Experiences of a REI (NY style)

2006-11-26T23:40:00.000-05:00

Hello,

Sorry that I have not been posting on this blog much. The reason is that now that I am familiar with the blog page and its set up I have created a new blog that is better organized, and with a lot better information. Please check it out at www.reiknowledge.blogspot.com

Thanks

p.s. all my new posts will be to the new blog

2006-09-26T15:45:00.000-04:00

Well it has been a rediculiously busy past few weeks for me, but I do have some Updates. I have been working on some numbers for the house that I am trying to purchase from my fiance's family. Here is the work up of the numbers related to the house.

Some Updates
I came about this estimate through various comparables in the surrounding neighborhood. I also adjusted the price per square foot due to the variations in SQFT, and shape of the comparables. That is why my estimate is on the lower range when compared to the Cost/SQFT of the other properties.

Below is an estimate of what I believe it will cost to repair and renovate the house to todays standards.

This estimate is not including repairing the roof structure, which I believe will increase the cost substantially. This Estimate is also based on hiring all the work to be done. In really life I will try and do some of the stuff myself, especially the stuff that one doesn't need a permit for. The only things that I will have hired out are the things that requir a permit, anything that takes significant skill, etc.

2006-09-13T11:09:00.000-04:00

Running the Numbers on a Property...

These are just some of the property evaluation tools that either I or my partner created after reading different books, and trying to work it out on Excel. My main goal was to come up with one Excel Worksheet that would evaluate the property numbers with the least amount of data that needed to be input. I never really found one that I like so far, but there are some very good ones.

2006-09-12T20:48:00.000-04:00

Some Much Needed Advice...

Okay, I am in a little predicament, and I would greatly appreciate anyone's thoughts, insights, or advice on this matter. Here it goes...

My soon to be wife's parents own free her (my soon to be wife's) grandmothers house. It is a small 900 sq. ft. house that is in fairly poor condition. It desperately needs new roof framing along with new shingles and such. Along with that it needs updated electric, paint, flooring throughout, and a new tub (her grandmother needed a handicapped tub which unfortunately takes up the whole bathroom). My predicament is that they (her parents) are willing to sell us the house after the remodeling is done, fairly cheaply. But the major predicament is that they would like to keep the house in the family. Which would mean that we (my soon to be wife and I) would not be able to capture any of the equity in the house to place into another house or investment. I do not think it would be appropriate to sell the house back to them (her parents) for FMV if they sold it to us for less. I also do not want to be sneaky about it either. I would like everything out in the open to prevent possible problems.

Here are the numbers to the house...

Comps place similar houses at about $28 - $30,000
* I believe that after all the repairs and remodeling, it would be about $30 - $35,000
Current mortgage on the property is $0
Taxes About $1000 / year

Any advice would be greatly appreciated.
Attached is a basic floor plan of what it is currently like, and what I believe it should look like after repairs.

Again please give any thoughts or ideas.

2006-09-12T20:42:00.000-04:00

Finally Pictures...

Hey look at this I finally figured out how to do pictures. It only took me a week to figure it out. Thanks to everyone who helped me with this. So here it is, the mighty 5-unit. I know it doesn't look like much, but it is actually very large, and well maintained. Sorry that I don't have any more pictures to put up of it, but as soon as I do I will post them.

2006-09-11T00:12:00.000-04:00

Some Problems...

I have been spending the past few days trying to figure out this whole blog thing, and I can not seem to find any answers. So I am making a request out to other bloggers that may read this blog. If you have any idea on how to attach pictures to your blog, attach excel documents and/or charts to your blog, and maybe even some video to your blog as well. I would greatly appreciate some advice, or the name of a website that may give some meaningful information about these questions of mine. Thanks in advance.

Investing in Duplexes, Triplexes, and Quades

This is a decent book about buying investment properties, especially those that the title mentions. I particularly like the Valuation of Your Property Chapter (Chapter 8).

It goes into decent detail about a few different numbers one should look at when evaluating a deal to purchase. Some such numbers would be...

Gross Rent Multiplier (GRM) -
GRM = Purchase Price / Gross Scheduled Income
Ex. Property #1 Price: $245,000
Rents: $1,300 X 12 = $15,600/year
$245,000/$15,600 = 15.7 GRM
* One can also use this formula to estimate the cost of an investment property as well

Cash Return on Investment (ROI) -
ROI = Remaining cash after all expenses / initial investiment
Ex. $3,000 / $25,000 (Down Payment) = 12%

Margin -
Margin = 100 - operating expenses plus debt service / gross potential income
Ex. Gross Potential Income (100% occupancy) $31,000
Less Operating Expenses -$5,000
Net Income $26,000
Less Debt Service -$20,000
Cash Flow $6,000

Debt Service $20,000
Operating Expenses $5,000
Total Expenses $25,000
Accordingly: total exp $25,000 / gross potential income $31,000 = 80.6% break even
Thus, your margin is 19.4 % (100% - 80.6% = 19.4%)

Cap Rate -
Cap Rate= NOI / Purchase Price
Ex. $50,000 / $500,000 = .10 = 10%
*One can also use this formula to estimate the value of an investment property as well
Ex. NOI / Cap Rate
$50,000 / .09 = $555,555

Over all I believe that this is a very useful book. I believe that it is worth the read. Again its title is Investing in Duplexes, Triplexes, and Quad by Larry B. Loftis, Esq.

2006-08-27T19:41:00.000-04:00

Possible Short Sale

What my partner had to say about it...
SFH. Brick, 4BR/2.5BA. In ground pool. Landscaped. Whirlpool tub. 3 stories. Newer roof. Newer kitchen. All appliances in kitchen.

I sent this lady a pre-foreclosure letter a few months ago.
She called and said she had a buyer, but they couldn't buy right away.
She needed $12,000 to catch up with the lender, including fees.
I suggested she lease/option the home to the buyer for a $12,000 option fee.

About 2 months later, she called me again.
The lease/option fell through.
She needed to sell, and wanted to avoid foreclosure.
Was I still interested?

