Second house almost done

The Cherry St house has been on the market for two weeks now.  The open house was well attended, but no offers yet. Doesn't help that the realtors are out of town on vacation for a week!  Keeping our fingers crossed.

The second house is on track to be finished this week.  The air conditioning finally was installed on Friday (much too late for the poor folks who've been working there since early July!).    Hope to have it listed before we leave for vacay.

Hubby is working with a friend of his to find the next project.  They put in a bid on a single family home on a nice piece of land.  It would definitely be the biggest project yet, but he had to bid way under the asking price in order to make any money at it.  He has a little room to increase the offer, but not too much.

Meanwhile Hubby has been measuring and documenting all of the improvements made an how long everything took and how much everything costs.  This is what he really brings to the game. He is really focused on developing consistent processes so he can more easily predict profits, etc.

Still haven't rented the one unit we still have open. Getting a few calls every couple of days, but the "right" tenant hasn't been found yet. After the previous disaster, he is obviously being a lot more cautious!

Some Financials - or "How Profitable Is This Anyway"

Hubby and I discussed the course of the business a bit tonight.  Some of his realtor friends want him to start negotiating with banks on their behalf, and he will get a portion of the profit from any sales that result. They also want him to do some property management (for rentals, and housing developments, etc.).  He also wanted to discuss maybe bringing in a partner to help fund the next renovation (we have enough to fund about 2.5 projects, but not three full ones).

After much debate we figured out some of the financials.   He will make about $15,000 from the first flipper, and he could make as much as $30,000 from the second. If we estimate conservatively, at $15,000 per property, and consider that we can comfortably do 2 properties per quarter.  That is a profit of $120,000 per year (before income taxes, of course).  This does not even count the income from the rentals.  Very lucrative.  Of course, we are dependent on the realtor getting the houses sold, but it is really in his best interest to move the properties (because we won't buy a third until one in sold).  During the down times (which we might have in August) Hubby can work on the rentals, and also develop the estimating process, and start generating a list of interesting properties for the next round.  Even if we miss our estimates in a particular quarter, we should still be just fine financially.

Decision:  for right now, Hubby is going to stay focused on the flipping and rentals.  It has only been two months.  We can always re-evaluate after the first year.

In other news, we finally got the water turned on in flipper number two!  Nothing much to discuss on the rentals right now.

Finally listed!

Flipper is finally listed.  Looks fantastic!  Here is the listing with some great pictures of the property:
http://www.remax.com/property/108472628-60440123/1322-CHERRY-ST-Pottstown-PA-19464/

Bought all of the materials for the 2nd place yesterday morning.  Work has already started and because it's a townhouse there is not much to do on the exterior (we needed to fix a drain pipe - already done - and the patio might need to be relaid because it slopes too much toward the house.  Doing a minor kitchen remodel (new counter top,  new floor, maybe new appliances, but keeping the cabinets).  Need a few interior doors, but the exterior ones are already fixed and/or replace.  New furnace and AC, of course (that seems to be one of our trademarks - and helps the resell value tremendously!).

Not much news on the rentals this month - definitely a good thing! - have received rents for 5.5 out of the 6 units that are occupied.  Expecting the 2nd half of that last one on Friday this week (keep fingers crossed!).  Need to get new tenants into the place that ended up being evicted, but really happy to be rid of the old ones.  Almost giving up hope of ever seeing any of the money we are owed on that one.  The place is clean already and we may move the stove from the new flipper to this apartment, but otherwise it is good to go.  Hubby is confident it will be occupied by August 1st.  It does feel good to have the rental situation a litter calmer, at least for now.

Tenants moving out

It seems like we will be losing tenants from at least 3 of our 7 apartments, and maybe as many as 5!  We are happy about 2 of the tenants who are definitely leaving.  One has struggled to pay the rent on and off from the beginning. The second is the unit we are trying to evict.  Unfortunately the other three are all fabulous tenants.  One family has lived in their unit for over 4 years.  We will certainly miss them, and Hubby will be very busy trying to fill vacancies as they come up.  Luckily things seem like they will be spread out a bit, so we won't have 5 empty units at one time.

