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Mike's Week of Investing- (ending 4/3)
Mike's Week of Investing- (ending 4/3)
Youtube Channel for Before and After Rehab Videos
Don't want to add it to the blog since, apparently, BP frowns on the outside links. But if you're interested, you can catch the link to my before and after videos (including the before videos of the houses I mention below), you can check the link out on my profile.
1) TENANTS
Quick update on my tenant stuff.
1) Settlement renter still hasn't paid. Broken Record.
Have no choice but to file the eviction. I told them I was going to. So looks like I have to eat this one for now. But this is one of the few tenants that I know I'm going to be able to eventually collect from. They're getting a huge settlement soon that I should be able to attach to.
2) Lynwood renter.
Finally paid up for last month and some of this month. Should have rest in a week.
3) Crete. All good there.
4) Aroma Park. Service line done. Plumbing done.
Cost me a pretty penny but no more problems which is nice to hear.
5) Got a couple of outstanding minor repairs that I've asked a new contractor to schedule. Doesn't seem to be going very well though. Almost a week later and the contractor hasn't even set up an appt with all of them yet. I told him that even if he couldn't get out there right away to at least call to schedule something further out so the tenant knows I'm on it. Very frustrating when they just don't listen. Some of these contractors wonder why they don't have any work. Its because they don't know how to run a business.
2) REHAB
HOARDER HOUSE (STRATFORD)
Looks like the mold in the attack wasn't as bad as the roofer first thought.
But they started on roof yesterday and found that some of the plywood was bad anyway. Gonna have to replace about 40 sheets at $45 a sheet. Nice little extra.
My contractor is still working on the Peotone house and I want to get this stratford house moving forward. So i had the monee contractor (who has a big company and multiple crews) bid the flooring job. A little pricey but not too bad. They wanted 11k. I told them I could only do 10k. They came back at 10,500. I said 10k. They accepted. It was fair given a couple other bids I had. But I think these guys are new and are starting to understand I have my price and thats what I'm going to pay. If they can make the numbers work at my price, fine. If not, I gotta move to the next one.
In this case though, I just need to jump start this house and have it ready to go for my main contractor. His pricing is better. His work is as good as theirs. And, at this point, I just need to save some money on my budget given some of the overages I've had. 2k on the roof and 2k on the damaged sill. Those two things alone just ate up most of my contingency.
Keep in mind too that, going into this house, I knew I was going to have to take some hits like that. Whenever you see a house thats been vacant for 5 years to the point that the gas company has removed the line, the floors in the bedrooms have collapsed, etc, etc. you know you're not in for a cosmetic rehab. :-)
Even if I have to come out of pocket 5 to 10k on this house, I was ok with that. Its in one of the best subdivisions in all the areas I invest in. Its normally impossible to come close to getting a house in that subdivision where the numbers will work.
And hopefully, I can make up for the overage on the rest of the rehab.....
When its done. New roof. New floors. New everything else.....
PEOTONE HOUSE
Plumbing is all squared away. Contractor (carpentry stuff) hasn't done much over the last 5 or 6 days though and that had me worried. It was one of the reasons I brought that other crew in to knock out the floors at stratford.
Then I asked my guy if we could put a schedule together to see when some of these things at peotone are going to start getting knocked out. He told me he'd be done by the end of next week. I'm not buying that. But I told him I would give him a $500 bonus if he could finish by the 15th (two weeks). He said he'd be done by the end of next week. I told him I'll still give him til the 15th to get the bonus but the end of next week would be even better. We'll see.
Wanted to mention one other thing here that I keep forgetting. I actually started showing this house about 4 days after I closed (once the hvac was installed). Had a great applicant come in and they took the house. We set the move in date for May 1 and I told em it might be sooner.
But I definitely believe in showing the house as soon as you close. Some people might be turned off by the construction. But the bottom line is that I almost always have my houses rented before the rehab is completed. So they're ready to move in within a week or so of the rehab being completed.
If you wait til after the rehab is completed, then most people tend to need 30 days notice which means you're almost ensuring yourself an entire month of vacancy. With lost rents (1350 in this case) plus utilities plus the month extra of hard money fees, I typically account for about 2k per month for every month the house is empty.
To me, its an absolute no brainer. List it and show it. I have to do some hand holding on the showings to paint the picture. And I typically send them a link for my before and after rehab videos on previous houses to give them an idea of the type of finish we put in to our rentals. But it is so much easier to deal with when you have the house rented before the rehab is completed. Less stress too.
