Wheatie's Real Estate Investment Saga

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.