She bought the place in March 2004 for $164,000.
She has it listed for $179,000.
She did get some minor flooding through floor drains during 2006 flood.

I tried to do comps.
There is nothing similar in the area.
The place across the street is under contract at $124,900.
It is wood sided, 3/1.5.
Nowhere near as nice.
Realtor had the same problem.

Seller is divorced recently.
Two judgments against her for $48,000.
Shoud be cleared by her bankruptcy.

Financing was 100% VA Loan at 5.25%.
Has assumability clause.
I offered $127,045 with contingencies:
100% Assumable loan to me.
No more than $8,000 in flood damage.
Attorney review of bankruptcy filing.

She has signed contract at that price.
I start dealings with the lender on Monday.
We'll see how this one works.

I plan to fix and flip this one.
My gut feel says I can sell for $160-$175,000 with no big trouble.
Of course, I've been wrong before.

2006-08-27T19:37:00.000-04:00

Appartment #1 (Contract #1)

This is what my partner (dad), had to say about this property from the beginning...
Here's my story, it's sad but true...

Everyone knows that you should hold real estate in an LLC. So, in an effort to get started out right, my son and I decided that we should set up that LLC. With some help from the company I work for, we set up our LLC by ourselves. The cost to set one up in NY was $200. In addition, I spent $26.95 for a downloadable Operating Agreement that I modified to fit our needs, plus about $70 for the required advertising and affidavits.

Problem one arises. Did you know that if you start an LLC in NY in 2005, but don’t actually buy a property, you still have to pay a $500 annual fee? Lesson #1: Don’t form the LLC until you at least have a property in mind.

I went home invigorated after the Rich Dad Poor Dad Meeting 2006 in Scottsdale, AZ. We tracked down a few realtors and found two that I like. One Realtor, Lisa, looks for multi-family homes for us. The other, Greg, deals in REO’s and “as-is” homes. In addition, we hired one of my son’s college friends to print and mail pre-foreclosure letters for us.

The RDPD meeting was in late-March, and by mid-April I had looked at several properties. I say “I” because my son was away at school. I made offers on a few of the properties – all lowball offers – but no bites. At Easter, Brenton came home for a break, and we spent a Saturday looking at several multi-families with Lisa.

Property #1 had a lady who “hated the neighborhood, and wouldn’t go outside – day or night” as well as a guy who wandered around mumbling “dust, dust, there is too much dust in the world”. He had actually taped plastic to the ceilings in his apartment to keep the dust away! The house was in rough shape, so we walked.

Property #2 had a lovely blue tarp roof. We couldn’t get into any apartment except one. The lady in that one loved the place. She also explained that everyone in the building was a little nervous about opening doors, ever since the DRUG RAID the night before. She said they took one of the tenant’s boyfriend away, along with drugs and guns. Adios, property #2!

The next place we looked at was a property at 20 Doubleday Street. This was an older 5-family with an asking price of $114,900. When we went through the apartments, they were all neatly kept. The tenants seemed happy to be there. One tenant had been there for 43 years! There were 5 gas meters and 5 electric meters! It was fully rented! BINGO!

So we ran home, and put together an offer. Here were the numbers they listed in the MLS:
Annual Rents -- $26,220
Taxes -- $3,534
Insurance -- $1,358
Heat -- $5,400 (Hey! What about those separate meters?)
Electricity -- $1,168 (Again!)
Water/Sewer -- $775
Cap Rate – 12% as listed

No vacancies. No maintenance. No management.

So I sent the realtor an email. It was sort of a “Letter of Intent”, although I didn’t call it that. I made allowances for 8% vacancy, an increase in taxes, a big increase in utilities, and some room for maintenance. This brought the cap rate down to 8.63%. I made an initial offer of $90,000.

The seller came back with a $100,000 counteroffer. We asked if they would be interest in seller financing. They said “no”, but we came back with the following counteroffer anyway:

1. The first option would be an offer of $95,000** with conventional financing at 80% of the purchase price. We would pay cash for the remaining 20% of the purchase price. This would eliminate the need for seller financing.
2. The second option would be an offer of $97,500** with conventional financing for 80% of the purchase price. We would require the seller to finance the remaining 20% of the purchase price in the form of a 2nd mortgage. The terms for this financing would include us paying the seller 3 points (approx $3,000) on the purchase price at closing, with the 2nd mortgage paying interest at 8% fixed, over a term of 15 years.
3. The third option is an offer of $100,000** with conventional financing at 70% of the purchase price. We would pay 10% in cash at the time of closing. We would require the seller to finance the remaining 20% in the form of a 2nd mortgage. The terms for financing this option would be 0 points paid to the seller at closing, with the 2nd mortgage paying interest at 8% fixed, over a term of 15 years.

** All of the purchase prices outlined above will be increased to cover closing costs. All closing costs are to be rolled into the financing (subject to approval of conventional lender).

The seller quickly accepted option #2, and we signed a contract. I sent it on to my attorney, who read it and said “did you really mean to offer $3,000 plus 8% to have them finance less than $20,000???”

A call to Lisa got us out of this one – sort of. We agreed to go with option #1, but the seller getting $98,500 instead of $95,000. A $3,500 mistake, but still not a bad deal.

Lesson #2 – Have someone with good business sense proof-read your offers before they go out. Of course, I only meant to offer 3 points on the portion they were financing, not the entire purchase price LIKE I WROTE IN THE FREAKING CONTRACT!!!

We updated the terms in the contract, and faxed them off to Rochester for my son’s signatures. Things were looking good now. We’d own the place soon, and my son could work all summer long on fixups, as well as getting some landlording experience.

Doubleday is a short street, only about a block long. There are several multi-families on the block. I ask Lisa to contact all the owners to see if any others are interested in selling. She does, but no one is.

We had a property inspection done, which found a few critical items the seller had to fix, along with a list of things Brenton could do during the summer. Our lender reviewed the numbers and supporting documents, and said we got a great deal. And then things seemed to stall. Among the problems we ran into were:

The loan officer at the lender I was using had an opportunity to move to another branch. She just sort of quit replying to my calls. After a couple of weeks, we discovered what was up, and were given a temporary contact at the bank. Of course that person did nothing. Lesson #3: Be more proactive in communication.

