2010 June

Archive for June, 2010

Are Vacant Showings Better?

June 30th, 2010 |

Author: joe

Having one of your properties sit vacant is one of the biggest money sucking problems a real estate investor can face. As we struggled to rent one of our latest properties out, we started to really understand the big benefit of doing a tenant first rent to own strategy like I discussed a few weeks ago. That big benefit is not having to worry that the property you just bought might have to sit vacant for awhile while you find it’s future residents.

With vacancy prevention in mind, we have been showing our properties before we actually own them. We put it in the purchase and sale agreement that the sellers will allow us to show the home three times – each time for 90 minutes – for the purposes of finding tenants. We only show the homes if we think they look presentable because we want to attract good tenants, but we will show them occupied.

As long as the property is clean, in good condition and doesn’t smell badly, I find that it is usually ok to find tenants with the property occupied. I will never show a property that is beat up, really messy or stinky because that sort of situation attracts the wrong kind of tenants.

But even if a place looks good occupied, I am starting to think that showing a property occupied is not the way to find good tenant buyers.

With lease options (rent to owns) there is a greater emotional attachment to the home. There is also a higher standard the home must meet in order to be something they actually want to work towards owning. So when it comes to finding tenant buyers I am starting to think that vacant is better. It seems like even though I can see how amazing a house is, there are just too many issues that are hard to see past when someone else’s stuff is in the way. And – what we’re finding – is that when you advertise it too much before you actually own it, by the time it is vacant you have no momentum left in your advertising to get new interest in the place.

But I don’t have enough evidence to decide yet and I really hate to have vacant properties so I would love to hear what my fellow investors here at Bigger Pockets have to say about this. But first, let me recap how things have been going since we started to focus on rent to own properties late last year:

First property we filled as a rent to own.

It was clean, cozy and showed pretty well with the owners belongings in there. He was a single guy and didn’t have a lot of stuff. We showed it to six different people and from those people we found a very happy couple that fit our program perfectly. They pretty much moved in right after we took possession, leaving the home vacant for only a week or so.

Our Second Property:

Now this one was a little trickier. It’s a gorgeous character home with ocean views. I could see it’s charm and appeal but it did need some work. We had three open houses and had 15 or so different groups of people come through the place. We didn’t have anybody interested enough to even fill out an application.

We took possession at noon on a Saturday and had the house filled with carpenters, painters, and other labourers working to get it cleaned up and fixed up. On Sunday afternoon a couple came by to take a look at it, and completed an application on the spot. The final work was completed on Wednesday. The carpet cleaning company rolled out on Thursday at noon, and their moving truck rolled in Thursday at 12:01 pm.

It took the property being vacant and for work to be in progress for someone else to see just how great this home was. But that was all it took.

The Third Property:

This one is in an area that EVERYONE seems to want to live in. And, it has a basement suite. Those two factors combined to make it a home that we barely even had to show to get it filled. And honestly it did not look good when we showed it and the people still grabbed it quickly. I guess this really is an example of just how critical location, location, location is! Of all the homes this one was the least attractive and needs the most amount of work in my opinion yet we could have rented it sight unseen because there was THAT much demand.

The Fourth Property:

This is the one we’re stuck on … we had a super long closing on it and probably started advertising it too early. We had it under contract in February but didn’t close on it until June 1st. We started advertising it in early March and showed it three times to about 10 different groups total and never even had anyone complete an application.

We had a lot of people interested in it, because it’s in a very convenient location. And a lot of people love the fact that it’s only four years old, but until it was vacant we didn’t even get an application.

Looking back … maybe it was the way the home was decorated for a retired couple?

Or maybe the furniture made the rooms look too small?

I’m not sure … all I know is that since we took possession and painted it, we’ve had applications and we’ve had very positive interest … but we still haven’t had anyone sign on the dotted line.

After Painting

Now that it’s vacant – there’s a dramatic difference in the results but we have no momentum behind our ads. I even tried pulling everything down for a week and relaunching … but that didn’t seem to fool anyone! We have had less response to the property in the last 2 weeks then I had in the first 2 days when I initially posted it.

So with the next couple of properties we’ve got coming up I’m wondering if we should even show them before we have possession of them. I hate to guarantee myself a vacancy but I also don’t want to end up with a great property that everyone knows has been on the market for nearly 4 months … wondering what’s wrong with it or worse, what’s wrong with our rent to own program!

Are Vacant Showings Better?

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Short Term Long Term Deep Pockets and Dinghies On Small Docks

June 30th, 2010 |

Author: joe

When Grandma spoke we listened. She was tempered steel wrapped in GrandmaSpeak. Tough? Around our family, nobody, at least out loud, claims real toughness, as the standard set by Grandma is something for which we only strive. One day I was whinin’ about an upcoming American History test. She asked if I was prepared to do well. My answer, that I hoped for a good grade — not the answer she was aimin’ for.

