A little back story first.
Earlier this year I did two major things: Left my regular "day" job and started my OWN real estate investment company without my former partner. While both were scary in some ways, they were exciting and fun in many others and I've really enjoyed being my own boss. I had run the numbers before I became unemployed and knew that I could go the summer without working at all, and much longer if I could get another cashflowing property under my belt. My plan was, if things went well, to buy a quad or other multi-family building that would cash flow at least $1000 or more a month so that I could have a little more income coming in and then be able to work on other aspects of real estate with a lighter mind.
I knew I had enough money for one good subject-to transaction. I was looking for a quad (or larger if possible) that would ideally not have any immediate/large repairs, hopefully have at least a couple of current PAYING tenants, and that the seller would need no or practically no cash down from me. I had enough to pay for closing and a couple of back payments, and am perfectly willing to do minor repairs myself if needed. Yeah, I know, many people told me I was probably dreaming about nailing such a property. Who'd just sign over a quad in good shape with good cashflow potential?
So when a Realtor called me up out of the blue and told me about this really awesome quad that was bank owned and just lowered to a killer price, I was interested. I'd spent the summer looking for a multifamily building and wasn't having much luck within my parameters, so a killer REO seemed worth a look. The Realtor was right. It was an awesome deal. The previous owners had been rehabbing it and were nearing completion when I guess they ran out of steam or money or both. All the major things had already been finished, it just needed some minor stuff to be ready to rent.
I absolutely knew, without a doubt, that the numbers would qualify for a 100% hard money loan. I had the percentages and fees memorized and ran many estimates and circumstances and tried to use conservative numbers. I happily put down my $2000 earnest money deposit and after some back-and-forth on numbers I got it under contract. Although I can't qualify for a hard money loan due to not having the regular income to refinance out of it, I knew this kind of slam-dunk deal with no money down would be good enough to get a financing partner. I was right, they lined up fast.
Problem is, the 100% hard money financing didn't go quite as I expected. Turns out that even though this will be a "hold" property and not a flip, and even though it is in the cashflow's best interest to keep rehab costs down and not do any extra bells and whistles (its really in a "lower income" area, after all), the lender still requires a MUCH larger rehab budget than my contractor's estimate. Twice as much, actually. They say its to protect their investment in case they have to take the property back, but from what other people are telling me of their experiences, this 100% lender never really gives 100%, there's always some caveat that prevents it. They advertise 100% rehab loans, but everyone I know that has used them (or tried to use them) ends up actually needing cash down. So with a doubled rehab budget the numbers no longer qualify for a 100% loan, and none of my potential financing partners has the relatively small amount of cash to cover the increased budget.
So its looking more and more like the deal is dead.
But wait, its not over yet.
When I submitted the offer I was in a hurry and went online to get a quick pre-approval letter from an online bank late at night. I just needed something to lock up the deal fast, other offers were coming in. Now the bank that owns the quad is demanding to see a denial letter from this online bank that I was preapproved with in order to let me out of the contract with my $2000 earnest money. Problem is, I can't get a response from the supposed "bank" that I got the preapproval from, so I can't seem to get a denial letter. My $2000 may be going down the drain, and what's worse the Realtor that I was working with doesn't seem to care. In retrospect, I probably should have used my own agent rather than the listing one so that my own interest was better protected.
And Murphy still wasn't done yet.
The worst part is that during all this, I actually found the deal that I'd been waiting for all summer. A man called me off of a mailer I sent and said he had two quads that he was getting behind on payments with and he was ready to walk away. SCORE!
Oh, wait, some of my meager amount of money meant for just this deal was already tied up in the other REO quad. Major Bummer.
One of the two quads he owns turned out to fit all my criteria, so after some thought and consideration it is now under contract with me and a new partner (see yesterday's post) to make up for the fact that I am lower on funds than I should be.
I could lament about the fact that I should have stuck to my plan and waited for the right quad to come my way, but I still believe the first REO quad is an incredible deal and I don't regret pursuing it. I actually still want it, but am running out of ideas to get to the closing table. If I loose my $2000, I'll only regret rushing and not using a more legitimate bank's preapproval letter!!!
So, please wish me luck in getting out of the contract with my money. As an unemployed person I really need to keep every dollar I have, I have no way to make it back! Or contact me if you want to buy a quad with minimal repairs needed at a great price in Richmond, VA and can either finance it yourself or have good credit and good income and can bring a little cash to the hard money closing table.
