​Mike's Week of Investing- (ending 5/1)

Mike's Week of Investing- (ending 5/1)

We got another one this week. Really needed to take a break but we picked up another house this week. #41

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. Tenant appears to be getting close to the presettlement loan of 20k. If so, then I'll get my money. But they only have a week before I will be filing with the sheriff's office to have them removed. It'll be interesting to see where this nets out.

2. Monee and Peotone both rented and tenants paid and signed leases. Now 34 houses in service. And Edwin (wrapping up rehab) is rented, lease signed for and paid in full. I actually rented this to an insurance company. Instead of getting 1350/mo, I got 1725/mo from them. Its a short term lease but they were ready to go and its a 4 mo lease that should go from 6 to 12 months.

I don't like the short term leases because I know I'll have turnover of a month plus make ready. But with the additional profit, I figure I'll still come out ahead. And if it can go to 8 or 9 months, I'll make out like a bandit. And the make ready will be charged back to the security deposit if they do any damage.

Not only that but put in the lease I was entitled to show the house once they give me the 30 day notice. So hopefully we can keep the turnover down to 2 weeks or so.

The other thing I like is that its rented mid month so I don't have to wait out til the first of the month and that actually saves me 2 weeks of open time as well.

But one thing I'd point out. When the insurance companies call, they'll want you to do a short term lease and they'll want to pay the listed price. I'd never take that deal. And if you just ask them for the higher price, they'll balk. You have to lay it out for them. You don't take short term leases and here's why - the one month of vacancy plus the make ready costs plus the additional leasing effort. And the ONLY way you'll do it is if the rent is (Rent + x) to cover those costs. They might still say no.

But thats the only way the numbers make sense to me. And this is the second time in two years I've gotten one of these deals. I made about 2k in additional profits the last time so it worked out real well for me there. :-)

2) REHAB

HOARDER HOUSE (STRATFORD)

Still a money pit. But the roof is now done. All the structural stuff is wrapping up. They now have an issue with the fireplace. I paid them money to brace the fireplace so when they were doing all the work with the beams and rim joists, etc, the fireplace wouldn't go. Now they're saying when they're jacking up that area, the fireplace is separating from the wall and wants to go.

They want to charge me $1,400 to take the bricks down and put them back up. No thanks. I told them to take some plywood and 2x4's and create a sleeve so when they jacked the wall up, the bricks had nowhere to go other than to stick against the wall.

Had to be cheaper than $1,400. Their Project manager doesn't seem to get it though and their foreman still hasn't called me. But these guys better get going. They told me 2 to 3 weeks tops to get this all done. We're over a month now. If they're making me wait to finish this work, I'm going to make them wait to get paid once they do.

PEOTONE HOUSE

All done. Lease signed. Renter moving in. Came out great.

MONEE HOUSE

All done. Laminate came in great. Instead of paying the 2,800 that crazy company wanted to do the hardwood, I paid 700 to put in the laminate. Laminate was 700 bucks as well. But its still much nicer.

And I got the dead deer out from under the porch as well. That other contractor was supposed to do it but they stuck me a bit. I raked the thing up onto a sheet of plastic and pulled it back into the trees near a burn pile that was out there.

House came out great though. Tenant loved it.

OSAGE HOUSE

Rehab is moving along. Ended up having to replace the furnace/ac so that was a 3,800 hit that I wasn't expecting. Tile work is about done. Flooring (5mm vinly tile - clickable) just got delivered. Had to switch my countertop choice because my normal style isn't in stock. And I'm also getting rid of the cabinet that housed the oven top and will use the stove countertop as storage. Now I can just put a new stove in there and call it a day.

I don't like the oven tops and stoves being separate like that for some reason.

This house is now rented though. Nice older couple. Great salary. They're just looking to tide themselves over by renting until they retire in 5 or 6 years. And they loved the big back yard.

Turns out there are a family of foxes around here too. My wife saw a couple of them the other day as she was painting. The neighbor came over to chat with my wife and he said the foxes have been coming there for years.

Always something new.... :-)

EDWIN HOUSE

Rehab going well. They should be wrapped up this week. Carpet measured and just waiting on for me to pay. I want to get the painting done this weekend and the carpet and appliances next week and then the tenant (insurance company client) will be moving in on the 15th.

Its called JIT (just in time) rehabbing. We're going to be getting done Just in Time. :-)

And another story here. I bought a sprayer for all the trim and door work at this house. I hate doing trim and just have too much going on to spend an entire weekend or more doing this one. Almost the entire thing of trim and all the doors had to be done. Didn't want to pay the 1k to get it done.

Sprayer worked great. Was done in 3 hours with another hour for clean up. Sprayer was $160 so it paid for itself. This house was perfect for it though since the walls hadn't been painted and there is no flooring down AND i was going to replace all the interior door knobs as well.

3) ACQUISITION

Yes. We got another one. :-)

Jordan Dr - This house is not a typical house for me. Its a 3/1, 1,000 sq ft home.

Normally, I won't touch anything under 1,300 sq ft. Thats my absolute rule.

But this house had been sitting on hud's site for 3 months and when it hit 4 and they dropped the price again, I had to put in a bid. I actually did it just to see if I had their formula locked in. Sure enough, 4 months, 40% off list. And they took my offer.

Got this house for 42k net to hud (or about 45k total purchase price).

