The week between Christmas and New Years has traditionally been favorite of mine– perfect time to think about the upcoming year.

Real Estate Investment:

2008: Not much to say about the state of affairs in REI. Lots of talk, not much action. We made offers that were accepted and fell through due to the turbulence of the mortgage industry, made offers that were not accepted, thought about making offers but didn’t for various reasons. etc. We’re all set up and ready to go with Commercial Bank if and when we find something that makes sense financially.  Hurricane Ike had far reaching consequences that could not be foreseen ahead of time which should bring opportunities in the not too distant future.

If we’re going by feelings, it felt that 2008 was a year of wheel-spinning  without much forwardly movement. Looking at things objectively, I believe 2008 was a year of getting things set in order, preparing to take advantage of opportunities in 2009.

2009: The mister would like to buy 3 homes next year, one fixer and 2 newer homes needing mostly cosmetic work. The lack of contractors due to the storm actually provides an opportunity for the mister to teach his small fry protege’ some of the skillz he’ll need to repair his own houses one day. Holding time will be longer but we’ll get a chance to work on things together and that’s always good.

Final Thoughts: I’m thankful for our small portfolio of rent houses and the steady stream of rent checks that arrive in the mail each month. They provide a much-needed cushion during uncertain economic times. I’m thankful we now have the financial savvy to move forward during a downturn. But  mostly, I’m glad we’re able to work on something we really love doing together as a family.

Homeschool:

2008: This was a big year for homschooling in the Brz household.  DS and I are worked on his schedule and learned to balance real life experiences with the necessary academic progress to keep his options open should he choose to pursue a more traditional college course of study. I added a class in Finance which included books like Richest Man in Babylon and we played Cashflow 101  twice weekly. He loves Teaching Textbooks Pre-Algebra and seems to be retaining the lessons from Easy Grammar Plus although I’m constantly amazed at how much we refer back to those old lessons from Shurley Grammar.

2009: These days our homeschool life is just Life. Work, play, and academics all merge together. At the end of each traditional academic semester, we make notes, reevaluate our progress and fill in any gaps. He’s ahead in some subjects, behind in others and I could really care less, which is a testament to my progress as a homeschool mom more than his as a student.

If I’ve learned anything, it’s that children learn and grow differently and it’s not when you learn something but if. No one asks DD2 if she learned to read in kindergarten or 3rd grade as she heads in to Bauer Hall at the university to take her Advanced Accounting Final. And no one is going to care if DS takes Pre-Algebra in 8th or 9th grade.

Final Thoughts: The homeschool world use to be my only world. I wrote articles, spoke at workshops, taught at co-ops plus the juggling act that comes from planning coursework for 4 children and implementing same. Keeping house, teaching math and reading, growing a garden, brooding chicks… I dearly loved every minute.

And now, it’s almost over. Three more years just doesn’t sound like much when you have 18 behind you. And, no surprise, I’ve found that I am a much different person than I was back in 1990 when we cracked that first Saxon Kindergarten math workbook. Yes, the kids are doing well, but I’m the one who’s learned the most. The improved academic skills, along with the confidence that comes from tackling a multi-year, longterm project and finishing successfully have given me a ‘Yes indeedy, I can do that’ attitude that was sorely missing before. My years as a stay-at-home, teach-at-home mom are directly related to my current enthusiasm for investment and real estate.

Go figure.

Family:

2008: I dearly love my family but rarely talk beyond the frivolous basics here. That’s because family life is sacred and my love for the mister and kids is beyond question. We’ve collectively had our share of joy, stress and sorrow, but I can’t be anything other than altogether grateful for another year of love and laughs. Each one is a gift that the mrs does not take for granted.

