Mike's Week - An inside look at a MONTH of Investing

Mike's MONTH of Investing- (ending 6/19)

Well, its been a month since my last post. Just nothing but crazy going on here. And then we went to CMA Fest for a week so I was scrambling to get everything in before we left. Thought I'd do an update now and just start this up.

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

1) TENANTS

Update on my tenant stuff.

We managed to get all three of those properties we closed on leased and the tenants moved in before we left. Well, leased any move in paid for. Diversatech ended up getting leased, paid for, and then the tenants moved in while we were on vacation. I gave them the code to the lockbox and they let themselves in. They paid via the online service and signed the lease via email and scan as well. Never even met em. :-)

1. No issues with the Peotone and Monee renters so those houses are now fully in service. Typically, I expect a handful of issues to be reported by tenants when they first move in to a newly rehabbed home. You just can't catch all of it unless you're living there.

2. Osage and Edwin moved in. Had a couple of minor issues each. Fixed and now they're all squared away. 

3. Karen Dr. Moved in while the rehab was going on. Carpet was actually getting installed on thursday and the tenant was moving stuff in on friday - even though the bathrooms and the kitchen work still wasn't completed. But I was trying to help the tenant out since they needed that weekend to move. It was pretty crazy but we got it done.

4. Bergera moved in. This was the tenant that was in our other braidwood house just a few blocks away. But they just didn't like the home or the yard (too big). I showed em bergera and they fell in love. Their rent went up from 1225/mo to 1425/mo even though they went from an 1800 sq ft home with a 1/2 acre lot to a 1,400 sq ft home with a corner lot that was less than a .25 acre. But it was built in 2005 and with the paint and carpet, it was basically brand new construction again. It also had 9 foot ceilings as well so that helped some too.

The Lincoln house they were in is already rented and that tenant is moving in July 1. I had so many calls on that it was silly. I got it rented just before we left for vacation. And I bumped the rent from 1225 to 1275 to boot.

5. Diversatech. The tenant was being transferred to the area and she sent her manager to come view the house. This house was another near new construction (built in 2002 but rehabbed back to new construction level with carpet, paint, updated fixtures throughout). She loved it. Send me the deposit and first month rent online. And I gave her the lockbox code so she could let themselves in as we were going to be out of town the week they needed to move in.

Story here though was that as we were waiting at one of the booths at cmafest, I got a vmail from her saying she couldn't get in. Now what? I called her back. Turned out she had one of the numbers off on the lockbox code. I gave her the correct number and she got in. Would have been tough to deal with had I not been paying attention there because I wasn't watching my phone much during this trip.

3 Notices:

I also got 3 notices from exsiting tenants

1) Drummond - Medical issue

2) Yale - Couple split up and were getting a divorce

3) Amhurst - Couple bought a home

I decided to list the houses on postslets.com only and not craigslist. Got so many responses it was sillier than braidwood. :-) But still haven't called anyone back yet. Although I had one couple that I had interviewed before on osage and they were too slow with the deposit and lost out on the house. But they saw the listings and knew they were mind and left SEVERAL vmails for me to try to lock one of them in. I decided I'd respond to them. They met me the day after we got back from our vacation and gave me the full security deposit so they could lock in Yale. They saw the before and after videos but they have not actually been in this house. Thats how much they wanted it. :-)

Another funny story. The tenant in drummond was actually a friend of theirs and apparently they talked with her and she really praised the home and our responsiveness (she had recently broke her kitchen faucet and we had it fixed the same day). So this couple was really wanting to get in. But shows what a small world this can be. Then they shared the story that their current landlord wasn't fixing a bunch of critical items (leaky roof, exposed electrical wiring). And they were paying 1,250/mo for a 3bdrm/1,000 sq ft home. That was even more shocking. Yale is a 3/2, 1,500 sq ft home that I'm renting for 1,350.... I definitely try to be a little under market but clearly they were getting gouged there and in a house that was terrible. Made me feel that much better.

Drummond told me today they would be out this weekend so I'll start scheduling showings soon. I just don't like to schedule showings with tenants in there. Even moreso in this case given the tenant has some serious medical issues and I don't want to add to their stress.

