Home > Archives for February 2006
Tuesday, February 28, 2006
Monday, February 27, 2006
- Trash out
- New paint inside and out
- New A/C vents
- Replace mini-blinds / vertical blinds
- Remove drapes
- New linoleum where there is existing linoleum except hallway.
- Replace all electrical outlets, light switches, and plates.
- New front door. Use existing knobs / lock if possible
- New wall heater
- Remove door and door frame at archway
- Replace ceiling fan
Rooms Through Archway
- Replace door to add-on room and install door knob
- Replace window A/C unit
- Replace skinny windows with all the same type
- Can wood paneling be removed?
- Fix holes in drywall
- Clean up / Reface fireplace
- Remove cabinets
- Remove washer and dryer
- Replace window
- New light fixture
- Fix drywall
- New outside door. Use same knob if possible
- Remove refrigerator
- Remove stove
- Replace cabinets, countertop, and sink
- New light fixture
- New door
- New closet door
- New ceiling fan
- New closet door
- New closet door
- New vanity
- New bath / shower enclosure and hardware
- New window
- New medicine cabinet
- New light fixture
- New toilet
- New closet door
- Remove car
- Remove shed
- Remove trash
- Replace evap unit
- Replace fence
- Fix tops of fence pillars
- Fix roof fascia
- Straighten and repaint fence iron
- Replace outside light
- New house numbers (1 place only)
I was a little bit disappointed to learn he no longer has additional people working for him, so the job will take longer. He estimates it will take about a month and he can't get started until the middle of next week. He'll be faxing me a quote later. This is a pretty big job, so I'll see how well he does, not only in terms of worksmanship, but also time estimates and cost.
Now, on to the photos!
The Entryway / Family room:
Converted Room: This room was a carport.
This is a room just off the converted room:
There is one additional bedroom that I did not take a picture of. Looking over these pictures, I've noticed they don't really do the place justice. It's much trashy-er than this shows :-) I should have taken some pictures of the backyard...
My handyman suggested that the kitchen cabinets might just need to be refinished instead of replaced. I thought about replacing them because the bottom of some of them needed replacing. I also am replacing the countertop and sink, so I figured might as well do it all. It's pretty much a straight run, so I don't think they would be too expensive. The handyman is going to consult with his cabinet guy and see which option is more affordable.
Friday, February 24, 2006
The house itself isn't in too bad of shape. It needs paint, walls patched, and virtually all the outlets, light switches, and plates need to be replaced. A couple windows need replacing. I think all the doors need to be replaced. The fridge needs to be thrown out and the stove needs to be replaced. (At least the fridge was still running and didn't reek of spoiled food.) The evap cooler needs replacing (and strangely enough, I couldn't find a thermostat or control for this thing in the house). The kitchen could also use new cabinets and countertops. They look ok from the outside, but inside they are somewhat beat up. There are two wall heaters that should be replaced, as well as a window air conditioning unit in a room that was converted from a carport.
The locksmith was the same guy I used on my last property and, when I told him my company's name, he remembered me. He said "Don't you have a place over at 53rd and Olive?" I said no, then realized that was where my last property was. He said he passed it the other day and saw it was for sale. I don't see it listed on the MLS, so maybe it's a FSBO. (But that doesn't make sense because the buyer's daughter was a Realtor.) Anyway, the locksmith remembered me and asked for a business card. Good thing I had some made up recently! He told me he "dabbles" in real estate and gave me his card. Basically, he is a birddog who gets houses under contract and assigns them. I told him that was how I obtained this property. So we talked a bit more and I told him all my funds were committed now, but to try me in a couple months. He may be a good contact, since he probably knows lots of neighborhoods and as a locksmith, he probably goes to houses that might need to be sold quickly - martial problems result in someone being thrown out and locks need to be changed, that sort of thing.