2009: As the kiddies are all big and stuff, only they know what’s up for next year. The mister and I want to take a trip or two together– no kids, no dogs, just us. Also, as my mom enters her 4th quarter-century, there are bound to be aging issues. I hear the technical term is Aging in Place and as we’ve come to find out, that’s not so easy in a ‘give ‘em a pill and send ‘em to daycare’ world. So far, doctors have not been our friends or advocates. I expect we’ll have to find some alternatives outside the mainstream to the issues Mom’s facing with her health, eyesight, hearing and mobility.

Final Thoughts: Only thankfulness fills my heart on this one. I’m thankful the girls are growing up to be strong, independent woman who love God and still want to hang out with Mom and Dad. I’m thankful Mom’s still here and in excellent health for her age. I’m thankful DS still hugs me in the mornings and brings me coffee when I’m incoherent.  I’m so very thankful for the mister who is always the mister- steady, lovable, dependable, soft-hearted, faithful, honest. And cute.

Did I mention cute?

Friends:

2008: This has turned out to be an amazing year of reconnecting with old friends as well as bonding with those precious families we invite over for coffee and dominoes on a regular basis. And, let’s not forget internet friends who are just as real and just as welcome as those we see with eyeballs.

2009: The mister and I both have a 30 year high school reunion this summer. That should be good for a laugh or two and perhaps we’ll find a few of those we unintentionally lost along the way.

Final Thoughts: I’m ashamed to admit that I once thought friends were optional–nice but unnecessary. Marrying young, piling on the babies, then sequestering ourselves in a fit of homeschool/homestead life may have contributed. Ten years of chronic pain and poor health following a botched surgery didn’t help any either. But it is those very friends I once took for granted that have taught me of their necessity.

The day after our doublewide was destroyed, I stood in the rain, looking at the ruin of our house and instinctively did the only thing that came to mind. I called Laurie Byrd. I remember mumbling something incoherent about, “the trailer’s gone and I don’t know what to do.” Her reply? “We’ll be right over.” 

On Memorial Day, the entire Byrd Clan dropped everything, loaded up their car with homemade cupcakes and chainsaws, hooked the trailer to their Suburban, then spent hours in the pouring rain removing the tree from the roof and moving our essentials to temporary housing. We can never repay them… not only for the physical help, but also for the emotional support of their presence (although I do try to cut Vernon a larger than average piece of cake when they’re here.)

And as I approach the mid-century mark, I’m discovering how very important is that wonderful creature, The Girlfriend. Women need each other. We do strange things that men will never understand.  We bleed from various places, give birth-or don’t. Decorate various parts of our body, shaving off some things, growing out and coloring others. We gain weight, lose weight, find lumps and bumps and odd colorations. We cry and giggle and shop and dance and we need to do it in the company of supportive woman who understand and participate with joy. Thank you Becky and Sandra and Laurie and Annie and Pam and Susan and Sandra and Ann and Mom.

Spiritual Stuff:

2008: In some ways, this has been a rough year. I’ve had to learn to trust God to care for the kids while I let go of worry and fear. I’m learning that He’ll work in their lives just as He’s worked in mine.

2009: Lord only knows…

Final Thoughts: For those who’re  here to read about our real estate adventures, this will probably be superfluous. My internet buddies are a diverse group with deeply held beliefs ranging all about the spectrum. As a rule, I keep things close to the heart, not because I worry about offending anyone, but mostly because I feel spiritual matters probably deserve their own spot- a bloghome of their own where others can stop by for only such things without being assaulted by 45 pages of foreclosure pix.

Final Final Thoughts: There may be a separate blog coming. Or not.

~Happy New Year and a Blessed and Prosperous 2009 to Each and Everyone~

Hurricane Ike was rough on the trees. This cedar is sorely missed.

 

 

Popularity: 1% [?]

Tags: friends, Homeschool, real estate investment, spiritual life

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

All this hurricane stuff is getting old. Seems like it’s time to do some business. Unfortunately, Ike is still affecting just about everything, slowing us to a snail’s pace with all things real estate. And watching the banking industry implode hasn’t helped much either.

