OfflineI'm a 50 year old retired high school teacher, mother of three and grandmother to two. Last May/June I attended my first Dean Graziosi weekend seminar and was inspired. Real estate investment seemed like a perfect "fit" for this next stage of my life as it gives me flexibility to spend time with my grandchildren and gives me goals and purpose - - - and hopefully financial reward!!
I'm a Canadian in an area that has a strong seller's market. I find it tough to find properties with potential that are deeply discounted.
However, in September I decided to take the plunge and I purchased a 100 year old house in a neighborhood that is enjoying some revitalization. I am taking the lead on this project and arranging my contractors myself and lining up the inspectors, engineers, etc. that are involved in the project, and shopping for and ordering all the finishing items such as flooring, light fixtures, etc. It has been keeping me pretty busy as it is an hour away from my house so has involved quite a bit of running around. As is often the case with older homes, there are problems that aren't immediately evident. And I have been running into some of these so the profit margin on this project is narrowing. However, at this point I am thinking that I will at least break even and possibly make a little and it will have been a good experience for what I have learned from it - - trying to keep a positive attitude.
Purchase Price: $112,500
Closing & Holding: $8,000
Rehab Costs: $60,000 (had initially hoped for only $40,000 but now I am hoping I can keep it to 60k)
Selling Price: aiming for $205,000 (This is quite optimistic)
Realtor Fee: $12,300
Net Result: $12,200 profit
I have decided I'd like to focus more resources on real estate investment in the US. I developed a contact in Virginia and have concentrated my attention in that area.
I put an offer in on a 2 bed/2 bath townhouse in September that was accepted. I took out a personal unsecured loan here in Canada and made a cash offer. The property was owned by the Veteran's Association. Well, closing kept getting delayed due to liens (4 in total) and a judgement that was actually against another one of their properties but somehow it was stalling my purchase out. By early December, I had signed an extension to the closing date three times and it was going to be time to sign a fourth time. But a couple of things had happened by now . . . . I had learned more about the market and realized I had offered too high. And I was tired of keeping that $85,000 cash tied up when I could have completed a flip on another property in that time. So I didn't sign the extension and I released the property. The other thing that had happened was that the gentleman who is my "eyes and ears" down in Virginia had told me it would require $5-6000 of rehab and as time went on I realized he was way off on that, and I had based my offer on that information. Some things are meant to happen and i believe that the delays that came with this property, allowing me the time to second guess my purchase, were meant to be to protect me from getting into a bad deal.
Then I made an offer of $40,000 (subject to inspection) on a duplex on the advice of my real estate agent. This was my first short sale involvement. So once the bank approved it, my project manager and realtor went to take a look at it, but it was a piece of junk, so we released that one as quick as we could!
Then I put a bid in on a HUD home, a nice little single family residence on a large corner lot. Again, this was sight unseen but the offer was subject to inspection and when they went to take a look at it, there were foundation problems, so we backed out of that deal as well.
I found a 3 bedroom 2 bathroom townhouse with owner financing. The listing agent was actually a partner in the ownership of this property. Here are the details:
Purchase Price: $79,000
Downpayment: $10,000
Interest Rate: 5%
Balloon Payment in 2 years
Rehab costs: $8,000 (note, I just fixed up enough for renting this, not for a flip)
Completed this project January 2 and is now up for rent for $1,150.
So I am currently into this property for approximately $20,000 by the time you include holding and closing costs. And it should cashflow $575/month so I am pretty satisfied with this project. I am hoping to do two or three flips that will give me the $ to pay this out in full in two years and then it will cashflow even higher or I can refinance it.
Then I put an offer in on another townhouse. By now I was getting better at judging what I should be offering on a property. I used this formula . . . .
ARV x .65 - rehab costs = offer price
But I had also now learned to look at other flips in the neighbouring area and determinig what other investors were paying per square foot for their properties they were flipping. What I found was that to have a successful flip you generally had to have a $50/sq foot difference between your purchase price and your selling price. This of course will be determined a bit by the condition of the property when you buy it, but it's a quick rule of thumb I have started to use.