The ending isn't written in stone yet, but Saturday is the start of our big vacation of the year and I'd sure like to go without a stressed out mind and heavy heart.
Thursday, August 27, 2009
Wednesday, August 26, 2009
Countdown to a quad closing!
Today was a happy day! Not a closing day yet, but the next best thing. Signed contract day! The second quad deal that I've been toying with for a while now is officially under contract as a totally "Subject to the Existing Mortgage" deal. Yippee!!! I'm just a title search away from owning a nice cashflowing quad!
Actually, I'll be owning 50% of a nice cashflowing quad. I was in the unfortunate circumstance of having already put some of my small amount of cash into the first REO quad I found (which is still under contract and up-in-the-air about closing), when this second Sub2 deal, the deal I really had been looking for, came along. So with very little cash left in my account and the seller's sob story of how impossible it was to keep the place rented, I hesitated to put the building under contract immediately. Sometimes he who hesitates is lost, but I knew that I would have a hard time buying two quads at the same time with my very limited funds. But lucky me, I happened to had met a local fellow investor in my social networking earlier in the year, and it turns out that she was looking for this exact same type of deal too! So now I only have to put up half of the title, closing, back payments and holding cost money, which takes a huge burden off me and gives me the confidence to move forward in the deal. It also helps that she has a great method for keeping her units rented!!! =)
So today we met the seller at the property (for the thrid time!) and he readily signed the contract, showed us copies of his leases (three units are rented, for the moment), and gave us authorization to contact his mortgage company so we can start the Sub2 process. Title search was ordered today and we're going to get an inspector out there in the next day or two just to give it a once over and know if there's any structural issues. Then, within a few days or so, we'll have ourselves a closing! Did I say "Yippee" yet???!!!???
The nice thing about Sub2 transactions is that it really is a winning situation for everyone. We get a property that will cashflow and, eventually, build good equity (there's not much equity in it now, but that's not what I'm after), the seller gets his back payments caught up, avoids foreclosure, his credit score improves over time and he gets rid of the headache that he just didn't want to deal with in his retirement. Oh, and the bank gets to keep getting payments on their nice lucrative loan, but with banks being such whiners and tightwads right now I really don't care what's in their best interest.
Happy day! I'm so excited about this quad that I sometimes forget the trouble I'm having on the other one I have under contract! But not for long... sigh. More on that in another post, right now I just want to revel in the fact that I have very nearly achieved what many people told me was impossible/extremely unlikely. Now I wonder what is the appropriate amount of nose-rubbing I can do without being unlikeable at investor groups? ;-)
Actually, I'll be owning 50% of a nice cashflowing quad. I was in the unfortunate circumstance of having already put some of my small amount of cash into the first REO quad I found (which is still under contract and up-in-the-air about closing), when this second Sub2 deal, the deal I really had been looking for, came along. So with very little cash left in my account and the seller's sob story of how impossible it was to keep the place rented, I hesitated to put the building under contract immediately. Sometimes he who hesitates is lost, but I knew that I would have a hard time buying two quads at the same time with my very limited funds. But lucky me, I happened to had met a local fellow investor in my social networking earlier in the year, and it turns out that she was looking for this exact same type of deal too! So now I only have to put up half of the title, closing, back payments and holding cost money, which takes a huge burden off me and gives me the confidence to move forward in the deal. It also helps that she has a great method for keeping her units rented!!! =)
So today we met the seller at the property (for the thrid time!) and he readily signed the contract, showed us copies of his leases (three units are rented, for the moment), and gave us authorization to contact his mortgage company so we can start the Sub2 process. Title search was ordered today and we're going to get an inspector out there in the next day or two just to give it a once over and know if there's any structural issues. Then, within a few days or so, we'll have ourselves a closing! Did I say "Yippee" yet???!!!???
The nice thing about Sub2 transactions is that it really is a winning situation for everyone. We get a property that will cashflow and, eventually, build good equity (there's not much equity in it now, but that's not what I'm after), the seller gets his back payments caught up, avoids foreclosure, his credit score improves over time and he gets rid of the headache that he just didn't want to deal with in his retirement. Oh, and the bank gets to keep getting payments on their nice lucrative loan, but with banks being such whiners and tightwads right now I really don't care what's in their best interest.