I know I'll get these houses rented almost immediately once I can show them.

Other tenant issues:

Nothing else really notable that I can think of. Have a couple of late payers this month that they're finally coming thru on payments. Had 3 a/c issues this week that all turned out to be nothing. One was actually working correctly. One had a short in the wires that was an easy fix. And the other one appears to be working correctly as well as its running. But the issue only appears to occur when it gets really hot. So I'll have the hvac guy go back out when it hits 90 or so again. But thats the amhurst house anyway and the tenants are moving out in a few weeks so I'm not as concerned with that one.

All in all though, not too bad for the existing stuff.

2) REHAB

HOARDER HOUSE (STRATFORD)

Plumber that I had hired ended up flaking out on me (go figure). Got another one supposed to start this week. HVAC is in. Electrical was just a couple of minor things and thats wrapping up this week. Drywall work is almost done (other than bathroom areas where they're waiting on plumbing and electrical to finish). And I've had another crew out there all week working on the drainage to this house.

I had them trench an entire side of the house on the outside of the sidewalk path so that it catches all the water coming from the neighbor (which is sloped significantly down to this house and this house is sloped significantly down to the house on the left so its how the area works). Then I had them put in two sump pumps in the crawl and over 12 tons of gravel and trench to the sump pits inside the crawl as well.

Lastly, I'm having them put in a vapor barrier today so that even if there's moisture down there, it should help prevent that from causing issues in the flooring. We've had a ton of rain over the last week or so (flash flood warning type rain) so its been a real good test to see whether this is working. Definitely seems to be. No standing water can be seen anywhere in the crawl anymore. And the pumps have been running very infrequently now that the outside trench was done. Keep in mind, this is the house where I had to replace all the joists, rim joists, subfloor, and several beams because the crawl had water in it for so many years - and the hoarder had stacked junk up to the ceilings for so long. The two bedroom floors and the family room floors had literally given out and fallen through to the crawl (which is about 4 feet deep so it was scary).

KAREN Dr.

We wrapped that one up as the tenant was moving in. Technically, we had a couple days longer for the rehab as the tenant really didn't have the right to move in til the first. But I was trying to help them out. I don't think the contractor was too happy with it. He was mumbling some stuff while my wife was painting. But these guys know better than to complain to me. I'm all about moving forward. He was supposed to have been done the end of the previous week anyway so it was his own fault. But it was some kind of crazy trying to wrap up that house and have that tenant move in at the same time. Won't guarantee it won't happen again though. I am a big believer that contractors don't really work hard until you give em some deadline or reason for hitting the deadline.... i.e. In this case, the deadline was that the tenant was moving in - one way or another. :-)

DIVERSATECH

This one was an easy reahb. New roof. Fridge. And then some drywall work to fix the water damage caused by the roof problems this house had. Roofer came through on time. I had someone fix the drywall and then I matched the paint as best I could. Fridge went it. Only trick was that the stupid kitchen faucet leaked so we had to have that replaced. And of course the locks changed. Also put in the blinds and changed the toilet seats (we did that ourselves) But it was a relatively painless rehab. Paint matching was a bit of a hassle. But we got it pretty good considering.

BERGERA

This was another easy rehab. My wife did the painting. I did some of the cleaning and replaced outlet covers. Sears delivered appliances. The issue with this one turned into a near nightmare though. Carpet. I had ordered the measurement a few days before the closing. Stuck a lockbox on it after the closing and thought we'd be good to go so the measure guy could get in any time. Measure guy no showed on the measurement though. It was a week before I realized it hadn't been done. So I called the measurement company and asked where the measurement was at. They said I needed to talk directly with the guy. What? You don't know if he's measured or not???? Come on.

So I called the guy and he said, Ooops, I forgot. He got the measurement in and I went in to lowes to pay. Before I went in, they had told me my stock carpet that I always use was in fact in stock. Great. I got in there to pay and they double checked the carpet. Nope. It was in stock. But it was spread out over 3 rolls so there was no way to get enough carpet to do the living room (good size) with one roll - which means the same dye lot. Great.