After I left, I called my handyman and confirmed my Monday morning appointment. I'm thinking there is about 2 to 3 weeks of work, depending on if one or two guys do the work. Back when I used this guy personally, there were two people and I'm hoping that is still true. (His business named has changed, so it might just be one guy now.) As a ballpark figure, I'm guessing $10,000 to fix the place up.
On an administrative note, I noticed I've been inconsistent in referring to my houses. Old posts refer to House 11 and this one I'm calling House 3. In the past, I numbered houses that I put an offer on. I think going forward I'll have to do something like Offer X for places I've put offers on and House Y for houses I've actually purchased. With all her houses, why doesn't Trisha have these problems? Must be because she seems to end up buying every house she puts an offer on! :-)
Tuesday, February 21, 2006
Monday, February 20, 2006
Not good. I told Joe I would have to start charging her rent of $50 a day, payable weekly if she was not out by 5 PM Tuesday. This property has officially been mine since Friday and the utilities have been put into my name effective that date. I gave her until Sunday and she still needs more time. Joe said he understood my position and today I faxed over a rental agreement for the seller to sign.
I had planned on going over there tomorrow to change the locks and make an inventory of what needed repairs. I won't be able to do that now. My handyman was busy this week and he won't be able to come out until next Monday to go over the list, so at least I don't have to reschedule him.
I can sympathize with this woman because U-Haul has done the same thing to me. However, this is strictly a business deal for me and I can't lose money or take more risks than I have to. I felt I was being fair by giving her the weekend free of charge, but I can't let three more days go by without some compensation for use of the property and utilities.
This also illustrates that the role of birddog (which Joe basically was) doesn't always end when escrow closes. He is still functioning as the liaison between myself and the seller.
Friday, February 17, 2006
The seller responded to the questions my insurance agent asked:
- The plumbing has not been updated in the time the seller has lived there (since 1995).
- A new circuit breaker box was installed last year.
- The roof was replaced about 10 years ago and some minor repairs to it were made last year.
I tried calling my handyman to set up an appointment for Wednesday to go over what needs to be fixed, but I got his voicemail. No return call yet. I plan to go check out the property on Tuesday and meet with the handyman on Wednesday. On one of those days, I will also try to schedule a locksmith to come out and re-key all the locks (but if the doorknobs aren't in good shape, I'll just have the handyman replace the knobs instead). Depending on the state of the appliances, I may have to order new ones and get those installed. Once I have an estimate from the handyman on when their work will be done, I'll schedule new carpet to be installed shortly after that. If all goes well, I'll then be able to put the house on the market!
I've not spent much time looking into this, but it seems like you are basically making an unsecured loan to people. The site does claim to run credit checks on potential borrowers and assigns them a credit rating but, as Savvy Saver pointed out, their credit checks seem to miss a lot of outstanding debts.
Additionally, if you make a loan and it is not repaid, you may not even be able to track down who borrowed your money! From Prosper.com's FAQs:
Will the lenders know my identity?
There is never a need for lender and borrower to contact each other and it is entirely up to the lender and borrower to choose how much information they wish to share about themselves.
So how does Prosper.com make money? They charge both the borrower and the lender. The borrower pays a 1% closing fee (or $25, whichever is greater). If you choose not make payments electronically, the borrower is also charged an additional 0.25% interest. The lender, on the other hand, is charged a 0.5% annual servicing fee, accrued daily, based on outstanding loan principal.
Because the servicing fee is based on a daily outstanding principal balance, which is an amortized amount, the servicing fee will vary for each loan based on its interest rate and length. As an example, the site says on a $5,000 loan at 10% interest, the fee would be $40.40 over its full 3 year length.
Prosper.com was started by the founder of E-LOAN.
I'm somewhat interested in this. I'm not sure about making unsecured loans, but you can start lending with as little as $50, so the risk is low. (The maximum amount you can lend is $25,000.) I prefer hard money lending with property as collateral. The returns are generally higher and you get to keep any loan origination fees. (Prosper.com will collect late fees and pass them on to the lenders.) But this looks like a relatively easy way to get some extra cash.