And it lets me start the refi a few weeks before the rehab is done too. My banks like to see the house rehabbed and rented. It takes a couple of weeks to get to the appraisal, so thats why I start the refi
MONEE HOUSE
Had the hvac work done in the basement so the ductwork wasn't running under the joists. Its now tucked between the joists to free up the ceiling space.
Contractor started there yesterday. Couple of minor issues:
1) In the living room, there was carpet over the hardwood in one area. I had intended to pull it up and refinish the hardwood. Turns out that the carpet was covering about 1/3 of the space of hardwood. The rest of the area the carpet was over was just plywood. Ah. Who does that?????
So now my choice is either:
a) Install hardwood and restain to try to match existing as best they can. Not sure how that will look though but.
b) Install hardwood and strip all the hardwood in the entire room and refinish so it matches. Most expensive option.
c) Remove some of the hardwood all the way back to the entry and then do laminate in the room. Cheapest option but then no hardwood.
I'm definitely leaning towards biting the bullet and making it right. Install hardwood in missing space and then refinish the entire room. Sucks but I can't see taking out perfectly good hardwood. Its the principle of it.
2) Second issue and this one not very big but thought I'd share.
The contractors were doing a walk around the screened in porch room on the house and found a dead deer under the room. Its kind of built up pretty high so you could see how something could get under that room but you don't typically find a dead deer issue.
Contractor calls me up and then texts me and says there's a dead deer and that he thought I should know - as if I'm going to clean it up. I told him I needed him to clean it up and that I don't do that stuff. He talked to me this morning and said that there's some environmental company that will take care of it for $200 and they'll cremate it.
My response - $200???? Thats a NO! :-)
Bag it and put it in the dumpster. Done.
Its not like I killed the deer. And its not toxic. So I'm not paying to have the thing cremated. Thats like asking me to buy a burial plot for the thing too isn't it? :-)
And, oh by the way, listed this monee house a couple days after I closed on it as well.
Had a couple of showings already. First one wanted it but only if I would do a rent to own thing with them. I told them I don't sell any of my houses. So that didn't work out. The next showing was a perfect fit.
Husband has good job with great pay. Younger guy. Wife is from a very small town and doesn't like the idea of all the neighbors. Wife was jumping up and down after I ran their stuff that night and called and told them they got it. Had the hold deposit the next day.
So this one is rented before the rehab had even begun. Granted, its in decent condition right now but still. For those people that wonder whether they should wait til after the rehab is completed, I'd share with them that I really do have most of my stuff rented before the rehab is completed.
That last braidwood house was one of the few exceptions and that had a lot to do with the time of year (december) more than anything else.
BOURBONNAIS - OSAGE
Closed on this house on Friday at noon. Contractor is on vacation til the 3rd and is set to start on the 6th on this one. This is a separate contractor than the ones I'm using on the other houses. Gotta keep everything moving forward.
Its hard going thru so many new contractors like this but I just can't afford to let a house sit waiting for one to free up. Like I've said before, every month a house sits, its costing me 2k a month.
3) ACQUISITION
Osage just closed today.
Still waiting on Edwin house to get the lender/seller to record the sheriff's sale deed but that should be coming pretty soon here. I know they told the title company they were close to having that done.
I have a couple houses I'm bidding on and a couple others I'm watching. But the pickings are so slim right now, its scary.
I think this is pretty typical for me too. Its a series of peaks and valleys when it comes to inventory. The biggest difference in the run I've been on here is that I've been able to take down 3 or 4 (or even 5 like right now) houses at once during the peaks and then, for the year, it ends up averaging out at that 10 or 12 houses a year number.
At some point, even I start to wonder when my luck will run out though and the valleys will be permanent. Its got to happen eventually. Just of matter of when. I'm hopeful there are going to be another couple of years of decent opportunities. Maybe not as good as the ones I've been picking up over the last 18 months. But good enough where the numbers will still work from a cashflow standpoint - even if I have to put in 5k to 10k a deal on a couple to make the ltv's work.
If I have to do that on one out of every 2 or 3, I could live with that. Just need to try to get to 50 in the next year or so. Once all these close and rehab/rent is done, i'll be at 37 total. So 13 in the next 15 months is about what I'm shooting for now.
We'll see.
4) FINANCING
Nothing new on the financing side. I did check in with one of my local lenders who I had told about the stratford house back in november. Gave him a heads up that the rehab is slow going because we got delayed 2 months due to the gas line issue. Told him I should have two more houses rehabbed and rented in the next month and wanted to see if he would do those instead. Yep. So now we have a home for those two refi's.