So for this next property, I studied the price/sq foot other investors had been paying in the development, and I went just $1.5 over that and got it. This is a 3 bedroom 2 bathroom Fannie Mae townhouse. I should be completed rehab and have this back on the market by the end of February, 2014.
Purchase price: $61,500
Rehab Costs: $27,500
Closing & Holding: $6,000
Projected Resale Price: $125,000
Realtor Fees:$7,500
Net Profit: $22,500
Financing came from that personal unsecured loan I had taken out for the first 2 bedroom townhouse that I backed out of.
My most recently accepted offer is a 3 bedroom 1 bathroom 980 sq foot brick ranch. They have accepted $60,000 subject to financing and inspection. I have discovered that this property has a long term tenant (10 years) in place who wants to stay. The problem is that they are only paying $600/month. My realtor, a building inspector and my property manager, are all going to meet to go through the house and I will have a better idea of the condition of the property and what I should reasonably be able to expect for rent. Apparently the tenants are expecting and willing to pay more in rent with a new owner in the picture. My strategy with this property is to get $800-900/month rent for about five years. At that point, I am going to convert the attached garage into another bedroom and bathroom, thereby increasing the square footage and adding value. This neighbourhood has lots of converted garages already and 4/2's are selling for $130-145,000. I am hoping it will be more like $180,000 after five years.
There is a Hubzu house on auction just down the street from the house above. It has six days left so I am going to keep an eye on the bidding for that one. I will have to crunch some numbers and then I can jump in if it looks like it's going to stay within my projected budget.
In between all of the above, there have been other offers, including some owner financed offers to owner/sellers, and a couple of other offers that have been rejected.
But the biggest project of all is a joint venture I am trying to put together to purchase a package of 14 houses. They are owned by three entities that all have one common partner. They are all mortgaged by the same bank and they are all up for short sale. My goal is to put together 2-3 investors who will pay the down payment and I will get an equal share for putting the deal together. Our strategy is to sell three of the houses to cover the down-payment, so that my partners and I will end up owning 11 properties with no money of our own in the deal. All properties are currently tenanted. At this point the deal has been accepted by the seller and we are awaiting third party approval. I am working hard to find financing at the best possible terms for my investors. And my realtor is working on the due diligence for me, putting together CMA's and inspecting the properties and looking over the lease agreements, etc. Wish me luck on this - - it could be amazing!!
Well, this has gotten really long-winded so thanks to anyone who has stuck it out this far. Now that I've started this, I will try to update it more often so my entries aren't as long.
I am pretty excited about all of this and feeling like I am on the right track, but I will feel better once I have sold my two first slips successfully and have a tenant in my townhouse - - then the smile will be ear to ear!!
Looks like your really got the ball rolling! Congratulations!
www.tw4homes.com website
https://tvallc.isrefer.com/go/RehabLite/reigirl/ FREE SOFTWARE FOR WHOLESALERS, REHABBERS AND AGENTS! Present professional looking deals to buyers and lenders as well as run your numbers and get the ROI.
Nice!!! Sounds like you have been very busy and working very hard. keep up the hard work.
Laura
Laura
Amazing job. The things you have learned and the people you have met by taking action will be of great benefit to you in the very near future. You are definitely on the right track! Keep it up!
Best wishes,
Michael
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
Good for you! You are certainly jumping in with both feet.
I look forward to hearing about your continued journey.
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
Keep your eyes on the prize and hands to the plow and dont look back, much success, Jim
jbischoff
Thanks everyone for the words of encouragement. I feel I am learning everyday. Some deals are working out great and some not as good as I had hoped. I hope to reach a point where every deal is "golden" once I have lots of experience and in the meantime will chalk the not so great deals up to being part of the learning curve.
Bonnie
It's been a long time since I've done an update and so much has happened . . . .
My townhouse that was up for rent for $1,150 . . . . . STILL hasn't rented!! It has been sitting empty for three months. Recently my property manageent dropped the price to $1,075 and took new pictures and they tell me they have shown it 5-6 times this week and are confident it will rent soon. Wow, I sure hope so . . . . my bank account I have set up for that property is drained to the point that a cheque came back NSF the other day and I am digging into other funds to keep it "afloat" until I can get a tenant in there!!
