Wheatie's Real Estate Investment Saga

Last Thursday night, exactly four weeks after closing, the place is ready to rent. Finished up some minor items inside, and wrapped up the landscaping.

After several comments about the yard I figured I really needed to do something. My wife's something of a gardener, so I twisted her arm into helping out. She picked up some plants at Lowes, and got those in last Wednesday night. I worked on the sprinklers, and mostly, but not completely, go those working. I realized I had missed getting one set of parts, so couldn't get them going. I also managed to blow the fuse in the sprinkler timer in the process of replacing the bad valve.

On Thursday I picked up the missing pieces, a couple more butterfly bushes and fuses, and finished up the sprinklers and landscaping. Unfortunately, it was rainy yet again. Normally, we would have very little rain by this time of year. But this has been an unusually wet year. By the time I got to the house on Thursday, it was pouring. After setting in the truck for a bit waiting for it to ease up, I made a dash inside. I worked on inside stuff for a while, mostly cleaning up. When the rain stopped, I started working outside. Unfortunately, the cloudburst had flooded the valve box. That made for an entertaining time of fixing the valves, but I managed to get them working. I had somehow messed up the wiring and even though the replacement was working, another wasn't. Alls well now. Got the remaining plants in, and got all the sprinklers working. Put down some grass seed and was raking it in when the clouds burst yet again. So, I took the time to run to HD for a few more pieces. The rain had eased up by the time I got back, but showed no signs of stopping this time. So, finished up hooking up the remaining heads (these little mini sprinkler things in the beds) in the rain. Of course, it stopped just about the time I finished.

Nevertheless, its all done. Crammed as much stuff from the garage as I could into the truck and headed home.

We had a long weekend in Glenwood Springs. This is out on the western side of Colorado. They have a big hot spring there and a gigantic pool that's too hot to set in for more than a few minutes on one end but cools down a bunch by the time it gets to the other end. We usually go up there in winter. Always an experience to set in a outdoor pool while the snow falls and the lifeguards wear parkas. We drove down to Aspen Saturday afternoon to check out the farmers market. Picked up a few things including some very cool but way too expensive handblown glasses. Had lunch at a place where all the waitresses looked like models. Didn't even bother looking in most of the stores.

After getting back I had a showing on the place. Yet again a very interested prospect who wants to move in at the end of July. I've had a lot of this lately, both on this place and another recent vacancy. Seems odd people are looking so far in advance of when they need to move. So, I now have a couple of folks who seem like good prospects but don't want to move in for several weeks. I'll keep trying for the next couple of weeks, and if nobody moves in, I'll give them a call back.

Finished up grouting the tile, got the receptacles back up, and got the smoke detectors replaced. Need to touch up the paint in places and that about it for the house.

The hard money lender (servicer, really) came by and had a look and said it looks great. Says the rest of the rehab escrow is in the mail. Hopefully it comes very soon, cause I'm just about tapped out.

He did mention the yard could use a little work. I messed with the sprinklers some in the last few days, but still have a sticky valve and some leaks. So, tonight I'll head over and try to finish that up. I've talked my wife into working a bit more on the beds, so she's supposed to get some plants today and we'll get those in.

Started the refi process. Four to six weeks to close is the current estimate. We'll see how that goes. First time I've done this since the HVCC guidelines went into place. Rates are looking pretty good 6.125% with one discount point for a 30 year fixed.

I entered the property into Denver Section 8, and I've called them several times to find out what the process is. I have at least one prospective tenant that's approved for Section 8, likes the place, and would move in quickly. Not sure what's holding them up or why I can't get anyone on the phone.

