I gotta say its been a very crazy few months.  Between the little guy, rehabbing a new rental, and having 18 family members over for Christmas, its been a bit chaotic.  I wouldn’t have it any other way.  So here is the long awaited (far to long) update to what is happening in this end of the real estate world.

We got a rental property under contract just prior to my son’s birth.  During the following weeks the selling agent was slow at getting us all the paperwork and did not even get the property dewinterized until just before Thanksgiving.  That gave us 1 week for inspection, closing, appraisals etc.  We actually did quite well and closed the 1st week of Dec.  That worked into my favor since the next hard money payment would not be till Feb 1st.  It costs us 4 points and 15%. It is a 1966 sq ft 4 bed 2 bath tri-level with partially finished basement. The house has a 1 car garage and sprinkler system.  While the house is tied to the city, it also has well water.  The property was purchased for 106555 and full renovated for 15k.  We borrowed 10k on heloc and used 5k out of pocket.  The property just appraised at 154k.  We rented the property with less than 1 week on the market for full asking of 1500/mo with a 2 year contract. My conservative estimate shows $270/mo net positive cashflow.  This assumes 8% vacancy, 12% maintenance, piti of $750 and pm fees averaging 12%.  I count annual lease up into my percentage rate for pm fees.  I forgot to mention, we also switched property managers during this time.  I was able to negotiate a lower PM fee of 8% (10% is the norm in the Denver market).  I’m currently a few days away from refinancing out of the hard money into a traditional mortgage.  The will hold of payments till March 1st, which will help recover some cost.

We made our fair share of mistakes on this rehab.  We have plans for the property down the road, so we went a bid overboard on the repairs.  Things you don’t normally see in rentals such as backsplash, side by side refrigerator, matching overhead lights. Sadly we went 30% over budget.  That’s what happens when we don’t stick to our scope.  I also missed a few key repairs when first looking at the house.  Some I should not have missed, others I couldn’t have seen unless I ripped up the floor.  That said, I am very happy about the outcome.

Before                                                                                                                                          After
 
 
 
 

I leave you with this quote “Learn from the mistakes of others.  You can’t live long enough to make them all yourself.”  Eleanor Roosevelt

I’m proud to announce the birth of our son Tavin Richard Miller. He weighed 6lbs 13oz. 19 inches long. Jen labored for 8 hours and gave birth naturally at 10:22 am.

In extremely minor news in comparison, we got our 4th rental property under contract last week as well. The plan is to close by the 28th. I’ll detail all that in another post.

After a long dry spell, I had a couple wholesalers call me. Both properties would cash flow, both were near my target market, yet I passed on both. They would hurt me more than help me. Its tough to be floating on the ocean surrounded by water. Wait long enough and that salty water starts looking mighty tasty. Take a drink and your demise is only a short time away. Houses are everywhere, just gotta find the ones that help you, not hurt you.

These houses simply did not fit into my overall investment criteria. Property #1 was a 2/1, 1 street over from rental #3 and needed very little work. My projected rents were $800-$850 and would have a net positive cashflow of $100/mo. 63k (closing, repair and refi) is a lot of risk for $100 net positive. I nearly bit on those one, but after some good chats with my wife and my coach, I feel I wisely passed. The 2nd property was in the right location, was the right size, and would be a marginal cashflow property as a rental, but needed to be 15k lower to fit into my needs. I liked the house, just not the deal.

Shiny object syndrome (SOS) is the bane of many investors. They jump from one type of deal to the next or one type of investment strategy to the next without any thought of were its leading them. I am just as guilty of this. Have a plan, stick to the plan, and execute it with vigor.

Tip: I have been finding many new wholesalers lately via Craigslist. Do separate searches for wholesale, arv, investor, fix-up or any other terms only investors would use. Also search for all properties in your price range in your target zips. Gather a list of all those wholesalers. Start calling them, emailing them or simply signing up on their attached website. I have gotten 5 new active wholesalers in the last 2 weeks with this simple method. I went and looked at several of their properties and got some face time with these wholesalers. My potential deal volume has gone up greatly and this didn’t cost me a dime.

