Mike's Week of Investing- (ending 4/10)

Mike's Week of Investing- (ending 4/10)

Its been a roller coaster of a week. All in all. Getting some more houses.

Got one that I changed my mind on. Rehabs are moving along. Stratford has become a money pit.

And we had a good week of renter payments.

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 filed. Court date set for the 20th. Haven't heard from the tenant and don't want to contact them to give them a heads up on the service thats coming.

2. Had some late payers this month - 4 or 5. Sent out texts to follow up.

Got some payments in and some partial payments in. All in all a good month for collections. The remaining back rent should be coming and the late fees are always nice.

2) REHAB

HOARDER HOUSE (STRATFORD)

This one has become the money pit. Contractor started on the joist/subfloor work. Got a call that it was going to also be the rim joists and a few support beams now too. I'd say about 15k hit total. I knew going in that I'd probably have some of this with this house. Still glad I got the house. But I just can't stand all the 2 steps forward, one step back with this house. I told the contractor to get on it and lets knock it out. Floor and roof better be done in 2 weeks.

PEOTONE HOUSE

Well, the "end of the week" completion date came and went. They're getting closer but not quite there yet. I did find out about the credit for the new furnace/ac I installed. Comed and Nicor both give credits for the high efficiency stuff. Should be about $500 total. Free money is free money.

As for Peotone, I think we've got another week to 10 days. Most of the stuff is wrapping up. Just need to get that final piece done on each thing to close the house out. Tenant came by to take a look. They're pretty excited. They loved the tiled in stand up shower in the master bath and the tiled in tub/shower in the main bath. Definitely a nice upgrade.

We're all set with this one. Wife is finishing up the painting this weekend and the rest of the contractor stuff should be done by then too. Will let the tenant move in as soon as we finish. I typically don't charge if its just an extra week or so. I figure its much better to have them responsible for the utilities for the extra week. And I'd always prefer someone be in a house than have it vacant.

Looking forward to see this house being complete. It was as ugly as could be. Really want to see the siding go up in the front. This house had ugly siding in the front and then brick on the sides. I replaced the siding and went with some really nice faux stone look. Looks great in the pics and in the container. But need to see it on the house..... Expensive is all get out. But since I was only having to side the front, I figured I could really get some pop with it and it would be worth the cost. We'll see.

MONEE HOUSE

This one is almost done as well. Just need to figure out something with that living room. Again, as a recap, the living room had hardwood showing in about 40% of the room and then carpet over the rest. But when we pulled back the carpet, it was showing more hardwood underneath. Turned out that hardwood was only there for about another 20% of the room. So now its about 60/40 hardwood/subfloor.

Asked the contractor to install new hardwood and then refinish it all. Quote came back at 2,400. Not going to happen. I asked what else I could do. He had nothing. So I went over there the other day. Looks like I'm going to see what it would take to chop off a little of that hardwood even with the pillar/beam and then run a swatch of darker hardwood perpendicular to the direction the stuff thats in there is going today. Then install some prefinished stuff going back the same direction again for the remaining half. Stone might be a tad off but I'm hoping that really dark swatch will make it less noticeable. More importantly, I'm hoping it'll look like its by design.

If I can pull that off, I'm thinking it'll be a lot less than the 2,400. Its only a space of about 150 sq ft of hardwood to install. Plus some removal of the existing stuff and the decking thats down there now. Trying to get the number to come in at 1,500.

At some point in the future, I would then have the option to just refinish all of it the same stain/finish. I just can't bare to take out all that hardwood (200 sq ft) so this may be the only option I have to hit my number.

Basement finished out pretty well. Need to get the electric done and the painting and we should be good to go. I'm shooting for 10 days or so for that as well. This one is rented too though and the renter is anxious to get into this one as well.

I definitely love when tenants are excited to be moving into the home..... Its nice to see them appreciate the rehabs we're doing.

OSAGE HOUSE

This one seems like it may be getting lost in the shuffle so we're going to have to pivot a bit. I had a contractor take a look at this one about 2 weeks before I closed. He told me he was going on vacation but would be able to start on that house by the 12th. Well that was a sunday. Left him a vmail last week and again today. No response yet. If I don't hear anything by end of today, he's getting the boot and I'll have to move on.

EDWIN HOUSE

Just closed on this one on friday (10th). Already had two contractors come take a look. Shouldn't be difficult rehab. First one that responds with a quote and can commit to a timeframe will probably get it and then I'll roll the other one over to OSAGE.

At this point, I already have 3 crews going so I'm running out of options a little bit. But these other rehabs are much easier so once these finish, it won't take them long to knock the rest of these rehabs out. Other than the Hoarder house (stratford and Peotone), these are minor rehabs at 3 weeks oress.

I know the monee contractor is itching to start on another one for me. So they'll probably get turned loose on osage soon.

3) ACQUISITION

Great week for the acquisition side. Got two more houses. At the Osage closing a week earlier, my realtor mentioned that one of her other clients (flipper) was bidding on the same hud house that I was. I told her I had better get in there to firm up my rehab numbers and put my best number in. This house was in tremendous condition. If I really wanted to, I could get by with a 4k rehab. It was that good. But I'll do a couple other things to really make it right (i.e. tile floors in bathrooms, tile in shower, etc) and I think I can still get in for 8k or less.

But I bumped my number to 100k net on the weekend and on monday morning, hud accepted. Got it. 4/2, 1,900 sq ft. Built in the late 70s. Just a fantastic rental in a nice subdivision with great schools. Doesn't get any better than that. The only catch on this one is that I actually have to come out of pocket a little more than usual. Normally its just the points and the closing costs minus the taxes. On this one, the purchase and rehab are going to come in around 74% LTV so I have to come out of pocket an additional 4k to make the numbers work for my hard money lender. Still, I'll pay an additional 4k to add a rental like this. Love the 4 bedroom homes with this kind of space. Just don't come along very often.