Our attorney seemed to quit communicating with the seller’s attorney who seemed to quit communicating with the lender’s attorney. Information and documents just didn’t seem to flow from one to the other. Lesson #4: Collect all the data and documents myself, and make sure they get to the proper people.

Every time I had a question for the seller, I had to call Lisa, who had to call the seller’s agent who had to call the seller for an answer, who called Lisa, who called me. Way too many intermediaries. Lesson #5: Meet face-to-face with the seller early in negotiations, and contact them directly with questions.

Then comes June 2006, and major flooding here in Upstate NY. Fortunately, nothing happens at the property, but the area comes to a halt. Banks, hotels and hospitals are flooded. Roads are flooded or washed out. Many homes are washed away or ruined. Later, this is called a 500-year flood. This is after many people just recovered from 2005’s 100-year flood. Lesson #6: Sometimes, when you think that things “can’t get worse”, they do.

In late June, I meet my new loan officer. Nice guy. He’s new to the bank, and is going on vacation next week. Lesson #7: See lesson #6.

I’ve grown concerned with the idea of having to sell many of my stocks to finance the 20% down payment. I have a lot of gain in these stocks, and I’d prefer not to pay taxes on those gains. So, I hatch an idea to use the account as collateral for a line-of-credit at the bank. I’m told that they can do this “with no problem”. “How much do you want”, they ask. I say $50,000. They say $35,000. OK, I’ll take it. Lesson #8: There really is more than one way to skin a cat!

Mid-July hits, and I’m told we should close on the 21st! I wait and wait, but no call from my attorney with a final date and time. Finally, I receive an email stating that he is waiting for approval from the lender’s attorney and that he somehow missed getting the Certificate of Occupancy and Certificate of Compliance from the seller. Looks like no closing for a few days at least.

July comes and goes. Still no closing date. I call and email my attorney. He says that the bank has required a survey, since this is a commercial property (over 4 units). He’ll take care of that. But the lender’s attorney is only in the office on a limited schedule. His wife is having twins, and has gone into the hospital with complications. Lesson #9: Always require full physicals of attorneys and their immediate families.

Shortly after this, the wife delivers the twins prematurely. She is doing OK, but the infants aren’t in such great shape. The lender’s attorney will be out of the office for the foreseeable future. They assign a new attorney to the case. She leaves for vacation the next day. Lesson #10: Those jokes about attorneys…they aren’t really jokes. I’m thinking about how a batch of them might taste “with Fava beans”.

The new attorney returns. I know this because I receive a short email from my attorney. It says, “bob-got letter from bank's lawyer asking for all kinds of stuff. need to talk. will track you down.” In all reality, the attorney didn’t need all that much. The prior attorney had most of it, but she just didn’t know it yet. Closing day is drawing near! Unfortunately, so is the date that Brenton has to return to college. I’m assured that we’ll close before then.

Somewhere during all this, I called my insurance agent to secure insurance for the new property. He comes back with “about $2,800”, but he isn’t sure how quickly they can firm up the quote. Mind you, the seller listed insurance at $1,358! I call Lisa, who calls the seller’s agent, who…well, you know the rest. She gets the name of their insurance company. I call them, and lock in insurance, with no inspection, at $1,582. This is based on a higher replacement value than the seller had. Lesson #11: Get insurance quotes early, and shop around.

It’s August 9th, and we’re at my attorney’s having Brenton sign Power-of-Attorney forms because he has to go back to college in the morning and we still haven’t closed. While I’m there, I pick my attorney’s brain on a Short Sale deal I’m working. There is a bankruptcy involved, and he gives me a few warnings about potential problems. Lesson #12: Never put the Fava beans in before you are done picking an attorney’s brain.

Shortly after this, I get a call from the bank. They have received a letter from Schwab stating that they will not allow the account to be pledged as security. I call them, and find out that they require $1,000,000 in equity and no margin before they will consider this. I have neither. I call the bank, and argue my case. They mull things over for a day before coming back with a solution. They will still give me a line-of-credit for the same amount, but I’ll need to give them a second mortgage. Lesson #13: Be persistent. Stubbornness will yield you great benefits.

August 22nd is closing day! I hang up and call them right back, just to make sure I am on with the right attorney. In the time since my first walk-through, a tenant has left. When I talk to Lisa to firm things up (we were planning on some repairs to that apartment, plus a furnace conversion), I find out that it has been re-rented to a couple displaced by the flood. And this is at an increase in rent!

The day of the closing, I do another walk-through, this time with both Lisa and the seller. Everything is in great shape. In fact, he has put in some new electrical in the basement. The apartments are all still spotless! Where did these tenants come from???

The morning before of the walk-through, I look through the legals in the local paper. 40 Doubleday is in foreclosure. During the walk-through, I look at the property next door (22 Doubleday). It is a similar structure, although not maintained as well. The seller says that someone just bought the place a year ago, a he died recently. Hmmmm???

I go home, and do a quick search on the MLS. A 2-family at 44 Doubleday – the last house on the street – is for sale. A check the next morning finds a 3-unit (2 houses) at 14 Doubleday is for sale. Both of these were bought by out-of-area buyers within the last year. 14 Doubleday got a new roof before the owner decided out-of-town remodeling was too hard.

So…I’m looking at all these places next Wednesday. Before things are done, we may own the better part of the block! These places were all bought real cheap by the last owners, so I’m hopeful I can work some seller financing on them. I may be open to partnering with someone too. If you’re interested, drop me an email at Bob@HomeProRentals.com – just put Doubleday in the subject line or I may delete you.

Lesson #14: Never, ever, ever, give up! The seeds you plant in your daily dealings will eventually grow.

2006-08-27T13:44:00.000-04:00

Lots of Activity

The past few weeks have been very busy. There are a bunch of new appartments on the market that we are looking to hopefully purchase. My partner is going to take a look at them this Wednesday the 30th. When I get the details I will post them here for everyone to see and read.