To share some of my own personal paranoia with you, I will not give any company permission to electronically withdraw money from my bank accounts. (Now electronically depositing is another matter!) If you are interested in using Propser.com, I would suggest opening a separate checking account and deposit only an amount you are willing to lend.
Thursday, February 16, 2006
I also called the utility companies and had service transferred to my name, effective tomorrow.
I got a call from my insurance agent, who had some questions about the building. It was originally built in 1951 and he wanted to know if the plumbing, electrical, or roof had been updated since then. I don't know the answer, so I've passed those questions on to the seller.
The next steps for me are to meet with the seller (or Joe, who assigned his contract to me) and get the keys. Then, I need to go through the house and make a list of what needs to be repaired.
Talking about buying at foreclosure auctions, the article says:
Auctions are by far the riskiest way to invest, says Rick Sharga, vice president of marketing at foreclosure listing site RealtyTrac.com. "You are buying the property sight unseen, and you will be responsible for any taxes, liens or second mortgages still on the property."This is simply not true and Sharga should know better, given the company he works for. First, there is no need to buy a property sight unseen. Auctions are announced in advance and the properties up for sale are listed. It is true you may not be able to get into the property and do a complete inspection, but you do have the opportunity to at least look at the outside, possibly peer in the windows, and formulate an educated guess at to the condition - a far cry from "sight unseen."
Second, while you will be responsible for taxes (which are not an unknown amount - you can get any amount due from your tax collector's office), you are NOT responsible for any second mortgages or liens provided they were recorded after the mortgage that is foreclosing! A foreclosure wipes out all liens recorded after it (again, except for tax liens, which always must be paid). If fact, if you look at the liens against a property, you will never see anything titled "First Mortgage" or "Second Mortgage." There are just mortgages. The "first" or "second" designation refers to the date the mortgage was recorded. The one recorded earliest is the first, the next one is the second, etc.
If the first mortgage is foreclosing and you buy the property, you may have to pay some of the second mortgage if you agree to buy it for more than is owed to the foreclosing lender. For example, a property has $100,000 due on the first mortgage and $20,000 due on the second mortgage. You win the property at auction for $110,000. You pay $100,000 to the holder of the first mortgage and the remaining $10,000 to the holder of the second mortgage. That's it. You are not responsible for completely paying off the second mortgage because when the first mortgage foreclosed, all subsequent liens were wiped out. This is why second mortgages are riskier, from a lender's point of view, than a first mortgage - there is a possibility that they will not get paid off if the property goes to foreclosure. This also explains why sometimes the holder of the second mortgage will go to the auction to bid up the price of the property so that it is high enough to ensure he gets paid.
Tuesday, February 14, 2006
I emailed Joe to see if by any chance he got an SPDS from the seller yet. This will tell me which utility companies I need to call to transfer service (among other things).
I've decided to go with a different handyman this time, rather then the guy I've used on my last two projects. That guy was pretty good, especially with his price, but he works really slow and always takes longer to complete a job than he estimates. Instead, I contacted a company that I used for a job at my own residence a couple years ago. I wasn't sure how big of a job they could handle, so I called and gave them a rough idea of what I need done - interior and exterior paint, bathroom repair, some drywall work, etc. Turns out, they handle everything from a complete remodel to changing a light bulb. As an added bonus, their next opening is Monday, which is when I should have possession of the property. I didn't set a definite appointment yet, since I don't have keys to the property and I haven't even looked around to generate a list of everything that needs to be done, but I let them know a job will be heading their way soon. They will probably be a bit more expensive than my other guy, but, from what I've seen of their work, they are more professional and punctual.