But Baby! It Has Such Lovely Curb Appeal…

A cute triplex on a lovely, tree-lined street in town has been on the market over a year. Asking price started at $130K. The mister and I took a tour when the price dropped below 100K. After running the numbers, we passed politely due to major structural issues. While we don’t sweat the big stuff, the price has gotta be almighty good before we bite. This puppy has major foundation issues (at least 10K for all those concrete piers), roof plus eaves and soffits totally rotted, and termites so bad they’ve taken to eating the hardwood flooring– never encountered *that* before. Oh! And did I mention the stairs only Spiderman could love? Ugh…

Unfortunately, the previous owner tried to hide all the major problems with coats of thick plaster (to hide settlement cracks) and tons of paint. He prettied up the place just dandy without dropping a penny for repairs… (heavy sigh)

On the bright side, the property is located on one of the nicest streets near the historic district and the only local junior college that serves 3 neighboring counties. Rising gas prices forced students who once commuted to move to town, so rents are up. Each 1 bedroom 1 bath unit has its own garage with washer/dryer connections, (termite eaten) hardwood floors and tons of parking– all hard to come by in this part of the city. Plus, the floorplans are roomy with big kitchens full of cabinets and lots and lots of closet space.

Yesterday, the price dropped once again from 80K to 60K. After running the numbers way-back-when, we believe the sweet spot’s around 45K. Never, ever would’ve thought it would have come down from the stratosphere even this close to the vicinity of reason. With a conservative estimate of 30K for repairs, and rents hovering around $450/month this baby just might be profitable… if we can find the funding.

Maybe it’s time to dig the superhero costume out of storage. First order of business would be a fly-by to see how the place held up to Ike. If that roof’s still there, it’ll border on the miraculous.

Front- Unit 2… doesn’t look so bad in the pix, does it? That would be because previous owner was handy at hiding stuff.

Back view… oh! the unseen rot! But asbestos shingles which termites will not eat and the State of Texas still lets us keep.

Garage with Unit 3 upstairs and unmatched garage doors. Mailbox for upper unit on the far right.

Spidey’s Stairs of Doom and one of the dozens of trees that probably beat the place to death during Ike.

Popularity: 6% [?]

Tags: local lenders, real estate investment, REI

After whining yesterday about the lack of financing for fixers and the unwillingness of major lenders to fund cash-out mortgages and re-fi’s, Seth over at Flip They House posted about his recent experience with a local lender who offered him a 100K line of credit on generous terms.

Well… I Swanny!

Feeling a little sheepish for not having thought of this myownself… Thanks Seth.

There’s a lovely little dump with Brz written all over it that thanks you too.

On another, totally unrelated note…

…JoJo has bumps. DD3 just pointed out nickel-sized whelps under the fur from paws to neck covering his entire furry self. My latent powers of doggie ESP refuse to cooperate so no idea where or why these bumps are upon him. The usual suspect would be fireants as Somedog tends to dig up fire ant beds for fun when his landscape trimming chores are complete. The only thing certain is that DoDo does not want them touched.

UPDATE: All America rejoices to hear JoJo’s Bumps have Dis-Banded. One Benedryl plus one wet Boxer in my clawfoot tub, plus baking soda and vinegar equals One Backflip (DoDo’s, not DD’s), one sad sorry soaked bathroom, 2 sad sorry soaked dear children and the mysterious dissappearance of bumpage.

Details at eleven.

Popularity: 6% [?]

Tags: local lenders, real estate investment, REI

One reason for switching  blog focus from real estate to navel gazing is the molasses slow pace of our REI interests these days. Having a pretty good chunk of operating capital tied up in one place (that would be the Magnolia House) coupled with the cratering of the mortgage industry left us in limbo-land without a paper umbrella. Our old strategy of buy with cash, fix with more cash, reappraise, then pull out more-cash-than-put-in isn’t going to work any more.