2006-08-27T13:35:00.000-04:00

Updates

Offer #3 - We were out offered by about $2000

Offer #4 - This deal disappeared and we thought that it was a no go. But after about a month the homeowner called us back. So we are moving forward with this deal as well. We have all the paperwork and numbers that we need from the home owner, all we need to do now is go through the bank, and find the money to do this deal. I will be posting more about this as time goes on and new information arises.

Contract #1 - This 5 unit building has been a major pain in the butt. But after a long time we finally closed on it. I will be posting the full details when I get everything organized. I hopefully will have some pictures as well for everyone to look at.

2006-08-27T13:32:00.000-04:00

LONG Time No See...

Sorry that this blog has been pretty slow, or non-moving the past few months. I was extremely busy over the summer months. I had 3 jobs, and worked many many hours. But now that I am back I plan on taking full advantage of it. So again, I am sorry for not posting in a while.

2006-06-04T11:38:00.000-04:00

Offer #4

4/1.5 House. Well maintained, and looks nice. Owner bought the house about 2 years ago with a 100 percent VA loan. She is in foreclosure. We are planning on a short sale this deal. We shall see.

Offer #3

3/2 House. Well maintained, and looks nice. It is currently rented (tenant has been there 5 years). Owner passed away in a flood, and son currently lives in Germany. He is asking $25k, and we are offering $17k.

2006-06-04T11:30:00.000-04:00

Contract #1 Update...

Okay this property has definitely been an up and down deal, but I believe that we finally came to an agreement on this one. In the end we are going to pay $98k for the place, with 20 percent down (our money). The seller is going to make the repairs to the building that were mentioned in the inspection. Hopefully that is the last of the negotiations for this deal.

Goals for 5/7/2006 - 5/17/2006 Updated...

1. Make list of people to call for when I get home. (RE agents, Title companies, inspection agents, etc)
- Done

2. Come up with a flyer to be placed around town to attract possible deals.
- Done

3. Lay out my plan of attack for the summer.
-Done

4. Organize packets for lease/options, and subject2 purchases.
- Done

5. Come up with a phone screening sheet.
- Done

6. Start reading Start Small, Profit Big in Real Estate.
- Done

2006-05-09T16:45:00.000-04:00

Update on contract #1

Things are coming to a sort of stand still with this deal. As I mentioned earlier there was a little problem with the contract, and our attorney was trying to work it out with the seller. We had the inspection done, and there was a few things the needed to be fix, but nothing that I believe was to unexpected. A few cracked walls, some stains, some outlets that aren't working, etc. So I believe that it came out alright. We are trying to get the seller to credit us for the repairs and what not, but I do not believe he will take it. The deal that he thought he was going to get, is ending up being nothing like, or very little like what he originally planned. So we will see how this ends up.

But through doing this deal we have learned some valuable lessons.
#1 - double and triple check the contract before you hand it in.
#2 - Make sure your RE agent understands everything that you are doing, and plan on doing
#3 - We found out a great bank to use, where we can get 100% financing if we need.
#4 - We found a good inspection guy that can come in handy in the near future.
#5 - And we learned about the general process you goes through while purchasing a place, not to mention that we now know it can be done.

My Main Summer Goal

My main goal for this summer is to purchase at least three (3) houses. This can be either though lease/options or subject2 purchases. These will be short term purchases, and short term being within two (2) years max. Hopefully only a few months. The earnings from these purchases will go directly into our company, or into my partners stocks, or both. Which in turn will be used to acquire a long term hold.

Goals for 5/7/2006 - 5/17/2006

1. Make list of people to call for when I get home. (RE agents, Title companies, inspection agents, etc)

2. Come up with a flyer to be placed around town to attract possible deals.

3. Lay out my plan of attack for the summer.

4. Organize packets for lease/options, and subject2 purchases.

5. Come up with a phone screening sheet.

6. Start reading Start Small, Profit Big in Real Estate.

Goals for 4/30/2006 - 5/7/2006 Updated...

1)Stay involved in the purchase process.
- This is an on going process, but I am staying as involved as I can be.

2)Find out as much as I can about "Sandwich leases."
- I have been studying, reading, etc everything I can about "sandwich leases," and "subject2" purchases that I can.

3)Start to re-read Start Small, Profit Big in Real Estate
- Have not been able to do this, because of the previous goal. But I will put this on the next set of goals to accomplish.

2006-04-30T13:22:00.000-04:00

Goals for 4/30/2006 - 5/7/2006

1)Stay involved in the purchase process.

2)Find out as much as I can about "Sandwich leases."

3)Start to re-read Start Small, Profit Big in Real Estate

Auctions

If you don't know already auctions area great place to go find bargains for your real estate investments. You can get anything from flooring to windows and siding very cheaply. I believe you can save literally thousands if you go to auctions knowing what you need for any given place. Just my two cents.

52 Homes in 52 Weeks
by Dolf de Roos

I got the chance to read this book a few days ago. I found it very interesting and thought provoking. It wasn't what I would call a "how to" book, or even a book about investing in real estate so much. It was more of a story of Dolf's and his partner's journey through this goal of buying 52 homes in 52 weeks. I really liked their method of sandwich leasing the property. I would think that this would be a very good method for doing pre-foreclosures. I would think that it would eliminate the Due on Sale Clause worries, and let you get into the property with almost none of your own money. The only thing that I can see as a worry would be if they do not use what you pay them for the rent and the house goes in foreclosure anyways. If you have experience with doing sandwich leases please post your thoughts about them. It would be a great help to me.

Goals for 4/23/2006 - 4/30/2006 Update...

1)Monitor the pre-foreclosure process.
- It is going great. Our person is doing everything perfectly. It saves us a ton of time so that we can focus on other important stuff.

2)Find my financials for our financing.
- Found them, and handed them in. Our loan process is going along smoothly, and it looks like it will continue to run smoothly until the end. Lets hope at least.