My townhouse I was flipping - - remember that I am doing this long distance from Canada and have a project manager in Virginia who is overseeing my projects? Well, I thought this next townhouse was going to be ready for market at the end of February - - my real estate agent went into the property and called me!! She said that not only was it a mess with tools and everything still lying around so she couldn't take any pictures, but that my project manager had made some bad choices that were going to make it impossible for her to sell the property when compared to the competition on the market in the neighborhood. He put linoleum in the living room, painted the entire place builder's white, and put in white washer/dryer in the kitchen even though all the other appliances are stainless steel. So I had to get on the phone and have a chat with him. This guy says he knows what he's doing but these things proved to me that no only does he NOT know how to flip a house, but that he wasn't listening to me and was spending MY money the way HE thought was best. The result is that I have paid to get the entire place repainted, putting laminate flooring over the linoleum in the living room, dining room and hallway, and swapped out the w/d for a pewter color that will look more appropriate with the other appliances in the room. This has delayed going to market by 3 weeks and cost me $4,000. He has fronted the money to get this done quickly and has waived his usual 10% fee on these changes. AND I have elicited a promise from him that he will NEVER use builder's white again or put linoleum in a living room again!! The thing that made me most angry about this was that all three of these items had been discussed with him and he went ahead and did his own thing anyways. In fact, he had gone so far as to tell me that Lowes didn't even have stainless steel or silver colored washer dryers, so he was actually lying to me. Needless to say there will have to be more communication moving forward or this relationship won't last very long. I have another person in the wings who I can work with if this type of thing continues to happen.
The flip here closer to home that I am project manager for got slowed down. I was away for 5 weeks and during that time, virtually nothing happened. I had left my carpenter in charge of contacting my door/window guy to get final measurments so the order could be placed and he completely dropped the ball on that, which set us back a month on our final completion date. We have had inspectors come in for plumbing and electrical and they noticed structural items that need looking at, so now I have to get more engineer reports and building permits, and that is slowing me down as well. However, I have a long list of people to contact and things to do this week and hopefully by next week things are moving forward again. The good news for me is that the weather is staying cooler here which means the spring market upswing is holding off a bit and I might not miss the prime selling time by so much as I might have if we were having a normal spring. At least I hope not! At this point I am hoping to go to market April 22 - 29 but a lot of that is going to depend on time lines of contractors I am going to line up this week. Part of the problem here is that I put my faith in an earnest young man who was new to the business. But when I hired him he had two other young guys working with him, who have now abandoned him. So he is on his own and is now in over his head. I have discussed with him that I need to hire other contractors to come in and take over some of this project, and he has agreed that is a good thing. However, I made the mistake of pre-paying him in full for some work ($5,000) so we are now negotiating exactly what work he will still be responsible for on the house, based on the money he has already received. Another lesson learned by me - - - use experienced workers with a proven track record - - - and pay in installments along the way, not in lump sums up front.
The 3 bedroom 1 bathroom ranch I purchased in Virginia with the existing tenant is going very well. I LOVE buying a buy and hold with an existing tenant. My property management negotiated $820/month rent. I have a property inspection report that shows that a few things need repairing, so we are in the process of making a priority list of repairs to determine the order we are going to tackle them in. I will do these as cash-flow allows on this property so I don't take funds from other projects.
The HUBZU auction property just down the street from that one . . . . I was the successful bidder for this property. It is another 3/1 ranch, in fact it is exactly the same floorplan as the one above. This also has an attached garage, but this one has already been converted to living space. However, it is a family room with green carpeting and dark paneled walls, so will need to be updated. I have my team going to the house tomorrow. This team consists of my Realtor, my inspector, my project manager, my contractor and my property manager. I am not sure whether I am going to buy and hold or flip this property. It will depend on what kinds of quotes I get from my contractor, what projected rents are for a 3/1 or potentially a 4/2 if I do the conversion, and also what kind of terms I can get on financing. I will have to make up my mind soon but am waiting to hear back from all of them after they all look at the house tomorrow. Today was supposed to be closing date on this property but we have requested an extension. With HUBZU I have found that they charge you $300 for an extension as well as $100/day to extend, so I have to get this closed up quickly and get rolling with it.