Needs 20k or so for rehab. Should appraise out for 95k or so.

Should rent out for 1050/mo.

My numbers after I refi: PITI - 650/mo. Rent: 1050/mo. Gross profit 400/mo.

Again, not a great appreciation house. But this house is one town away from where I live so its super close and in one of the better school districts around. Should be a great long term rental. Already had new siding, roof, windows. Just need to fix the garage (siding, door, etc), put in some pop items (tile in shower, new flooring, paint, a/c).

One thing I'm going to do on this one is put granite countertops in since the counterspace isn't that big and it'll be a differentiator to really make the thing stand out for that size home. Kitchen and bathrooms......

Karen Dr - Closing set for friday the 8th. This one is already rented. Had a showing at osage where I felt the fit was a bit off but shared that I had this house coming and showed it to them. They loved it. Loved the additional space. They're staying with family now but I told them it would be ready by the 1st of June.

Its an easy rehab though so we'll see. The tightest piece of it is getting carpet measured and installed by then.

Bergera - Closing set for friday the 15th. This one is carpet, paint and appliances as well. Not rented yet but it should go fast. It was built in 06 and has 9 ft ceilings throughout. Hope to get this one rented by the 1st as well. Tough to do that though given most people need to give 30 days notice. So I'm thinking it may not be til the 1st of July. Or maybe middle of the month.

I won't list a house that I don't own yet though so nothing I can really do.

Diverasetch Rd - Closing date not set but it'll be coming soon. This one just needs a roof repair and some drywall repair in a few places. Don't even need to paint it.

With all these houses going, the only way we could have possibly done these deals is because a couple of these houses needed so little rehab. Ive never seen a handful of homes like this that needed so little rehab but were picked up with such a nice discount. Each one had their reasons why though.

Karen Dr was me timing the price drop and the fact that it had a couple of things that were really dated that an owner occupany simply would not have been able to accept (countertops, paneling, etc).

Bergera was because it was on auction.com. In my areas, not many owner occupants want to deal with the auction sites. Typically its just the investors. It also helped that some investors aren't aware how the auction sites operate. You may not be the high bidder but the sites may call you back and ask you if you're still interested and at what price. Thats how I got this one.

Lastly, Diversatech. That one had to be because of the roof. Owner occupants probably couldn't get financing on a house that had a faulty roof.

There's always some reason though as to why we're getting the houses at a discount. At the end of the day, it comes down to needing to be an issue why an owner occupant wouldn't want or be able to take the deal down. Usually its because the house needs significant rehab (jordan). But every once in a while, I run into these low maintenance rehabs that just amaze me.

Last year I got a braidwood house because the seller (bank) had limited the offers to all cash or rehab financing only. I assumed that was because the thing needed a ton of work. Instead, I found out it was because the bathroom was missing a vanity! Ha. Turns out the bank had a buyer on the hook before and their financing fell through because they wouldn't finance the house without a vanity. Intead of replacing the vanity, the bank limited the offers. Great for me. Its the only reason I snagged that deal.

Going in, I know I can't compete with owner occupants. But sometimes we get lucky like that. :-)

Just so you know its not all roses on my offers. I had an offer in on another nice house this week. Really thought my number was solid given where they were at. But somebody else snagged it. Would have loved to have that house. Another 4 bdrm deal. Actually it was a 3bdrm, 2,200 sq ft house. But I was going to convert the front room to another bedroom to get 4 bedrooms. Was set up perfectly. Would have been a fantastic house.

Still not sure what it went for. But that one stung a little bit.

Also had an offer in on a house in monee. This thing had a finished basement that had a bunch of mold in it. It was not only missing siding on the back of the house up top. But it was missing the tyvek and stuff as well. You could literally see the studs in the attic.

They listed at 95k. I offered at 84k. They countered at 94k. I said thanks but no thanks. And if they change their mind on my number, let me know.

I could probably still make the numbers work at 94k. But just don't like the house enough to do it. Some houses I fall in love with if I think they're going to be great long term rentals. And I'll pay to take them down - even if I have to come out of pocket a bit. But there are others that I just don't get the same feel and unless the numbers are fantastic, I'm not doing it.

A little like Jordan. I don't really like that house because its only 1,000 sq ft. But at that price and given the condition of the house that I can put it in with my budget, thats a deal I just can't walk away from.

4) FINANCING

Still moving forward on the refi's. One local bank doing a couple of the refi's for peotone and monee as we speak. Another has committed to doing the 3 amigo deals (i.e. easy rehab, great areas/houses) of Karen dr, bergera and diversatech. And I'm working on a new bank to do osage and edwin right now.

This new bank isn't as responsive as I'd like. But sometimes banks are like that with new customers. I'm guessing they just want to see you put in more effort with contacting them so they know you aren't wasting their time. Not sure if thats true. But its the only thing that makes sense. Happens all the time to me when dealing with new lender.

Once I close on the first deal or two with a bank, then they seem to be much easier to work with.

So there was another week of investing. Two more houses now in service and closed out. Collections going extremely well on my existing homes. And I've got both edwin and osage rented even though rehab hasn't completed. so we're on top of things right now. 

Just need to keep the momentum going. And lets hope we don't have any more dead deers to deal with. And lets also hope those foxes don't attack my contractors as they still need to fix the deck. :-)