I know being an ARM, it won't stay here forever, but with today's headlines about ARM fallouts, I figure it will hover around this area for at least another 9-12 months. The good news in all of this is that the almost 2% drop has increased my cash flow for the property. Add to that we now have the place listed for $100 more than before, and we now have well over $600/mo. cushion to work with. Of course taxes and insurance probably eat about $250-$300 of that, making it more like $350-$400/mo. (yes, there are other intangibles, too).

I know what many people are probably saying now and that's "but your last tenant left at the end of February and it's still empty, so you are LOSING money each month, not gaining it", and they are correct, but not as much as one would think. First, the tenant broke the lease, so I got to keep her deposit. That deposit covered the March payment (and probably most of April's as well). It's not even midway through April, and I have a ton of interested people looking to rent the house. Even if these two prospects don't pan out, I can always drop it down $100, and I'll probably have 2x as many people wanting to rent, so I'm not too concerned with it being empty for too long. Within a month or two, I'd be back to making a profit.

Another Busy Month (And It Ain't Over Yet)

This is one of the biggest reasons I don't post much anymore ... TOO BUSY!

House #1: Lease/Option?

I've had numerous people call and email about House #1 (I have it for sale and rent), but nothing seems to pan out. I even had one lady call me on St. Patrick's Day and we talked for a good 6-7 minutes about the house. The conversation was coming to a (positive) close, when I asked her her name. She said it was "Shamrock" and that her mother's name (who was going to be the actual buyer) was "Irish". She swore up-and-down that it was not a prank, but it was just TOO coincidental. Needless to say, I haven't heard from her since.

During the last couple of weeks, I also had time to repaint the exterior. The home is 3-side hardiplank, so I needed to use almost all of the 5-gallons of paint I bought. Very tiring work, but I finished this past weekend. I must say it looks 100x better now.

The good news is that I have another very interested buyer. I no longer get my hopes up until I get a signed contract, and I'm not about to do the same with this lady (even though she sounds honestly interested). I am to meet her at the house in the next couple of days, so she can view the inside. She said she wants to lease it for AT LEAST a year and then purchase it (depending on how things go in the next year). Before I could mention the words "Rent-to-Own", she did. I haven't told her yet about recent Texas legislation re: L/O's, but I plan to when we meet. I'll probably have her sign a regular 12-month lease and have her sign a 6-month option at the beginning of the lease and at the 6-month time period. The Texas Law stipulates that the contingencies are enforceable for a combined Lease w/Option to Purchase that is more than 180 days (6 months). Therefore, as long as I make the option period only 6-months, I am OK.

Business Ideas

I finally had enough seeing my ideas on a scrap of paper instead of on a store shelf, so I decided to be a little more proactive. I put some "feelers" out and am starting to get some positive feedback. One of the things I found out is that I can license my ideas, instead of going traditional route of bringing my idea to market by myself. Basically, I submit what is known as a Provisional Patent Application (PPA), which protects my idea for up to 12 months. I then license my idea to a manufacturer who will take the idea to market (i.e., manufacturing and distribution). They make money off of my idea, while I get a percentage of the sales (along with an upfront fee). Just one of the things I'm considering.

Update on House #1

After work yesterday, I met the husband to exchange checks and termination forms. He gave me the correct ones this time, so at least I made $100 for my efforts the past two weeks.

Right after that, I went home, changed, loaded up the car, and headed to House #1 to see what the deal is with the "mold" the lady's mother had mentioned. I also brought along a bottle of Tilex just in case. I get there and I can somewhat understand the lady's mentioning of the "mold", although, it was green spots and not black as she had told my wife. As I mentioned before, central Texas is known for it's high mold count. Just about anything that doesn't see constant sunlight will have mold growing on it. The thing about this type of mold is it usually just an eyesore and not a health hazard (i.e., it's not toxic). I get the bleach/soap solution ready and start scrubbing. About 2 minutes into it, I say "Screw this!" and get the bottle of Tilex and start spraying. Almost instantly the mold is gone. So, me being lazy, I decided to just spray the spots of mold instead of burning some calories. After about 10 minutes, I get a water hose, spray it off, and all is done. I'm still going to paint the exterior, though, as it has become weathered and could really use it. I figure the $100 I got from the couple will pay for the paint, and I should be done before the weekend (I hope).

Buyers who have a relative in RE

I briefly talked about the potential buyer for House #1. It turns out that her mother is a "retired" RE agent from out of state (IOW, she didn't have her license in Texas). The buyer told me this early on and in the back of my head I knew it would come back to haunt the deal - and it did. In the 2-3 weeks since the couple first "fell in love" with the house, I must have showed it to them at least three times, maybe four.

