Last week, the mister and I decided to make an offer on this place.

Asking Price: 40K
Tax Value: 92K
After Repair Value: 80K
3 bedrooms, 2 bathrooms, 1 car garage
1600 sq. ft.

We decided to offer 30K cash budgeting 25-30K for repairs with 3 months holding costs. After much discussion which involved hand waving, number crunching and the employment of latent powers of prognostication, a call was placed to our contractor, Frank,  to see if his crew could schedule the heavy grunt work anytime in the near future. Uhhhh… not so much.

Frank then proceeded to tell little me the Facts of Life. Or at least, the facts of life related to construction in a post-hurricane zone.

• He has a backlog of 23 hurricane damaged homes awaiting his loving attention.
• Everyone else he knows of any credibility has the same or more depending on their proximity to the coast.
• There are plenty of storm chasers around without credibility so be careful.
• Prices for labor are through the roof… literally. Roofers are charging 3 times their usual rate. His assessment went something like this… Pre-Ike, Susie Homeowner could call 3 roofers and expect 3 competitive bids. Now, Susie can call 3 roofers and not get so much as a return phone call. Competition is zero. Roofers are getting nice, fat insurance checks and they like that very much, thanks.
• All other contractor pricing is experiencing a similar artificial hike. So, dear mrs, just go ahead and triple your usual estimate for repairs and that would be *after* placing your name on a waiting list and waiting months as homeowners who need their primary residence repaired get priority over investors. So there.

So (says I), how long before things get back to normal? Three months? Six months maybe? No (says Frank), Count on another surge of calls from desperate homeowners in 6-9 months when the storm chasers and newbie contractors walk off leaving homes unfinished, taking the money and running off to the next disaster area. Then another year or more mopping up the mess.

Bummer…

Which Means…

This seriously messes up The Plan as A) the mister has a fulltime Big Boy job which needs careful attention during this recession and B) most homes need work… lots of work… both from the general malaise suffered by most foreclosures as well as hurricane damage and C) this will slow our timeline and D) increase our holding costs and E) did I mention that the mrs can’t swing a hammer? And all but the youngest of the child labor force is off doing grown-up stuff? 

Big, big bummer…

So…

No offer on the house above. We’re refiguring everything in light of this new info, which I should’ve known already  as this is the second major hurricane to hit our area in the last 3 years.

Popularity: 3% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Sunday, I went house-hopping with a friend looking to buy a home. We visited here and here. Both of these lovely sfh’s make more sense as fixer-type primary residences and my friend is extraordinarily handy.

We arrived at the home on the 1/2 acre lot before Sandra and walked ’round the back to inspect the yard. Rounding the corner, we simultaneously stopped chattering and started whipping about in circles like JoJo with an itch on his stub-tail trying like thunder to find the source of the waterfall. Only there was no pond or other water feature upon last inspection. And nobody in their right mind installs a fountain in the backyard of a foreclosure, right?

The Kitchen Window…

…and the newly-created lake front property.

It didn’t take long to find the source– water gushing from under the kitchen window with the entire back half of the home was now standing in/encircled by gallons and gallons of suspicious looking H2O.

Once inside, we found the hose to the dishwasher unhooked and the valve wide open. Water was standing inside the cabinets, running behind the wall, under the sheet vinyl flooring across the kitchen to the utility room which now had a sub-floor so soggy and rotted that falling through to the ground below was a distinct possibility.

Adding insult to injury, the bathroom plumbing under-sink was also leaking violently which had, in a short time, destroyed the solid wood cabinetry and soaked the walls and flooring.

So what had been a solid little house was now a soggy pile of junk. Which begs the question… why? There was no– absolutely no– water leaking  anywhere on our first inspection although I’m pretty sure that both water and electricity were on. And to be leaking at this magnitude… well, it looks like someone sabotaged the place on purpose.

Such a shame…

Popularity: 3% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Here are a few pictures of a nice little house we looked at last week:

Pecan trees in the front yard– nice old fashioned poured concrete porch with iron pipes for support.

The driveway side showing siding blown off by Ike, concrete steps and shed with tree limb artistically draped over the top.

The shed is a piece of rotted junk. Note the black spot front and center on the floor– the mister put his footsie through there.

Back corner– lots of limbs on the roof, but at least the roof’s still there.

Nice tree with some limb damage. The neighbors rebuilt their fence already. Also note the old style post to the right for a wash line.

Almost faux fireplace– looks like a gas jet in the corner. Built-in bookcases with a nice ledge.

You don’t see these much anymore– a heater grate on the livingroom floor.

