Archive | July, 2012

Dog Days of Summer

16 Jul

I haven’t been blogging a lot lately because a lot hasn’t been happening on the real estate front.  I’ve been spending most of my time either with family, golfing, fishing or boating.  I really need to get my taxes done so I can begin the process of refinancing money out of my rentals, so I can buy some more, but taxes are a ridiculously daunting task for me.  Money is coming and going in all directions and I can’t make heads or tails of anything.  It’s pretty embarrassing.  Plus, when I look at how much my wife and I spend every month it puts me in a bad mood, so I try to avoid it.  I think I should probably talk to Suzie Orman.

Anyway, some things have happened recently.  The property on Champine has an accepted offer of 114k!  If you remember Champine, that was the property I thought I was getting for 60k, ended up being 70k and needed a new foundation and roof that put me at 80k, leaving me very nervous about if I was going to make money flipping it.  Well we had two offers of 114k the first day it hit the market.  That really shocked me.  I had to concede 3k in concession cause the basement starting leaking, but overall it looks like I will make a really good chunk of money.  I think the overall message here is that the banks don’t know what they are doing and it’s pretty easy to make money in real estate if you are in the right market.  I jacked that deal up 10 different ways and it worked out with room to spare.

20901 Hawthorne finally got approval.  The bank wasted about 2 months of my time while it was mysteriously “under review.” But, hopefully by next week it will be mine. The final bill here is around 30k, I am hoping to rent it for 900-1000.  I also might have to kick up to 5k into it to get that price.  Either way, it easily fits under my 2% rule.

I have been rounding up money to try to get into the asset package game as well- namely delinquent notes.  I have an investor buddy, Jamison, and we really excited about it.  I don’t really love the structure of the company though.  50% of the profit will go to investors, and the other 50% to employees (2-4 investors, 2 agents).  My main problem is that it’s really hard to pitch to outside investors because they have to give up such a high % of their profits.  I’m an employee also, so it doesn’t hurt me too bad, and I know it will make a huge return, but it’s a huge % to the employees.  And its not that they don’t deserve a good chunk, because it’s a lot of tough work. Kicking people out of their house or negotiating those deals is not easy, and giving them straight commission on houses that are like 20k isn’t worth anyone’s time, but if we plan to make 100% returns (realistic, imo) it might equate to 50k checks for 6+ people, which is high.  And our primary snag is that we don’t have enough money raised.  We need to get around 800k and the more we get the better the packages we get (buying in bulk will get us a larger discount.)  I’m really not that important of a piece in this whole thing so I haven’t fought the structure too much, but I think I might try and get things rearranged a little, because right now I’m not comfortable pitching it to any investors under the current structure.

The other thing that is pretty interesting is that their is a huge foreign investment contingent that is looking to buy rented properties in and around Metro Detroit.  They buy them sight unseen for around the Spex rule of 2% monthly rental income/purchase price.  So for a house that is rented for $800 you can sell it to the Chinese or Scandinavians for 40k.  The beauty of this is that getting $800/mo (especially if you can rehab cheaply) can cost you a lot less than 40k.  I know one investor that is doing 15 of these currently and hasn’t lost money on any of them.  You can dip into lesser neighborhoods as well and they don’t seem to care as long as they get their price.  That really increases the profitability and I normally don’t mess around with questionable neighborhoods cause the extra % is not worth the headache of managing risk/headaches, but it’s great if I can just flip them off my hands. The main problem is that I have no direct relationship with any of these buyers and I don’t know exactly how I’m gonna establish one.  But I definitely plan on trying soon.

Also, I have had a few rental headaches lately.  The Elmira land contract guy missed his first two 1500 dollar payments, another was short some money, a few AC units breaking down, plumbing issues, and squirrels in the attic.  Just typical stuff when you have a bunch of houses.  I don’t want to give the impression that REI life is all just cashing checks, there are days I’m definitely doing stuff I don’t want to do.  Like today I’m going to fix this girl’s sink ($20 dollar fix, 1 hour drive – cause I’m too nice).  That stuff is boring for a blog, but I know many of you are thinking about maybe one day getting into this type of real estate, you should be aware that its a combination of business and B.S work like that.  You can hire that out of a property manager, which at some point I will do, but this being my first year, I figure I’d learn it hands on first.  That usually costs 10-12% off the top.

Fishing this year has been going well – Image

Thanks for reading.  Plan on blogging more soon.