In also am trying to put together this 14 house joint venture deal. I have some paperwork on my desk that I need to get finished for the financing for this project. It has the owner's approval of our offer (which was 50% of tax appraised value) and is awaiting third party approval. Apparently part of the problem is that the mortgages have NOT actually been defaulted on these properties so the bank is reluctant to allow the properties to be sold at such a reduced cost. The owners are considering purposefully defaulting on a couple of months of payments to motivate the bank to accept the offer. However, currently the partner who is our contact in this deal is out of the country for 10 days on vacation so I haven't been able to get an update for a little while to see if they have decided to move forward with that strategy or not. I am just hopeful that my investors I have don't get tired of waiting and back out before all this comes together.
A year ago I was approached to be an investing partner in a joint venture project someone was putting together to purchase a 19 unit apartment block in Chicago. I jumped at the opportunity (definitely too hastily in hindsight) and put $100,000 into it for a 1/4 share of this deal. There are two other investing partners, and then a partner who is getting a quarter share with no money in, but is doing all the business end of things (due diligence, putting the deal together/closing, setting up property management, securing the rehab loan, overseeing rehab, setting up accounts, entity, etc. etc. etc.) However, this fellow was NOT experienced enough himself and got rushed into closing too quickly before due diligence was complete. As a result, the entity was not formed yet and the property ended up being purchased in his own company's name. His intention was for us to form our entity and he would "sell" it to the new partnership for $1. However, this was going to create capital gains issues for future. Not only that, but he didn't secure clear title to the property himself so wasn't in a position to deed it over to us. Shortly thereafter, he declared that he would simply get a loan himself and buy pay us back to buy us out of the deal. At this point we changed from being investors to private lenders for him. He seemed willing to sign papers to that effect at a meeting we had together, but subsequently told us that his lawyer said it "wasn't in his best interests" to sign a loan/mortgage document with us. Well "duh" that would prove he actually owed us money!!!! Recently we have received an e-mail from him saying that he has been unsuccessful in securing any financing for this project, and has been suffering health issues (nerve damage related to stress) so is prepared to deed the property over to us and that his lawyers are awaiting our instructions. Needless to say this has caught us all off-guard and has swung us back into an investor position again rather than private lenders. We three investors are meeting this week to discuss this. Obviously if he has a warranty deed to offer us we will be glad to have the property in our own names so our investment is more secure. However, we are not sure at this point what type of deed he has the property under himself and what he can offer us. We will probably still have to deal with the capital gains issue as well once this is all said and done. And now we will have to make a decision as to how to move forward with this . . . . will we try to sell the property as is, or will we rehab and take over? And who takes over the business end of things? And how does that person get compensated for their time and efforts in that regard? I have been thinking I might look for someone to buy out my share and I would take over the business portion of this on the same terms as we had originally agreed to, as I don't think the other two investors are in a position to do it. I guess I will know more after we meet this week. However the other problem is that he has given us so little information. I have sent him two subsequent e-mails asking what kind of deed he has to offer us and he has not answered back. This has been typical behavior for him throughout this entire 9 month ordeal. The man is not good at keeping communication open. Oh, and guess what . . . after all this mess up he has the nerve to tell us that we owe him a $85,000 acquisition fee for securing the property for us. I imagine we will have to pay him something to buy him out of this deal as he will probably hold the deed "ransom" until we do, but I have no intentions of paying that much. Not only have we all been paying interest on our money for the past few months, but we will still have capital gains issues to deal with in the future and those expenses are all due to his incompetence and lack of experience. To be honest, I have trouble admitting all of the above as it is embarrassing to have been part of this. And I know that many people reading this will feel this was a con-man who "took" us. However, I firmly believe this was just a guy who thought he knew enough about what he was doing and saw what he believed to be a great opportunity and jumped in too quickly, dragging us in with him with his and our own enthusiasm. Part of the reason I think this is that we have actually met together at his house and con-men typically keep you at more arms-length than that. I think the man just got in over his head and was taken advantage of by another investor at the other end of the deal. So from that regard I actually feel a little sorry for him, but his dealings with us have been very selfish and self-serving.