Diningroom with built-in and a view into the kitchen.

Old parquet flooring is coming up- most cabinet doors removed to who-knows-where. No leaking plumbing is a plus.

The cabinets are solid if somewhat neekid.

Hot water heater in the kitchen closet. Note the little door on right…

…don’t see too many of these… love it~!

Ugly sunroom windows took a beating during Ike.

Sunroom ceiling has tons of character and possibly some water penetration. Hard to tell with these solid wood ceilings.

The only truly hideous feature– the Bathroom of Doom.

Definite water damage here– but no bad smell.

One of the bedroom closets showing the tongue and groove boards the house is built with and the cool shoe rack on the floor.

Parting shot– this little guy next door *needed* his ears rubbed. Constantly. Or else.

Popularity: 4% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Hope everyone’s had a wonderful, relaxing holiday. All Brz’s came home, ate much and decorated abundantly. We are very blessed

Drive-by Report:

We drove around town and ruled out most of the homes based on location or other obvious reasons. A few we’ll keep an eye on in case price drops. One home in particular gave us the creeps for no obvious reason whatsoever… no way to explain that skin-crawly, goose-pimply, ax-murderer-lurking-in-the-garage feeling you get from some properties. But as the mister and I were both ready to flee within 5 minutes, we’ll just cross that one off the list, why don’t we?

Icky House…

The Mister’s Fave

I must say that the mister’s descriptive powers were right on target with this baby:

• Asking Price: 40K
• Tax Value: 92K
• After Repair Value: 80K
• 3 bedrooms, 2 bathrooms, 1 car garage
• 1600 sq. ft.

Exterior:

Someone started renovations without finishing…

…which might be good as this is the addition to the back of the house. Poor building techniques combined with a disregard for drainage and this entire wall needs to be rebuilt.

The mister kicking all the way through to the master bathroom.

The driveway.

A look at the neighbors… notice the storm damage that still isn’t repaired.

The Good:

Nice living room rehab started but not complete.

Lucky shoes find hardwoods…

…in good shape in the living room and one bedroom.

The kitchen is not hideous. Cabinets are solid wood, no plumbing problems, counters could stay as-is for now.

The Bad:

That’s the spot behind the shower door where the  mister’s boot went through. Floor, joists, walls, everything is rotted.

Bedroom with paint issues…

… and another with a similar problem. Yes indeed, that’s a black bedroom with a black ceiling.

The previous occupant left the closet white for decorative purposes.

And this is the second bathroom. That’s a wet floor from a fresh leak.

Notes:

As I mentioned before, the mister likes the place. It’s roomy with a surprisingly good floorplan. Unfortunately it needs tons of work– roof, siding, windows, two bathrooms not to mention the 20 foot exterior wall that needs to be rebuilt from the inside out. This one would be every bit as much work as the Magnolia House…maybe more.

Personally, I think it’s worth about 25K in it’s current condition with an estimated 25-30K in repairs  and would probably rent for $950. We’ll probably watch it awhile as it’s due a price drop any minute now.

Popularity: 4% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

The mister and I are heading out for an afternoon round of drive-by’s. For the uninitiated, the drive-by is the ritual stalking of prey in the REI world and best enjoyed in good weather with lucky shoes. Complete report to follow asap although I’m told a Holiday Approacheth which demandeth my attention pronto. Many little Brz’s are phoning in requests  for treats such as Pecan Pie Cookies and Sweet Potato Casserole with Praline Topping.

In no particular order:

3/1 Asking: 35K

Notes: Already stalked this one– horrible exterior, interior appears much better. Nice street with nearby park and nice houses on both sides. Privately owned, back taxes outstanding.

3/2/2 Asking: 63K

Notes: Fantastic neighborhood, could easily sell for 100K or more after repairs, needs foundation work according to Sandra.

3/2/1 Asking: 40K

Notes: The mister’s already (ahem) been inside this one and is very interested. The mrs can’t figure out why based on his description. The location is fantastic-at the end of a deadend street in a great area.

3/2/2 Asking: 100K

Note: According to Sandra, this one’s in move-in condition.

3/1/1 Asking: 38K

Notes: Located in a small town nearby that we know very little about, but might be a good area for expansion.

3/1/1 Asking: 45K

Notes: ??

4/2/2 Asking: 115K

Notes: Very close to one of our Hot Pockets. After Repaired Value: 170K+ with potential rent of 1500-1600/month.

3/2/2 Asking: 35K

Notes: Large foreclosure with rapidly dropping price.