Happy day! I'm so excited about this quad that I sometimes forget the trouble I'm having on the other one I have under contract! But not for long... sigh. More on that in another post, right now I just want to revel in the fact that I have very nearly achieved what many people told me was impossible/extremely unlikely. Now I wonder what is the appropriate amount of nose-rubbing I can do without being unlikeable at investor groups? ;-)
Saturday, August 22, 2009
Cross your fingers and don't breathe, some quads dangle almost within reach.
I could not be happier to say that I have TWO quad deals in the making that are looking very good right now. Even though I was out of town all week, I still somehow managed to make phone calls and drive to the Panera and Office Max parking lots to send emails (I was much too sweaty and covered in paint splatters to venture out of the car!), which was enough to keep things rolling along on both deals. I must say I'm quite proud of myself for doing this unique form of multi-tasking!
I got back yesterday evening. Today, Saturday, I went to Quad Deal #1 with a contractor and hard money lender to get a firm repair estimate and figure out if its going to meet the financing requirements like I think it will. I'm thrilled that the contractor's bid came in exactly within my target. Rock on with my bad self! I've always been pretty good at estimating repairs, but wasn't so sure on a 4 unit building like this, especially after reviewing the home inspector's notes (which I had happen while I was out of town, a good and bad thing but at least I know there's no big surprises). Little things times four can really add up to big bucks. But, the contractor's numbers were good, so now I get to move forward one green space towards the closing table. Nobody breathe, please...
Of course, now I am starting to get nervous. This is the time when deals often begin to fall apart for me, and my confidence is slightly rattled from past failures. I've been doing some thinking about my past unclosed deals though, and I'm sure that this time I have better deals, more experience, and more confidence than I've ever had before. I am resolute in my determination to make these things close. IT WILL HAPPEN. And this time next month I fully expect to be the proud owner of two lovely quads that will bring me a nice chunk of monthly cash flow and ease my family's worried minds. Yes, it will happen. I know it will. I know it will. I know it will.
Still too nervous to discuss too many details and jinx the whole thing, but I do promise that as soon as the closings happen I will happily tell you all the whole story for each one. How I found them, what I did to buy them, etc.
Until then, please sleep with your fingers crossed under your pillows for me. My 2009 Big Goal #2 is getting closer and closer to becoming a reality. I could really use all the luck and support I can get!
I got back yesterday evening. Today, Saturday, I went to Quad Deal #1 with a contractor and hard money lender to get a firm repair estimate and figure out if its going to meet the financing requirements like I think it will. I'm thrilled that the contractor's bid came in exactly within my target. Rock on with my bad self! I've always been pretty good at estimating repairs, but wasn't so sure on a 4 unit building like this, especially after reviewing the home inspector's notes (which I had happen while I was out of town, a good and bad thing but at least I know there's no big surprises). Little things times four can really add up to big bucks. But, the contractor's numbers were good, so now I get to move forward one green space towards the closing table. Nobody breathe, please...
Of course, now I am starting to get nervous. This is the time when deals often begin to fall apart for me, and my confidence is slightly rattled from past failures. I've been doing some thinking about my past unclosed deals though, and I'm sure that this time I have better deals, more experience, and more confidence than I've ever had before. I am resolute in my determination to make these things close. IT WILL HAPPEN. And this time next month I fully expect to be the proud owner of two lovely quads that will bring me a nice chunk of monthly cash flow and ease my family's worried minds. Yes, it will happen. I know it will. I know it will. I know it will.
Still too nervous to discuss too many details and jinx the whole thing, but I do promise that as soon as the closings happen I will happily tell you all the whole story for each one. How I found them, what I did to buy them, etc.
Until then, please sleep with your fingers crossed under your pillows for me. My 2009 Big Goal #2 is getting closer and closer to becoming a reality. I could really use all the luck and support I can get!
Saturday, August 15, 2009
One hard week = A quad for Melody?
Nope, I haven't forgotten about my blog here. I've had one hell of a crazy week or so, chasing leads, answering the phone, looking at properties and generally feeling like I'm actually doing work. WORK. Ugh. Not exactly what I want to be calling it but hey, the going is starting to get tough so you know what that means...
