​Mike's Week of Investing- (ending 4/24)

Mike's Week of Investing- (ending 4/24) - HOUSE #40

Missed last week's blog. Just a tad busy right now.

But we got another great house under contract (homepath.com) and that one will get us to the big "4-0" for count. I guess 40 is just some arbitrary number but I can tell you that I would have never guessed in a million years when I started that I was going to put something like this together.

Heck, if you asked me 2 years ago when I was at 19, I would have said no way, the market was done. Yet here we are 19 months later and we have managed to pick up 21 houses in that period. And the last 3 are such easy rehabs, it almost doesn't seem fair. :-)

Feel free to check out the link in my profile for the Youtbue channel to see my before and after videoes.

1) TENANTS

Quick update on my tenant stuff.

1. Settlement renter still hasn't paid. Eviction court was Monday. As soon as we get called up in front of the judge, the attorney asks if he can confer with the defendance (i.e. my renter). Judge agrees. Tenant agrees not to contest the eviction if we give her 3 weeks. Sure. That seems easy.

Now the tenant is actually scrambling to come up with the money. Either way I know I'm getting paid. I now have the judgment so I can go after her husband's earnings and/or the medical settlement.

But I'd rather get it today than wait for tomorrow. Plus, they're not bad people so I'm hoping they can come up with it. Why they waited til the eviction is beyond me. But sometimes, thats what it takes for some people.

2. Everybody caught up on rent except the settlement tenant. Not bad out of 32 houses. 2 more moving in on the 1st to get me to 34 that are now in service.

2) REHAB

HOARDER HOUSE (STRATFORD)

Still a money pit. But the roof is now done. All the structural stuff is wrapping up. Inspection is today and everything looks good. On to the subfloor net.

PEOTONE HOUSE

Wrapped that up as well. Had a couple of drywall fixes at the last minute but took our after pics and video on Sunday. House came out pretty good. Was a tough weekend to paint a bunch of trim on saturday and then the ceilings on sunday. And then we did a light cleaning ourself. I told the tenant the cleaning service would be there on the 31st but they wanted to start moving in sooner.

I always let them move in a few days early if I can. Thats a couple less days of risk of having it vacant. And a couple of days less in the utility bill. I don't charge them for the extra days either. This way, if they find anything that should have been fixed, I don't feel guilty. They're  technically not paying rent yet. :-)

MONEE HOUSE

This one has been "almost done" for about two weeks now. The only thing left is the flooring in the living room. Cleaning people actually hit the house sunday. The problem was the original contractor took 10 days to get me an estimate with the living room floor issue. And what they came back with this time was unacceptable. I said thanks but no thanks.

Then I tried getting the hardwood guy out there to give me number. He kept putting it off too. A week went by and he still hadn't made it over to the house to look. So finally I just decided it was going to be laminate over the hardwood and subfloor.

As a recap. Here was the issue. When I looked at the house, the front half of the living room was hardwood, the rest carpet. I pulled back the carpet and there was hardwood enough. But when the carpet was removed, it turns out that only another 10% of the room was hardwood. The rest was just another layer of plywood to make it even.

I'm guessing the hardwood was damaged there so instead of replacing it, they put plywood and then carpeted over. Or maybe they just wanted carpet. I really wanted to just put in hardwood for the remaining 40% or so of the room (150 sq ft). But they were quoting me 2,800. I told them I didn't care if it matched perfect and didn't need them to refinish the entire room. Just go with a middle strip of hardwood for a design/separator and then put in new prefinished hardwood and match the stain as close as possible. At 2,800, that was way too much in my mind for a 350 sq ft room. I could have replaced all the flooring at that ($8/sq ft).

So now I'm waiting on the laminate to come today and the Edwin house contractor will hit to wrap that up. Renters move in on the first. The only thing left is for me to remove the dead deer under the screened in patio. Contractor was supposed to do it but he whiffed. 

Unfortunately,when nobody else will do it, you have to......

OSAGE HOUSE

Started the rehab. Went to get the heat on and turns out the furnace, which was under the crawl, is shot. $3,800 coming out of pocket on this one now. But the cabinets worked out ok. And the contractor is moving along. The only trick is that I think I'm going to try the vinyl plank flooring on this since I'm opening up the wall between the living room and kitchen and want one flooring type for the whole area to give it better flow.

The trick is that I don't like the stuff that lowes has in stock (2mm junk) and homedepot stuff (allure) is too pricey for what you get. Also, I want to avoid the glue stuff and go with the floating floor/clicklock type. The glue stuff seems to have some issues with coming up and sometimes with the smell.