4/2/2 Asking: 79K

Notes: BIG house in good neighborhood. ARV: 130K

3/2/2 Asking: 78K

Notes: ?? Just listed today- no chance to ask Sandra as she’s off holidaying.

Popularity: 4% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Presenting Dumpy Dirtbag in all it’s glory….

Just oozing curb appeal.

Next door neighbors…

… and beyond.

View from the front door… out of shot but visible from the same location– lemon yellow,  baby blue and maroon red. Easily the most colorful house we’ve ever looked at.

Close-up of the mantel-like object glued to the living room wall.

DS checking out the lovely purpleness of the hallway.

And at the end of the hallway, we crammed into the utility closet and all looked up trying to see angels…

…without much success.

Master bathroom

Probably the most disturbing thing in the whole house… the mystery of the raised bathtub. Exactly why  is this tub 18 inches off the floor and where exactly is that plumbing going?

Mystery room off the master bathroom.

Evaluation: Termite infested, plumbing challenged, structurally unsound Money Pit in a rotten location. Over priced by about $24,000. Considering the condition, this one probably should be Humpty Dumpty.

Popularity: 6% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Much REI stuff going on… most of the dull-but-necessary variety.

 Paperwork is in, bank accounts are (not) transferred for various way snooze-worthy reasons. Besides taking a couple of days for R&R (Hey Becky!), I’ve spent most real estate time running numbers… and running numbers… and running numbers, trying to find the sweet spot given the terms Commercial Bank offers which, as of yesterday, were 7.5% fixed for 3  years, 20 year amortization, 80% LTV.

If you’d like to whip out your calculators and play along, here are a few from this week.

On the High End:

Puppy Palace (still on the market, price dropping)

Current Asking Price: 110K

4/2 and a half/2

2000 sq. ft. of builder grade everything

Needs: Paint, flooring, a few minor repairs- 8K

Will rent for 1350-1450

County Tax Records: 145K

80% LTV: 116K (Could fold in 3K closing and 3K for repairs for an out of pocket of 5K)

P&I: 935

T&I: 300

PITI: 1235

Evaluation: I’ve been playing with this one for *days* as I’m still a bit enamored with me some Puppy Love. Price dropped last week and surely some owner occupant will jump as this makes much more sense right now with OO financing. Still, if it doesn’t sell for some crazy reason (and things have certainly been crazy lately) we might give it further consideration. However– a PV this big would cause the payment to fluctuate wildly if interest rates start climbing in 3 years.

Coastal Beauty

Asking price: 100K

3/2 and a half/2

2400 sq. ft. with some custom touches

Needs: Paint, carpet cleaning

Will rent for: 1400-1500?

County Records: 137K

80% LTV: 109K (Could include 3K closing costs and all repairs)

P&I: 883

T&I: 650 (That is *not* a misprint)

Evaluation: This one was a seductive beauty. Located in the latest and greatest subdivision near the new high school, rents are only estimated based on classified ads from the local paper. One look inside resulted in instant and overwhelming house-lust… beautiful arches, soaring ceilings,  lovely balcony overlooking the formal living room– and my camera back home on the counter. I ran the numbers estimating both repairs and taxes based on prior experience and quickly called Sandra telling her an offer was forthcoming.

While performing due diligence something with the tax records looked hinky… surely the trusty calculator needed a new battery~! But no… apparently this beauty is located in something called a MUD district which makes taxes alone $500/month. Add in the cost of insurance post-Ike and BAMMO!

And when I think how close I came to relying on estimates…

Moving right along to…

Mid-range

Pink Poo Place

Asking price: 70K

3/2/1 plus den

1700 sq. ft.

Needs: wood floors refinished, Wallpaper-B-Gone, paint, and other stuff totaling 10K

Will rent for: 1000

County records: 105K

80% LTV: 84K

P&I: 677

T&I: 225

Evaluation: I think this would work at 50K making the payment $510. The house is hideous but has excellent bones underneath and doesn’t need near as much work as might appear to the untrained eye. Pulling out the horrid carpet, ripping the mauve wallpaper from every wall and undoing some of the last owner’s ‘improvements’ would be a start. The neighborhood is wonderful, the roof, siding, foundation, ac/heat, wiring, plumbing,  are all either new or updated. Piles of poo notwithstanding, I like this place.

Lowest End

Dumpy Dirtbag

Asking price: 25K

3/2/carport

2000 sq. ft.

Needs: ???

Will rent for 700-850 based on size and location

County records: 68K

80% LTV: 54K

Evaluation: We’re extremely familiar with this neighborhood. It’s right across from the dragstrip in a great school district with mostly dumpy trailers and a few site-built homes. Hopefully I can get inside soon and see the wonders of this lovely mansion.