One of the problems with move-outs and showing is that you have almost the same problems as showing a house, but none of the control.  Hubby showed one of the apartments tonight, but the woman who was interested was really turned off by the mess, from both the interior of that unit, and by another tenant who has junk all over the place.  We may need to wait until the tenant is completely out, and force the other tenants to clean up their act before even trying to show the place.  This definitely means lost rent as the place sits vacant.

The renovations are continuing on the flipper and we are still waiting to close on the 2nd flipper (although the realtor says he has a buyer for the 2nd one.  All we have to do is get thru the buy and renovation!).  Hubby is continuing to work with folks on craigslist about the wheel chair ramp and I finally finished up with all the eBay stuff.  Hubby is enjoying working on the property half days.  He may put  in some "overtime" this weekend to paint the basement!

Reno continues/court case update

Hubby is trying to get the tenants out of the house as fast as he can.  Even offered to forgive a month of rent just to get rid of them.  No idea what they are going to do. Strongly suspect they are going to drag it out as long as possible.  At least the judge agreed to revise the judgement to include May's rent, and Hubby is going to file for possession as soon as possible.

Reno work is continuing.  I saw the new kitchen design today and it looks really really nice. The whole project will take only about $2000 in materials (not counting paint and flooring).  That's not really too back for cabinet/countertops/backsplash.  Still debating the design a little.  I like shelves instead of upper cabinets.  I think it will look better and be more modern and versatile.  Hubby is having to referee the debate between me and the handyman. Usually we agree, but hubby still insists on asking both of us!  Son says the attic looks fantastic now that an old "Beaver board" ceiling has been removed and the place is cleaned up!  One room down, 8 to go - lol!

Court Case Results

So, after all the worrying, the tenant didn't even show up for court this morning. This usually means that we get an automatic judgement.  The judge is going to figure out how Kae can manage to get the money we are owed (4 months rent! + court costs).  It may involve attaching their paychecks.    Of course, this doesn't mean that they are gone from the apartment.  In 10 days we file for possession and if they are not gone within 10 days after that, we can change the locks and sell all of their stuff.  This is a little scary. We've never actually thrown anyone out before. We really don't feel bad about the guy that we believe is causing all of the trouble, but he lives with his girlfriend and her teenage son, and that does bother me a little. We will have to see how it goes!

Closing on the house that we will be flipping today. Started getting organized for the yard sale, and met with our HVAC guy to get an estimate on the furnace, which will have to be replaced.  Also found out that we won't actually be tied into the property for 90 days like we feared.  It turns out the 90 clause is just for short sales, not for general sales or foreclosures.  That is a big help because we are hoping to turn it around in about 60 days.

Yard Sale in Our Future

So ... we got into the house that Hubby is closing on, on Tuesday.  It is full of crap that we need to get rid of.  Much of it is trash, but there is enough useful stuff, that we feel bad just tossing, so we are going to hold a yard sale.  Hubby wants the place empty as quickly as possible, so we will have to work every night from Tues thru Friday to get the yard sale organized, and then have the yard sale Sat and Sun!

Never a dull moment. Hopefully the yard sale will pay for the dumpster we will need to get rid of whatever doesn't sell!

Sneak preview of court case

As I mentioned before, we have two apartments that are really problematic right now.  One is on a payment plan and they are doing great.  They should be completely caught up by the end of the month (fingers crossed). The others missed payments in the plan right away and are now 4 months behind on the rent.  We have a court date scheduled on Tues to evict them.  While hubby was fixing something at the property today, one of the tenants told him that the man that we are trying to evict is going to tell the court that there is a problem that we refuse to fix and that is why he is withholding the rent!   This is very frustrating, especially since hubby takes care of every single little problem immediately, and usually at great expense.  The tenant never reported the supposed problem to us.  Unfortunately, the judge has been very difficult to deal with through out the process, so we are very concerned that he will take this guy's word for it and delay the eviction.  Did I mention 4 months without rent!!!!!!!!!  The "problem" would cost all of $50 to fix.  Don't they think we would have fixed it, if it was true that the rent was withheld because of it?  Grrrr!!!!  A lot tenants get behind because of job losses, etc.  I'm not saying that they are perfect, but we have such a history of working with people to try to help them back on their feet.  The folks in this problem apartment both have good jobs, but they just will not pay the rent.  It's days like this that we feel like being total slumlords, or throwing in the towel!

