All Forum Posts by: Michael Woodward

Sorry for the enormous picture. Let's see if this works better.

Ok....I had to do some research on how to attach an image to my post. Let's see if this works.

Sorry. I'm apparently doing something wrong. I'll see what I can do to fix it.

Sergio, I used to build new houses in FL and found that people always responded well to the tropical theme. I think you need at least one small palm tree in the front yard. If you clear out all the scrubs and place the palm in a central spot in the front yard, it will have a much cleaner look. A flower bed on each side of the front door works really well. Fruit trees are also very popular but I would put it in the back yard instead of the front. They're so popular that I had several stolen.

You might also want to consider more grass seed (or plugs/sod) and some fertilizer. A nice deep green lawn is very inviting.

The house color looks good. I used that same combination on several of mine.

I'll try to attach a picture of my project below.

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Mike, I want to second what Brandon and David said. The rafter tails don't carry much load and serve mainly to support the soffits, facia, and gutters so you should be able to get away with just nailing new 2x4's alongside the existing trusses and rebuilding the affected area.

If you're in an area with high snow or wind-load requirements in your building code however, you might have to find out if there are specific rules for repairing them. If there ARE specific requirements for repairing them, a good contractor or architect can tell you what you need to do. City/county inspectors are usually willing to tell you what needs to be done but I wouldn't get them involved unless your project requires permitting. Sometimes those guys are looking for things to do and will load you up with all kinds of other things to repair/update that are not legally required.

My experience with them is mixed. Some were very friendly and helpful but some tried to over-step their "police" power with unjustified repair requests. One in particular tried to use pure intimidation on me but I stood my ground because I knew what he was asking for was not required. It can turn into a messy political situation so I would not get them involved unless it's already in permitting.

Shawn, I've found that many of the houses I buy don't have septic records. I guess it's just not a high priority in some areas to have it recorded. Regardless, Jon is right that you need to have your own septic inspection done. It will serve as the tie breaker between the two that your realtor told you about. That will especially useful if your inspection finds the exact problem the other inspection found. You can be pretty confident about your cost to repair it if you have two matching inspections. Hopefully your inspection will agree with the previous one that said the system was ok.

Nate - Unfortunately, what you're describing happens a lot. I have an excellent contractor right now but I've hired very bad ones in the past.

My advice would be to arrange a meeting between you, your contractor, and your lender (assuming you're not paying him with your own cash). Let your lender be your arbitrator because he has a stake in your success as well. Ask your contractor to bring all his receipts so you can balance the work that's been completed with the amount you've already paid him (......and make sure his receipts match what's been delivered to the job site!) Your lender should have a strong influence on your contractor as the source of the money. Hopefully that will be enough to motivate him to get on track.

If you're using your own cash and don't have a lender to help you out, you might need to schedule the meeting with an attorney (at his office) so he can review the contract in front of the contractor. That should be enough to convince the contractor to honor his agreement. Even if you have to pay the attorney for his time, you should come out way ahead by having the meeting.

I would also encourage you to find the shortest exit plan with this contractor. If the work he's already done is close to what you've already paid him....or even if he's ahead a little, then like Ned said, fire him right away. You won't likely convince him to change his character so you're better off cutting your losses.

Like the old proverb says, "Chasing the snake that bit you drives the poison to your heart".

Hope it works out well for you!

Michael - You raise some good questions. I think that any of your what-if scenarios could very well come true. Predicting which one it's going to be is the hard part. I don't think it will be impossible to predict but it will take a lot of diligence to keep up with which way the market is going to move next. Hopefully we'll hit the right combination and ride the next wave. The downside (literally) though is the trough that inevitably follows every wave. Personally, I'm hoping for a low surf.

When I first got into real estate and started researching past performance, I found a beautifully smooth upward property value appreciation line on the valuation graph. That made comps very reliable and predictable. Banks rarely questioned appraised values because they had been so steady for so long. Now the chart looks more like a cardiograph......huge spike followed by a huge drop. I don't think the market is strong enough to support another big spike right now but the volatility we're seeing is going to cause problems with comps for a long time.

Regarding your question about lenders lending for SFH; the ones I've talked to are anxious to lend but the new regulations are so tight that many people just don't qualify. I think we'll have to see a dramatic shift in the unemployment rate to support a "real" recovery in real estate.

Jack - I like to cooperate with the banks when possible because they've brought me a lot of deals in the past. It's just unfortunate (for me) that they've found an easier way to unload in bulk. I definitely have to change my approach.

Rich - It appears that my area is just catching up to what you've seen in yours for a while. I'm committed to the rehab strategy so it looks like I need to get REALLY good at finding properties before they appear on the public radar. I noticed in your profile that you were able to "retire" from daily work at 29. That's great! You figured out something very early that most of us are still dreaming about. Congrats!

Karen - Hope your office building project goes well. Thanks for the feedback.

Michael P. - I'm seeing exactly what you described. I tell myself every day that I'm a "shopper", not a "buyer". That helps me resist the urge to chase a bad deal past my threshold. If the numbers don't add up, I don't buy it. I've got the feeling that the irrational buying we're seeing is because the investment "winds" are blowing in that direction. That's what got real estate in trouble in 2006. Hopefully cooler heads will prevail and it won't get completely out of control. Meanwhile I'll have to live with fewer good deals.