Not enough info at this time to evaluate but this price range may produce better results overall.

Popularity: 6% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

So here’s the deal…lots of REI stuff going on which explains the lack of post-age.

First:

The mister has spent every minute of his off-time since the hurricane making repairs to our personal residence (mostly fencing and downed trees) and our rent houses (fences, trees, shingles, damage from water blowing in around doors and windows in older homes), none of which was covered by insurance, all of which has to be done pronto to prevent more damage.  No complaining– we are so thankful especially considering the many landlords around here who lost every single investment property. Still, it is a huge drain on both our time and emergency fund.

Second:

We’ve decided to set up with our local bank. They will extend a line of credit to make cash purchases based on a combination of our cash on hand and the equity in one of the rentals. Also, they’ve agreed to convert these purchases to mortgages with the following terms: 7-8% interest fixed with a 7 year balloon, 20% down, 20 year amortization. At the end of 7 years, they will decide whether to continue carrying the loan at the original rate based on our history of on-time payments. This may not be the greatest in the world, but might just be the thing for some of these cheap foreclosures running 30-40K. To make this work, we’ll have to find very good deals indeed.

Another local bank has offered us commercial lending at a lower interest rate with LTV based on tax records. The terms would be: 6-7%, 3 year fixed, 70% Loan to Value (LTV), 20 year amortization.

 Here’s the difference: With the commercial, if we buy right, our out-of-pocket could be zero. For example:

(using 100K just for simplicity)

House Imaginary: Commercial Bank

Price: 50K

Needs: 10K repairs

HCAD value: 100K (county appraisal district value listed on tax records)

Closing costs: 3K

In this case, commercial bank will loan us up to 70K but no more than actual purchase price and repairs. That would be 63K at 7% fixed for 3 years with zero down.

House Imaginary: Regular Bank

Regular bank will loan 80% of either purchase price or appraisal–*whichever is lower.

Or:

80% of 50K equals 40K. Out of pocket expenses: 10K downpayment, 10K repairs, 3K closing cost for a total of 23K out of pocket. Of course we’re talking less expensive houses that need few repairs, but the difference is still proportionally big.

Ideally, we could purchase House Imaginary using the Commercial Bank, make repairs, wait at least a year for seasoning issues, reappraise and get a mortgage with Regular Bank. This would allow us to maximize our current cash, leveraging it into multiple homes with little out of pocket. We’d still need the 20% for a downpayment later, but (hopefully) cashflow would be high enough to accumulate within those 3 years.

Here’s the rub: Both Commercial Bank and Regular Bank want us to keep our rental house checking account with them… which obviously we can’t do. So, I’m trying to decide whether to set up with Regular Bank and just forget Commercial or if there’s enough merit to trying to set up with both, if that’s even possible.

Any thoughts?

Popularity: 7% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Puppy Palace is a no-go. Basically, we were told that, no matter how good our credit or how well our properties cashflow, we are ineligible for another mortgage because we have ‘too many’– a statement which seriously ticks me off as I thought the old artificial limit of ten was way too low. Commercial mortgages just won’t do in these uncertain times– we were offered 6.5% fixed for three years with a 20 year amortization making the note too high and refinancing a necessity. No way I’m gambling on the mortgage industry three years from now. Our local bank will still finance investment properties for us with 20% down at 8% interest. Nice to keep in mind but not good enough for the houses we were looking at.

Another Investor wants to know what we’re doing next… not a clue. The Mrs.’s brain tends to act like a choo-choo, chugging along in one direction until derailed. And she was seriously derailed this time around. I’m of the opinion that saving the cash is best as AI mentioned unless we can find something with enough cashflow to rebuild the war chest quickly. That would take some serious flowing.

Today, Sandra and I went around town perusing the current foreclosures in town under 70K to get a feel for what’s available.

House #1

2/1//1 detached

1500 sq. ft.

Asking price: 70K

HCAD: 70K (county appraisal for tax purposes)

Days on the market: 11

Market rent: $850/month

Nice older home on a beautiful 1/2 acre lot. New roof, hardwood flooring, garage, workshop and shed. Needs paint and a serious cleaning.

Front yard and view of the street.

One drawer missing in kitchen, otherwise in good shape.

House #2

3/1/1 plus den

1500 sq. ft.

Asking price: 54K

HCAD price: 83K

Days on the market: 115

Market rent: $900

Nice, solid house with vinyl siding and faux concrete rocks thingies.