I leave you with this quote: “One reason so few of us achieve what we truly want is that we never direct our focus; we never concentrate our power. Most people dabble their way through life, never deciding to master anything in particular. ” Tony Robbins

The blogging world of real estate is sometimes very small. My wife and I had the pleasure of having dinner with Shae of www.goodfaithinvesting.com. She happened to be in town for a seminar given by Susan Lyons. Its amazing how many ideas can be shared and discussed in two hours. There is nothing more motivating then spending time with people that are making it happen. Shae and her husband certainly fit that category. Oh and by her account the seminar was great and I am kicking myself for not attending.   Hopefully there will be a round 2 in the near future.

In my world, its been a busy time networking.  My wife and I went to Baltimore to visit with my coach and other club members.  Another opportunity to meet with movers and shakers.  I walked through nearly  a dozen homes in varies stages of rehab, got a chance to spend several hours discussing my plans with my coach and enjoy some decent Baltimore weather on the inner harbor.

I have bumped up my marketing campaign.  Still with little success so far.  I am up to 500 letters per month.  I am sending to absentee owners.  I am also sending letters to distressed homes in a drive for dollars campaign.  One item I have focused on as well is finding wholesalers.  That has not been an easy task.  Many do not have great ways to find them via there websites and seo.  Hint hint to any wholesalers out there.  I decided to get on craiglist and do s few searches.  Rehab, investor, wholesale, bargain, you get the idea.  As I came across these folks selling actual homes, I either called them or sent them an email.  Will it work to find me my next deal? It can’t hurt.  I now have 4 methods of finding properties.  Absentee owners, MLS, drive for dollars, and wholesalers.  I will keep up on those to get the next property.

Till the next update (sooner rather than later), I leave you with this quote.  “The successful networkers I know, the ones receiving tons of referrals and feeling truly happy about themselves, continually put the other person’s needs ahead of their own.”  Bob Burg

I got a scary phone call from one of my property managers yesterday.  A soon as I picked up, I knew this was going to be one of those calls.  I could tell from the tone of his voice.

The water heater went out on one of my rentals.  Same water heater I repaired 2 years ago.  It didn’t just go out, it sprung a nice big leak.  Total replacement.  Thankfully this tenant called right away to let us know of the issue.  No water drying service this time.  The water heater was not the scary part.  The scary part is the handyman got shocked when he went to work on the water heater.  Not good.  To see if it was just a built up charge, he tested it again and got shocked a 2nd time.  He’s alright thank goodness.

Many if not most electrical systems are grounded to the plumbing in older homes.  Its nothing new.  If there is an issue it should trip the breaker and not electrocute anyone.  Essentially the electricity will use the plumbing instead of a person to find the quickest way to ground.  This throws the breaker.  Unfortunately this house like many built in the 50-70′s has Federal Pacific Breakers.  They were cheap breakers back then and folks got what they paid for.  Federal Pacific breakers are what almost burnt down my last house.  Its obvious there was a fault and the breaker did not trip.  I’m will not take any chances, all those breakers are being replaced.  Quickest decision in my landlord experience to date.   When it comes to the safety of my tenants, there are not shortcuts or chances to be taken.

Total cost ended up being really good.  $1100 for new water heater and panel replacement.   Unfortunately, I still have not been paid on this property.  Denver Sec8 has drug their feet on processing the paperwork.  They have 60 days to send out the approval and even more time to process our signature after that.  My PM is footing the bill until we are paid on this property.  The bill will come from the back rent collected.  I also hope this will encourage him to get after Sec8 a bit more.

That’s it for now.  I leave you with this quote “Safety isn’t expensive, its priceless.”  Author Unknown

I’m hardly the first to do this, but I have been inspired by Danny Johnson at www.flippingjunkie.com.  Btw, if you haven’t checked out his blog, I highly recommend you do so.  Danny and his wife are making things happen in his area.  Want to see how marketing works 9 different ways.  His blog is the place to go, plus several other useful posts.  He already got quite the following and has only been blogging for a bit over 2 months.

My marketing efforts have been limited to the MLS and absentee owners.

The MLS has resulted in a lot of competition and wasted time.  I’ll never rule it out, but I’d rather not fight 28 other bidders for one house.  Yes that happened to me 2 weeks ago.