“Hope” she said, “is not a plan, it’s an excuse being nurtured in the mind’s womb. Unless you’re referring to faith, this family doesn’t hope — it does.”

Many years later I was watchin’ a movie titled, The Rock, starring Sean Connery. His character voiced the same sentiment, but in, um, more colorful language, which won’t be repeated here. Suffice to say, he wasn’t impressed with folks who ‘tried their best’. He called them losers. Grandma was tough, but never unkind.

She also taught me to know my limitations — without limiting myself — a concept it took her more than a short time to explain to a 13 year old eighth grader. The long ‘n short of it is that we absolutely can do pretty much what we believe we can do, just not by next Tuesday. Maybe not for a couple hundred Tuesdays.

Slow down — segue zone.

Don’t wanna be right about this, but it’s my opinion we’re headed towards many years of sustained high unemployment, and all it brings to the table. Unlike the early-mid 1990’s or the same period in the 1980’s, interest rates should remain WAY low for longer than most suspect. This bodes well for serious long term investors with solid plans. It won’t hurt the feelings of the quick-turn crowd either. And there’s the snake in the woodpile.

Rehabbers are soon gonna learn a lesson, at least those who’re not as knowledgeable as they fancy themselves, or those who are, but don’t sport pockets as deep as may soon be required, or both.

I expect sooner than later the extend and pretend M.O. of so many lenders will arrive at its inevitable end. When this happens, most, not all real estate markets are gonna be flooded, relatively speaking, with super low priced REOs. Combine this price hit with the ever tightening underwriting, and you have a recipe for quick turn hell.

Short term investors without deep pockets are like dinghies tied to a small dock attached to a large ocean — with a tsunami on the way. Their only chance for survival is to find themselves safely loaded on a trailer headed for an inviting driveway somewhere far inland. The alternative is to be bashed into a floating pile of splinters.

Much as those in formerly high appreciating markets (like my own in San Diego) thought the final chapter would never be written, rehabbers without big-time experience/expertise AND very deep pockets, will become just another splinter, floating anonymously among the wreckage. Not so for the deep pocket bunch, who’ll be smilin’ as they whistle their way to the bank. They’ll be multi-tasking while there — depositing cash flows and/or profits, while acquiring the next super bargain.

Yes, the value of real estate is gonna go down in most of the country even more — how much more is anyone’s guess, but mine is it’ll be easily more than a tad.

Long Term Investors

There are a couple ways to go here. REO type product, or well located/well built property in areas relatively unharmed by this ongoing, seemingly never ending saga are pretty much it. I prefer to remain in areas in which the market correction was but an irritating set of waves, doing little real damage. Those markets have been and are still flourishing, and promise to be remarkably resistant to this next set of waves — maybe tsunami. Of course, flourishing these days often means holding their own, which beats morphing into a floating splinter every way from Sunday, right?

Those who’ve bought in these regions the last few years, are now comfortably rollin’ down the investment highway on cruise control. For those whose retirement is down the road, they’re morphin’ the cash flow into ever increasing equity via monthly loan balance reductions. Those fortunate enough to have even deeper pockets have combined their leveraged acquisitions with a cash purchase or three, so as to fund their drive to free ‘n clear the others with the massive cash flow.

They’ll end up 7-15 years from now, depending upon the original depth of their pockets, with more retirement income than they ever thought possible. As Grandma taught so well, it wasn’t hope that got ‘em there, it was eliminating their so-called limitations one by one over time. They replaced hope with doing — with knowledge, expertise, and experience — if not theirs, someone else’s.

The message I bring today is primarily aimed at those hard workin’ folks who aren’t yet playin’ in the Deep Pocket League. Simply put — either partner up with someone in that league, or tend to puttin’ your own financial house in order. If you opt for the ‘full speed ahead’ setting on your dinghy, the consequences could haunt you for quite awhile.

With apologies to Grandma, but not wanting to sound harsh or unkind — if you’re becoming fearful reading this, and not smiling with gleeful anticipation, put yourself on the sidelines — now.

As Grandma was also fond of sayin’ — “It’s much better to hold your place than to lose it.”

Think long term, at least for now — down the road, those are the folks who’re gonna be cruisin’ on calm seas. Without deep pockets, rehabbers may be headed for Splinter City. Those sportin’ pockets with impressive depth are about to kick some seriously impressive short term butt.

Again, as far as the new wave of foreclosures are concerned, and the subsequent drop in values, I hope I’m mistaken.

Short Term Long Term Deep Pockets and Dinghies On Small Docks

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Open Question: are you able to rent a flat at age 17 when the dss are paying for it?