Nice street– not as nice as #1, but well-kept homes.

LOVE this kitchen. Solid wood cabinets to the ceiling with large pantry. Everything here is in excellent condition.

The other side– note open shelving above counter and oversized range hood.

Big pantry…

Lovely greenn dining room…

Den in back with paneling and faux fireplace.

Great bathroom with more wood cabinets.

Big backyard with access from the road behind. Road noise is minimal– perhaps because of the lower speed limit and the mature landscaping.

Hardwood flooring throughout in good shape.

House #3

3/1/1

1300 sq ft

Asking price: 75K

HCAD price: 75K

Days on the market: 451+

Market rent: $900

Nice, solid house in need of some exterior paint and trim repairs.

Typical hideous ’70’s kitchen…

… complete with hideous ’70’s paneling and flooring.

Original bathroom in great condition. The house will fetch higher rent due to better location in nice private neighborhood but needs more repairs, especially to the exterior.

House #4

3/2/1 plus den

1700 sq ft

Asking price: 70K

HCAD price: 105K

Days on the market: 90+ (corrected 11/14/08. According to Sandra, Pink Poo was on the market 11 days when we toured.)

Market rent: $1000 (after repairs– see pix below)

Exterior in great condition–vinyl siding, new roof, beautiful corner lot in same neighborhood as House #3.

Interesting bathroom tile…

…and *the* most hideous toilet in Texas.

Lovely pink carpet to match throughout entire house. The mrs found oak underneath using her lucky blue tennies. These babies have found many a hardwood floor in their five years of service.

Dog Piles of Doom… scattered artistically across pink carpet.

Heavy sigh… *love* this kitchen. Note the vintage stove…

…a bit dirty though.

There was one more house but it was ugly and I’m tired.

Allow Me to Introduce…

This is Bucky. Here he’s trying to digest my shirt.

Apparently, Sandra didn’t have enough to do what with selling real estate and all. She’s now mamma to one orphan fawn…

…who trots into her beautiful kitchen for his bottles. Let’s hope that tile is sealed

Popularity: 7% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

A quickie call to our mortgage broker late this afternoon and the Puppy Palace deal may be history. Today’s market meltdown caused investor mortgages to head over 8% and rising even with the rate cut. Looks like the timing on this just stinks.

 We have until the 23rd to find a mortgage at 7%. Also, we’ll ask the bank that owns the property to carry the note. Other than that, we’re pretty much done.

Ah well…. there’s always another deal another day.

Popularity: 9% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Unfortunately (fortunately?), lots of activity and little time for typing, so just a quick post with the numbers on Puppy Palace.

These are current as of this morning. There should be enough play that any fluctuations in variables won’t be a problem. Numbers are rounded a touch for simplicity:

Asking price: 115, 500K

Contract Price: 117K

ARV: 155K (taken from comps in the last couple of months)

Down payment: 10% (11,700)

Closing costs: $4000

Repairs: $7500

• $6000 (flooring- includes ceramic tile in the upstairs bathroom)
• $500 (paint)
• $500 (misc. repairs– dirt, repairing fence and front light)
• $500 (misc. upgrades– we’re considering replacing the vanity in the upstairs bathroom when the ceramic tile goes down)

Basic Numbers:

Price: 117K

Down: 11,700

PV: 105,300

Interest: 7.5% (Chuck thinks this may drop if we wait a bit to lock in)

Term: 360 months

Note (principle and interest): $736

Taxes and Insurance: $250

Total PITI: $985

Rent: Conservative- $1400 Optimistic $1500

Cashflow: $415-$515

A Few Notes for the Sake of Those Just Starting Out:

You’ll notice that items such as vacancies, repair costs and management fees are not subtracted from cashflow. While these are very real expenses and must be considered, I didn’t include the computations here for several reasons.

#1 We’ve been doing this awhile and have a pretty good reserve in the business account to cover unexpected costs. It isn’t necessary to calculate this for each house anymore. When we bought our first couple, those expenses were figured to the gnat’s whiskers and no properties were considered unless potential cashflow was high enough to build a reserve at the same time as PITI (principle+interest+taxes+insurance.) BTW, it took a long, long time to find that first deal.

#2 The reason I want such high cashflow from each property is to continue padding the reserve. The greater the number of rentals, the greater the reserve must be. Cashflow from this property will go straight to savings until enough accumulates to cover a year’s worth of taxes, insurance and two months vacancy.

#3 This does not include management costs because I consider the entire amount my reward for being such a lovely property manager. Someday, I’d like to be in a position to hire this out, but that day hasn’t arrived.