Well, last Friday we were to meet at the house and sign the contract. I get there and the wife has the contract and EMD waiting (the husband is not with her as he had another commitment all weekend). The bad thing, though, was that it was all filled out wrong and she was missing an addendum. So, I made the necessary corrections, and told her that she would need her husband to initial the corrections or redo the contract and have them both sign. Of course that meant at least another day of waiting.

Saturday, I realize my foolishness and call the wife to tell her that she will need to put down an option fee in order to hold the property in the meantime. She says that she is on her way out of town and won't be back until Sunday evening. I tell her that she has no interest in the property yet and that if someone else wants to buy it then I'll have no other choice but to accept their contract. She says if that's the case then there is nothing she can do to prevent it at the time.

On Monday, I haven't heard from either of them. I got picked for jury selection, so had to spend most of my time Monday in court. During a break, I called the title company to reassure myself of what all wee need to do to start escrow. On another break, I call the wife back, but get her VM, so I leave a message. About an hour later, I get a call back, but can't answer it since I'm in court. On the next break I answer the VM, and it's some man saying he's the buyer's father. He says that he wants to ask some questions about the house and to see if we will negotiate the price. WTF?!?! With hardly any time to talk, I call my wife and tell her to call back and see what the deal is. We had already negotiated a price that both of us agreed to.

A little while later I get in touch with my wife and she says the couple decided not to buy the house. It turns out the buyer's mother (the 'retired' RE agent) really influenced the couple enough so they backed out of the deal. My wife said she talked to the father first and told him we were all set to sign a contract but the buyer didn't fill it out correctly, but that the price was already set. She then talked to the mother who told my wife that it was overpriced and there was mold on the outside of the house. She then talked to the buyer who told my wife that they found cheaper houses in the area, and that this property was "too high" for them as they wanted to make some improvements later (totally opposite excitement from when I met with her).

It's apparant from backtracking the 3-4 days prior that the parents really got to the couple. I'm not sure if the mother told the buyer to intentionally fill out the contract wrong just to stall a little while she had time to look at the place (and the prices around the area, etc). Either way, we were both pissed as we feel we were conned by this couple - maybe not intentionally, but who knows. Of course, we learned a HUGE lesson in this process, which we will definitely not repeat.

The funny thing is the buyer told us that she would still give us the $100 option fee, and she put it along with a termination letter under the door mat. When I got it, I realized that on the check AND on the form, the buyers put "May 10, 2008" instead of "March 10, 2008". I'm supposed to meet the husband tonight to get a corrected copy of both, but not sure if he'll even show up.

Lessons learned? (1) Don't get hopes up even if the buyer seems overly excited about buying a property, since nothing matters until closing, (2) make sure ALL parties are present when filling out a contract as it leaves things "dangling", and (3) if the buyer is an agent, or has a relative that is an agent, understand that headaches will probably ensue.

While I was at the house, I looked around and noticed a few small patches of green, which could be surface mold, which can easily be removed with a bleach/soap solution. It's not like it was toxic mold. In central Texas this stuff grows just about anywhere that the sun doesn't hit. As far as overpriced, I did a check from a postcard I received from my agent showing market trend analysis for the subdivision. House #1 IS one of the highest-priced homes in the subdivision, but (1) it's right inline as far as price-per-sf, and (2) it has features most homes in the subdivision DON'T have, like stunning views in the back, no neighbors in the rear, and the largest 1-story floor plan.

The good that came out of this is that I plan to clean the few "mold" spots on the outside wall and repaint the entire outside. I'm also thinking about raising the price afterward and offer a $2k bonus to the buyer at closing. Additionally, I may spend about $30-$50 on some colorful flowers for the front to make it even more attractive.

Update

It's been a wild and crazy February and March looks like it will be no different ...

House #1: Tenant

This is a long story, and I don't have the time to write every detail. Basically, she wanted out, we had her sign a letter stating some conditions to break the lease, she signed it, she then reneged on it, the old lease went in affect, and she abandoned the place. A few days later, we get a letter from her basically saying she DIDN'T abandon the place, and if we try to contact her she'll sick her attorney on us for harrassment, etc. LOL!

House #1: On the Market

I put House #1 back on the market after tenant bolted. Thankfully, she didn't do any damage to the place, but it still needed about 5-6 hours of cleaning, which I finished over the weekend. We put it for both sale and rent to capture both audiences.

