All Forum Posts by: David Midgett

Gauging market upswing involves a lot of guesswork.

Neighborhood improvement is often a J-Curve. Starts real slow, gathers momentum, then starts happening fast. You have to decide how comfortable you are jumping in at a specific point on that curve.

Obviously, the earlier you jump into a gentrifying area, the better the bargain. And the higher the risk.

I'd start with your ideal tenant. Where do they want to eat, shop, hang out, etc? Are those places opening up? Are those people moving into the area?

Also look at vacancies, crime reports, absentee owner ratios, etc. Are those data sets improving, static or getting worse?

But in the end you can't beat boots on the ground. A single afternoon going door-to-door knocking and saying "I'm thinking about buying in this area- what can you tell me about the neighborhood?" can be invaluable.

Rocky-

Back when I was in law school, the Florida Bar sent a guy to explain the admission process. He said "you can be admitted even if you killed your own mother.... as long as you are honest about it, admit it, and did the time for the crime".

I had a friend who was denied Bar admission because of an SEC complaint from his stockbroker past (which he WON). The reason he wasn't admitted? By maintaining his innocence (because he WON), the Bar felt he wasn't being fully truthful and forthcoming with all facts.

My advice? Don't say "it wasn't my weed".

Instead say "I was arrested for possession of under 20 grams on a traffic stop. I've done drug court, community service and take regular drug tests. I'm clean. My record will be expunged. I've sure learned my lesson and can assure you this will never happen again."

That's it. Don't be defensive. Don't tell them the cop was wrong. Just tell them the facts so that they see you are honest, forthcoming, contrite and won't pose a problem for the profession.

Best of luck!

Andrew- 5 points and 12% sounds right, but as a lender, I never require a flat minimum. It is usurious, but more importantly, I'd love you to pay the loan off and borrow again as soon as possible.... because I'd charge you points again. Negotiate!

Greg:

I've owned self serve car washes and a laundry mat.

Give me rental houses any day.

The problem with self-serve is you either need to pay to have round-the-clock attendants- or pay to fix what the public does to your equipment.

Our laundry mat had brand new, card reader machines. Somehow one of them broke every week. Even with an attendant. People overload machines. They won't empty lint traps. They let their kids hang on open doors. They leave ink pens in the dryer for the next poor soul.

The car washes are even worse. People steal the wands, brushes, vacuum houses and anything not chained down. They pressure wash old engine blocks with your recycle grey water. They rinse cement into your drains. They dump tires in your trash cans.

And that is from actual customers.

Add in the crack head who breaks into the digital selector box because he's too stupid to realize the quarters fall down into a wall safe. Or the kid who thinks he can run a dollar bill on a string into your change machine and pull out a stack of twenties.

Some weeks our checks from criminal restitution payments exceeds the coin collections...

Leasing the coin op businesses to hard working immigrant families was the best thing I ever did with these ventures. They have family members on site to wash cars... or wash and fold clothes... which adds to the bottom line and prevents problems.

And it let me focus on my rental houses.

Bobby:

Great point-- cash for keys is for calm owners.... not the irate ones. The aggravated ones just get more offended and destructive at the offer.

I like your form, but we keep the offer verbal. In our county in Florida, we get an automatic writ of possession as the foreclosure auction buyer, without further court order. The Sheriff posts and evicts with no additional process or paperwork, as long as no intervening objection or appeal has been filed.

In our case, a written Occupancy agreement could be construed as a lease. Then the occupant would be able to defend against the automatic writ of possession (even when they didn't do what they were required to do), and we would be forced to institute a whole new eviction action. For that same reason, we never let an owner stay an extra couple of weeks in exchange for them paying pro-rated rent.

However, if I was in a jurisdiction which already requires an ancillary proceeding to evict following a foreclosure auction, I'd use your form every time!

George, others have pointed what you could have done to prevent this-- mostly in how you chose a contractor. And you already know the hourly work is part of what screwed you over.

An experienced contractor should be able to quote a total for expected work, with an agreement for a change order if unexpected work arises. Hourly means they don't know how long their job takes. Figure out why. Require the quote in writing. And require a completion date. Then add a penalty/bonus provision.

For example, my contractor quotes $2,000 and expects to be done in 5 days. If he gets done a day early (AND the work is done to my satisfaction), he gets $100 bonus. A day late and he gets $100 less. Most contractors like this arrangement, but you have to watch for time sandbagging on the next quote.

Time is money. My contractor agreements make that a two way street.

Chad: The income streams you mentioned are not passive... they are hands-on businesses. I've owned car washes, laundry mats, restaurants, horse partnerships... you name it. NONE were as passive as they were pitched. So now my passive portfolio is just rental houses, hard money loans and seller carry notes. Much less work...and much better returns. Diversification needs to have a purpose.

Good call on the flat fee listing. I'm a broker and have realtors that can out-sell a spice trader... but listing a rehab on MLS is pretty straight forward. A great listing won't make you a penny more - at least not at your price point - although an experienced agent will keep a deal from blowing up when the inevitable happens. Just make sure the selling agent that brings you a contract has the knowledge to pull everything together for you, and you should be good.

Next time get those rehab estimates nailed down and you will be golden.