#4 We do most repairs upfront and have few to zero repair costs. Part of this is due to management and a solid lease and part to the mister’s obsessive eye for anything that can and will go wrong along with his ability to repair/replace and upgrade before move-in of the first tenant with the goal of zero repair calls. Doesn’t always work out that way. A house put into service that is older or in disrepair will have higher repair costs and lower tenant satisfaction.

#5 In this district, at this time, we don’t have to figure vacancy. We call this our Hot Pocket: a relatively small area where certain types of homes are in such low supply and high demand that a well-maintained home will rent for a premium (the properties are also called HP’s for obvious reasons.) If they’re fixed up with durable materials (ceramic tile or other hard surface flooring, semi-gloss paint, etc), we  send in the cleaning crew the moment someone moves out and have a signed lease with prorated rent before the crew arrives. At the moment, we have 2 Hot Pockets. This will be #3. I’d love to have at least 10.

This is atypical for rent houses in general, but many folks have Hot Pockets nearby even if the market is down overall. For our other homes in other areas, we figure one month per year vacancy although we do our dadgummedest to keep our tenants once we find them.

More later…

Popularity: 8% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Our local market hasn’t slowed a bit. Apparently, it didn’t get the memo.

Of late, the mister and I have been stalking a nearby neighborhood full of new-ish homes in the hoity-toity school district of choice, hoping to find a 3/2/2 or larger brick in close to move-in condition. The Bee House is a fairly typical, if somewhat distressed,  example.

 Most are 5 years old or less, 1450 sq. ft. or larger, starting at 130K and rising,  brick with hardiplank and builder grade everything with an occassional upgrade to bathrooms or kitchens. Rents start at 1300 and rise accordingly topping out around $1500/month. In our experience,  homes like these, in this district, stay rented without vacancies… none, zero, zip, nada. Very nice little perk.

The Part Where We Get Happy and Start Throwing Offers About…

House First: 

Last Friday, a foreclosure listed on a nice culdesac at an asking price which would cashflow according to Brz standards. Being a speedy (and slightly OC) business woman, I arranged a tour with Sandra asap. By the time we arrived, 2  offers were already on the table.

Here’s the details and a few pix:

• 4 bedrooms/2 and a half baths/2 car garage
• Story and a half: master down, 3 bedrooms, 1 small, full bath upstairs
• 2000 sq. ft.
• Brick and hardiplank siding
• Asking price: 115K
• After Repair Value (ARV): Comps running around 155K
• Repairs needed: Carpet and Paint plus misc. totalling less than $500

Storm damage… but overall, a lovely brick home with lots of curb appeal.

And more storm damage. It’s possible this might be fixed by the neighbors before closing.

Very nice floorplan with the utility room and master downstairs… this is  from the entry, past the dining and kitchen into the living room. The mister thinks the carpet may be salvageable but a laminate  or one of the wood-look vinyls would be nice downstairs.

The kitchen with ceramic tile, laminate counters and appliances. Everything’s in great shape.

Nice half-bath downstairs by the master bedroom and staircase.

The trusty financial calculator has run enough numbers for this ‘hood to know when a deal comes along. Apparently, certain locals without financial calculating skillz can also spot a deal. This same floorplan is selling for 155K in similar condition. And, fortunately, things are still selling well here.

If we were to purchase this house, we’d like to paint everything with two-tone semi-gloss paint, replace the carpet with laminate or other wood-look flooring downstairs and a nice, dirt colored carpet upstairs. Also, the mister gets quite worked up over upstairs bathrooms and would like the waterproof and tile the floor even if the current flooring is okay (which it is). A few minor repairs (the light fixture out front, some dirtwork in the back yard and repairing the fencing) and this place would be good to go.

After arriving home, the mister received a call complete with squeaky uptalk and much hand-waving. An offer for about $1000 over asking price went out pronto at which time the mrs. noticed another foreclosure newly listed… in the same neighborhood, on the same street, 10K less than House First. Too dark by this time for a repeat visit, Sandra and I convened onsite the next afternoon.

House Second:

Details and Pix:

• 3 bedrooms/ 2 bathrooms/ 2 car garage
• Single story
• 1770 sq. ft.
• Brick and hardiplank
• Asking Price: 102K
• ARV: 150K
• Repairs needed: Paint, flooring for all previously carpeted areas, baseboards throughout! (very strange), repairs of about $200 tops

Sandra checking out the utility room. Love the 10 ft. ceilings and the art niche in the entry.