House #1: Prospective Buyer

Not two days after putting the signs in the yard, I got a couple interested in buying the place. The wife fell in love with the views and large backyard (which is what I try to emphasize in my marketing). I showed them the inside of the house and they wanted it even more. All this while I was still only about 1/4 way through cleaning the place. I called the wife last night and she says she and her husband were filling out a contract offer as we spoke. I'm going to try to meet them either tonight or tomorrow night to iron out the details. They said they aren't using an agent, and neither am I, so I'll save over $8,000 in commission fees, which I MAY use as leverage in the negotiations.

The Big Why?

This is the thing I'm really trying to find now. For the last 3-4 years, I've always had a notion of why I want to do REI, but never had a vision of it. I think this is the piece I've been missing (and it's a REALLY BIG piece). I got the book Getting Things Done by David Allen, and it has really opened my eyes on a few things I've been seriously neglecting. I'm only about 1/3 of the way through and I'm already feeling a since of change - upliftedness - in my psyche. A lot of things are going to happen in the next 30-45 days (I hope) and these changes will lead to bigger, and, perhaps, better things in my life.

Hiatus

I have been contemplating whether to continue this blog or not for some time now, and I think what I've decided is to just go on hiatus for a while (maybe even permanently). I am finding myself being pulled in about 10 different directions and just need some time to really gather my thoughts and see what path I need to go down. Work at my JOB was hectic last year, but slowed down over the holidays. Unfortunately (or fortunately), our project is slated for even more work the first half of this year, which means less "free" time at work to get anything done. My kids are at the age now where they are demanding more of my time to play, and read, and ask 100's of questions, so I need to spend more of my "free" time at home with them. And, instead of becoming a master of one, I feel myself becoming a 'jack of all trades' - or, more appropriately, thinking of numerous business ideas, but failing to execute any of them.

I read an article in the local Sunday paper last week about a guy who wrote a book, appropriately titled "Getting Things Done". Supposedly, he has a revolutionary way of prioritizing your life in order to not only excel, but to provide more time to enjoy the things that matter most. I'm going to order the book ASAP as it is exactly what I need. I also got in touch with the seasoned RE investor who pitched at the investor's meeting I went to last week. Hopefully, we can meet one day this week or next so that I can pick his brains a little on how he "made it" - not so much in the technical sense, but in the organizational sense. I'm also trying to figure out the BEST business idea from the lot I have and running with it.

So, lots of things on my plate this year, and not a whole lot of time to devote to my blog. It's been a joyous, and sometime turbulent, 3+ years writing hear, but I just feel I need to close a chapter in my life and open another book. I thank everyone for helping me by giving worthwhile advice over the years, and I wish those same people all the best in their endeavors. My email account will still be active and I will continue to read messages there every day, so don't hesitate to write.

Best of luck to everyone!

Investor's Meeting

I went to my first meeting with the investor's group I talked about here. I have to say I wish I had known about this group long before now. Not only are the meetings and membership FREE, but they also served free food and drinks at the meeting. You can't beat that! I told a friend of mine, who is also a RE investor, about this meeting a couple weeks ago, and he also made it there.

The group's moderator started the meeting by showing a slide of the night's discussion topics. The only downside (if you want to call it that) about the group is that it focuses on all kinds of investing - mostly stock and options trading. So the meeting was about 95% about the moderator's activities since the last meeting (earlier this month). The very last part of the meeting was a presentation by a seasoned RE investor, who was going to talk about the Austin RE market. The moderator had the RE investor and another gentlemen stand up as they were two of the "big" players in the group. According to the moderator, the RE investing had been doing flips and what-not since right after high school. I kid you not, he looked about my age or older, which tells me he's been doing this a LONG time. Unfortunately, the moderator's presentation dragged on and I had to cut out before listening to the RE investor's presentation.

Anyway, the moderator does nothing but trade stocks and options (and only a very small bit of RE investing). As he was going through his presentation I was dumbfounded at how much knowledge this guy had. He was throwing up articles and charts and graphs and so on and talking terms I've never heard of before. The two things that really caught my eyes and ears was the level at which this guy "plays". He brought up one slide that showed a single stock he'd bought and sold in which he made $10,000 in less than a day. He's not a day trader, according to him, but just happened to get in on a stock whose company was getting bought out later that day. In-between his Greek terminology, he mentioned that he bought five blocks of 500 shares each of the stock, which on the chart was trading at about $20/share. That equates to $50,000 to me and this is just one of gazillion stocks he owns.

