All Forum Posts by: Frank Adams

I don't know NC law but "due on the 1st" means late is any time after that. Id nail and mail my notice today. That's the way I did it in Texas and California and out of the 30 or so that reached that point only two ever showed up in court. Just don't tack on late charges until the 5th.

Lynn N wrote: "I ask lenders to figure out how much my buyer can afford." But at what point are you asking? This is pretty vital information to find out within the first 10 minutes of them walking into your office.

I got my license about 12 years after becoming an investor. I also had an MBA and about 1/2 year of law school mostly on contracts. The only reason I was getting my license was because with my license I could attend in person the RTC sealed bid auctions. I managed to win a couple of bids by being there in person. 

After 10 years as an active investor I already knew a few things:

Most agents are not very good at their job. This is not a knock on agents in particular, most people are not very good at their job. See also "the 80/20 rule".

A lot of people claim to be "not a good test taker" and throughout my undergraduate years I used to say that was shorthand for not knowing the material. One day it dawned on me that I was one hell of a great test taker; took the SAT hungover and finished in the top 10 in my state, on the law school admission test I scored in the top 10%, and had never taken a prep course. So there is such a thing as a "bad test taker", but knowing the stuff cold helps a lot more than most people think. While I was hanging out at the broker's office where I would hang my ticket one of the agents asked me when I was taking the test so I told him the next date. He just said, "oh, you'll fail it, guaranteed". 

I asked him if he'd like to make a friendly wager and we agreed on $20.00 (I wanted to make it $50). I made the same points that I made above and he said that wouldn't matter.

I took the test in a large college classroom, think English 101 your Freshman year. About 300 people in there. After all the explanation about filling in the circle, erasing completely if you change you mind, etc. (Seriously, we still have to explain how to take a standardized scoring test?) The proctor asked if there were any questions. One lady raised her hand and said that since some people have watches with alarms on them (this was 1990 so no cell phones yet!) could the proctor tell everyone to silence their alarms! I thought, "oh, you're in trouble lady".

About 20 minutes in to test time I finished up and started to leave and realized everybody else still had their head down. So I went back over all my answers and then I saw another guy start to get up. As we reached the hallway I asked him what he thought of the test; "easy as pie".

As far an not needing to know how to calculate how much concrete it takes to pour a driveway. I always thought that was as much a reading comprehension/native smarts question as a math question. The dimensions given are all liner, 30 feet X 24 feet, that must be converted to VOLUME, 6 inches thick because concrete is sold by the (cubic) yard.

For practice ask an agent, or a friend for a copy of a filled in contract and executed HUD 1. Study each blank on them and KNOW what goes in which space and why it's a particular name, number of legal description that goes there.

I'm sure others on here will expand on, and correct this where needed. I lived in Texas until 10 years ago and , unless things changed only CITIES could enforce building codes. That's part of why DFW looks so different from the Houston metro area. 

Most everything in DFW is in one municipality or other, so building codes. In Houston, particularly in the boom years, a lot of what was built was in the unincorporated parts of Harris, Fort Bend or some other county.

NO! NO! NO!  A kid falls, hits her head and becomes a quadraplegic. Do you have the spare cash to provide 24/7 care for her for 75 years?

I guarantee your insurance company will point out that they're not on the hook. Even if they were they'd just "throw in" the policy.

Jim and Matthew gave you good advice. In my HOA experience (30 years in TX with a lot of rentals and flips so a lot) not only are boards reluctant to take changes to the membership, unless they can see a benefit to themselves, this sounds like something that will mostly benefit you, but might be salable as benefiting everyone if it keeps values up. However, in every HOA I've been a member of, up to 2,000 once in Houston and several more between 600 and 1100, to the 23 members where I live now in Colorado, changes in by-laws require an affirmative vote of 75% of the membership. Since we're lucky to get 10 households represented at our meetings, and since I quit as president the current board sometimes have the opinion that the "by-laws" are "by-suggestions". I have to constantly point out that it doesn't work that way!

The last place we bought, it was to live in not rent or flip, was on the market for $359,000. My wife asked how little I was going to offer and I told her I was thinking about offering $275,000 =/-. She talked me into offering $287,635, all cash, no inspection (we had his inspection report and he'd only owned it a year) 5 day closing. Owner countered early the next morning at $306,000, but that it would take 10 days to close.

NOTE: I had looked at the county records and knew the owner had bought it one year earlier. I used a criss-cross directory and asked 3 neighbors what was wrong with the house that they were selling so early. They told me nothing but the guy was a youngish doctor and he was having trouble getting a practice established but had been offered a teaching position at a medical school back east. Doing my homework helped.

I once bought a place that was on the market to settle an estate, elderly husband and wife died within a few hours of each other, it happens more often than you'd think. It was on the market for $59,900. When I looked at it a few things jumped out at me; it looked like a manufactured home but it was stick built, adding to the look was a 1 X 6" molding between the "skirting" and the house proper, that was painted a clashing color, it was a 2/1 but there was an 8' X 14' laundry room that was crying out to be a 1/2 bath. 