Nice, nice kitchen with upgraded cabinets, ceramic tile backsplash, porcelain tile floors and lack-of-baseboards.

Dark green paint in the living room. The fireplace could use a little love. And some baseboards…

This place is nice… very nice. High ceilings throughout, coved ceilings in the bedrooms, and custom touches like the jacuzzi tub and leaded glass front door. The yard is just the right size, the fence endured Ike and the backyard has a big covered patio. Once the flooring is replaced, this one will rent for the same amount as House First.

Update: We scrambled to get an offer in on House First on Saturday. Today, Sandra sent a note saying we have a signed contract. Sweet~

House First to be designated Puppy Palace from here on…

… for obvious reasons. Not so obvious are the crater-sized holes with which the previous owner’s pups decorated the backyard. Note the plywood covering the neighbor’s upper window– a sure sign pictures were taken shortly after Ike.

Our offer on House Second is still pending.

Popularity: 9% [?]

Tags: cashflow, foreclosures, landlord tenant issues, positive cashflow, real estate investment, rent houses, repairs

Shopping for real estate is personal– every investor’s looking for something different. Some turn away from termite damage, some get nervous over cracked slabs, others are fanatical over water problems. Our biggest concern is always location. Almost anything can be fixed if the numbers work and you have a good contractor, but short a load of dynamite or a pack of pachyderms, location is permanent and if it stinks, you’re stuck.

Note: Recently Biggerpockets founder, Josh Dorkin asked if I’d write weekly for the website’s blog. My first contribution is on this very topic because (surprise!) it’s weighing heavy on my mind. Currently, we’re finishing the Magnolia house and looking for house number next. So as not to repeat myself repeatedly and stuff, you can read the post here.

Looking for Prospects

Over the last few years, the mister and I developed a drive-by system for winnowing out the dross. It doesn’t always work, but it keeps our real estate agent from throwing things at us.

We check location and exterior condition and try to get a sneaky-peak inside without actually breaking and entering.

Location:

• General atmosphere of neighborhood
• Condition of neighboring houses
• Presence of Nearby Nasties (things that can’t be changed like a power plant next door or freeway behind the house)
• Quiet or busy street

Exterior:

• Signs of termite damage (dirt mounds or tunnels running up the foundation)
• Cracked slab (walk the perimeter, look for visible cracks that extend up the brick)
• Rotted eaves and siding
• Condition of paint
• Condition of roof
• Appealing yard (fenced or not, too large or too small)
• Garage or carport
• Outbuildings

And if a peek inside is available:

• Intact bathrooms and kitchens
• Presence or absence of flooring
• Holes in the doors and walls

Yesterday’s Prospects

The two places I actually located yesterday are good examples of what you can find on the drive-by.

#1

3/2/2  asking price $86K

From MLS: HUD HOME ****CASE #XXX-XXXXX**** SELLING ‘AS IS’

Living: 10X11
Den: 10X17
Dining: 9X11
Kitchen: 8X8
1st Bed: 9X12
2nd Bed: 10X11
3rd Bed: 9X9

The asking price on this one’s high, but its been on the market awhile. The neighborhood is well established, good trees, a lot of quiet streets. 3/2/2’s consistently rent here for $1000/$1100 per month. Before the drive-by, my estimate for ARV (after repaired value) was 100K. Inside pictures from MLS show an interior in great shape for a HUD home-tile floors, new cabinets and counters, nice-looking bathrooms.

It took awhile to find this house– no sign in the yard. Here’s a summary:

Location:

The house sits on a corner lot and the nearby houses are in great shape with well-kept yards.

House across the street– police officer living nearby is always a plus.

One very big negative just half a block away–

This may not look so bad, but any large apartment complex is a turn-off to potential tenants. This nice looking place just happens to be public housing and no one around here will rent anywhere close by if they can help it. I’m afraid it’s a deal-breaker.

Exterior:

The brick and eaves are in excellent condition–no sign of rot. Even the paint’s in pretty good shape. A walk around the perimeter turned up no signs of settlement. The roof is older but no patched or curling shingles. The yard’s small, but neatly fenced with a large concrete pad for 3 or more cars.

There’s a notice on the front door:

This will probably keep the house from selling for quite awhile.

Baby-sized prints in the cement– these are starting to get to me…

Peeking through the windows:

The interior doesn’t look as good as the MLS photos– tile floors are poorly done and look like a DIY project gone bad. Otherwise, no surprises.