Another thing I liked about the guy is he really knew what he was talking about when it came to fundamentals. He had articles and reports and so on from analysts and who knows who supporting his decisions. But he was also humble about it and made sure we knew that he DID have down days/weeks, too.

A couple of things I wrote down that he mentioned in particular had to do with some of his plays. Disclaimer: I am NOT giving any advice here - only what this guy had mentioned. Basically, he started getting heavy into shipping companies recently. Not air freight companies, but companies who ship large items over the water. He had put up a chart on the group's site a couple of weeks ago, and mentioned that even during the time he posted the chart until the meeting last night, several of the stocks had already jumped another 20% (and this was already on top of having big gains before). He also said that grain ETF's, like DBA and RJA are looking good.

The reason? China.

China is supposedly becoming a HUGE consumer and the demand for commodities is growing exponentially in the country. This, according to him, was the reason he got into the shipping stocks and the reason they have risen when most of the market is falling. Again, there were a lot of articles and charts and what-not he put up to support all this assumptions, but just him showing the charts on many of the stocks and their performance the last few weeks was enough telling for me.

His big prognostication is that beef will be HUGE the second half of the year. He even had an article showing a press release from Tyson in which they said that the demand is going through the roof and prices will raise accordingly. Another article showed that the people in China will be the main influence as they are showing no resistance to already growing prices there and the demand is actually seen as growing.

All-in-all is quite interesting to see how this guy goes through his daily routines of getting up early, investigating resources on the web and other places, looks at financials, etc., and makes his calls. He has no formal job - just plays the market (and does it well). I was definitely impressed.

Offer Submitted

I hesitate to even mention this deal as it's going to be such a long shot. I submitted an offer on the property I mentioned in the previous post. I won't go through posting all the numbers as it will probably all be for naught. My agent said she sent it on to the listing agent, so we'll see what the bank has to say about it in the next day or so.

Edit: Within an hour of posting this entry, my agent called and said the listing agent called her to say that there were multiple offers on the property, but the listing agent wouldn't give any details (i.e., what the offers were). I suppose the listing agent is telling the truth even though it's been on the market for over a month now. IMHO, it's a nice house - especially for the price. I told my agent to keep my offer in for now, and I'll discuss with my wife whether we want to up our offer.

Deal In The Works

I ran across a bank REO last week which looks to be a real good deal. I won't go into much detail now as my agent hasn't submitted my offer yet. However, I will say that this particular property will probably end up being our personal residence instead of an investment property. My plan right now would be to get it under contract and then immediately sell or rent our current personal residence. Once we close on the new property, I would immediately do a cash-out refi. Then, we'd live in it for two years and sell for a substantial profit. Of course, a LOT of things need to go right for this deal to work. Right now, my wife isn't too thrilled about the house itself (as far as living in it).

My agent sent me comps and even at the low end this property will be a gem. It doesn't need ANY work from what I can see, but I would definitely make some cosmetic improvements over the two years to add more value (e.g., wood flooring, finish the wood fencing, add a roof to the patio).

The offer I submitted was pretty low and my agent initially balked at it, saying the bank would probably not even counter it (other than a total rejection). But I gave her a list of reasons for my low offer. Seriously, I doubt the bank would jump on the offer, but it's a starting point to start negotiations. I have a meeting with the loan officer today to go over my options. Having been in the military, I'm eligible for a 0-down VA loan, which right now is about 5.5%, but we'll see what works out best.

*** FOR SALE: REI Courses ***

I ran across three real estate investing courses in my desk while getting things cleared away for tax time. I figure I haven't opened any of them in about two years, so it's probably better to unload them (the wife would love it, too, as it's less "clutter"). Until I figure out how to get PayPal configured on my blog, any interested parties can just email me at the address in my profile. Here are the three courses:

Wholesaling for QUICK Cash (Steve Cook)

An indepth "how to" book on flipping houses by one of the masters. This is the previous edition as Steve now has a new edition for sale on his web site. You can view details on the course here. The edition I have has 226 pages, and includes a CD with all the forms you need to get started.

Rehabbing for BIG Cash (Steve Cook)

Learn all the nuts-and-bolts about how to rehab properties from someone who has "been there and done it." Steve walks you through all the things you'll need to not only get started with rehabbing properties, but to keep the pipeline flowing. As with the previous course, Steve has updated this course and no longer has this edition available. You can read the details of his updated version here. The edition I have also comes with a CD.