 Clearly a new strategy for growth is in order.

After many, many weeks our mortgage broker donned his superhero costume and strongarmed gently persuaded Wells Fargo to pleazie squeezie stop stalling/nitpicking us to death and close already. So, with latest property nicely leveraged and cash in bank, we begin our journey once again, looking for whatever works in today’s reality.

Yesterday, our long-suffering real estate agent took us through 6 houses in the local snooty school district looking for a 3/2/2 brick to add to our portfolio on the 10/90 plan (10% down, 90% leveraged with at least $300/month positive cashflow after PITI.) Super Chuck (the mortgage guy) believes that, with our good credit and portfolio of nicely performing rentals, he’ll be able to acquire a non-owner occupied investment mortgage for us in the 7% range.

We decided to make 2 offers… but passed on an absolute steal in a great neighborhood because of the amount of cash needed to bring it up to our standards (10% down plus 20K in repairs equals too much cash out of pocket that we can’t get back… at the moment we’re looking only at homes in close to move-in condition.)

Heavy sigh…. watching those rehab deals go to someone else is giving the mister a twitch.

Popularity: 6% [?]

Tags: real estate investment, REI

Here’s a house we drove by today:

Asking price: 40K

2 bedroom/ 1 and a half baths/ no garage 

MLS Description:

1910’s antique house, sheetrocked, electrical and plumbing updated, in downtown area, good roof, exterior is in good original condition, corner lot with plenty paved parking, great for business location or residential.

More pix:

House is on the corner with a wrap-around porch.

Not much yard, but nice trees.

Great storage closet

Living room

Kitchen– tiny, tiny

Bathroom

This little place is in a mixed commercial/residential area where many of the homes have been turned into antique/resale shops.  It appears to be in very good condition and has tons of curb appeal.

DD3 and I stopped in at the resale shop next door and were mobbed by small children and puppies. This lady says she’s trying to buy the house, but Surprise! can’t get financing. She’s a young mother trying to run her own business but the place she’s in is too small with little to no parking. She’s wanting to rent out booths to others to subsidize her income from the sale of used furniture and doodads and only has space for one other person now.

Here’s What I’m Thinking…

If we could negotiate a cash price (30K or less) we could owner finance to Ms. Resale. Terms might look something like this:

Purchase price: 30K

Selling price: 60K

Downpayment: 5% ($3000)

Interest: 9.99%

3o years: 360 equal payments of $499/month

or

20 years: 240 equal payments of $550

With a little fixup, the house could appraise for 70K and loans in that range are easier to find. This might give Ms. Resale a bit of time to clean up her credit and pretty up the house.

Thoughts? Discussion? On a purely practical level, any suggestions on structuring a loan like this? 

Popularity: 14% [?]

Tags: owner finance, real estate investment

This property is still on the market and I’ve been rolling ideas around, trying to come up with something to make the place profitable without depleting our cash reserves completely.

So I’m standing at the kitchen sink, washing the icky-ness from the breakfast dishes, see? Minding my own business, see? And like a dufus, I notice this:

The view from my kitchen window…notice anything interesting? Neither did I.

The memory of our neighbor standing by those horses smacked me like a wet mackerel across the chops:

“Sold nannie’s house for $8000… gave the guy 4 months to move the d*** thing, but he never got ’round to it.”

I’ve been looking out that window everyday for a year without actually *seeing* that house.

The possibility of anything coming from this is slim, but the lesson’s clear enough– opportunities are everywhere if you just keep your eyes open.

Popularity: 10% [?]

Tags: real estate investment, Rehab, rent houses

Marc’s on his way over right-this-minute. As soon as he arrives, we’re going over to Magnolia to glaze the kitchen cabinets~ Happy Dance! (The mister would like to point out that, technically speaking, he and Marc will glaze and I will chronicle for posterity via digital imaging although I would like to point out that no one would *know* unless the photographer were in attendance.)

