I stopped by the property this morning and it is still in good shape. I think two things are helping keep the vandals at bay: the padlocks I put on the back gate and all the construction going on in the neighborhood. The construction has caused some streets to be closed and I had to take a rather circuitous route to get to the property. I'm glad the house is under contract now. Viewings for buyers would probably be low due to the construction.
I still have not received an official Buyer's Inspection Notice yet. Technically, this means the buyer isn't asking me to fix anything the inspection turned up. However, I am wondering if everything is ok with my agent. I haven't seen her online recently and she hasn't responded to my email of a couple days ago. Both things are rather unusual. I called her this morning and got her voicemail, so I am still a bit up in the air.
Update: Heard from my agent, who is on vacation. She has a friend checking her fax daily, however, and she has not received anything yet. The buyer has 10 days from contract acceptance to notify us of what they want fixed and that deadline is fast approaching. In fact, I signed the final counter offer on the 10th. My agent hasn't faxed me the seller-signed copy of the counter offer, so I don't know when they signed that. We gave them until the 11th to sign it and I've got a post here dated the 12th, saying the house was sold, so I'm guessing they only have 1 or 2 days to get us the form. Otherwise, I don't have to fix anything!
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Thursday, July 20, 2006
Tuesday, July 18, 2006
The Next Venture Has Begun
As I alluded to earlier, I have started a new venture that is pretty exciting. Things have been finalized now and I am willing to discuss some details.
Several months ago, I attended a get-together of several people from the richdad.com message boards. I came out of that meeting very fired up on apartment investing and got started on educating myself on that subject. I haven't gotten very far in that respect, but I have put another one of the important points from that meeting into play - partnering.
Les, one of the presenters and participants at the meeting, is someone whom I have had some limited contact with over the past 4 years. He has recommended a couple of investments to me that have done pretty well, he has a great reputation, and after spending a weekend talking and listening to him, my comfort level with him is fairly high. So when it became apparent that I wasn't going to be ready for apartment buying in the near future, I decided to look at other investment opportunities. I contacted Les to see what he had available. Most of the projects he had were medium- to long-term investments that were expected to generate large capital gains, but no cashflow. Since I am looking for cashflow right now, I eliminated these. There were two that did provide cashflow and, after reviewing them, I decided on one.
My investment is part of a $1.75 million dollar first mortgage on a commercial renovation project going on in northern Louisiana using hard money loans. The project consists of two office buildings, a parking garage, and a parking lot. The project has been going on for 6 months so far, with an estimated 6 to 18 months remaining. At this time, the principals will refinance to a conventional loan and pay off the hard money loans. One office building has a 30% occupancy rate, the other 5%. However, the building with the 5% occupancy rate already has a positive cashflow, so there is huge room for profit there. The people doing the rehab feel the other building can be brought up to market occupancy and rates in a short amount of time. (One reason the occupancy is so low is the previous owner was planning to convert the top two floors to condos, so they weren't even attempted to be rented out.) The renovations they are planning will improve the existing office space, allowing higher rents to be charged - going from around $5 per square foot to $8 - $10 per square foot.
My investment is actually a separate contract between Les and myself. He had a large amount of his own money invested and I am buying out most, but not all, of his position. My investment is for $150,000 at 12%, with interest only payments for 6 to 18 months, after which the principal amount is due. There is no prepayment penalty. The project has a history of on-time payments. The contracts were faxed on Friday, the money was wired, and I am now a hard money lender on some commercial property! This is my first investment with the "big boys" and so far, I am impressed. Les is the total professional and doesn't keep you hanging - less than 1 week elapsed from the time I decided to invest until the process was complete.
Several things excite me about this investment. First, it a large amount of my money. The houses I have written about to date are investments for a group of investors (except for the very first one, which was also solely my investment) who have basically hired me for a percentage of the profits. I am using their money. This investment is all mine. Second, it commercial property. And lastly, it out-of-state. Although I have a couple investments in companies in the San Francisco area, they are relatively small, so I consider this my first real out-of-state investment in real estate.
Several months ago, I attended a get-together of several people from the richdad.com message boards. I came out of that meeting very fired up on apartment investing and got started on educating myself on that subject. I haven't gotten very far in that respect, but I have put another one of the important points from that meeting into play - partnering.
Les, one of the presenters and participants at the meeting, is someone whom I have had some limited contact with over the past 4 years. He has recommended a couple of investments to me that have done pretty well, he has a great reputation, and after spending a weekend talking and listening to him, my comfort level with him is fairly high. So when it became apparent that I wasn't going to be ready for apartment buying in the near future, I decided to look at other investment opportunities. I contacted Les to see what he had available. Most of the projects he had were medium- to long-term investments that were expected to generate large capital gains, but no cashflow. Since I am looking for cashflow right now, I eliminated these. There were two that did provide cashflow and, after reviewing them, I decided on one.