The "Ultimate" SUB2 Guidebook (William Tingle)

William has been doing "subject-to" investing for years now and provides all the information you need to successfully do Sub2 deals. From getting started, finding motivated seller, signing the documents, closing, and so on, William's course has it all. The course also comes with a companion CD with all the forms you'll need. You can see more information about this course here.

As of the time of this post, here are the current prices of the courses above:

Wholesaling for QUICK Cash (V2.0): $297.00*
Rehabbing for BIG Cash (V2.0): $297.00*
The "Ultimate" SUB2 Guidebook: $279.00

(*) Steve Cook is currently selling both courses in a package deal for $394.00.

So, if you were to order all three courses online, you could be paying $673! However, I am willing to sell all three of the courses I have together in a package deal for only $325 - a savings of almost 52%! Don't want/need all three course - I can sell any two courses I have together in a package deal for only $250! And, if you just want to purchase one of the courses I have, I'll sell them individually for $150 each! All of the courses are in excellent condition and contain ALL of the original binders, CD's, and pages.

Again, if you are interested just send me an email at the address in my profile (under "About Me" in the left column of this page near the top), and I can send you more information about the products.

Note: Prices do not include shipping and handling charges. Buyer is responsible for paying the shipping and handling.

Business Mentorship

In our Sunday paper, they always have a short 4-page Wall Street Journal section in the Business section. I usually skim through it to see if there are any newsworthy items. In this week's edition, they had a piece about people in different stages of progressing their business who are now 'stuck, and spinning their wheels' and need a mentor to help guide them through. They mentioned a few web sites where entreprenuers can connect with successful business mentors, who will help guide them through the next steps of creating a successful business. One particular web site, MicroMentor, seems to be ahead of the game in this arena. This service isn't so much for the timid, either. You have to be 100% sure of sticking it out for the long haul, because once you get a mentor assigned, you will both work on a plan of success and have routine milestones. I'm sure if you start and then bow-out, you won't be given a favorable rating for future endeavors.

So, I'm thinking about seriously drawing up a draft business plan for several of my ideas and giving it a whirl. I think I'll only pursue one - or maybe two at the most - ideas, and see if I can get over this first big hurdle of actually coming out of the blocks. I have a good idea which two ideas I'll cncentrate on, but I want to give it a lot of thought beforehand so I'm not making the wrong decisions early.

No Word From Tenant

I gave the tenant up until this past Friday to say "yea" or "nay" about leaving at the end of the month. We got no response on Friday, and none Saturday, either. So, on Saturday, we decided to pay the tenant a visit, however, no one was home. It was obvious she was still living there as there were things outside and I peeked in the rear door and all her furniture, etc., was still there - just no tenant. I put in the letter that if we didn't get a response from her, we would assume she was staying and the original lease - with all of it's conditions - would continue to be in affect.

Both of us are pretty sure that given the circumstances, we will drive by there one day between now and the end of the month and the tenant will be long gone. As long as she doesn't damage the place when she leaves, I'll be thankful if that were to happen.

Live and Learn

I have started a list of things I plan on changing when it comes to (pre-)screening and managing future tenants. All of these ideas I got were from reading how other successful landlords operate, including Terry Sprouse who is the author of Fix 'em up, Rent 'em Out. Some of the things I'll do differently:

1. Tenant must have a bank account.

Neither of the previous two tenants I had had a checking account with a bank (as far as I could tell). They both paid me with money orders or cashier's checks. The former tenant was late one time and the latter was late three times. Both tenants wanted to move out before the lease was over. The tenant prior to those two had a checking even though they were moving from Houston, but was never late one day. Matter of fact, she always paid about 4-5 days AHEAD of the due date. I've also heard this from other landlords, so it seems like a pretty good litmus test to prescreen tenants. Maybe there is a responsibility factor involved with having a bank account, or something. Not sure. What I do know is that it looks to be a good guage on how well the tenant pays each month (and whether they want to leave early). The bank in question should have at least one branch in the area, too.

2. Give rental "rewards" to good tenants.

I first heard this when dealing with lease/options, whereby the the owner gives credits each month to a tenant/buyer who pays on time. If they don't, then there is no "reward". Basically, one sets the rent at a set amount each month for the duration of the lease as usual, however, if the tenant pays their lease on time, they are given a "credit" in the form of paying less rent. IOW, if the rent is $1,000 per month and the tenant pays their rent on time, they only have to pay $950 or $975. This implants a psychological memo in the tenants head each month to pay on or before the due date. If they miss the date, they have to pay the regular rent payment (plus late fees).