Ben - I considered the buy and hold strategy a couple years ago but I didn't move forward with it. Now that I hear every day about so many investors and new investment companies going in that direction, I think that I've already missed the opportunity. I learned in 2006-2008 that when I see the whole crowd going in the same direction, I need to stop and head in the other direction. Thanks for your input.

Justin - Thanks for the list. That makes a lot of sense. I'm limited to items 2 & 3 but I'm hopeful that getting really good at them will make it work. By the time I'm an expert at it, maybe the market winds will be blowing my direction.

J Scott - I've been wondering how the investors you described are selling their plan to their shareholders. Either they aren't playing smart or they're hoping that they time their exit so they have a chair when the music stops. You would think that the shareholders would be savvy enough to match their strategy with current economic fundamentals (unemployment, new taxes, etc).

David - "Paying rehabbed ARV for non-rehabbed properties?".... exactly my question! I don't see how they can sell this plan to their shareholders. I hate to think that they are just in it to collect a short-term fee of some kind and will bail out when they have to actually start performing on the portfolio! I'm sure there's more to the story that we'll never know.

Ned - Thanks for your response. I'm afraid this scenario is making a crap sandwich because the lower end of the market is being inflated by incoming investors but the higher end of the market is limited by what typical buyers (people with jobs) can afford. It looks like a recipe for a stalled market.

Michelle - I'm wondering how long this pattern will last. I think the people that HAVE to buy right now will take it on the chin with the higher prices but those that have found a way to survive in a down economy (moved in with friends or relatives) are going to stay on the sidelines. This price increase is way out of line with the general market trends and will likely pass by the average person before they know what happened.

It's incredibly bizarre to me that we just recently went from terrible news every day about "10 years worth of foreclosures flooding the market.....and we'll be over-run with inventory forever"..... to suddenly, inventory levels are at a 5 to 10 year low?!!?

If you're a pilot...... you just came out of a turbulent storm cloud....get a few moments of sunshine..... and you see another dark patch ahead. Don't turn off the seat belt sign just yet. This is going to be bumpy for a while longer.

I've been a fix & flip rehabber in east TN for about 10 years now. I've seen a dramatic change in the availability of distressed properties over the past month or two that has me a little concerned. Good rehab projects have always been fairly easy to find but very recently it's like the spigot was suddenly turned off. I'm wondering if anyone else is seeing this in their area and what your thoughts are.

I know that investor activity is high around the country right now but it's the lack of properties coming on the market that's most disturbing for me. I got a phone call this past week from a company that buys houses in bulk, directly from banks across the country. He was asking if I was interested in any of their wholesale deals in my area. This confirmed a suspicion that I had over the past few weeks that banks were unloading their properties directly to large investment companies instead of putting them on the market themselves. I don't fault the banks for wanting to unload in bulk and I don't fault the investment companies for making a profit but I see a real problem developing on the horizon from this.

The problem is that the investment companies don't add value to the properties. Their profits are taken entirely from the transaction where the bank releases the property back to the public which is typically where the rehabbers make their profit. If the rehabbers can't make money fixing the houses, the houses won't get fixed. The large investors aren't going to get into the business of fixing the houses, so distressed properties will sit in their distressed condition even longer. That brings more negative pressure on neighborhoods and the market in general but, more importantly, it cuts the heart out of the urban/suburban blight recovery (i.e. puts me out of business).

Initially, I considered these investment companies as typical wholesalers (which are good for rehabbers because they bring them deals) but unlike "typical" wholesalers they want to make $10k to $15k on each house instead of $2k to $5k a "street-level" wholesaler would expect to make. Those numbers don't add up........not in my area anyway.

I'm very interested to hear your thoughts about this.

Taylor, I've been exactly where you are right now so your post resonated with me. My very first real job in high school was in construction. I did that for a while but eventually wanted a bigger challenge so I got my engineering degree. After a few years of hitting my head on the corporate ceiling, my attention went back to construction, only this time I was doing all of the work on my own investment properties. After a couple years of lifting, nailing, coughing, aching, roofing, and generally running myself into the ground (including one project that literally almost killed me because I was doing ALL of the work myself), I had a realization. This sucks!

I was making really good profits on every flip (as high as $50k on one) but I was severely limited on the number of projects I could do. The result was that I was only doing two or three flips a year. The worst thing that was happening to me though, which I wasn't even aware of at the time, was that I wasn't getting better at the "business" because of my "busyness".

I finally came to the realization (and reminded daily by the bulging disk in my back) that I needed to get really good at leveraging. It's common knowledge that real estate investing relies heavily on leveraging money but not everyone gets good at leveraging services. I made it my mission in 2012 to become an expert at leveraging. I'm a long way from being an expert at it but my progress has allowed me to keep a full time engineering job and flip one house roughly every two months. By the end of 2013, I want my average to be one flip per month. It would be absolutely impossible for me to do that if I were still doing all of the work myself.

I would strongly encourage you to follow your instinct to find good people to leverage. I have two key people that do 90% of the work in my business.....a really good Realtor....and the worlds BEST contractor! My contractor carries 75% of the business all by himself. I pay him well and he takes care of me.

Hope this helps!