June 30th, 2010 |

Author: joe

i am 17 and claiming benifits i dont live with any family member so ive been looking at flats but i keep getting mix messeges saying wen your unemployed you have to be 18 to have a flat bt you can be 16 to rent one wen ur a studant ive heard back from a couple of landlords so i would like to know this information before i waste their time thanks x

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Open Question: Can the city fine me for not leaving Illegal basement?

June 30th, 2010 |

Author: joe

The owner of the house we renting the basement in didnt tell us he wasnt allowed to rent the basement out. The city inspector came by 2 weeks ago and told us that we have to leave or rent an upstairs bedroom. The owner agreed to let us move upstairs. Then he stole money from us. I confronted him and he said he needed time to pay it back. (the owner and his wife are illegal and begged me not to report him to the police). 2 weeks went by and still no money. Then today the owner called the city inspector and told him that we are refusing to move out and the inspector came by and told us we have a week to leave (the owner has to go to court on July 13th) or he will have the judge fine us $750 a day for us being in the basement. We have a month to month lease with the owner and are not behind in rent. We want to leave but we dont have the money since the money we did have saved the owner stole. The money was in my sock drawer and I stupidly didnt take it with me when I left that day(I didnt want to put it into my bank account since the bank is investigating some charges that I didnt make). Can the city fine us for not leaving in a week? We just need time to find a place.

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PROFIT STACKING?

June 30th, 2010 |

Author: joe

Nick,

So I would need to sign an option agreement with wholesaler #1 for however long his contract with the seller is for I’m assuming. This gives me an equitable interest, therefore I can legally market the property.

Let’s say I do find a buyer. It only works if I’m able to find a buyer at a marked up sales price from the original asking price from Wholesaler #1 to make any coin.

So Wholesaler #1 wants 50K for this property, I need to bring in a buyer for 55K.

On my original purchase option with Wholesaler #1, do I write the contract like he did with the seller (My name and/or assigns ___), or what? Do I become Wholesaler #2 and then assign to my end buyer? He gets the property for 55K, I collect the difference between the end purchase price and 50K at closing. It reflects on the HUD, and everything is ok.

OR…

Double close like you mentioned with original wholesaler using end buyer’s 55K, and you pocket the remaining?

Which is easiest? The most important thing is the option agreement with wholesaler #1, or I can’t participate.

I get a bit confused after I bring in a buyer for 55K…

Thanks Nick!!

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Just sold 2 properties owner financing..What will you give me for these notes??

June 30th, 2010 |

Author: joe

yes bill..that’s what i’m working on…lol….the point of this thread is to kinda judge what i may expect to recieve as offers, so i do appreciaet the input as this is my first time trying to sell a note…..as for the whole story…it is all in thsi thread…the licensed apprasier (who i paid good money to btw) appraised this at 120,000 by comps, and 150,000 by income approach…how he got these numbers would be in teh appraisal that i would share with the buyer of the note, as is the credit report that i pulled on teh buyer, etc. don’t think i’m tryin to decieve anyone…that’s not my plan at all lol…

j scott, good points about the income approach..of course the 50percent rule takes 50 % of gross market rents i believe..my rents are a bit under market,althoug not enoght o make up the spread still…at any rate, i don’t know of appraisers using this 50% rule anyways…do you? i woudl think it’s up to the buyesr of these notes to look at my appraisal and other info i can provide, and then do their own due diligence.

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things_to_remember_when_considering_home_staging_as_a_career

June 30th, 2010 |

Author: joe

Things to Remember When Considering Home Staging as a Career

A lot of in people take their talents for granted. Some just ignore these natural skills that theyâ€™ve got while some assume that they simply donâ€™t have what it takes. If only you can recognize your true talents that can help you build a successful business then you might be giving more importance to these innate talents and skills.

Have You ever considered Home Staging as a career? If you arenâ€™t sure that youâ€™ve got enough skills or talents to be successful as a home stager, there are a lot of Home Staging classes out there that can help you hone those skills and become a successful home stager.

If you have a lot of creative juices flowing within you, then you are halfway there. You do not have to be an interior design professional to consider Home Staging as a career. You just need a little help from the Home Staging courses to help you hone those creative skills. By then you will be doing just fine. If you have the talent, then no training can substitute for that.

If you are an organized individual, then you have a definite advantage. You will have keen attention to detail if you are an organized person. This is a very important skill especially in the Home Staging department. Most often than not the houses that you will stage are decrepit or chaotic, so a high level of organizational skills is very important.

A lot of clients call you in to prepare their house fro Home Staging a few weeks before they sell the house. Sometimes the house is already listed in the real estate markets or for sale houses before they even decide to stage a house. Do you think you can cope up with the pressure of a tight deadline?