So lots of my current projects have some pitfalls at the moment. However, I believe most will be overcome and turn out not so badly in the end. I sat up last night and made a long list of everything I need to do for each property to move forward in a positive direction this week. It is now 10 minutes to 8 on Monday morning so it's time to get started on that list. By the end of this week I hope to have done the following . . . .
1. have a renter in the 3/2 townhouse
2. have a repair schedule in place with my property management for the 3/1 property with the tenant in it
3. have an exist strategy determined for the 3/1 brick ranch HUBZU home
4. have financing secured for the 3/1 brick ranch HUBZU home
5. have negotiated with my young contractor for his scope of work for the prepaid $5,000
6. Have at least four other contractors lined up to work on the local house here (flooring, exterior, roof, drywall/taping/painting)
7. Have gotten engineer reports and acquired a builder's permit for work to be done on my local flip
8. Have determined what kind of deed we can expect on the Chicago apartment block and met with other investors to determine how to move forward.
So it will be a busy and interesting five days ahead! You would think I wouldn't have time to do anything else . . . . . but there is an owner-financed property I am looking at in Florida . . . . hmmmmmmm. I am going to send out an e-mail asking a few more questions about this one!
Wish me luck!!
Bonnie
THIS IS WONDERFUL HOW DID YOU GET THE BUYER TO PURCHASE YOUR HOUSE AND THE FINANCE YOUR REHAB
I'm a Canadian in an area that has a strong seller's market. I find it tough to find properties with potential that are deeply discounted.
However, in September I decided to take the plunge and I purchased a 100 year old house in a neighborhood that is enjoying some revitalization. I am taking the lead on this project and arranging my contractors myself and lining up the inspectors, engineers, etc. that are involved in the project, and shopping for and ordering all the finishing items such as flooring, light fixtures, etc. It has been keeping me pretty busy as it is an hour away from my house so has involved quite a bit of running around. As is often the case with older homes, there are problems that aren't immediately evident. And I have been running into some of these so the profit margin on this project is narrowing. However, at this point I am thinking that I will at least break even and possibly make a little and it will have been a good experience for what I have learned from it - - trying to keep a positive attitude.
Purchase Price: $112,500
Closing & Holding: $8,000
Rehab Costs: $60,000 (had initially hoped for only $40,000 but now I am hoping I can keep it to 60k)
Selling Price: aiming for $205,000 (This is quite optimistic)
Realtor Fee: $12,300
Net Result: $12,200 profit
I have decided I'd like to focus more resources on real estate investment in the US. I developed a contact in Virginia and have concentrated my attention in that area.
I put an offer in on a 2 bed/2 bath townhouse in September that was accepted. I took out a personal unsecured loan here in Canada and made a cash offer. The property was owned by the Veteran's Association. Well, closing kept getting delayed due to liens (4 in total) and a judgement that was actually against another one of their properties but somehow it was stalling my purchase out. By early December, I had signed an extension to the closing date three times and it was going to be time to sign a fourth time. But a couple of things had happened by now . . . . I had learned more about the market and realized I had offered too high. And I was tired of keeping that $85,000 cash tied up when I could have completed a flip on another property in that time. So I didn't sign the extension and I released the property. The other thing that had happened was that the gentleman who is my "eyes and ears" down in Virginia had told me it would require $5-6000 of rehab and as time went on I realized he was way off on that, and I had based my offer on that information. Some things are meant to happen and i believe that the delays that came with this property, allowing me the time to second guess my purchase, were meant to be to protect me from getting into a bad deal.
Then I made an offer of $40,000 (subject to inspection) on a duplex on the advice of my real estate agent. This was my first short sale involvement. So once the bank approved it, my project manager and realtor went to take a look at it, but it was a piece of junk, so we released that one as quick as we could!
Then I put a bid in on a HUD home, a nice little single family residence on a large corner lot. Again, this was sight unseen but the offer was subject to inspection and when they went to take a look at it, there were foundation problems, so we backed out of that deal as well.