Also updated the accounting on the rehab. Total spent is $12,532. Rehab budget was $9,000. So, why the $3,532 overrun. Several reasons:
1) Paid for labor to have tile installed. I had planned to do this myself. $1400
2) Tile was more than initially budgeted. I overlooked two items - the backsplash and the edge pieces around the tub and shower. The backsplash was about $95 and the edges were $170 for a total of $265. Those edge pieces are really expensive compared to the plain pieces. Overall, I was over budget $240 on the tile, so except for these two overlooked items I was very close.
3) Countertops. I found relatively cheap slab granite, so that ended up being "only" $1500 installed. OTOH, I'd only budgetted about $500 for this item. Nevertheless, it was a timesaver over granite tile, and looks really good. Which should help the appraisal. This was the one splurge vs other houses in the neighborhood. Granite tile is the norm, with only a few granite slabs.
4) Paint and paint accessories. Ended up needing an additional five gallon bucket of paint vs what I had estimated. I also didn't account for the plastic, paper, and tape for masking, and for the caulk. This was actually a bit of a disconnect between the painter and I. He has said at one point he would supply this. But then I later pushed him to remove the popcorn ceiling, so I didn't feel like pushing back on these items. Nevertheless, it was over $100 for all this stuff, plus $100 for the additional paint.
5) Miscellaneous. By this I mean screws, bolts, nails, caulk for the tub and showers, faucet and toilet hookup lines, trash bags, trash disposal, aerators, ant spray (which STILL hasn't killed the ants), saw blades, screwdriver bits, cleaning products, misc bits of drain to get the sinks and lavs hooked up, trim, etc., etc., etc. I consistently omit all this minor stuff, and it really adds up. Without a line by line accounting for every receipt, its tough to get an exact figure. Almost every trip to Home Depot for some big item resulted in a handful of little items, too. All together it looks like this was $600-800 for this little stuff.

Its been several late nights trying to get this wrapped up. Mostly just small things to do, but it seem like there are a never ending supply of them. A couple of nights I've really felt like I'm just at the wall.

After working all day, I went to the property to work, and just felt like I could not make any progress. In a post a long time ago I wrote about focus. New investors sometimes dart from one approach to another like a butterfly. Short sales? No, apartments. No, I'll do some wholesales. No wait... I recommended finding a niche and focusing. Same applies to the rehab work. On the previous project, I spent too much time darting from one job to another. So, on these nights when I really felt like I could accomplish nothing, I tried to pick something and just get it done. It really does help.

Friday night was a classic. Normally, we have dance lessons on Fridays. Right now its salsa at 7:00 and ballroom at 8:00. Its not my favorite night for this, because on Friday I'm ready for the week to be over. But the salsa class has been together for 15 weeks now, and the ballroom class is going on a year, and classes don't often hang together this long. But last Friday my wife was feeling ill. Both of these classes tend to have more guys than women, so I really didn't want to go by myself. Either the men or the ladies rotate around, so everyone dances with everyone else. But if the class is unbalanced, someone doesn't have a partner once in a while. So, off to the property to work.

I got over there and just couldn't get into making any progress. But I picked something, and pressed on. There were some fits and starts at first. The replacement for a slightly leaky shower faucet cartridge proved much leakier. After getting the old one back in, that moves further down the list to try to replace. Where do builders get this crap anyway? A "carefree" faucet? Never heard of them.

Actually made lots of progress over the last few days. Cabinets are refinished, showers and tub scrubbed out and caulked. New carpets all vacuumed. Yard mowed. The big project was the new tile (tumbled stone, really) backsplash. Took a bit longer than I expected, but it went pretty smoothly. Really should bought more spacers, though. Somehow, it just didn't click that 200 tiles and 250 spacers was a mismatch.

Had one prospect look on Saturday morning and two more today. The Saturday one is section 8, and a couple of other callers have asked for that, too. So, I'm trying to get onto Denver section 8. Put the property info in online last week, and left a message on their voicemail. Hopefully I can get that sorted out and the inspection done. It would sure be nice if there was just one authority for the area, instead of several different ones. Both the section 8 lady and one couple tonight weren't actually looking to move for a month. Drives me crazy. Am I supposed to give up months rent and hold the place? I don't get why people look so far in advance. OTOH, the last vacancy I had I did end up renting to someone who initially looked way in advance, so maybe one of these folks will pan out. The couple today were trying to figure out where their furniture would go. That's always a good sign.