The flipping properties seem to be back on track. Hubby will close on one on Tues (busy day!).  We are going over tomorrow to take a look around.  The house is not empty, so we have to figure out the best way to get rid of the stuff left behind:  dumpster, yard sale, or craigs list!  Hubby was able to negotiate a deal with the home owners association for the 2nd flipper.  They are going to waive a $2000 charge because they can't produce a receipt.  The seller has agreed to pay the rest of the amount owed.  Hopefully we will close on this property sometime next week.

Big Decision Made and Title Insurance Snafu

Well Hubby official gave notice to his full-time employers last week. We are in it with both feet now!

Still waiting on the closing for the townhouse I mentioned last time.  Tonight we have to go bug the Association President at that development.  Apparently there is a $2000 charge to the association that the seller (a government agency) is questioning and they won't sign off on the sale until the issue is resolved.

For a second property we are trying to buy, interestingly enough from our realtor, we ran into a problem with title insurance. For the realtor it is a true flipper, he bought it one week and planned to sell it to us the next week.  The title insurance companies won't insure it, because they say that the realtor agreement with the bank that he purchased from had an unstated 90 day wait clause.  The title insurance company won't take it for 90 days, but that doesn't fit Hubby's time table at all.  We are trying to work out a deal with the realtor to have him self-insure the title for the one-week time that he owned the property.  This involves lawyers on each side, so it is taking some time to resolve.

With some luck we will own two property next week!

Meanwhile the renter situation is looking a bit brighter.  One of the tenants that is on a payment plan has been paying regularly. Sadly, the other one is being taken to court next week for eviction proceedings.  Meanwhile Hubby is out at midnight trying to track down someone who still owes $50 for this month's rent!

Closing Delayed

It takes a ton of people to actually buy or sell a property.  There are the obvious (buyer and seller, real estate agents, etc) and the not too surprising (title insurance personnel who actually manage the closing docs) but there are a bunch of others you may not consider, and it is worth keeping them in mind.

First of all are the local tax authorities, especially if you live in a state with a property tax.  The buyer and seller each pay a portion of the property tax, for the portion of the fiscal year when the property was owned by each party.  Of course, only one person actually pays the tax, so the other party reimburses for the amount owed.

This usually works out fine, but if you manage to close near a tax due date, things get weirder.  The title company needs to contact the taxing agency and find out how much the tax is and whether it has been paid.   When buying or selling you really need to look over the HUD very carefully and double check everything.  Make sure you understand each line item. Once when we bought a property 2 days after the new fiscal year started, the title company inadvertently tried to get us to reimburse the seller for almost a year of property tax because they assumed the tax had been paid (it wasn't).  Most recently, we were charged with a reimbursement of tax, which turned out to be legitimate, but the title company assumed the tax wasn't paid, and was going to make the seller pay it at closing.  Something like this can hold up the whole process and the last thing you want to do is wire money for a closing and then get stuck at the table when someone notices an error.

Another factor to consider, and this is what just delayed our most recent closing is the home owners association, if you are buying a condo or townhouse (or any other property that has an HOA).  A lot of these properties have special assessments which must be paid at closing by the buyer or the seller.  In this case, the HOA has an assessment but we don't know the details. The title insurance company has been all over the HOA (really the management company that does the processing for the HOA) and even paid an extra fee for expedited service.  Unfortunately the HOA did not respond in a timely manner and the closing is now delayed two days. This means the HUD will need to be redone (for the taxes) and we are up against a wall in terms of our contract with the seller.  Keeping our fingers crossed for closing on Wed.

Hubby quitting work to invest full time in real estate!

Well, we learned a big lesson about flipping properties about a week ago (late on blogging because I was out of town for a family emergency).  The second place we were trying to buy for 75K went to someone else.  Here is how it all unfolded:
- Hubby got the bid in on Wed night.  Bid 75K and had and inspection contingency.
- Handyman went over early Thurs morning and said the place looked great.
- Realtor called or emailed around 10:30 Thursday saying that the bank had to officially break a prior agreement.
- Hubby crazy busy at day job all day. Finally called realtor back on the drive home.  Told him to drop the inspection contingency.
- Hubby thought about it some more and called realtor back and told him to offer full price.
- Learned first thing on Friday morning that the place went to someone else.  Someone offered full price with no contingencies on Thursday afternoon.