I'm not going to go into much detail because I don't want to count my chickens before they hatch, so to speak. But, you know how I've been hankering after a multi-family for a long time? Maybe you remember my goal of purchasing a 4-unit building this year? Well I did look at a quad on Monday that pretty much took the cake of all quads I've looked at over the last 10 months. Only one little catch, its an REO. Well, I wasn't about to let anything as small as being unfinanceable stop me from scooping up one of the best deals in town. I put in an offer on it the next day (had to get a POF letter and certified funds for the earnest money) and after some negotiations I am officially under contract with a DAMN good deal. Tons of equity and cashflow to be made on this baby. Now I'm just working out the whole financing problem. I may have found someone to partner with me and get the deal financed for a 50/50 split on the equity and some of the monthly cashflow. Fine by me, if it works out I'll gladly give up whatever it takes to get the deal done. It will be a win-win-win-win situation! :)
Found some other deals, not quite as exciting as that quad but still interesting, that may come to fruition soon. One is actually a pair of other quads that may become Sub2 deals. Its really been a tough week though. I've got to say that if I have to work this hard every week in order to do good business, I may have to just start looking for another job. Especially if all of the work I did this week actually turns out to make zero money. Won't that be a gigantic disappointment? I know its not going to be all bon-bons and rainbows in this business, but I am seriously exhausted and can't remember when I've ever been so busy. But, I think I've got at least one thing in the bag, hopefully two. So as long as something pans out I think I'll be okay with my progress.
Oh, and I may have said I would be blissfully at home for the whole month of August, but it would seem that duty calls and I am once again leaving for the great north and their most excellent pizza. Long distance rehabbing is quite interesting and with New York winter not too far off, we figure we should get as many visits in as we can while the weather is still good. So, I shall answer the call of the paintbrushes and drywall once again. Hey, what good is not having a J-O-B if I can't up and travel at any time for any reason at all?
I'm not going to go into much detail because I don't want to count my chickens before they hatch, so to speak. But, you know how I've been hankering after a multi-family for a long time? Maybe you remember my goal of purchasing a 4-unit building this year? Well I did look at a quad on Monday that pretty much took the cake of all quads I've looked at over the last 10 months. Only one little catch, its an REO. Well, I wasn't about to let anything as small as being unfinanceable stop me from scooping up one of the best deals in town. I put in an offer on it the next day (had to get a POF letter and certified funds for the earnest money) and after some negotiations I am officially under contract with a DAMN good deal. Tons of equity and cashflow to be made on this baby. Now I'm just working out the whole financing problem. I may have found someone to partner with me and get the deal financed for a 50/50 split on the equity and some of the monthly cashflow. Fine by me, if it works out I'll gladly give up whatever it takes to get the deal done. It will be a win-win-win-win situation! :)
Found some other deals, not quite as exciting as that quad but still interesting, that may come to fruition soon. One is actually a pair of other quads that may become Sub2 deals. Its really been a tough week though. I've got to say that if I have to work this hard every week in order to do good business, I may have to just start looking for another job. Especially if all of the work I did this week actually turns out to make zero money. Won't that be a gigantic disappointment? I know its not going to be all bon-bons and rainbows in this business, but I am seriously exhausted and can't remember when I've ever been so busy. But, I think I've got at least one thing in the bag, hopefully two. So as long as something pans out I think I'll be okay with my progress.
Oh, and I may have said I would be blissfully at home for the whole month of August, but it would seem that duty calls and I am once again leaving for the great north and their most excellent pizza. Long distance rehabbing is quite interesting and with New York winter not too far off, we figure we should get as many visits in as we can while the weather is still good. So, I shall answer the call of the paintbrushes and drywall once again. Hey, what good is not having a J-O-B if I can't up and travel at any time for any reason at all?
Tuesday, August 4, 2009
I feel the NEED for LEADS!
I'm BAAAAAACK!
Whew! I feel like I've been living out of a suitcase for close to a month. Travelling up north multiple times and then vacation to the beach (not that I'm complaining about THAT), I barely had time to unpack for one thing before I was packing for the next! But now I'm back at my home sweet home with my lovely fluffy bed (soooooo nice to sleep in my bed) and am ready to make things happen for the month of August.
July found me getting mentally ready for some big things to happen and laying ground work for what I'd need to really hit the ground running when I finally had the time to devote to my real estate business. I created my new website, created fliers and ordered mailers and took care of some "administrative" type duties last month in between travelling times. And now the time is here for the race to begin! Run, Melody, RUN!