To illustrate, a few pictures to show progress so far:

Before: Cabinets were non-functional–doors didn’t close, drawers were missing.

During: My nephew, Christopher, repaired  and rebuilt the cabinets. Can’t tell much from the picture, but things are much better.

Mr. Brz sprayed the cabinets and doors using oil based primer and paint (Sherwin Williams: Dover White.)

He turned the living room into a spray paint gallery by taping off the walls with sheet-plastic. The walls are Sherwin Williams Softer Tan.

And this one’s included because my honey looks so cute through the window from the porch.

Popularity: 24% [?]

Tags: painting cabinets, real estate investment, Rehab, rent houses

This first purchase tossed us way outside our comfort zone.

Here’s where we were mentally at the time of purchase:

Note: If you notice something missing, leave a comment and I’ll edit the post.

• ARV for the house was 110K.
• Asking price: 100K  
• Offered 82.4K which was accepted without counter. We learned at closing that 2 bids came in the same day and ours was $500 higher.
• We estimated repairs would cost 18K and take 3 months (stop snickering)
•  We planned to reappraise and cash-out refi to pay off the credit cards. The difference would come out of the remainder of our income tax refund.
• Market rent for a 3/2/2 in this neighborhood and school district was $1100-$1200/month. We were hoping for $150+ positive cashflow.

Taken during our 18 month tenure from my favorite spot in the backyard.

Here’s what actually happened: (Numbers are rounded to the nearest hundred)

• Purchase price: $82,400
• Down payment: $0
• Closing costs: $2600 (borrowed from family, paid back with income tax refund)
• Repairs took twice as long to complete- 6 full months, almost to the day
• Repairs and Rehab: $23,700 paid for with credit cards and a signature loan from the credit union (to pay the cabinet guy, tile installers and roofing contractor– less expensive than a cash advance on the credit cards)

Holding costs: (paid out of the monthly household budget)

• Utilities for 6 months: $400
• Mortgage for 6 months: $3900

Fortunately, there weren’t many surprises during the rehab. We blew the budget on upgrades– like switching from the $100 builder grade toilets to the $220 29-golf ball Champion byAmerican Standard (if you know what this is, my condolences… you are one serious rehab junkie). Flooring went from an estimate of $1600 for vinyl peel-n-stick tile to $2900 for ceramic tile.

And so on, and so on…

At the time, I was visiting a forum full of hard-core real estate investors. One of the regulars asked, “Do you intend to keep this house? Then DIRT: Do It Right The First Time” (yes, I know this doesn’t spell dirt, but this guy was really smart and really helpful and very successful and I wasn’t about to correct his acronyms.) “Spend more for durable materials that will last indefinitely. In the long run, you’ll save by replacing less often and reducing the number of repair calls.” So we did and I’m not sorry. (Please note: Not every house will support the level of upgrades we made. If ARV is only 50K, peel-n-stick tiles might be more appropriate.)

Funny How Life Intervenes

After the tree hit the trailer, we refinanced to shave $100 from the monthly payment. At that time (about 7 months after purchase) the house appraised for $120K. We eventually got a check from the insurance company that paid off the signature loan and credit cards. We lived in the house 18 months and quickly found a tenant who signed a 6 month lease for $1100/month. When he moved out, we rented to our current tenants who pay $1150/month. Our cashflow is $400/month… very nice. Recently, we had the house re-reappraised (for 130K) and opened a 30K HELOC to make cash offers on other properties.

So how did we do? I dunno and I’m not sure I want to.  The situation ended up being most unusual.

In every way imaginable it’s been a profitable venture– starting with how much we learned about ourselves, our abilities and limitations and each other. We call the house Rehab 101– much cheaper than college tuition.

Could we have done better? Maybe– but I’m not complaining

Christmas at the rent house. Pretty nice digs for refugees.

Popularity: 11% [?]

Tags: getting started in real estate, real estate investment, REI, rent house