My investment is part of a $1.75 million dollar first mortgage on a commercial renovation project going on in northern Louisiana using hard money loans. The project consists of two office buildings, a parking garage, and a parking lot. The project has been going on for 6 months so far, with an estimated 6 to 18 months remaining. At this time, the principals will refinance to a conventional loan and pay off the hard money loans. One office building has a 30% occupancy rate, the other 5%. However, the building with the 5% occupancy rate already has a positive cashflow, so there is huge room for profit there. The people doing the rehab feel the other building can be brought up to market occupancy and rates in a short amount of time. (One reason the occupancy is so low is the previous owner was planning to convert the top two floors to condos, so they weren't even attempted to be rented out.) The renovations they are planning will improve the existing office space, allowing higher rents to be charged - going from around $5 per square foot to $8 - $10 per square foot.
My investment is actually a separate contract between Les and myself. He had a large amount of his own money invested and I am buying out most, but not all, of his position. My investment is for $150,000 at 12%, with interest only payments for 6 to 18 months, after which the principal amount is due. There is no prepayment penalty. The project has a history of on-time payments. The contracts were faxed on Friday, the money was wired, and I am now a hard money lender on some commercial property! This is my first investment with the "big boys" and so far, I am impressed. Les is the total professional and doesn't keep you hanging - less than 1 week elapsed from the time I decided to invest until the process was complete.
Several things excite me about this investment. First, it a large amount of my money. The houses I have written about to date are investments for a group of investors (except for the very first one, which was also solely my investment) who have basically hired me for a percentage of the profits. I am using their money. This investment is all mine. Second, it commercial property. And lastly, it out-of-state. Although I have a couple investments in companies in the San Francisco area, they are relatively small, so I consider this my first real out-of-state investment in real estate.
Saturday, July 15, 2006
House 3: Another Update
I've received a copy of the inspection report summary. Nothing too out of the ordinary, considering the house is 50+ years old. Some things were found that the first inspection report found and some things were noted that weren't in the first report. I have yet to hear anything from the buyer regarding what, if anything, they want me to fix. I expect that will come Monday or Tuesday. I also received a copy of the earnest money deposit check.
One nice surprise is that I'm getting the $500 earnest money deposit from the last sale that fell through. (Hmm.. looks like back then I wrote the buyer put down $1,000 earnest money. It was really just $500.) If you recall, the deal fell through because the buyer couldn't get financing. With the new contract Realtors are using, this actually is not categorized as breach of contract and therefore, the earnest money deposit can go back to the buyer. We submitted a Cure Notice when we reached the scheduled close of escrow date. This gives the buyer an official notice that they have 3 days to correct the situation (i.e. find a new loan) or they are in breach of contract. But this buyer never responded to the notice! According to my agent, this means the title company has no official reason why the buyer has backed out and, therefore, the earnest money is forfeited to me! All the buyer had to do was let the title company know in writing that they could not get a loan and they would have gotten their deposit back. Oh well. I guess this is just another piece of evidence that the buyer's mortgage broker and agent were not very experienced. And I'm not feeling sorry for this person either. It's been almost exactly one month since the deal fell through. That's plenty of time for them to contact the escrow company and ask for their deposit back.
One nice surprise is that I'm getting the $500 earnest money deposit from the last sale that fell through. (Hmm.. looks like back then I wrote the buyer put down $1,000 earnest money. It was really just $500.) If you recall, the deal fell through because the buyer couldn't get financing. With the new contract Realtors are using, this actually is not categorized as breach of contract and therefore, the earnest money deposit can go back to the buyer. We submitted a Cure Notice when we reached the scheduled close of escrow date. This gives the buyer an official notice that they have 3 days to correct the situation (i.e. find a new loan) or they are in breach of contract. But this buyer never responded to the notice! According to my agent, this means the title company has no official reason why the buyer has backed out and, therefore, the earnest money is forfeited to me! All the buyer had to do was let the title company know in writing that they could not get a loan and they would have gotten their deposit back. Oh well. I guess this is just another piece of evidence that the buyer's mortgage broker and agent were not very experienced. And I'm not feeling sorry for this person either. It's been almost exactly one month since the deal fell through. That's plenty of time for them to contact the escrow company and ask for their deposit back.
Thursday, July 13, 2006
House 3 Update And The Next Venture
Escrow has been opened on House 3 and the inspection is supposed to be happening today. I will be getting a fax of the signed contract and the earnest money receipt sometime today. I'm glad to see the inspection is happening just one day after escrow was opened. The buyer is not selling a house to buy this one, so perhaps she is hurrying to get into the place before the first of the month so she doesn't have to pay August rent. (Not to mention collecting the $50/day credit I am giving her for closing early).
In other news, I am embarking on new REI venture that is exciting and somewhat scary... I won't say much now because nothing is finalized, but I will say it involves commercial real estate in another state.
In other news, I am embarking on new REI venture that is exciting and somewhat scary... I won't say much now because nothing is finalized, but I will say it involves commercial real estate in another state.
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