3)Be as involved in the purchase process as I can be.
- I am doing this as much as I can. I am asking as many questions as I can on stuff that I do not understand or know. I am also trying to stay as involved as I can be at the moment. I can not wait for summer to come, so that I can take a very active role in the whole process, and hopefully get things flying. I have the time where as my partner does not, so I believe that I will be a big help to him and our process.

2006-04-23T23:26:00.000-04:00

Goals for 4/23/2006 - 4/30/2006

1)Monitor the pre-foreclosure process.

2)Find my financials for our financing.

3)Be as involved in the purchase process as I can be.

Contract #1 Update

Well to put it simply it looks like we made a goof, or an opps. And unfortunately it is costing us some time. But hopefully it will not cost us this deal. We said that we would give the seller 3 points towards his loan (covers our downpayment). But when it got written we did 3 points of the purchase price, which was not our intent. So we are in the process of fixing that and hopefully making it right again. But I don't believe that this is a deal killer anyways. We shall see. Other than that little misfortune everything seems to be going well. We found a very helpful lender and we got a better interest rate than we thought we would get, so all in all everything is going smoothly I believe.

2006-04-23T23:20:00.000-04:00

Goals for 4/16/2006 - 4/23/2006 Update...

1) Implement our strategy for pre-foreclosures.
- Got this all set and done. Our person is working hard to get the letters out, freeing up our time.

2) Analyze the deals that come to us
- This is an ongoing process, that I keep on the best I can. We are getting plenty that come across our table, or computer in this case. Its just a process of finding the good ones.

3) Continue to set up the Cash Flow group
- I am having a blast with this. Each game seems to get bigger and bigger. Not to mention more fun, and I always learn something new.

2006-04-16T18:38:00.000-04:00

Contract #1 (Offer #2)

- Huge 5 unit apartment. Almost no repairs (EST. $3,000). Asking $115,000. Offered $90,000 puts it at a 11% Cap rate, which we feel is acceptable. If it is accepted I will place more details about it on here.

Or offer eventually got accepted after some negotiating. They wanted $115k, we offered $90k. They came back with $105k, we gave them three options...

option #1 - $95,000 with 80% conventional mortgage.

option #2 - $97,500 with 3 points paid up front on a (20% seller financing) 8%/15 year 2nd seller mortgage and 80% conventional 1st.

option #3 - $100,000 with 0 points on a $20,000 8%/15 year 2nd seller mortgage and a 70% conventional 1st (10% cash down).

They accepted our offer #2 with the ability to call the 2nd mortgage in 5 years if they chose. So in this deal we have around $3k of our money in it, because they are paying closing costs as well. All we need to do now is get the financing from the bank, which I believe will be the easier part of this deal. I will post the final numbers, when we get all the financing in place.

2006-04-16T18:32:00.000-04:00

Goals for 4/16/2006 - 4/23/2006

1) Implement our strategy for pre-foreclosures.

2) Analyze the deals that come to us

3) Continue to set up the Cash Flow group

2006-04-16T18:28:00.000-04:00

Goals for 4/10/06 - 4/16/06 Updated...

1. My main goal for this week is to start implementing our strategy for bring us all kinds of deals. This involves talking to the real estate agents, implementing our strategy for bringing us pre-foreclosures without doing the majority of the work, and looking for FSBOs.

- Started implementing this, and so far it has been working really well. I get about 10 to 20 leads every week that meet a certain criteria that I gave my real estate agents. And on Monday I will start implementing our pre-foreclosure strategy. So far so good.

2. Because of my father, finish reading The Millionaire Real Estate Investor

- Finally finished it. A great read for anybody at ay level I believe.

2006-04-10T21:04:00.000-04:00

Offer #1

- 3/1.5 House. REO, needed a lot of repairs (EST. $15,000). Asking price $27,500. Offered $23,600. Sold for $25,500. Comps put it around $45,000 - $50,000.
All in all we lost the bid by $1,900.

0ffer #2

- Huge 5 unit apartment. Almost no repairs (EST. $3,000). Asking $115,000. Offered $90,000 puts it at a 10% Cap rate, which we feel is acceptable. If it is accepted I will place more details about it on here.

2006-04-10T20:46:00.000-04:00

Goals for 4/10/06 - 4/16/06

1. My main goal for this week is to start implementing our strategy for bring us all kinds of deals. This involves talking to the real estate agents, implementing our strategy for bringing us preforeclosures without doing the majority of the work, and looking for FSBOs.

2. Because of my father, finish reading The Millionaire Real Estate Investor

2006-04-10T20:34:00.000-04:00

Goals for 4/3/06 - 4/9/06 Update...

1. Continue to work on my strategy for bringing in deals.
- Came up with a good strategy, just need to implement it

2. Finish reading The Millionaire Real Estate Investor.
- Almost done. My dad is kicking my butt to finish it. He is just selfish, he wants it all for himself. :)

3. Continue setting up the Cash Flow Group in Rochester.
- Made great progress in this. Had my first group meeting that about 5 people played in. I had lots of fun, and learned a lot. I also believe that everyone else had a lot of fun as well, along with learned a good amount. I believe that as time goes on the popularity of this increases, because they advertising will increase, as well as the word of mouth advertising.

4. Finalize our goals for our real estate investments.
- I believe that we finalized our temporary goals, if that makes sense. In other words we have finished our goals for now, but I am sure they will change as time goes on, and as we get further along in the process.

2006-04-03T16:08:00.000-04:00

I am no longer going to put the "possible deals" up, because there are just to many to keep up with. I will however put up all the deals that we have in contract (ex. Contract #1), and those that actually get purchased (ex. Purchase #1).

2006-04-03T16:02:00.000-04:00

Goals for 4/3/06 - 4/9/06

1. Continue to work on my strategy for bringing in deals.
2. Finish reading The millionaire Real Estate Investor.
3. Continue setting up the Cash Flow Group in Rochester.
4. Finalize our goals for our real estate investments.