This was a real bummer because if Hubby had been working full-time on flipping he could have reacted sooner and we would have had the place.  Essentially a potential missed opportunity for an easy 30K. Bottom line, when something hot comes up, investors are all over it very quickly and we need to be able to react quickly and aggressively.  Giving the banks full price with no contingencies, whenever possible, is the way to go!  Obviously we don't want to lose money, but sometime you have to take a bit of a risk.

Hubby decided that the time was right to bite the bullet and leave his full time job.  He is away right now but plans to quit as soon as he returns.

Hubby also negotiated a weekly salary of $1250 with the handyman (we will buy all materials and hubby will work with him for half days, at least).  We feel this is reasonable ($250 per day), especially because we won't necessarily be able to keep him employed non-stop.  I think it is a little high, but we'll see how it works out. As long as we can make money, it won't matter too much.

On the rentals front, 5 out of 7 have paid for April (except one that owes $50, but we are pretty close anyway on those 5).  Another unit is on a payment plan of $350 per week until they get caught up and the first two payments have been received with no problem.  The 7th is not looking so good. They were on a payment plan, but blew it.  They were supposed to pay $700 while we were gone (they called to tell US that this money was coming) but when my son showed up to collect, only $300 was forthcoming (and this was after my son had to drive him to the ATM). They have to pay all past and current rent, late penalties, check bouncing penalties, and legal fees by April 23rd or we will take them to court to start eviction proceedings.

Yet another purchase

Hubby found a great deal on a house from an online service that sends him emails daily (I think his realtor set this up).  It is very close and was listed for $79,000.  He asked me to go look at the property because he was going to be very busy. The usual realtor wasn't available, so another member of his "team" met us there (hubby ended up leaving work early to see the place).  It is in really great shape, and in a really nice area.  Lots of cosmetic stuff, and the mechanicals need to be replaced (furnace, hot water heater, etc.).  Our HVAC guy came over to see it later and said he could easily install central air (it is a rancher and the floor of the main level is exposed in the basement). Central air will instantly add $10,000 in value.  There is some dispute about how much it will sell for when finished.  I think it could go for nearly $150,000.  The realtor said the absolute lowest was probably $125,000.

Hubby bid $75,000.  The listing was weird.  It was originally listed for 75, but then taken on the market and relisted at $79,000.  They want a cash deal, and a very quick closing date. We may end up closing on both properties in one day!  Luckily both will be pretty quick turn-arounds and hubby can quit his job for good to keep the business running (that was our goal all along).

Not much happening on the rental front.  One severely behind unit is now on a $350 per week payment plan from now to the end of May to catch up. I am doubtful.  The other unit that is majorly in arrears had a 2nd eviction notice posted last week.  They will probably be out by the end of April.  Early in the month, we have rents from 4 out of 7 units.  A fifth unit and the first $350 payment are supposed to be collected on Friday. Keeping my fingers crossed!

Inspection of next flipping property

Inspection of property we are in the process of purchasing today.  No big surprises.  One thing that came up was that the electrical box needs to be upgraded because it's only 60 amp (100 is the acceptable minimum).  On the good news front, it appears that the mold problem is happening due to poor drainage and an underground rain downspout that may be broken.  Both of those things are very easy to fix, so we can just run the downspout above ground and away from the house and add some top soil so the drainage is away from the property.  Another interesting tidbit is the price difference between inspectors. The guy we use charges $200, and that includes everything, including the reports.  We've heard estimates as high as $600.  Definitely pays to shop around!  Still working on the eviction process and looking for a second property to buy so we can start a pipeline (always having a project in the works will help everyone).

Bid accepted - project moving forward

Bid officially and finally accepted by the bank on the townhouse we first saw weeks ago (the one that was waiting for an owner occupier bid first).  Title search has begun and the inspection is scheduled for Saturday.  We know the inspection will report a lot of problems, but Hubby uses that report as a sneak preview of what will be found when he goes to resell (pretty clever!).  Our handy man called today looking for work, but the closing can't take place before the end of April due to all of the paperwork and because we are dealing with a bank, not a real human being!