Home Staging as a career requires you to work with a variety of people. You will be dealing with different types of clients and buyers who are an essential part of your project. Maintaining good relationships with these people is very essential to your Home Staging career.

If you have the basic skills mentioned above, then Home Staging as a career is not a far-fetched idea. It may turn out that a Home Staging career is the best one for you. Aside from you being able to use your talents and skills, you can actually make good money out of this career.

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home_improvement_warehouse

June 30th, 2010 |

Author: joe

Finding an home improvement Warehouse

Everyone knows that the best way to keep costs down while one is doing home improvement is to do as much of it as possible and for as little bit of money as you can. Therefore, finding a using a home improvement warehouse is one of the best choices that you can make.

What is it?

A home improvement warehouse is a place where you can find home improvement materials, tools, and ideas all for lower costs. This is because they store a lot of stuff , and are usually very large. The cheapest of these warehouses are going to be big name store brands that you will be able to find all across the country. At a home improvement warehouse you will be able to find anything that you are looking for, and at costs that you will be able to deal with.

What is There?

At a home improvement warehouse you are going to find materials. No matter what you need to fix your home, you will find it at the home improvement warehouse. Most of them sell a wide assortment of lumber and other building materials, and also the smaller things that you will need to create your home.

Not only that, but at the home improvement warehouse you will also be able to find the things for inside your home. You can find fixtures, lighting, carpeting, and all of the small things that you need to take your home improvement project all the way to completion.

Because there are so many things that are found at the home improvement warehouse these things will often be cheaper than other places. This means that if you can find this kind of a warehouse you can complete your home improvement projects for much cheaper than you would otherwise be able to do.

You might have to travel a ways to find your closest home improvement warehouse. It all depends on what part of the country you live in and what size of town. If there is not a home improvement warehouse near you, there is probably one within driving distance. You can take a large trip and make sure that you have all of the things that you need when you visit the home improvement warehouse. Often times, a home improvement warehouse will deliver to your home, so you don’t even have to worry about bringing it all home. They will do it for you.

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Deal analysis: SFH – Please Help

June 30th, 2010 |

Author: joe

The tax assessed value means nothing. You should really get some good comparable sales nearby to estimate the current market value and ARV if any repairs are needed.

Using $50/mo is a 4.5 vacancy if the $50 misc was all vacancy. This might be light you would want to investigate the market. Safer to assume closer to 10% if you don’t know the market.

When purchasing I often use 7-10% for management expense regardless of the fact that I will be managing it myself.

4.5% also seems light for repairs and maintenance. You want to factor in some kind of reserve for a capital expenses done the road as well. CAPEX expenses like a roof replacement will come up. I would not recommend deferring maintenance expenses because this usually ends up costing more over the long haul.

Based on the limited info provided this might be a good deal. Many here advocate the 50% rule and the 2% rule. These are good places to start when initially reviewing an investment.

Based on 50% rule

Rent 1100

less vacancy & expenses -550

Less P&I -366

Net expected cash flow 184/mo

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some_tips_on_interior_home_staging

June 29th, 2010 |

Author: joe

Some Tips on Interior Home Staging

Today’s competitive real estate housing market any type of advantage can make a difference in selling your home faster. If you want to avoid going through the pricing wars with other homeowners who are selling their houses like you, you need to make sure that you are adding value to your home and make it more appealing to buyers in ways no other homeowners can pull off.

You will want buyers to feel warmth from your home. You can do this by removing yourself from the picture and let the home sell itself. The best way to do this is to use some interior Home Staging techniques that will surely give your house an edge over the competition.

One of the least expensive ways to enhance a home is to give it fresh coat paint in modern colors. Updating paint makes a very big difference. Buyers see themselves in the home instead of seeing the work that still needs to be done. This is a must for any interior Home Staging that needs to be accomplished. Another essential task is to remove all the unnecessary clutter. Make sure that the shelves, cabinets, closets and counters are all clean. This allows your buyers to imagine that their own possessions are inside the home instead of yours. This also makes it appear larger.

As for furnishings just use comfortable pieces for cool weather and few furnishings during the hot, summer months. You will want to tap into the buyerâ€™s emotional side. When a buyer sees your home as a place away from all the harsh and hectic elements of the world, you are sure to sell that home.

Interior Home Staging can also be applied to the outdoor space in order to help sell your home. All you need to do is make sure that the inside of the house is coordinated with the colors from the outside of the house. Add in a touch of flowers and plants to match the season.

Always remember to put into mind the emotional needs of your target market. Buyers who have families, big or small, want shelter and security without sacrificing the warmth of a true home. After you have spruced up your home, add a few carefully selected props to encourage buyers that the house you are selling is the home that they are truly looking for. Remember, a house is very different from a home. Applying these simple interior Home Staging techniques will spell the difference between a house and a home, and will pay off faster and with a bigger pay check.

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