With absentee owners I have mailed 268 letters to 3 target zip codes.  I will mail to a fourth zip code in the upcoming 2 weeks.

Cost $112 in stamps and $80 for letters, envelopes and ink.  I may have to look into printing services like Danny suggested.  It will save me time, and maybe can save me money for paper and ink costs.

1 call on absentee owners so far.  Yeah I know, but I gotta start somewhere.

-Seller wants 135k on a house worth 115k and owes 85k.  Not motivated at all, is emotionally attached to the house and is planning on selling through a realtor friend at the end of May.  Obviously there is no deal here, but I feel kinda bad for the guy.  Ive seen some many people burned by realtor friends that simply don’t know their trade.  Hope he gets his sales price and even told him as much.  Heck it helps my comparable rental 3 streets over.

I plan on driving for dollars.  I have picked my target areas and have my recorder.  I just need to get out there and do it.  I’m planning on starting a small list and growing it regularly.  100-200 homes mailed on a monthly basis.  That’s all my marketing budget can afford along with absentee owner letters.

I also am on at least 10 wholesaler lists.  I am always watching for properties in my target area.’

I have no plans for bandit signs at the moment due to local ordinances but I am looking into mailing craiglist for rent by owner.  One thing at a time though.

So that’s my recent efforts.  “I leave you with this quote Life is a series of steps. Things are done gradually. Once in a while there is a giant step, but most of the time we are taking small, seemingly insignificant steps on the stairway of life.”  Ralph Ransom

How many folks out there are still working on their goals they set for the year? In our field I’d venture to say better than average, but still not 100%. With 1/3 of the year complete, its a good time to dust off those New Year’s goals and see how far you strayed from the path you have set for yourself.

My goal this year was to create positive habits. So far I have created 2 habits. Paying down debt like a hawk each paycheck and making my daily to do list. The debt part was easy, but the to do list faltered at times. I’m pretty good about it now and really feel lost if I do not complete this task. That’s a good sign.

Now I am working on 3 more habits, running 3 times per week, two 15-30 minute planning/retreat/recalibrate sessions per day and filling those wasted 5 minutes here and there with useful tasks.

I see all three as really helping me down the road. Running is obvious, but the retreat sessions should be very useful. My coach has pushed me to work towards taking at least one positive step towards paydays each day. Those sessions allow me to remind myself to take those steps. They are also distraction free times to brainstorm and reflect. I will pick a topic to focus on each session. I will then write it in front of me (to keep my mind from wandering) and focus on solutions to that problem. I’m only a few days in, but its been pretty incredible so far.

As far as wasted time during the day, I have been filling that with absentee owner letters. It is very time consuming to print, stuff, seal and stamp letters. Those 5 minutes here and there can greatly reduce my dedicated time to the task.

Okay, so that’s me and my goals. I hope others are keeping with there goals. If your not, what can you do to improve your performance.

I leave you with this quote, “Either you run the day or the day runs you.” Jim Rohn

I have been concentrating and finding deals in the last 4 weeks and simply forgot to post on the blog. I was concentrating on the MLS. I have made 20+ bid/calls. I call them bid/calls because my Realtor will call all the prospective listing agents to see if its even worth a bid. For instance, last week I looked in a nice 3/2.5 in a decent owner occupied area. He made the call. 67 walkthrus and 28 bids in 2 days. No point even wasting my time with a property like that.

I have noticed the MLS competition in my area really creeping up. I know I shouldn’t jump around to much, but I am switching over to direct marketing primarily. I am in no mood to get in a dog fight with other investors. Direct marketing has very little competition. I would rather compete with three people than 28 for a house. Yes its much more costly and interactive, but I believe that is what it will take. This will open me up to different types of deals. I must learn about owner financing, lease options and subject2 deals.

I will still receive my emails from the MLS. Deals can still be found, I know because I watch the sold properties in my farm area. I just need to open more doors to get that deal.

My coach has been preaching this for the last few months to me, just took a bit to get through my thick skull.

No other big news for now other than Sec 8 not paying me on my new rental with them. Grrr. Time to spend more time in their office.