On the administrative side of things, I made some purchases that I had been putting off for a while. I got the 2006 version of Quickbooks Pro, which I need to import the file that my CPA returned to me. I also ordered my business cards and bought a fax software package for my PC. This will accept faxes, convert them to PDF files, and email them to me. This way, I don't have to be at home to pick up a fax and, hopefully, I can cut down on the amount of paper generated (which is always a lot in this business).
Monday, February 13, 2006
I drove out to look at the property that afternoon and after that, met up with Joe. He suggested we meet at a Starbucks in Scottsdale and, when I got there, I realized this was the same Starbucks I had met a Realtor at a couple years ago when I sold my first house. Interesting coincidence!
The house looks in OK shape. It's in a Hispanic neighborhood that is pretty well-kept. Yards were nice, although there was a lot of dead grass in them. Some houses were very nicely maintained, others, just so-so. Several new cars were parked in driveways and on the street. The owner was still in the house, so I couldn't go in, but the outside looked OK. From what the Joe told me, it needs new paint and flooring, some work in the bathroom, and some minor drywall work. It has EVAP cooling and could use a new unit. The house was built in 1952. The roof looked decent. There was a one car carport that has been converted into an additional room, including plumbing for another bathroom. The house is a 3 bedroom, 1 bath with about 1,500 square feet. The converted carport adds another 400 square feet. The price is $138,000 and comps are in the $170,000 to $185,000 range.
When I met up with Joe and his wife (who is also a real estate agent), I got a bit more info about the property and the seller. The seller's husband has been arrested for a drug-related charge and she is a witness against him. She wants to sell the house and get away. She cancelled the first sale because her lawyer told her she couldn't leave the state. Apparently, now she can. She just wants $45,000 out of the sale and can leave as soon as she gets the money. Luckily, she has a disclaimer deed from the husband which clearly states the property is solely hers and he has no interest in it. (I've verified this.)
The house is a fixer-upper. If I wanted to go all out, Joe thinks I can put in the additional bathroom and sell for close to $200,000. I'm not sure if I want to do that simply because I'm a bit leery of holding on to this one for too long, given the rapidly declining market. Putting in a bathroom would require getting a contractor, which almost by definition, means the project will run over budget and longer than planned. Once I get inside and have a detailed look, I'll know more. (FYI, I have seen pictures of the inside and it doesn't look too bad.)
So I gave Joe a check for $500 earnest money and we signed an assignment contract giving me all his rights in his contract. Escrow will open today and will close on Friday, making this the fastest close I've done so far. Joe and his wife are getting $10,000 from assigning me this deal - their contract with the seller is for $128,000 and I'm paying $138,000. The sales contract is pretty standard and the sale is contingent upon my approval of the title report. This means even if the report shows everything is fine, if there is anything I don't like on it, I can cancel the sale. Otherwise, the property is being sold as-is.
While talking to the buyer, he asked how I got involved in this business. I told him my tale and we discovered that he actually knows my old co-worker! When I said he was a principle of BuyAZForeclosures.com, he mentioned the guy's name and I said yeah, that was him. Turns out, Joe has flipped some properties to BuyAZForeclosures before. It's a small world! We also talked a bit about the types of properties I look for and he'll keep an eye out for me. All in all, this was a good deal that included some good networking!
Thursday, February 9, 2006
This is still in beta, so there are some bugs. I've noticed that when you zoom in to the highest magnification, you tend to end up somewhere other than where you were looking - I ended up about 5 miles east when I tried it. Also, at higher magnifications, the hybrid view, which superimposes street names onto the satelite view, gets confused and puts streets where they aren't.
Monday, February 6, 2006
In my conversations with the owner and based on what was written in the appraisal, I discovered she had been trying to sell the place since September. She originally tried to sell it for $126,000 and in December, she sold it for $100,000. That sale fell however, because the bank required the seller to have 30% down. That could mean either the buyer had bad credit or, more likely, the bank didn't like the property. I tend to think it was the latter.