Will start figuring out where we want to stick these other 3. Again. I try to spread out the loans so that no one bank feels like they're getting too much exposure to my portfolio. Plus, I think they like seeing me getting all these other loans from other banks. I'm guessing they're thinking that if all the other banks are lending to me too, it must be ok for them to do the same..... :-)
Another week. Another step forward. Lets see if we can avoid any major plumbing issues and/or any more dead deer under the houses and we should be good. We've got work going on 3 different houses right now, soon to be 4. But having work going and having work being completed are two different things.
Its all about getting them done and getting them rented. The rented part is clearly easy. I love having them rented before the rehab is done. Makes things so much easier in terms of stress.
Comments (2)
Thanks.
re: Picking a renter.
I use the basic stuff for picking - Gross monthly salary 3 times rent. Good job history (if they just switched jobs, thats a bit risky). I try to avoid truck drivers and nurses. Truck drivers because the pay is not as consistent. Nurses because I just seem to have really bad luck with nurses as tenants. They don't pay.
No evictions - no exceptions. No criminal with exceptions. If they're 40 and they have a misdemeanor or something, I'd take em. But honestly, I rarely have anyone with any criminal ever.... Credit doesn't matter.
Also good rental history. If they jump around every year or two, thats a red flag. I'll ding them a bit.
Lastly, its about "fit". I want a family that fits the house. If they have 4 kids and its a 3 bedroom house with small bedrooms, I'm going to say no. Just not going to be a good long term tenant. They're clearly settling and aren't going to stay.
But since we started running credit, criminal and eviction, we've had real good luck with picking tenants. My collections on the 32 houses we have in service are ridiculously good. And our turnover is every bit as fantastic compared to what it was the first few years that we started.
I attribute that to the checks and also the level of rehab. I'm definitely rehabbing to a higher finish these days and that really seems to be helping. I even went back on some of the earlier houses and done rehab make readies to bring them back up as well. HUGE difference.
I'm priced right and the houses are some of the nicer rentals around. Thats a good combination and one that really seems to help keep vacancies down. Since December, I have not had a single turnover yet. And out of 32 houses, thats pretty good. :-)
Before December, I was on a string of about 7 months with no turnover. So over the past 12 months, I've had 2 turnovers. One bought a house. The other lost their job and moved in with family (another nurse of course).
I think the combination of the checks and the right rehab level really help. Keep in mind. I'm not making these houses brand new. I rarely do anything with the outside. But I do try to add a couple of really nice features (tile in shower, etc) that I think helps bring up the rest of the finish of the home. Their showers are nicer than mine. :-)
re: Listing
I list the houses on Craiglist and postlets.com (which is an aggregator listing service that posts to trulia, zillow, etc).
These are small to medium size towns (5,000 to 15,000) so sometimes I have to list in the newspaper too depending on the situation. But usually I can get them rented from the free sites.
I don't think they'd be considered on MLS though as you need a realtor to list them on there and I don't see any reason to pay a realtor any fees to rent them when I can get them rented pretty easily myself.
Osage is rented (rehab still going). Edwin is rented (rehab still going). And Karen Dr, a house I haven't even closed on yet, is actually rented. Someone that called about osage had 4 kids and even though it was a 4 bedroom houses, I suggested the Karen house and asked if they wanted to see that one. They did. They loved it - mostly because its got about 400 sq ft more space. So they're taking that one.
Its a perfect fit......
Part of it is sales too. If I let the showings walk thru a house themselves, they aren't taking it. I have to walk them thru it during the rehab to paint the picture. But when I do, my success rate is pretty good. I'd say maybe 1 out of every 2 or 3 showings, I'm getting applications on.
One last thing I'd add there. The other thing that helps is not to collect applications. If I get an applicant that meets my criteria and they want it, I'll ask them to confirm and then I'll run credit criminal and eviction. If it comes back positive, I'll offer them the house.
I don't like taking a week or two to "collect" applications because the good tenants will be gone by then.
I then require them to put down the hold deposit. And I tell them that the first hold deposit gets it. So just because they're approved and I'm offering them the house, that doesn't mean they're locked in or I'm stopping showings. I don't stop showings until I have a hold deposit. And they don't have the house until I have the hold deposit.
Mike H., over 9 years ago
@Mike H. I am getting very entertained by your blog. Easy to read and a lot of good points to take from. Like showing the property during rehab, so it's not vacant for a month. I am trying to catch up on the blog. Do you have any pointers on picking renter? And do you always list them on the mls?
Carolina E., over 9 years ago