I found a 3 bedroom 2 bathroom townhouse with owner financing. The listing agent was actually a partner in the ownership of this property. Here are the details:
Purchase Price: $79,000
Downpayment: $10,000
Interest Rate: 5%
Balloon Payment in 2 years
Rehab costs: $8,000 (note, I just fixed up enough for renting this, not for a flip)
Completed this project January 2 and is now up for rent for $1,150.
So I am currently into this property for approximately $20,000 by the time you include holding and closing costs. And it should cashflow $575/month so I am pretty satisfied with this project. I am hoping to do two or three flips that will give me the $ to pay this out in full in two years and then it will cashflow even higher or I can refinance it.
Then I put an offer in on another townhouse. By now I was getting better at judging what I should be offering on a property. I used this formula . . . .
ARV x .65 - rehab costs = offer price
But I had also now learned to look at other flips in the neighbouring area and determinig what other investors were paying per square foot for their properties they were flipping. What I found was that to have a successful flip you generally had to have a $50/sq foot difference between your purchase price and your selling price. This of course will be determined a bit by the condition of the property when you buy it, but it's a quick rule of thumb I have started to use.
So for this next property, I studied the price/sq foot other investors had been paying in the development, and I went just $1.5 over that and got it. This is a 3 bedroom 2 bathroom Fannie Mae townhouse. I should be completed rehab and have this back on the market by the end of February, 2014.
Purchase price: $61,500
Rehab Costs: $27,500
Closing & Holding: $6,000
Projected Resale Price: $125,000
Realtor Fees:$7,500
Net Profit: $22,500
Financing came from that personal unsecured loan I had taken out for the first 2 bedroom townhouse that I backed out of.
My most recently accepted offer is a 3 bedroom 1 bathroom 980 sq foot brick ranch. They have accepted $60,000 subject to financing and inspection. I have discovered that this property has a long term tenant (10 years) in place who wants to stay. The problem is that they are only paying $600/month. My realtor, a building inspector and my property manager, are all going to meet to go through the house and I will have a better idea of the condition of the property and what I should reasonably be able to expect for rent. Apparently the tenants are expecting and willing to pay more in rent with a new owner in the picture. My strategy with this property is to get $800-900/month rent for about five years. At that point, I am going to convert the attached garage into another bedroom and bathroom, thereby increasing the square footage and adding value. This neighbourhood has lots of converted garages already and 4/2's are selling for $130-145,000. I am hoping it will be more like $180,000 after five years.
There is a Hubzu house on auction just down the street from the house above. It has six days left so I am going to keep an eye on the bidding for that one. I will have to crunch some numbers and then I can jump in if it looks like it's going to stay within my projected budget.
In between all of the above, there have been other offers, including some owner financed offers to owner/sellers, and a couple of other offers that have been rejected.
But the biggest project of all is a joint venture I am trying to put together to purchase a package of 14 houses. They are owned by three entities that all have one common partner. They are all mortgaged by the same bank and they are all up for short sale. My goal is to put together 2-3 investors who will pay the down payment and I will get an equal share for putting the deal together. Our strategy is to sell three of the houses to cover the down-payment, so that my partners and I will end up owning 11 properties with no money of our own in the deal. All properties are currently tenanted. At this point the deal has been accepted by the seller and we are awaiting third party approval. I am working hard to find financing at the best possible terms for my investors. And my realtor is working on the due diligence for me, putting together CMA's and inspecting the properties and looking over the lease agreements, etc. Wish me luck on this - - it could be amazing!!
Well, this has gotten really long-winded so thanks to anyone who has stuck it out this far. Now that I've started this, I will try to update it more often so my entries aren't as long.
I am pretty excited about all of this and feeling like I am on the right track, but I will feel better once I have sold my two first slips successfully and have a tenant in my townhouse - - then the smile will be ear to ear!!
i am a beginner and want to be part of a really strong network of people i have done a few guru conferances but decided that dean is still the best . i now just have to get together with people that can help and assist. i can do it determind and broke but have the ability and the go to get this done