Lost the bid on the other townhouse, someone offered more than asking price.  Oh well, plenty of other fish in the sea.  We worry sometimes because we pay some one to do everything.  Most people who flip houses do a lot of the construction work themselves.   Paying for everything lowers our profit, so we will have to make up in volume (we are happy to make 10K on a property, others want to make 30K).

Meanwhile Hubby is really really frustrated on the eviction process.  We are getting zero help from the local and the county courthouses.  The judge wants us to give another notice to one group owes almost $1000 and another unit owes even more than that.  First eviction notice filed on both, but because we entered into a payment agreement with one group, the judge says we have start the process from scratch!  A lawyer we hired for an opinion says that the tenant has waived his right to a notice in the lease, but we are bound by what the court will say.

Could not find a constable who would deliver the eviction notice for us, but we remembered a friend who's a parole officer and PI.  Going to ask him to officially deliver the notice.  Hoping this will really get the tenants attention!

Tenants and Maintenance

Hubby spent all afternoon reinstalling a cabinet in one of the units.  I am convinced that the tenants were rough with it, but no way to be sure.  The guy who owned the place before us was fixing it up himself and the cabinet was clearly not anchored properly.  Hubby said it looks a little crooked now, but is at least usable.

The thing that frustrated me is that this unit is one of the no pay/slow payers.  At least one of the adults now apparently has a job and promised his whole paycheck next Friday toward the rent we will see!

Hubby went to the courthouse to take next steps against the unit that violated their payment plan.  Some towns have really helpful people working at the courthouse and they help step us through the eviction process. Unfortunately, this is not one of those situations.  Ended up making an appointment with the judge for Monday and hiring a lawyer friend of ours to make sure that we have done everything legally so far.  Very annoying.

On the flipping front, it appears like we will definitely get one of the places that we bid on, in spite of a paperwork snafu this week.  The other bid has been put "on hold" by the bank that owns the property (whatever that means).  We were only a couple of thousand dollars apart on that one so it seems like we should be able to work something out.  Our realtor insists that "on hold" in a good thing!

Latest updates

Wow - I was away for a week and a lot happened!  Hubby put bids in on two places.  One is the townhouse near us that he was blocked from bidding on and they accepted his bid right away!  Woo Hoo!  Flipping house number 2 in in the works.  Very excited but working with the banks is frustrating. They wanted everything submitted thru a website, but once they accepted they wanted original documentation fedex'ed right away. Of course, Hubby did that, and, of course, no word from the bank since!!!

The second bid went in for a condo near one of the rentals we own.  Listed for $57K, he originally bid $49 and is in negotiations. Says the highest he can go is $52 and still make what he considers to be the min profit.  The place is really dirty and needs paint (I haven't seen it, but that is what he says).  $10K max.  After all that it should sell for something in the high $80s, giving at least a $10K profit once you consider closing costs on both ends.  Feels like things are moving now!

Still dealing with frustrations from tenants in 2 apartments.  One group has not paid the rent in 2 months.  They claim that a tax refund is due on April 3rd (was originally March 26th).  On top of all of that, these people are constantly complaining about something with the apartment.  Today it was a cabinet that is loose.  As far as I'm concerned they have no cause for complaint given all the leeway that Hubby has given them!

Another group of tenants is on a payment plan, but already falling behind.  The excuses are amazing:  can get rides, paycheck eaten up by child support, etc etc.  They are always running around, but never have money for the rent!  Luckily we have 5 good, reliable, tenants because these two units would spoil him on the idea of landlording forever (at least they would for me - he has more patience!).  Going to court tomorrow to start eviction for these folks!

Search came up empty today

Hubby went out to look at a few more houses today to see if they had any flipping potential.  Saw one that he really liked, but the neighborhood is not the best (and you can't fix location).  Going back to the two we saw the other weekend.  Planning to put in a bid on Monday.

On the rental front, all March rents received with the exception of two apartments.  One of these will be given an eviction notice on Monday, but they swear they will be current when their tax refund comes (heard this story before - from different tenants) - time will tell.  The other late group are the ones on the payment plan.  The next payment date is Monday.  Waiting to see if we actually collect rent or just collect yet another story.  So far 5 out of 7 paid!