The property was in a large mobile home area. It's not really a mobile home park, but more of a part of town where people with mobile homes ended up. There is no monthly fee or any kind of neighborhood association. There were several other places for sale and I drove around checking comps. Doublewides were going from $95,000 to $139,000. Singlewides were for around $80,000 and lower. This particular property is strange in that technically it is a singlewide, but it was modified to be a doublewide. I think the appraisal from 2 months ago that came in at $108,000 is somewhat unrealistic. I feel the appraiser could have choosen whatever price he wanted, given the huge range of prices in the area. If you look at the properties selling for $100K and above, they were all much nicer than the property I was looking at.
So I ended up not buying this one. I'm of two minds on this decision. Part of me is worried that I'm rejecting it based on fear. Mobile homes are definitely outside my comfort zone. That's fine and I want to be able to move outside my comfort zone - that's the only way to learn and it's why I decided to look at this property in the first place. But everything else I was seeing just didn't add up. I couldn't see how the $108,000 price was justified. So I passed. I'm 90% sure it was the right move, but there is still that doubt that I chickened out. I keep thinking of that card in the Cashflow game that says "While you think about this property, the player to your right takes the deal." It's too bad this is a FSBO. It'd like to watch its progress on the MLS and see what it eventually sells for.
Friday, February 3, 2006
That was what I found this morning when I checked my email. The same person who sent me the offer yesterday (which another investor snatched up before me) sent me another one that he was passing on. It looks good to me, but the only issue is that it is a mobile home. I've got no experience with those yet. I've spoken with my Realtor friend and she mentioned that I should find out if the land is included with the sale. She hasn't sold a mobile home in years, so she wasn't sure of any other "gotchas" I should watch out for. Anyone have any experience with mobile homes they'd like to share?
Luckily, the seller had a professional appraisal done in December and I've got a copy of that. I don't see anything out of the ordinary on it except that the unit was a single wide that had an addition built on. The addition apparently covered up the HUD certification plate. (HUD certifies mobiles home are built to certain standards.) My Realtor says this may be an issue if a buyer is getting an FHA loan, as that certification will be wanted by the lender. However, she said with a conventional loan, it probably won't be an issue.
I'm going to call and talk to the seller today. The appraisal for the property valued it at $108,000 and the seller is willing to take $75,000, giving an instant $33,000 in equity to me. Average selling time in the neighborhood is 120 days.
Update: I spoke with the seller a bit ago. She is currently living in the mobile home and wants to sell ASAP. She can be out in 2 weeks. Her son is in the National Guard in Alabama and has been called up, so she's heading out that way. The property is a single wide mobile home that was gutted and had an addition built on to it. She owns the land and there is no HOA or mobile home park fee. She says there is no HUD certification plate - the unit never had one. She does have the VIN number though. There are no age restrictions in the mobile home park. The unit has a real roof and attic, not a mobile home roof. The unit has a septic tank, so in addition to the sales contract, we'll also need to sign a On-Site Wastewater Treatment Facility Addendum. This document basically instructions the seller to get the septic system inspected by a licensed inspector and make any needed repairs or the contract is cancelled. I'm heading out tomorrow afternoon to check the place out and, if all goes well, sign a contract.
Thursday, February 2, 2006
The email was sent at 11 AM but I didn't pick it up until about 6 PM. I'd hate to miss out on more deals like this, so I've modified my email program to alert me as soon as mail arrives, no matter where I am. But the good news is deals are starting to flow to me!
As a reminder, I am always looking for birddogs in the greater Phoenix area! And if you are birddogging, the info package I received from this sender is exactly the type of information I look for to evaluate a deal. I couldn't have put it together better myself!
Wednesday, February 1, 2006
Registration is limited to 25 people (which is now down to 23 since my wife and I have registered) and the cost is $58 per person. Details can be found at http://rdrt2006.ezsitemaster.com and registration can be done at http://www.webervations.com/magic-scripts/giftshop.asp?memberid=6260 .