Then they tell me they can get it from another store. Ok. That sounds good. It was supposed to be there monday morning. Nothing. Supposed to be there tuesday. Nope. Wednesday. Nope. Now i'm getting worried. Tenant is wanting to move in the following week. So then I call Lowes corporate to complain. I tell them it makes no sense that I can't get a stock carpet in stock within 7 days. And it makes even less sense why I can't get carpet from one store brought over to this one. Why is my store being told it can be picked up and then it isn't getting picked up????

They promise me someone from corporate will call me within 24 hrs. That doesn't work for me. So then I go into my store that night and tell them I need to see what they have in stock and I want it price matched to mine carpet. But it has to be at or above the quality/price point I'm at (1.25/sq ft). So they actually have one at 1.56/sq ft. The only one that I would even consider. So I got that. Had them bump someone on the install and had it delivered on Friday. Tenant moved in saturday.

Between this one and karen, I'm starting to think i'm doing a JIT (just in time) rehab model here. It was a crazy 4 week period there. It seemed like every single tenant was moving in the day of or the day after the rehab was being wrapped up.

But now we're back to having some breathing room.

JORDAN HOUSE

Closed on Jordan the day before we left for vacation. Although I did have the stratford crew lined up to side the garage while we were gone since they're kind of on hold until the plumbing and electric wrap up at stratford for them to start getting to the rest of the inside stuff.

For Jordan, its a small house. 3/1, 1,000 sq ft house. Got it for 44k. Have a 19k budget. Should appraise out around 95k. Should get a really nice makeover. Gonna do screening for the driveway. Its basically just grass, dirt and weeds right now. And will sod the back - as thats all weeds. 3,800 for that. 1,700 for the garage siding and door. The house itself already had brand new windows and siding which was probably one of the reasons I was ok taking a small house. I felt like i had enough budget to update everything inside and out to bring it to better than nice....

Inside, I opened up a wall between kitchen and living room to make it seem bigger. Taking out the hallway closet so I can expand the bathroom. Then I'm pulling out tub surround and tiling that in and will also be tiling halfway up the entire bathroom to really make it nice.

Will tile the living room, kitchen, hallway with some hardwood floor like tile (its a slab house so I want tile there). Will laminate in the 3 bedrooms. Tile the bathroom. New countertops. Kitchen Backsplash. And a new a/c. Paint the house and replace all the interior doors. This house should be the nicest 1,000 sq ft house on the block.  :-)

3) ACQUISITION

Things much slower in the acquisition phase - probably for some of the following reasons

a) The markets I focus on just aren't seeing the inventory. Its the same thing occurring everywhere else and its finally seemed to have worked its way down to my areas.

b) Its summer. Summer is always slower for inventory and deals. Banks don't want to budge off their numbers because they feel they can get a buyer and usually they do.

c) The rehab and tenant phase above really cut into my time. And I think at some point its just a little bit of burnout sets in where I'm not pushing as hard as I was to get more deals.

However, I do have two offers out there right now. Unfortunately both are in best and highest. I think I'm very close on one though as the realtor thinks I may have the highest bid of the bunch. Nothing explicit but she kinda got that impression based on a follow up request by the listing agent from the asset manager.

That one is the better of the two deals in terms of ARV numbers. But the other one is actually the house I really want. Just a phenominal house.

Going to do a couple showings tonight after work and tomorrow morning before work so hopefully we can put in a couple offers on those. There's on that really has me intrigued. Its a homepath house that is showing up on homepath's site as Back On Market but it appears as if the house had not be relisted back on MLS. So unless the buyer or agent was looking on homepath, they aren't even able to see this house. :-)

Sometimes its the little quirky things like that that end up leading to a deal. Had the hubzu house (anndon lane) do something fairly simliar. The house had gone under contract and then popped back up on hubzu. But the agent didn't relist it on mls. So if you were to search realtor.com or an agent were to search mls, they would not be able to see it was available. And it stayed that way for over 6 weeks. Finally, they had dropped the price and I was able to pick it up. The worst part was the day before the auction was ending I had told my realtor about it and she said it was not on mls. I told her it was available. She then contacted the agent directly and asked why it wasn't on mls!!!! Ah..... No! Don't do that. So it popped back up on to MLS the next day. Luckily I think it was too late for it make a difference.