2006-04-03T15:53:00.000-04:00

Goals for the 3/27/06 - 4/2/06 Updated

1. Finish forming a better strategy for bringing in deals that go with my purchase strategy.
- Finished what I believe to be a rough workup for bring in many deals that maybe worth investing in.

2. Finish working up a communications plan with my partner.
- I believe that this is an on going thing, but for the time being I believe that things are going good in this department. I believe that the RDPD get together in Arizona helped spark the fire which started our communications going.

3. Finish reading The Millionaire Real Estate Investor.
- Almost done, it is a bigger book than you might think it is. I would highly recommend reading it to anyone who is interested in real estate. It is packed with useful information.

4. Write down our goals for our real estate investments (what we start purchasing at, when we decide to move up to the next level, etc)
- Have a rough work up of this, and when I finalize it I will post it on this blog

5. Start implementing that strategy for bringing in potential deals.
- I have started implementing my strategy, and have had very good success with it so far. I plan on bring a lot more people on board when it comes to this so that I and my partner do not have to look for deals any more.

6. Start a Cash Flow game in Rochester.
- Working on this at the time. Started getting the word out to all the students, and am now thinking of ways to come up with more Cash Flow 101 games. If you have any ideas please share.

2006-03-30T22:57:00.000-05:00

Possible Deal #5 Update

- We tried to get a hold of the real estate agent to make our offer, and the property was already under contract. Just our luck. That was a solid investment property. We need to be quicker is the lesson learned from this. No more sitting back and e-mailing RE agents about deals. We are going to have to call them as soon as we find a deal and work out the numbers, that way we can get it under contract faster.

Lessons are learned everyday. On to the next one.

2006-03-30T15:15:00.000-05:00

Goal #6

Start a Cash Flow game in Rochester.

2006-03-29T10:17:00.000-05:00

Some Updates on Investment Properties

Possible Deal #1 - From previous post.
- it was a 3/1 HUD home, asking $24,000. We were going to place a bid on it once we got back from Arizona, because that was the first day it went up to investors. Got back from Arizona checked the web to see if it was available and it sold for $35,101. I believe that price is still a deal. I believe that house was worth around $60,000 - $65,000 so they got it at a good discount.

Possible Deal #5

This deal is a four unit apartment building. Asking price is $39,000, rents are around $350 per unit. My partner is going to view it today, and make an offer based in the viewing. The numbers look great on this property.

2006-03-28T01:07:00.000-05:00

Goals for the 3/27/06 - 4/2/06

1. Finish forming a better strategy for bringing in deals that go with my purchase strategy.

2. Finish working up a communications plan with my partner.

3. Finish reading The Millionaire Real Estate Investor.

4. Write down our goals for our real estate investments (what we start purchasing at, when we decide to move up to the next level, etc)

5. Start implementing that strategy for bringing in potential deals.

2006-03-28T01:04:00.000-05:00

Finished Goals of 3/20/06 - 3/25/06

1-3 are finished, and listed in a previous post

4. Try and figure out a better way to communicate with my partner (my dad), because we live in different parts of the state the majority of the time (I am in college).

- Started working on this, the Phoenix trip helped with this a lot.

5. Network with people at the get together in Arizona this weekend (3/23 - 3/36)

- Meet a lot of very knowledgeable people, read some of the previous posts

6. Start forming a better strategy for bringing in deals that go with my purchase strategy

- Started to get into this a little. This goal will carry over to the next weeks goals.

2006-03-26T20:07:00.000-05:00

Last Day In Arizona

Well today was another fairly interesting day. We had a few round table discussions today on many different topics ranging from financing to personal experiences. We also got to network with many different people and see what they were personally up to in there real estate adventures. It was a more relaxed day, that had great value to us. I also got to meet Shuan from the link to the right. He was very interesting to listen to, especially his ideas and what not. Biophase's blog is also very interesting, and I will be linking that soon. He was another real nice guy to talk to. He is very very intelligent, and has lots of experience in his area of real estate. All together this trip was well worth the money and effort to get here. I have learned an incredible amount of information, and plan to start implementing what I have learned in the near future. A big thanks to Russ and Erin Morgan for setting this incredible get together up. I would also like to thank Les Gee for the life changing REST workshop, and the great stories to go along with it. I would like to throw another big thank you to Steve O for showing us his apartments here in Arizona, and a great presentation. And finally I would like to thank everyone else (JScott, Biophase, Kimberland, Phil, Snowbank (Bill), mandy, F8, Sonya, Doug, leon, Jon, Shaunstu, Joy and many others) that was there for making it the great time that it was.

2006-03-26T00:27:00.000-05:00

3rd Day in Arizona

Today was my third day in Arizona, and it was another interesting one. Russ (Home_Theater_Guy), (Jayscott), and Steve O (Olafson ?) all presented different topics today, and they were all very interesting. Even Jayscott's presentation on what he does on the internet was really interesting, even though I had very little of the technical knowledge of how computer systems work. He is someone you can honestly say he is "scary" smart. He is constantly thinking, constantly planning even as he speaks. Not to mention that he is just an overall entertaining public speaker. Steve O's presentation was on apartment buildings, and everything that goes along with them. Here is someone that found a simple plan, implemented it and in turn got wealthy very quickly. He is someone that is just a wealth of information when it comes to apartment buildings, and someone that is just so outgoing and easy to talk to. Russ's presentation was similar to that of Les Gee's, but offered some different interesting twists. He is someone else that is just so easy to talk to and willing to help others. This trip so far has just been an amazing opportunity not only to increase my knowledge about real estate and increase my drive to accomplish my goals, but also to meet some simply amazing people. I would highly recommend that if you ever get a chance to go to a get together like this, go. It will not only change the way that you perceive real estate investing, but also how you perceive yourself.

2006-03-25T01:06:00.000-05:00

2nd day in Arizona

Well, what can I say I am having a fabulous time in Arizona. I just finished my second day out here along with completing the REST work shop. I have meet some outstanding people that are involved both in real estate and internet businesses. They bring a wealth of information to the table that you can not get from a book. Some of these people include, but are not limited to Les Gee, Steve O, Rob W (Spideyman), and Russ (Home_Theater_Guy). These individuals are just so kind, and helpful not to mention packed with knowledge. And these individuals are just a hand full of the many that were there like them.