I leave you with this quote “Your imagination is your preview of life’s coming attractions.” Albert Einstein

I have had a rather frustrating experience with sec 8 so far. For the most part, the tenants have been good. The entire struggle has been with the Denver Sec 8 office. Rather than focus on that, I will be focusing my energy to avoid the need for sec 8 in the future. That means once again, my properties need to shine. Also, If I have to lower rent to attract non sec 8 renters. It will save me money. Sad, but true.

It is a powerful lesson though. Never ever ever allow your business to be controlled by others or have a weak link with no backup plan. Sec 8 dictates my rent, my repairs, improvements, my rent increases, and even controls my pay day. I have very little recourse against the office itself. They have become my linchpin for those properties and that is unacceptable. I will share the story why at the end of the post for those that wish to read on.

In positive news, today is the official day that all three rentals are rented again. +2k income each month not counting expenses. Huge swing for a small portfolio landlord.

If you wish to read the rant, scroll further. Just venting a bit.

I have two rentals under the Denver housing authority sec 8 program. It took until March 15 to get two months back rent for rental #2 from them. The back rent goes all the way back to June and July 2010. Also missing is Aug back rent from them which I will not see. (They sent that payment to my fired PM who cashed it. “Not their problem.”) I called weekly and often times several times a week. Calls were either ignored or not returned. Over a dozen messages were not returned to myself or my new pm. I went to their office several times and was treated with disdain on 3 out of four occasions. I’m the big bad landlord. They then sent another missed payment to the fired PM in Dec after I specifically setup the new PM in Sept. Luckily that one was not cashed. Finally Early March I got confirmation the payment would be sent forward after some fuss. While they refused to print out any paperwork with the tenant info, they gladly print out the paper with my info without even checking my ID. Scary. Finally got payment Tuesday this week. I probably spent close to 40 hours collecting $1100 in back rent.

Next it took 3 weeks to get an inspection on rental #1 and 2 more weeks to get a reinspect. To make matters worse they lowered my asking rent by over $100 to “fair market rent” even though I have proof of other exact same model homes renting for my asking rent and higher. To make matters worse, the poor gal I will be renting to could not move in. She has been put out for over 4 weeks for their delays. How does that help improve housing in our communities? Between the delay and rent reduction, my reduced income will be nearly $2000 for this year on one stink property. That does not take into account 1 extra month of utilities. After all the delays, I would have nixed using them, but it would have cost me more to find another tenant this late in the game.

The final straw, its taken them 3 weeks to get an inspection on one property for a rent increase. It will be 3 more weeks until I get the reinspect on a 5 minute fix item. While the rent increase lost time and rent will not be as significant, it only adds to this problem. BTW, I will be writing them a letter asking why any landlord would want to stay on their program giving my experience.

Now I have a theory. Their funds did not get increased this year. By stiffing the landlords, they can save on costs. These delays are so egregious they almost seem intentional. I hope my theory is wrong.

These setbacks have only strengthened my resolve to have better properties.

On that I leave with this quote. “Nobody trips over mountains. It is the small pebble that causes you to stumble. Pass all the pebbles in your path and you will find you have crossed the mountain.” ~Author Unknown

Never ever lose momentum.  My wife and I worked day and night on our new home.  We worked till 3am on several occasions.  Getting up at 5am for work was not fun or smart.  But, it was a fantastic learning experience.  I am very glad we went through it.  The problem with doing work on our own house and working full time is time itself.  We used every waking hour.  I dropped everything else in real estate.  I lost all my momentum.  I have been fighting like hell to gain it back.  Never lose momentum.

As anyone in real estate knows, it takes months to build up momentum to that first deal.   I will be working hard on getting those deals in the works again.  I have lined up 3 hard money lenders, got my Realtor on board with my plan, narrowed my farm area, and started walking through properties again.  Its all numbers from here on out.  With the new financing lined up, I will be shooting for 3-6 more rentals this year.  I’m ready.

In other news.

After I made the last post I almost had to eat crow.  The renter backed out of the good rental.  I kept his hold deposit.  I wasn’t worried about this property re-renting and for good reason.  It rented two days later.  I will admit, it helps to have an all time low 2% vacancy rate in the Denver metro area.

I leave you with this quote “Success comes from taking the initiative and following up… persisting… eloquently expressing the depth of your love. What simple action could you take today to produce a new momentum toward success in your life?”  Anthony Robbins