But on this other one, I specifically told my realtor NOT to tell the listing agent it wasn't back up on MLS but it was back on the homepath site. I don't want to bid against a bunch of other people.....

There's another hubzu house I'm bidding on as well. Has some mold in the basement. But its still a nice house. LIttle further out of the range I've been targeting. But its a really nice area and I'm willing to do the 35 minute drive to pick up a house like this. Not much rehab needed. I think I'm very close on that one too. Maybe another 3 to 4 weeks of sitting and I think they may come down to my number.

4) FINANCING

Closed on the refi's for Peotone and Monee houses with one of my portfolio lenders (local bank). Appraisals came in right on my numbers.

I think I had estimated 160k to 165k for Monee. Came in at 158k. I still say the comps they used were off since they were comparing this house to houses in the country (lot size is 1.5 acre). I think they should have been using nicer homes (this one was built in 1998) in nicer subdivisions (this is an executive subdivision and one of the nicest in the county). But I'll take it. And then I estimated Peotone at 135k to 140k and it came in at 138k.

Ended up doing the refi and, after closing costs, was able to pocket 2k. Every bit helps.

Appraiser is running out to three of the other homes (karen dr, diversatech, and bergera) today with the wife to do the refi's on all 3 of those with another different portfolio lender. I checked the comps again and it looks like I should be good to go on all but one of them. The bergera one might be tricky given a couple of my comps literally just dropped off the 6 month period. But I sent a sheet with comps for each of the 3 houses with my wife to give to the appraiser. I even included my estimated ARV on there as well for each house.

Sometimes its better to give the appraiser a target and hope they try to reach it. Another little trick is if you need a certain number (say 155k), then give them a target of 160k. They may not always hit your target but you'd be surprised how often they come pretty close to it - provided you have the comps that are at that number or more. They may be cherry picked comps mind you. But if the houses are within that reasonable range (i.e. +- 200 sq ft, +/- 10 years in age, +/- a half bath) you should be fine.

That monee one was a tough appraisal. I knew it going in. It could have been anywhere from 160k to 185k to be honest. The problem was it was an outlier of a house in that subdivision. It was a 1,400 sq ft house in a subdivision of 3,000 to 5,000 sq ft homes. It was still a nice house. Had a basement (that I finished), had a nice size screened in porch with a gazebo that came off the deck and ran into the master. Was on a 1.5 acre lot. And had a real nice wrap around porch in front with a big deck in the back. But I knew there simply werent' any real comps for it. Nothing in that subdivision that size. And the houses in the subdivisions nearby didn't have the lot size nor did they have the cachet this subdivision has. At one time this house sold for 270k.....

But it came in good enough. And I got 2k back on the two refi's so I was happy.

Lastly, another appraiser is going to be doing the appraisals on Monday for the refi's of the Edwin house and the Osage house. Thats a third bank thats doing those. And that third bank has already said they'd want to do the refi for the stratford house (briarcliff subdivision is one of the best in the area). So the only one left now will be to find a home for jordan.

Jordan might be a bit tricky given its a much smaller loan (66k). But I'm pretty sure I can find someone to do that. Just need to ask. I try to spread the wealth a bit with my banks so that I'm continuing to bring them business but they don't feel like they're too heavily invested with my portfolio either. 1 out of every 5 of my homes is about the ratio I think most of these banks feel comfortable going.

I think it helps too that they see 3 or 4 other banks giving me loans so they feel like they can easily justify themselves continuing to give me loans as well. LTV's of 70% don't hurt either......

So thats been my month. Wrapped up 7 rehabs and rentals over the past 6 weeks I think....

Thats quite a run there. Two more in the works along with needing to deal with 3 move outs.

And i'm hoping I can pickup at least one more house this month to keep one of these crews going.

If not, a month or two off from acquistion wouldn't hurt right now. We've managed to add 9 homes already this year and I'm hoping to pickup at least 4 more by the end of the year so I can get to that 45 number. 45 houses at 45 years old. I'll take that any day.

Be sure to check out my profile to get my youtube url so you can view the before and after videos of all these rehabs. You gotta love doing this or else its work. But, for me, I can't imagine not doing this.