REST

I went into the REST workshop put on by Les Gee, not knowing anything about it or what it involved. I was planning on taking pages of notes, and placing them on this blog for others to see and hopefully learn from. But after going through the workshop all I can say is that if you have not gone through it, you are missing out. My father and I came here (Arizona) for 4 days, and the REST workshop made it worth it alone. It was by far the biggest eye opening opportunity that I believe anyone will go through. I learned more in that relatively short time period about my views as an individual investor and investment strategies, then I learned from all my real estate experience prior to this. It was truly that powerful, and I would advice everyone to take the REST workshop. You definitely walk out of that REST workshop knowing so much more then you did when you walked in. So to put it simply I decided not to put my notes on this blog, because I do not want to take anything away from it if you decide to go through it in the future. I also do not want to put my notes on this Blog because I want to encourage you to go through this REST workshop yourself.

2006-03-22T20:00:00.000-05:00

A possible answer to my question

I was doing a little research on the question that I posed in the last post, and I found a great cite that started to answer my question. The website is

http://www.reiclub.com/articles/

It basically says in a very simple summary that there is a time for lease/options, and a time for subject-to purchases. Since the Deed is not in your name in a L/O it would be dangerous to use this method if the seller was not reliable, because the deed could be marked while you are holding it. With a subject-to purchase the deed is in your name, so the seller can not tarnish it. This is a clip from one of the articles written by Wendy Patton on that website that makes it a little clearer.

Situation
Sellers that Have Bad Debt

Solution
Get the Deed : NO Lease option!

Vs.

Situation
Sellers that Have Good Debt

Solution
Lease Option or Deed!

I willcontinuee to research this. If anyone has any input, or thoughts please do not be afraid to write to me and I will write it on this blog.

2006-03-22T16:38:00.000-05:00

One Big Question to answer
I understand the technical differences between "Subject-To" and "Lease/Options" for purchasing properties, but why would you use one over the other? From my understanding you take over the various payments in both, the mortgage is not in your name on both, and both allow you to get into a deal rather quickly and with very little money. So why would you choose one over the other?

Any insight into this question would be greatly appreciated.

To me it seems like the "Lease/Option" would be a lot better. One can get the property under contract fairly quickly, and cheaply. I would think that one could set it up something like this. You find a desperate seller, and set up an lease/option to buy his/her property in a given amount of time. The payment for this lease/option is to catch up what is owed in arrears, and what not. Would this lease/option give you the right to rehab the property?

If this is possible I believe that if one could get favorable terms as far as length of the option one could purchase many more properties, and not have to worry about the "Due-on-Sale" clause.

The reason I ask this is because that clause has been a major stumbling block in having some investment properties at this time. My partner seems to be very worried about this clause being used, and because of that he tries to get the banks permission. Which like anything with the bank takes a lot of time. Which in turn has produced no deals. I understand why he is worried, and I have to respect that because it is his funding and credit that we are using. But at the same time I would love to find away around it so we can get the bus moving.

2006-03-22T16:28:00.000-05:00

Trip to Arizona

I head out tomorrow morning the 23rd for a get together in Arizona. It should be a great time. I will be doing the REST workshop with Les Gee I believe, along with networking with some other investors. I believe that their are about 25 people going to this get together from around the world. I believe "biophase" "Home_Theater_Guy" and "Kimberland" are some of the bigger names going (Names from the RDPD forums). I believe that it will be a great experience, and I hope to learn a lot. I will take some notes, and post them for people when I return.

2006-03-22T16:20:00.000-05:00

A little update...

Goals 3/20/06 - 3/25/06

1. Finish reading The Complete Guide to Investing in Undervalued Properties

- Finished reading this book by Steve Berges. It is a good book that basically covers the general basics. It has brought up some interesting questions though.

2. Make a list of contacts (RE agents, Lenders, General Contractors, Sub Contractors...Etc)

- I have a pretty good list at the moment. I believe that this list is a great start, and now everyone's names, numbers, companies, etc are all in one place and easily accessible.

6. Start forming a better strategy for bringing in deals that go with my purchase strategy

- I have begun to think about this. All I need to do is start writing it down on paper.

2006-03-20T00:21:00.000-05:00

My Goals 3/20/06 - 3/25/06

1. Finish reading The Complete Guide to Investing in Undervalued Properties

2. Make a list of contacts (RE agents, Lenders, General Contractors, Sub Contractors...Etc)

3. Come up with a flyer looking for private money...and start networking for private money, and hard money

4. Try and figure out a better way to communicate with my partner (my dad), because we live in different parts of the state the majority of the time (I am in college).

5. Network with people at the get together in Arizona this weekend (3/23 - 3/36)

6. Start forming a better strategy for bringing in deals that go with my purchase strategy

2006-03-19T02:37:00.000-05:00

Possible Deal #1

This house is a three bedroom, one bathroom house. It is located on a fairly busy street in a neighborhood that appears to be turning around. The houses right around it are in the process, or already have been rehabbed. The property itself has very out dated floors (yellow vinyl throughout), and walls (board looking sheets). The kitchen needs to be up dated along with the bathroom. All in all this house just needs some cosmetic upgrades, and will be ready for the market. I estimate the upgrades to be around $8,000 - $10,000 on the high side.

Possible Deal #2

This house was being sold at auction. My father and I unfortunately missed the walk through period to see what might have needed repairs, so we walked into the auction kind of blindly. (Note to self, don't do that again) From my dads drive of the place it looked in fair condition from the outside. It was a four bedroom, one bathroom house. It ended up selling at auction for $25,000. Not really sure why we did not bid on this one, but then again we walked in blind, which I believe is the main reason for not bidding it out a little higher.

Possible Deal #3

This house was right up the street from where I currently live. It is a three bedroom one bathroom house. From the outside it looked like it needed a lot of work, not to mention that it wasn't in the best house area. It was surrounded by small commercial properties. It was another auction deal, that ended up being sold before the auction period for $18,000.