I absolutely know that the few and far between leads that I've had trickling in from random places are not going to cut it if I want to do some serious money making business. And now I'm getting the itch to fill my pipeline. I feel the NEED for LEADS. I want my pipeline funnel to overfloweth. And of course, I want it that way on a shoestring budget because I am, after all, unemployed and broke!
But that's one of the beautiful things about real estate investing businesses I think, marketing doesn't have to cost us big bucks. A home printer and a ream of bright yellow paper is dirt cheap, and home made "bandit" signs (so I'm told, we'll see) are just as effective as pretty printed ones. And branding? Who needs that in our business? Maybe its helpful if you can afford it, but I don't really need to have fancy pens with my company name or a logo emblazoning everything I own like Realtors often do. My website I did myself and pay $5 a month for hosting, talk about affordable! When I was with my former business partner we wasted a lot of money on "marketing" that didn't produce very good leads, and I feel confident that what I'm doing now will be much more effective at a much lower cost. Of course, the proof will be in the pudding (more like DOUGH I hope!).
Today I devoted the entire day to business, even though I had to tote the kids along and subject them to several hours of riding around neighborhoods looking for interesting properties. OK, entire day minus time for a trip to McDonald's for lunch (their reward for not driving Mommy crazy in the car) and a quick stop at the grocery store (does anyone else go through 5 gallons of milk a week???). It really felt great to be focused on one main goal for the day, definitely something I'll do again and try to work in once or twice a week. Of course, tomorrow I promised we'd go to the pool and then there's the back to school shopping that needs to get done and errands that need to be run etc etc etc. Hey, one or two days of focused real estate work will be a big accomplishment for an inexperienced stay-at-home mom!
So bring on those leads, I'm open for business and ready to get my buying groove on!
Whew! I feel like I've been living out of a suitcase for close to a month. Travelling up north multiple times and then vacation to the beach (not that I'm complaining about THAT), I barely had time to unpack for one thing before I was packing for the next! But now I'm back at my home sweet home with my lovely fluffy bed (soooooo nice to sleep in my bed) and am ready to make things happen for the month of August.
July found me getting mentally ready for some big things to happen and laying ground work for what I'd need to really hit the ground running when I finally had the time to devote to my real estate business. I created my new website, created fliers and ordered mailers and took care of some "administrative" type duties last month in between travelling times. And now the time is here for the race to begin! Run, Melody, RUN!
I absolutely know that the few and far between leads that I've had trickling in from random places are not going to cut it if I want to do some serious money making business. And now I'm getting the itch to fill my pipeline. I feel the NEED for LEADS. I want my pipeline funnel to overfloweth. And of course, I want it that way on a shoestring budget because I am, after all, unemployed and broke!
But that's one of the beautiful things about real estate investing businesses I think, marketing doesn't have to cost us big bucks. A home printer and a ream of bright yellow paper is dirt cheap, and home made "bandit" signs (so I'm told, we'll see) are just as effective as pretty printed ones. And branding? Who needs that in our business? Maybe its helpful if you can afford it, but I don't really need to have fancy pens with my company name or a logo emblazoning everything I own like Realtors often do. My website I did myself and pay $5 a month for hosting, talk about affordable! When I was with my former business partner we wasted a lot of money on "marketing" that didn't produce very good leads, and I feel confident that what I'm doing now will be much more effective at a much lower cost. Of course, the proof will be in the pudding (more like DOUGH I hope!).
Today I devoted the entire day to business, even though I had to tote the kids along and subject them to several hours of riding around neighborhoods looking for interesting properties. OK, entire day minus time for a trip to McDonald's for lunch (their reward for not driving Mommy crazy in the car) and a quick stop at the grocery store (does anyone else go through 5 gallons of milk a week???). It really felt great to be focused on one main goal for the day, definitely something I'll do again and try to work in once or twice a week. Of course, tomorrow I promised we'd go to the pool and then there's the back to school shopping that needs to get done and errands that need to be run etc etc etc. Hey, one or two days of focused real estate work will be a big accomplishment for an inexperienced stay-at-home mom!
So bring on those leads, I'm open for business and ready to get my buying groove on!
Subscribe to:
Posts (Atom)
Posts