So that was my monday. I was pretty happy. Figured - thats enough. Got 5 houses going and 1 more under contract. Lo and behold, I get a call on tuesday from someone from auction.com. Asked me if I was still interested in the braidwood house I was bidding on. I had bid several times on the thing and every time was outbid. I think my max bid was about 100k or so and two other bidders kept pushing it up to 106k and 108k or more. And then you had to add the 5% premium on to that price so it was basically coming in around 113k or so and still no acceptance. But the thing kept coming back to auction.

They asked me what I would be willing to pay. I figured the reserve must have been 110k or more but I wasn't going to budge too much on my numbers. I told them 100k max. They said if I could do 105k, they could definitely get the bank to accept. Well, that 105k, is actually a bid of about 111k when you add the fees. Knowing that I was taking a 4k hit on karen from yesterday, I didn't want to do that number. I said the best I could do was 100k (105k) total. They said they'd take it back to the bank and see what they said.

Sure enough. They accepted. Got another one - two in two days. And this one is an absolutely gem. 3/2, 1400 sq ft. Built in 04 or 05. All brick exterior. Needed about as little rehab as that other house I just got. I almost believe I can do this rehab myself- because its paint, carpet and some appliances. I actually believe the only thing I need a contractor for is to change the locks. :-)

But this is another one that I'll probably have to come out of pocket 2 or 3k in addition to the points/fees. All in at 111k with the rehab and it will likely appraise out around 155k or so.

Still. It is so incredibly rare when I can get a house this new and this nice (vaulted ceilings, great room sizes, etc), that when they come around, I think its worth dipping into the cooking jar a bit to make the numbers work.

As rentals:

KAREN (4/2, 1900 sq ft): PITI should be around 900 to 950 a month. Rent should be 1,400 to 1,450.

Braidwood (3/2, 1,400 2005 house): PITI should be around 850 to 900/mo, Rent should be about 1,400.

Oddly enough, got another buddy that owns almost the exact same house and is renting it for 1425/mo so I know exactly what the rental market is on that one. :-)

So by Tuesday, I'm feeling as good as can be. And I mentioned that should be the last one I get for awhile given I've got no other offers out there and no real prospects I'm looking at. But what do you think happens on Wednedsay? I get an email from my realtor that the short sale offer I put in over 4 months ago actually came back as accepted. What is going on here? 3 houses in 3 days? That just doesn't happen to someone like me. I still view myself as a 3 houses a year investor - who just happened to go on this crazy run and now seem to be doing about 1 house a month.

Still, I remembered this house. It was a former duplex that was a bit cut up but I had given myself a pretty hefty rehab budget to reconfigure it to a nice 4/2 with a new kitchen, new furnace, and some redone bathrooms. But I told my realtor I needed to take another look after work. Glad I did. Right after that, I got the message from the contractor at the hoarder house that the flooring was all messed up and it was going to be way more work. Sock to the gut.

Thats got me a little down for the day. But I'm still happy with the deals. Then I get an email as I'm driving to the braidwood house that night. Its from one of my lenders. A new one (first midwest) that had been pushing this heloc on investment properties loan product. And I had already done one of these loans a month or so back and was pretty happy with it. Well guess what? They declined me. They said I should not have qualified for the first loan I got with them. Apparently, their loan product has a limit of 4 mortgage properties total.

4) FINANCING

What was really upsetting though was that before we even started the paperwork on the first loan, I specifically asked the lender if they would do this loan with me given how many properties I had. The reason I asked is that I ran into the same guideline with US Bank when I tried going after their HELOC loan product on investment properties. It was yes, yes, yes and then after everything they figured out they had a guideline on the number of properties I had.

It was definitely a sock to the face though. Not that it cost me money or anything. But it was just the fact that I had been lining up the financing on some of these homes and had everything figured out. Also was going to use that loan product to even steven me on the stratford overages.....

But thats exactly what I've found with a lot of these lenders. As an investor, I think we know the rules far more better than they do. And while I was lucky to get that first one through, its still a little frustrating that I specifically asked them whether I would qualify for the loan given the number of properties I have and they said yes. Not only that, but they actually did the loan. They didn't catch that guideline until I applied the second time..... :-)

I still have several banks that I like to use for my loans and I'm positive I can get these refi's done with them. But its always nice having more lending options. And, as sometimes happens, when one door closes, another one opens. I was sharing the first midwest let down with a fellow bp'er and they mentioned another local bank that has some good investor loan products.

So I'm in the process of working with them to see if they have some options for me too. One way or another, I'm going to add a new lender to my resource list. :-)

So that was my week. Rehabs moving along nicely on the existing homes. Closed on a couple of houses that I'm moving forward with the rehabs soon. And I was able to lock in 2 more fantastic deals in one week. 

Although I did have a bit of a one two punch with the beam/rim joist work at stratford and then the first midwest played some rope-a-dope with me as they pulled the loan product out from under me because I had too many homes. 

The funniest part is that I had actually asked the lender about a week earlier if they had a limit to the number of HELOC loans any one investor could get (completely separate from how many homes an investor could have). He said he didn't think there was a limit for any one investor but that we should do as many as we could to test if they might decide to create one. 

Ha. Who knew their limit for me would actually have been 0 were it not for the fact that they did the first one even though it didn't fit under their lending guidelines. :-)

All in all though, a great week. There's never truly a honeymoon period when it comes to investing. Gotta deal with the ups and the downs all occurring at once. But in the end, its well worth it!