Down to just two or three tasks to complete. Need to grout the new backsplash. Need to put in new smoke detectors. Then a thorough cleaning.

Yard and sprinklers could really use some work. A few people have said something, but most don't seem to be too concerned.

And I have a huge ant hill in the back yard that's going to need nukes or something. My previous attempts have been unsuccessful.

Since the last entry I've made quite a bit of progress. Seems like there's always something more to do, though, and the to-do list never gets any shorter.

The hammer drill and some longer tapcon bolts made short work of that troublesome toilet flange. It will stay put now.

Finished up all the trim in the kitchen and baths. This had been ripped out to do the tile. The old kitchen floor had three layers of vinyl squares, the last couple just laid up to existing trim and cabinets. I think that's incredibly sloppy. I removed the base cabinets and the tile guy pulled off all the trip, so the tile now goes all the way to the walls in the kitchen and both baths.

Spent some time scrubbing down the cabinets and then refinishing them. They were in good shape but showed a lot of wear. I'm replacing the drawer fronts, too. I received the new ones, so started finishing those, too. I got them all stained last night and hopefully they will be ready for polyurethane tonight.

With the cabinets and the trim ready, that just leaves the backsplash for major items. I finally broke down and called the counter folks to come trim back the counter a little. The back edge is fine, but the front edge is 1/4 inch longer. The fridge is 36" wide, and that's exactly how much space there is. It will go in, but it really takes some shoving. The icemaker isn't working (its a used fridge), and I'd like to try replacing the water valve and check the wiring. But I can't get it out! Grrr. This should be easy! They will be there Friday to trim the counter, then I'll do the backsplash.

Messed with the sprinklers for a while last night, getting good and wet in the process. As I though, I have one sticky valve that needs replacement. Several of the outlets (not sprays, those dripper hoses) are very leaky, so they're going to get capped off. I really just want to get the sprays going so I can start some grass.

One more night tonight, then Saturday to finish up any loose ends.

With the carpet layers out of the way, I was able to finish up some stuff inside. I admit its nice to be able to walk through the garage, but hauling off trash doesn't seem like progress.

With another bag of parts from Home Depot, I was able to get the kitchen sink back to working, got both lavatories up and running, and got one toilet back in operation. The other one continues to be a pain. Its in the basement, and should bolt right into the concrete. But, of course, the closet flange was broken and loose. I attempted to use various anchors and Tapcon screws to get a good grip, but it appears this isn't the first time this beast has been loose. Tomorrow I'll drag out the big hammer drill and see if I can get it locked down.

On a better note, I did get a hose bib replaced. I'd been dreading this. Its one of those frostless ones. It did its job, but at some point, it looks like they had left a hose hooked up and full of water, and it had split outside the valve seat. It was fine when off, but turn it on and water comes pouring through the wall into the utility room. Simple enough to replace, if you can get to it. Not only was it behind the wall, but over another wall. So, it wasn't just a matter of cutting a hole in the sheetrock, replacing the faucet, then patching the hole. A bit of luck was the it was accessible by removing the bath fan. But then what? Well, shark bites to the rescue. This is the second time I've used these in a tight spot. Worked like a charm. I was able to get the old faucet cut loose, then put the new one in with a shark bite. I never cease to be amazed that these slip in so easily, but then actually hold water.

Also got most of the new mini-blinds up. And several troublesome window locks fixed.

The downside to the carpet layers being done is that the end of the help. Just little stuff to do, but still, if I don't do it, it doesn't get done. Oh well. Only a three items of any significance left. That's getting the cabinets refinished, installing the backsplash, and putting in trim where it was removed for the tile.

I've had several calls on the place, and a few people have stopped in. So far nobody has signed up, but the funnel is filling.

Getting so close now. Carpets went in today. That made a big difference and gets a bunch of rooms finished. Just need to finish up in the kitchen, baths, some work outside and general cleanup.