Possible Deal #4

This house had four bedrooms, one and a half bathrooms. The siding was new, and there seemed to be a few, but not many repairs needed. I believe it also had a problem with the foundation that they repaired before the auction and would need to be repaid through the bid price. This house also was an auction house that ended up being sold before the auction took place for $38,400.

2006-03-19T02:12:00.000-05:00

The Purchase Strategy That I Am Going To Focus On

My strategy for purchasing investment properties in the beginning is going to look something like this.

I really like the REO market, and the auction market for purchasing properties. I like how easy it is to purchase these investment properties at a significant discount. Like they say, "your money is made when you buy." I believe that this will let me get into houses fairly cheaply, and still let me have money left over to do needed repairs. I will come up with the money to purchase these properties through conventional mortgages, private lenders, hard money lenders and personal funds if need be. I personally like Trisha's style of buying with one loan (I believe a construction, or rehab loan), doing the repairs then refinance with a more conventional lender in order to get better terms and pull out money. I believe that this strategy will work the best for what I am thinking.

My Selling Strategy

Depending on what we need at the time, the investment property we buy and the areas market we will do one of three things after the rehab is done.
1. I will refinance, pull some money out and use the property as a rental
2. I will refinance, pull some money out and Lease Option it for a given amount of time
3. I put it on the market right away, preferably just under the FMV

2006-03-19T01:40:00.000-05:00

My reasons for starting this blog
Well to make it simple. I found that reading Trisha's blog, Shuan's blog and AZ investor's blog (all three are found in the links)has not only been entertaining, but also highly educational. In my opinion more educational than many of the books out in the public today. They have given me many ideas and thoughts along will some much needed inspiration. One of my goals in this blog is to do the same for someone else. My other goal for this blog is to put my ideas, thoughts, goals, successes, and failures on here so that I can be held accountable for all of them.

Starting on Monday the 20th I plan on writing down my goals for the week, followed by how well I achieved them the following Saturday. I will continue this as long as I have this blog. I will also write down the deals that I am working on, and how they progress through time. This Monday I will start off on fresh feet for all to see, and hopefully learn from. Whether it is through my successes or my failures I hope that someone can learn even a small amount.

I congratulate Trisha, Shuan, and Az Investor for what they have done so far and I hope to continue to learn from them in the future.

2006-03-19T01:22:00.000-05:00

Things that we have done so far

1. Studied studied studied
2. Talked to numerous Real Estate Agents, Lenders, attorneys
3. Viewed hundreds of properties with RE Agents, and by ourselves
4. Came up with systems for finding investment properties, managing them, taking care of them...Etc (Just haven't used them yet, with the exception of the first one)
5. We have added and attorney to our team, and a darn good one at that
6. Talked to people in the pre-foreclosure stage, and tried to take there properties either subject to, if their was enough equity, or short sale if their wasn't enough equity (Both of which hasn't seemed to work yet). We even tried to do one or two options which haven't resulted in owning a property
7. Tried to purchase a few investment properties from an auction (came out empty handed)

Overall we have looked at several house, to many to count, but have only put offers on a handful

2006-03-18T19:08:00.000-05:00

Some things I wish I did and didn't do in the beginning up until this point.

1. I don't believe that one needs to form an LLC in the very beginning. This has done nothing but take money out of our pocket. Wait until you have one or two properties under your belt before you think about forming an LLC.

2. I wish I kept a list of everyone I contacted in the beginning, and a brief summary of what they said, and/or offered. In short get organized in the beginning, because it will be easier to stay organized as you go along, plus it will save you a lot of time when you don't have much. It would also be easier to go back and look at what people had to offer, and read it, rather than trying to remember it.

3. I wish I focused on one aspect of REI in the beginning. I believe that if one focuses on one aspect in the beginning one will get to the actual investing quicker. In my experience my partner (my dad) and I have been jumping from one strategy to the next. While we have learned a lot about REI in general, and generally know about most strategies we have yet to actually purchase our first investment property, because these strategies seem to get in the way. If you focus all your attention on one strategy in the beginning one can look for properties that fit that particular strategy and get one's feet wet fairly quickly.

4. I wish I got my feet wet early. I believe that it is important to get one's feet wet in the beginning and learn as one goes. I do understand that one needs to first have a base of education before one jumps in, but I believe having one property in the very beginning forces one to continue to learn at a higher rate then just reading about it. I also believe that it will give one the confidence that one needs to continue advancing one's real estate portfolio.

5. I wish that I would have been more forceful with people in getting what I needed, but at the same time be polite about it. I believe that one needs to be demanding in what one wants, and when one wants it done by. I don't mean be rude, and a pain in the butt. What I mean is that one needs to let the people around him/her self know that this is important to you, and that it needs to been done in a timely matter. I believe that I let a lot of people take me as not being serious in the beginning, and even a little now. I believe that if I was more demanding with what I want I would be further along than I am at the moment.

2006-03-18T18:40:00.000-05:00

MY HISTORY

My history up to this day in REI is fairly simple yet I already have great insights for new investors looking to get into REI. I started about two years ago when my dad gave me a book to read in my free time. This book was RDPD's book ABC's of Real Estate Investing. This was the book that started me into the vast world of REI. From that point on I read everything that had to do with real estate, business, and investing. I immersed myself in everything real estate as far as books goes. About six months after my reading began I started to network, and try and find properties that I could purchase and invest in. I talked to real estate agents, Lenders, other investors on the web, and my dad. I believe that one of RDPD's books stated that you will be laughed at, and "no" will be a word that you become familiar with. Let me tell you, I was laughed at, ignored and pushed aside by many many people, and that was if they let me in to begin with. I did not let that slow me down, I continued to talk to people and learn as much as I could through that process. After about six months of doing that (a year from the start) I was talking to my father, and he briefly mentioned joining with me, or partnering with me. A few days later I took him up on his offer, and we started seriously talking as a team. We went through the whole process of setting up an LLC, and started to look for properties to invest in.