3. Better screening of tenants.

I've learned first hand the rule about screening the tenants thoroughly BEFORE they become tenants as it will save a lot of headache once they BECOME tenants. Not only will I do a more thorough job of looking at a prospective tenants criminal and financial background, but also demand they have AT LEAST three previous landlords I can call. I still believe I was tricked with this current tenant by having her use a friend to say he was her former landlord. By having at least three previous landlords, it will be harder to trick me (not impossible, but harder). I will also institute a means to make it harder for prospective tenants to trick me. If their previous domicile was a house they owned, I'll expect them to have proof of ownership, etc.

4. Month-to-Month vs. Standard Lease

When I first became a landlord, I held steadfast that leases were to be a standard 12 months - period. Since that time, I have always used the standard 12 month lease (which automatically rolls over into a month-to-month after 12 months). I'm contemplating now on just using a month-to-month lease right at the beginning. There are certainly pros and cons to each, but as Terry mentions in his book, if a tenant doesn't want to live in my rental anymore do I really want to keep them there? Still deciding on this one.

Tenant Wants Out

Before retiring for bed last Friday, my wife checked her phone and noticed the tenant had called her and left a message earlier in the evening. She said the number was not one the tenant had used before and from the background sound, it was probably a pay phone. Anyway, my wife said the tenant was saying she wants to terminate the lease the end of the month. She didn't give a reason, but only that she wanted to get out of the lease by then. I think it's evident to us why, but she didn't want to say it. She also said she was going over to a relatives house and would call us back, but never did.

The next day, my wife and I discussed the matter in detail after reading the Lease Agreement thouroughly and decided she could terminate the lease early under certain conditions. The Lease Agreement itself doesn't spell out specific damages if the tenant vacates early, but does have one very important clause: "all unpaid rents that are payable during the remainder of the lease or any renewal period will be accelerated without notice or demand". Of course, I highly doubt if we were to enforce this clause the tenant would ever pay us, so, instead, we used the clause as leverage for our conditions.

We sent the tenant a letter saying, basically, that she can vacate early, but that she would have to sign an attached agreement, which spelled out a list of conditions she would have to fulfil first. We included the clause above from the Lease Agreement, but said that we would overlook accelerating all the unpaid rent if she would read, sign, and return the Early Termination Agreement to us by this coming weekend.

Some of the things we asked of the tenant were:

(1) The tenant would have to be out on or before January 31st.
(2) The tenant would forfiet refund of all or any portion of the security deposit.
(3) The tenant would be responsible for disconnecting all utilities solely in her name, giving the utility companies her forwarding address, and paying all residual bills for the utilities when/if they are due.
(4) Give us a forwarding address.
(5) Pay us an additional sum as compensation for terminating the lease early on or before the date she vacates.
(6) The condition of the property will be the same as when she moved in, excluding NORMAL wear.
(7) On the date she is to fully vacate, do a final walk-thru with me to inspect the condition of the property, to give us all the keys, and to give us the additional compensation (if she hadn't already).

It will be interesting to see what happens now. I swung by there Sunday just to make sure she hadn't already 'up and left', and there was still signs of life. I half expect her to just leave one day before signing the agreement I sent, but who knows.

Right/Left Brain Test

I saw this in a post on TheFastLaneToMillions.com and thought it would be good to pass on to others. It's a simple test to see which side of the brain you use most, and what (supposedly) that tells ...

Link

So which side of the brain do you use?

For me, I can only see it going clockwise. Try as I might, I cannot get it to go counter-clockwise. Interestingly - (based on this test, anyway) - I should be seeing it go counter-clockwise as most of what I do is "left-brained". Although, since "getting it", I notice I now possess many of the "right-brained" attributes.

Eviction Thwarted (Again)

I haven't been posting about the tenant this past week as things seem to be changing by the minute (literally, in some cases). I also won't go into a lot of the details as it would probably end up being a novel (and that's if I can remember it all).

Basically what happened was this ... The tenant was late. We sent a letter. The tenant said she sent the rent. She lied, we never received it, and gave her until today to pay everything she owes us to date (including current late charges). We received not only everything owed us, but about $90 extra.

The issues we have with the tenant are she constantly lies to us and is consistantly late. Even when my wife would catch her in a lie, she would still deny it. I guess it's expected when dealing with some of these types of characters. The lateness part has been addressed rather firmly now, too. In the letter I sent, I told her that she would no longer receive a warning from us when she is late, and we would immediately send her a "pay or vacate" letter to start the eviction.