Baths need to get the toilets and vanities back in. Worked on that a while Thursday night, but ended up not being able to complete any of it. I was missing some little something on every piece. Sheesh! Another trip to home depot for $100 of "misc". Someday I'll learn to properly account for all this lagniappe in the budget.

Since the carpet layers were there today, I did some outside stuff and stayed out of their way. One of the chores was to haul trash to the dump. We had some stuff around our house, too that needed to go, so I figured I could kill two birds. Ended up being two trips at $83 apiece. Marginally cheaper than a dumpster. I paid $205 for a nine yard roll off last time I rented one, and this was 12 yards. Also cut down the dead tree in the yard.

Started finishing up the kitchen. The counters were installed Thursday morning, and look very good. They cut the larger one about a quarter of an inch bigger than it should have been and the fridge is a very tight fit. Good news is the counter installers helped get it from the garage to the kitchen. Tried to get the sink back up and running after the carpet layers finished, but, of course, was a couple of fittings short. Hopefully, I have all the bits needed to finish up the sink and baths tomorrow.

Painters finished up today, including priming and repainting the door and garage door that peeled off after the first coat. Looks good, but the carpets are such a mess its hard to tell.
Spent the afternoon at an event put on by out state high tech trade group (Colorado Software and Internet Association) on raising capital. Some interesting stuff. One big take-away was that the rates we pay for hard money, in the teens plus several points, aren't that bad compared to some of the alternatives. As a small business, the only choice you have that's cheaper are commercial bank loans, and you'll only get those with a strong balance sheet, strong cash flow, and a personal guarantee. Everything else -- equipment leases, mezzanine financing, receivables factoring, and any sort of equity deal (angles, VCs, private equity) is going to cost you more. Leases and factoring (essentially getting a loan based on a discounted value of invoices you've billed but not yet received payments for) work out to 20% or so. Equity deals end up giving away a chunk of your company. Really, not too different than the idea that hard money is expensive but a money partner is even more expensive.
As I'm leaving, I get a call from the counter people. "We'll be there at 8:00 AM tomorrow to install your counters." Considering the sink base is still in pieces in my garage, I don't see that working. Rescheduled that for Thursday and left a message for the carpet layers that I'm ready for them.
Picked up the compressor and checked out the paint job. Put the sink base together. I love nail guns! Tomorrow night the base cabinets have to get back in. Just three, plus the end for the dishwasher, so shouldn't be a problem.
After that, only have small items to do.
I've had several calls from the sign already, and at least one person who wants to see it.

One of the downsides to just having the contractors bid the labor, and supplying the materials, is that sometimes you get it wrong. That happened today. The painter called late afternoon to say he was going to be short on the interior paint, but was trying to finish up today. Seems the new ceiling texture was soaking up a lot of paint, and needed a couple of coats. OK, no big deal, but it did mean a quick run by Home Depot to pick up the bucket and then an unexpected trip today to the job site. They were mostly done, though. Should be finished tomorrow.

Meanwhile, I had a task to rebuild the sink base. The cabinets in this property were in pretty good shape, except for the sink base and the drawer fronts. Sink bases always take a beating from the moisture and all the nasty stuff that gets stored there. The front finish panel was in good shape, though. The bottom had been replaced at some point, but in typical DIY fashion of cutting two poorly fitting pieces and scabbing them in place. The bases had to come out anyway to make way for the tile, so the sink base got a trip home to get property fixed up.

A sheet of cabinet quality half inch plywood set me back $25 at Home Depot. Since I had the hole thing, I replaced everything except the front. A bit of a finicky job, since I'm no cabinet maker. I can't recall the last time I had the dado blade on the table saw. But a few hours of careful cutting, and all the pieces fit together. Unfortunately, my compressors over at the property, so I couldn't finish putting it together. You don't have to use a nail gun much, or in this case, a stapler, to never want to drive a nail by hand. My wife had borrowed my SUV today, so I was in her car and didn't want to break anything trying to squeeze it in. I'll run by tomorrow and check the paint, pay them if they're still there and finished, and grab the compressor.