I actually thought I had this rented too. Bus driver that drives on this route begged me to show it. They loved everything. Had to have it. Numbers were ok. I was supposed to meet them on sunday to get the hold deposit. Texted them on saturday to make sure they were coming. Definitely..... Sunday morning I get the text - gonna have to pass. Now they're not sure if the dad can make the move. Even though the house they were in had electrical problems and mold......

Hmmmm. Thats exactly why I don't stop showing until I get a hold deposit. Although I've been getting lazy on returning calls on this one. Really bad. Just can't find the time right now. Thats what happens when you have to paint and clean two weekends in a row. And run around to all the other showings.

EDWIN HOUSE

Got another crew working on this one. And this one is now rented. Got an insurance company to rent it for a fire house client. Lease is 4 months and then month to month. But I got them to bump the rent from $1350 to $1725/mo. I figure that makes up for the 1 month of occupancy I typically have.

But I put in the lease that I have the right to show with proper notice (2 days) during certain days/times. The insurance company said its typically 6 to 12 months for these types of efforts. If I can 6 mos at 375/mo extra, thats 2250/mo more in profit. Even minus the 1350 in vacancy if it happens, I'm still coming out ahead 900. But if it goes 10 mos, then I'd be looking at an additional 2,400 in profits.

And the nice thing is that the house won't be done til around the 10th. I was able to start the lease with them on the 15th. Usually, I end up having to wait til the first of a month to start getting paid. So I'm actually saving about 675/mo there as well.

3) ACQUISITION

Well, we got another one. The big 4-0. And this is such a beautiful deal, its silly. House (homepath.com) had basically been rehabbed already. New carpet, paint, fixtures. This thing was better than my rehab (although the cheaper finishes so no tiled in showers or anything). But it was perfect.

Only thing wrong with it was it had a roof problem. Roof had a tarp on it and there were two walls that had water damage. But this thing is in the best condition of any house I've ever done.

As for the numbers. Its a 3/2.5, 1,800 home. Built in 2002. Yard is on the small side. But fenced in. Great house. Master bedroom has master bath and nice size walk in closet. Purchase price 105k. I figure about 8k in rehab (roof, two walls and the appliances). This should be a one week rehab tops!

Should appraise out about 170k. Figure PITI of around 1100. Rent should be about 1,600 to 1650.So gross profit of about 500 to 550/mo. And a one week rehab.

What a beautiful way to hit 40.

Life is good. If the pricing model ends today and this is the last house I ever buy, I'll be happy. Its kinda crazy that someone as ordinary as myself can put together a portfolio like this. Its been some sacrificing of some weekends and a few evenings here and there. But like I typically say, real estate is my passion and my #1 hobby. Some people like cars, others running, traveling, etc. But at least mine is one of the few hobbies out there that actually pays me money. Can't ask for anything more than that........ :-)

4) FINANCING

Starting on the refi's as we speak. Now that the two homes are rehabbed and renters moving in on the first, I started the refi's with one of my local lenders that I use. Great rate. Amortization only 20 year but its all about growing. And although the cash flow may not be as good as a 30 yr, I'm still getting a lot more principal paydown with them too.

I also took the last 3 houses (including #40) to another existing lender that I use. Showed them my numbers and asked if they would do all 3 (separately though as they don't do blanket loans). Yep. No problem..... Famous last words. But they asked for updated paperwork and gave me conditional approvals once the houses are rehabbed and rented.

So now its just a matter of getting these other 3 (osage, edwin, and the stratford house). I'm actually holding these back as I have a lead on a new lender and want to see if they'll do 2 or 3 of them. I'm always wanting to add more lenders to the rotation. The more end loan lenders I have, the better.

Most banks like to have limited risk with any one investor. So if I have 40 homes, they have a much lesser problem having 8 to 10 of my loans (20 to 25%) as opposed to 20 of my loans. They like staying at that 20% or less for number of loans. And a couple of these banks have a total dollar limit as well. Not that I'm close to hitting that at any one bank, but I do know that it exists.

Still, it seems that more and more local banks are opening up to us small time investors. And it also seems that when they hear the number of houses I have, it seems to open up the discussion quite a bit more than what it used to. I remember being at 7 or 8 and having to beg banks. Now, if the bank does the loans, they'll talk to me. Its nice finally getting to that level.

What would really be nice is if one of these local banks ever came to me and said, hey, we know your model, we've seen your growth. We'd like you to send you next 5 loans to us and we'll take them. 10 would be even better. :-)

Haven't been told no in a long time. But it would just make it that much easier if I had a built in Yes....

And that was my week (or two). Hit that big milestone of 40 though so it was a big week. But we're in JIT management mode right now given we've got 2 houses about to be rented, 3 houses under rehab and 3 more closings coming. And we're still bidding on more houses (almost had a great one the other day).