I offered $38K, all cash, 5 day closing, no inspection but they had to pay for termite treatment. They had T-111 skirting that was to and below grade all around and the termite damage was obvious. The Realtor called me two days later and said my offer had been REJECTED! That had never happened to me before. Before I could reply to her she told me to listen carefully to what she had to say; "the sellers, two sons, want you to know that they are reducing their asking price to $42,000." I told her to up my offer to $39,750. She repeated her previous statement and I said OK, I'll offer $42,000. "Done" she said.

I bought Hardi panels and cut them to replace the skirting, found a suitable 5 gallon can of "whoops" exterior paint at HD, bought a toilet for $5.00 and a faucet for $5.00 at a yard sale and a discontinued pedestal sink at Lowes for $20. I probably paid another $25.00 for PVC, toilet flange, roof jack and other miscellaneous stuff I didn't already have. I lived almost 4 hours away but I'd drive up on Monday morning with my supplies and work the 4 cities close to that house, and sleep on my air bed, during the week. Saturday morning I'd head home with a list and the following week I'd head back up.

The second people that looked at it bought it for $58,500, $3K down at 8%. They weren't in a position to refinance at then end of 5 years so I kept extending the term and here we are 15 years later still collecting. If all goes to plan I'll collect until I'm 85, if my cancer gets worse I'll try to sell the note while I'm above ground to prevent my wife from having to deal with it.

That's a long answer to a short question but NO, I don't consider 20% to be too low, depending on conditions. Also a good agent knows that the first offer is often the best.

If you're in the SF bay area don't try this strategy!

I see a lot of problems here. Why sell it to a buyer, in a seller's market no less, who can't afford it? Also, if the market is that good it sounds like you're currently renting below market rent. I realize that rents almost always trail sales but it reads as if you're way off.

You didn't mention your rehab costs, so based on your numbers your gain is even less than the $57K. 

You also should have some depreciation recapture, right?

If your tenant can afford the total nut on both mortgages why can't he afford a higher rent? Or for that matter why can't he qualify for a full loan?

How are you planning on reporting this on your tax forms? Both this year and in coming years as you report the interest and repayment of principle on the second? This seems highly problematic to me.

I think Joshua put his finger on it. There was (probably water) damage to those tiles so they added some screws to hold them in place. When you replace them the new ones likely wont' match exactly, age, smoke and whatever will have stained the original. I was only ever confronted with this once, again in a house that had water damage. I was remodeling the entire kitchen, insurance paid for a lot of that, and I knew that the droopy tile would make the kitchen look not as good as it should have. 

I had my guy quote me on pulling the old, 4 foot fluorescent, light fixture, sheetrocking the ceiling, putting in recessed lighting etc. It wasn't too expensive, but I had to get two other quotes to have him get his heart right on the price, but was I ever glad I did it. 

It depends on WHY you want to replace the windows and WHO you have do it. Window replacement business sometimes looks to me like the aluminum siding business did a few years ago. If you can do it for a "reasonable" price and/or do it yourself, it's not that hard then go for it. 

Unfortunately too many people replace windows because a salesman told them it would save them HUGE money on their utility bills, it won't. Well it might if you live in a HEAVY WINTER climate, Rocky Mountains or anywhere that you get a really long COLD season. Every place I've seen or stayed in up in the mountains near us already has double, or often TRIPLE glazed windows. You wouldn't want single glazed if you were living in Vail Colorado because all of your heat would disappear out the windows.

In Texas you have the opposite problem, one of heat gain. Ninety Percent or more of heat gain is through the roof in Texas, even in north Texas. I lived in Houston for 25 years and did a lot of rehabs/flips when there. I had buyers ask me, and met people who moved from the north, who asked about putting in double pane or storm windows. IIRC the payback period for double pane windows was about 35 years or more. 

Whereas the payback for ridge and soffit vents, and reflective material in the attic, could be as low as five years. That depended on whether you did the work or contracted it out.

I once replaced the windows in a foreclosure/flip I was doing but all of the siding needed to be replaced and the windows were of various, and mismatched, sizes and styles. In that case I deemed it worthwhile because I paid $22K for the house and figured I'd get about $60-$70K for it. Since I was going to spend about $20K fixing the place I figured spending about $1,200 or so on windows was OK.

I always liked selling places and financing them because on every one of the 30 or so that I did I sold the house for ABOVE MARKET price. When people answer an ad that reads; XYZ neighborhood, 3/2/2, owner will finance with $3,000 down". You're attracting the kind of buyers that walk into a car dealer and just ask what their monthly note is.

NOTE: The last one I did was almost 20 years ago, in Texas and was for a $59,000 sales price. So $3,000 wasn't too out of line at 5%. 

I liked doing it because I had quit my salaried job which allowed me to work on my rentals while collecting my salary and I realized that Texas' weird tax set up, no personal income tax but they more than make up for it property tax, and UNREGULATED homeowner's insurance rates were crimping my style as a landlord.