The drawer fronts had really taking a beating. I guess the former occupants hated drawers, because they were really beat up. Just the drawers, though, not the doors. Go figure. Anyway, I found a place online where I could order them in the exact sizes I needed and with the proper edge profile. I thought about just making these myself, since there are only seven, and they are just slabs with routed edges. But the only bit I could find with the proper profile requires a 1/2" router and mine's too small.

With replacing these drawer fronts, rebuilding the sink base, and a thorough scrubbing, the cabinets will look fine.

A little about how we found this place. This is in a neighborhood where I've not looked in this past. That bit me a little, but it worked out OK. My mortgage broker recommended I have a look here, and I have a hard money loan out on another property in this same area. We (Mike and I) looked at about three dozen houses in this area over the course of three weekends. Its one of the areas that really had a lot of foreclosures, and its still dealing with the fallout from that. Most of the properties we looked at were REOs, a few short sales, and a few that were trying to be sold by the owners.

We pulled comps and it was pretty useless. You could pretty much pick your comps and make any price you wanted make sense. Anywhere from about $60K on the low end up to retail sales around $160K. This particular house was one of the better ones. Plenty of space, no major issues, built in 1983 (no lead paint), proper egress windows. Listed at $69K. The area is very competitive, with lots of investor activity, and we didn't really think the $69K price would hold. We came up with a value of about $130K and offered $73K. At that point I think I was estimating, guessing, really, about $5-6K in fixup. We were looking at lots of houses, making lots of offers, and trying to get something to stick, figuring we would have a chance to sort the details out later.

Agent told us there were other offers and we didn't get it. Oh well, we have others on the table.

A couple weeks later, the agent calls Mike and says it failed inspections and were we interested in making another offer. After some hemming and hawing, I ended up offering $77K. That offer was accepted. He and I gave it a careful look and came up with about $7K in work. That still worked, with the $130K estimated ARV. The appraiser came back saying he thought it would only go $120K, and did I want to proceed? We went back and carefully looked at the best few comps. We also pulled current listings from $110K to $130K for the area with similar square footage and spent a day looking at these. Indeed, the ones on the high end of that range where pretty nicely fixed up. Tile in baths and kitchens, granite counters (mostly tile, a few slab), good paint in and out, and new carpets. The ones on the high end had all new appliances, mostly that fake stainless stuff. So, we reluctantly accepted the $120K value as about right. Plus, to even hit that, more work was going to be needed. In particular, the tile and granite counters. Nicer than I would have planned for a rental, but quickly becoming the standard for this neighborhood.

We ended up going back to the listing agent. By this point we're just days away from when we're supposed to close. The whole thing was something like two and a half weeks from executed contract to closing to start, and we're at the end. Still have a loan contingency, though. As Mike puts it, he gave him two documents. A request for release of earnest money and an amend and extend for a new price of $70,550. We also said we could close a week later than planned, which was the 28th of the month, and that we would drop all contingencies.

Amazingly, they accepted this contract. Boo yah!

First a bit of explanation.  Today I'll write about texturing ceilings.  You should reasonably ask how I got to this point, since clearly things have happened previously.  Indeed, there was a lot of work to get to this point.  In coming days, I'll go both forwards to tell about the progress on this house.  And, I'll go backwards to tell what has happened to this point with this house, how I bought it, and a little about another house.  Sort of like a Quentin Tarantino film where things don't happen in chronological order.

 

Anyway. This has been a bit of a long weekend. I had no plans to texture the ceilings in the four bedroom, two bath house, about 1600 sq.ft. altogether. Its a ranch with a basement. Two beds, a bath, living room and kitchen up, two beds, a bath, den, and utility room down. Proper egress windows downstairs, which is a big plus, in my mind, and a little unusual for the area.