Evaluation:

If not for the housing projects in the backyard, this would get a closer inspection. Mold may or may not be a problem– there’s usually some in most older homes whether HUD slaps a notice on the door or not. IMO, this house won’t sell anytime soon or for anywhere near $86K. Fear of crime will keep people away even if actual crime isn’t a problem. Before the drive-by, I thought this would be the house we’d be interested in, but I doubt it would rent for more than $700/month unless we wanted to go Section 8.

#2

3/1/1, asking price $29K

From MLS: FORECLOSURE, ONE STORY, ONE CAR ATTACHED GARAGE, FORMAL LIVING, FORMAL DINING, DEN, BREAKFAST ROOM, THREE BEDROOMS AND ONE BATH. PROPERTY IS BEING SOLD AS IS, WHERE IS. HARDWOOD FLOORS IN LIVING, DINING AND BEDROOMS. HOME NEEDS REPAIRS IN AND OUT.

Living: 16X11
Den: 23X11
Dining: 11X07
Kitchen: 11X07
Breakfast: 13X11
1st Bed: 13X09
2nd Bed: 12X09
3rd Bed: 12X10
Utility Room Desc: Utility Rm In Garage  

The neighborhood isn’t one of my favorites and is infamous for foundation problems. Still, the price made it worth a look. A 3/1/1 in this neighborhood will bring $800/$825 per month rent. My guess at ARV before seeing the house was $65K

Location:

Turning down the street, I was pleasantly surprised. It’s closer to grocery, schools, and shopping than I remembered, and the houses are nice with well-kept yards.

The house next door– the other nearby houses are the same or better.

View down the street looking the other way– nice yards, a lot of through -traffic while I was there.

Exterior:

Hmmm… I’ve seen worse.

This spot has one of those horrid Chinese Tallows growing overhead–sap on the roof probably caused this damage.

The windows and trim need replacing.

‘Nuff said

The backyard is spacious and fenced on 3 sides. The 4th could be easily enclosed.

Side yard has extra parking and a place for basketball.

Interior peeking:

Couldn’t see much through the dirty windows, but took a few pictures just for grins. Once uploaded to the laptop, quite a bit of detail is visible.

A view through a back window into the house. The room in the foreground looks like an addition–probably an enclosed back patio.

Another view into the add-on. One good thing about add-ons–they can usually be added-off easily if needed.

A view into one of the bedrooms– note the hardwood floor. Also, I didn’t see any holes in the sheetrock or doors and all the trim seemed to be intact.

Evaluation:

Strangely enough, I like this house. It feels solid  despite pictorial evidence to the contrary. If the slab was cracked I couldn’t tell. The roof needs replacing and the air conditioner was awol. My estimate for ARV after drive-by would be $80K and it might rent a bit higher than first thought. I’ll schedule an appointment to see inside for next Monday when the mister is off.

When Good Dogs Go Bad

I was planning to finish this off with a rousing tale of the vicious pooch that assailed my person. But sadly, the bum cannot endure another tale of woe. I’ll get to it tomorrow– for sure

Popularity: 12% [?]

Tags: foreclosures, real estate investment, rehabbing, rent houses

At this point, all I’ve got is a tenacious notion somewhere in this vicinity:

• Paying off truck/tractor=good idea
• Investing 30K=much better idea

Reality? I have 4 months to find and acquire an asset producing positive cashflow after expenses of $750/month. But to get from here to there, I’ve got to leave the realms of speculation and see what’s available.

 Idea #1

Buy a mobile home on land. These are readily available in our area and finding something under $30K is definitely possible. To bring in enough cash each month, the trailer would have to be 3 bedrooms, 2 bathrooms with a garage or carport and located in a school district with higher potential rent.  We’re not afraid of mobile homes–lived in one for years. Upkeep is minimal and repairs are inexpensive. However, they simply do not appreciate and we can count on offering owner financing once we’re ready to sell.

Idea #2

Look for a nicer 3/2/2 that will cashflow $750/month with a 30K  down payment. This is possible, but unlikely. So far we’ve never found a single house that will cashflow this much. Checking foreclosures might yield something, but no breath-holding allowed.

Idea #3

Buy 3 smaller homes, each with a 10K down payment that will cashflow at least $250 each. This is a better possibility, but more involved and might take a year to find all three homes… doesn’t exactly fit our timeframe. Finding some way to speed the process could make this work.

Idea #4

Look for a multiplex and use the $30K as a down payment. These rascals are few and far between although I know of one that might work– a six-plex with an unhappy out-of-town owner.

Time to run some numbers and check the listings :-) 

Popularity: 8% [?]

Tags: asset, assets, cashflow, foreclosures, investment, liabilities, liability, mobile homes, real estate