 

Actually, I had no plans at all for the ceilings. But somewhere along the course of closing the deal, my mortgage broker, who does rentals himself, mentioned “you should get rid of those popcorn ceilings.” Personally, I don't care one way or another about popcorn ceilings. But I know lots of people think they're dated. And we're trying to get a good appraisal so I can get out of this hard money loan. So, I had the painter scrape them off. He included that in his bid. After they're cleared off, he asks, “so, what are you going to put back up there?” “Nothing”, was the plan. He was right, though, that they didn't look too good. “Martin (the tile guy and the painter's friend) can do texture”. Unfortunately, the bid was $500. If it had been $300 I'd have paid, despite being over budget. But $500, no way.

 

Now, I really, really dislike sanding drywall. And there was a lot of sanding. A little googling turned up a Porter Cable drywall sander. Its a lot like a weed wacker with a disk sander on the end. If that sounds unpleasant, let me add its a lot like a gas powered weed wacker you hold up against the ceiling. I'll admit I was pretty skeptical about this thing. Especially when I found out the only place that rented them was Home Depot. The one nearest the property didn't have one, but Quebec does, they said. Nope, its broken. The one nearest my house said they had one, and it worked. So stopped by Friday night to buy a few things and check it out. Yep, its the Porter Cable one. Nope, it doesn't work, the guy said. But Lakewood has one, and it works. So, 8:00 AM Saturday morning, I'm there. Yep, got it. Includes a shop vac, but you have to buy the sanding disks, the pad behind the disks, and the bags for the shop vac. OK, no problem. Yes, leftovers are returnable. So, with a handful of consumables and the sander, I head to the property.

 

Amazingly, the thing actually works. It really does a number on the loose bits.

 

Unfortunately, 15 minutes into the work, like halfway through the first bedroom, the shop vac quits. Fortunately, I had my own. So, called the store and told them what was happening, and proceeded. This thing is seriously dusty, even with the shop vac going. Respirator and safety glasses were certainly in order. I sprang for high quality respirators with the last rehab, and I was sure glad to have it today. Eight hours, a few patches, and a lot of dust later, the ceilings were smooth.

 

It was so dusty I wondered if the dust was getting into the vac. I found out when I casually grabbed the shop vac and it didn't budge.

 

Dropped it off. Not sad to see the back end of that beast, but it SURE beats the sander-on-a-stick. The Porter Cable is over $500, but Rotoblast makes one for about $200. May be on my buy list for the next project that involves any significant drywall work (the bathroom in my residence, most likely.)

 

That was Saturday. Today was the texture. In the middle of this project, I'm trying to build my wife a new arbor. One of her's was consumed by a killer silver lace vine. I've read you should occasionally trim silver lace vines all the way to the ground, and I'm coming around to that approach. So, knocked off early enough on Saturday to make some progress and almost finished up Sunday morning. Just need to add a few more lag bolts and this will be done.

 

It was about 11:00 before we got to the property. On the last rehab, my wife helped a lot. This one, I've been trying to avoid that. But the yard needs some help, and that's her area. While I was working on the arbor, she dug up a bunch of day lilies to put in the beds at this property. So, I had her help today. Barry also came by for a while. He helped with schlepping heavy stuff up and down the stairs and with putting up the masking film on the walls. Finally, about 3:00, it was time to fire up the texture guy. Like painting, the work is in the prep. Between sanding, patching, wiping down the ceiling, and masking, there was much more time prepping. I did a knockdown texture on these ceilings. So, spray it on, wait 15-20 minuets, and then knock it down with a wide putty knife. Not too long after getting started, the day lilies were all in, so I managed to con the Mrs. into helping. We ended up getting a pretty good rhythm with me spraying and her doing the knockdown. It went pretty quick, though still a lot of work. And, many do my shoulders hurt.

 

But its done. I spoke to the painter this afternoon, and he'll be there tomorrow. A day or two for him, then the carpet folks later in the week. Countertops are supposed to be done by Friday. My focus will be to fix up the sink base, which as is often the case, needs a new bottom. Since I had to pull the base cabinets to do the tile, the sink base is going to get new sides and bottom. I need to finish that, and get the other bases back in place before the counter guys show up.

 

If all goes reasonably well, most stuff should get done this week. That will just leave minor items. We'll see.