Archive for the ‘ Deals We’re Doing ’ Category

Day 29 – A Nice Surprise for My Birthday!

Today is Day 29, and it’s my Birthday! 

I was planning to relax a bit today, but to my delight I got a phone call at 10am this morning from a gentleman in Hong Kong, and by the time the call was over, we had principally agreed on the sale of one of our properties.  I just need to prepare the paperwork but it looks like this one is going to move forward.  I’ll have all the details of this transaction in a future blog post, but today I just wanted to talk a little bit about what it takes to be successful.

As I mentioned, today was my birthday, and I spent a good part of the day working on moving my business forward.  We sold a house, got contractors lined up for a bunch of work, managed some inspections on one of our section 8 properties, and met with clients until 11:30pm.  Does that suck?  To some it may, but to me, at this point in my life, I was so very happy to spend my birthday in this manner. 

Here’s the point… My birthday yesterday was filled with work, but I’m looking ahead.  What is my birthday, or what are my kids’ birthdays going to be like 5 years from now.  By making sacrifices today, I’m making a better future for my family tomorrow…that’s my outlook.  So if you ask me if that sucks, I say HELL NO!  I had a blast on my birthday because I know I’m taking the right steps forward and this will only lead to happiness for me and my family.

The point is this, if you sacrifice now and make the conscious choice to move yourself forward, you will achieve success.  That success may not happen today, or tomorrow or a year from now, but if you work hard at what you’re doing and constantly move the ball forward, sooner or later you will start to see results in what you’re doing.

So get to work!

More to come…

 

Day 19 – SOLD!

So yesterday we told you that we had completed our Michigan Cash Flow Property Tour and that we hadn’t sold a single property.  Well, about an hour after I published that blog post, one of the investors who had been in town over the past couple weeks phoned me on the way to the airport and we arranged for him to purchase one of our properties.  So, now we’re well on the way towards our goal. 

We purchased this property at the end of March, and here are the list of costs we’ve incurred for the property:

  • -$15,500 Purchase Cost
  • -$2,500 Financing
  • -$2000 Closing Costs (Buy & Sell)
  • -$15,000 Rehab, & Holding Costs
  • -$900 Tenanting Fees
  • +$1,800 Rent Collected

Total Cost - $34,100

Sales Price – $45,000

Profit – $10,900

That’s right where we wanted to be with this property, so we’re very pleased.

This puts us a big step forward in our goal, and we have now earned $12,000 towards our goal of $60,000 in 60 days.

More to come…

Day 8 – A Busy Week…

Well, it’s day 8 on our drive for $60,000 in 60 days.  We’re having a phenominal week so far.  We have a couple of investors in town this week that we will be showing around town as part of our Michigan Cash Flow Property Tour.  We’ve spent the last two days with one of the investors that came in, and we’ve had a very enlightening experience, and we’re very excited about the potential partnership that will come from the discussions we’ve been having this week. 

It’s gonna be a busy week, but I think it’s gonna bear a lot of fruit.

More to come…

Day 4 – Put Some Money on The Board

Well today is Day 4, and the good news is we have money to put on the board already.  Unlike last year, we really didn’t have many investments going when we got started, but this year is different.  Through our company, Michigan Turnkey, we have set up a number of cash flow investment properties that provide cash flow to us each month, and they are also a source for flipping properties…

Essentially our business model is to:

  1. Purchase property
  2. Rehab the property
  3. Hire a property manager
  4. Place a tenant into the property
  5. Sell the property as a turnkey investment to another investor

In this process we have two sources of income – cash flow from the rental properties after they are setup, and forced appreciation from the spread we are able to achieve in renovating the properties and setting them up as rentals. 

Well, today is July 1st, and you know what that means – Rent is Due!

Currently we have 6 properties in our portfolio.  Of these six, four are currently rented, one is under rehab, and one just went vacant.  Here is our cash flow summary for this month:

July Cash Flow Analysis

So as of Day 4, we’re about 2% of the way towards our goal of making $60,000 in 60 days.  The interesting thing about this cash flow analysis is that the two properties that are vacant right now are really hurting our return.  These two properties alone would add an additional $1500 in cash flow…time to get them rented.  The good news is I just got word from our property manager literally in the last 5 minutes that we’ve received a rental application for one of the properties…we’ll see how that turns out.

More to come…

Day 3 – Real Estate Investing Stinks!

That’s right, sometimes real estate investing literally stinks!  Our newest property at 659 Wesbrook in Pontiac was a great find, but there’s one little problem…IT STINKS!  Literally!  It’s clear to us that the previous owner had dogs living in the property, and there is a pretty strong wet dog odor throughout the house. 

This is a bit of a problem because our property manager has 10 showings setup for Friday (yes 10!), and we certainly don’t want to turn off any of these potential tenants because of the odor.

We have narrowed the issue down to the carpet which we could replace, but other than the odor, the carpet is in really good condition.  So, we’ve decided to experiment. 

First we used Glade Carpet & Room Odor Eliminator.  This product comes in a powder form, and you basically sprinkle the powder all over the carpet.  We let the powder sit on the carpet for a few hours, and then vacuumed the carpet.  This has already made a remarkable difference. 

However, we’re still we’re worried the odor might come back, so we’re also going to try a couple of techniques that, quite frankly, don’t make a lot of sense to me.  Our cleaning lady told us to use charcoal or vinegar left out in the open of the room.  The charcoal and/or the vinegar are supposed to absorb the smell.  I’m not sure exactly how this works, but if it works, then who cares how right?

So, we’re going to try both…we’re throwing the kitchen sink at this, and if we can save the carpet that will save us at least $1000.

We’ll let you know how this turns out in future episodes, but we’d also like to solicit your feedback.  Have any of you faced this situation, and are there any other methods or products we might try to remove the odor?

More to come…

Read the Fine Print on Your Real Estate Contracts and Addendums

As many of you know, we purchased a condo in Pontiac back in August, and we really like the subdivision that the condo is in.  We’ve been scouting this subdivision ever since and we’re looking to purchase more of the condos in there to hold as rentals.  So as we’ve been doing lately, we drove through the neighborhood, and last week we found a newly listed condo just a few doors down from the one we purchased.

So we made the call to the realtor and found out it was still on the market.  The asking price was $23k, and we decided to put an offer in on the property at $15k.  A day later we got the following back from our agent:

Seller countered: $22,000, close on or before 12/20/2010, adding 100.00 per diem. Please advise. Thanks.

Now, you’re probably wondering just like I was what the heck “$100.00 per diem” meant.  My first thought was maybe they were going to take us out to lunch if we accepted their counter offer.  As you might imagine I was a little less than pleased when the realtor told me it meant that for every day past December 20th that we delayed the closing, the bank would charge us $100.  My next thought was, well, we can close in 2 weeks…do we get $100 credit for every day before the December 20th that we close?  Again, my hopes were dashed.  No lunch, no credit…needless to say this negotiation was not going well.

So we countered back at $17,500 and indicated this was our highest and best offer…take it or leave it.  Unfortunately the bank misunderstood our offer and countered back at $21,000.  So we again informed them that $17,500 was our highest and best offer…TAKE IT OR LEAVE IT.

A couple of days went by and we thought the deal was pretty much dead.  In fact we were working on three other deals, and then surprise, surprise, we received this email from our agent:

They accepted!
Just Sign what you need and I will do the rest…

The agent had attached the addendum the bank had provided and was looking for us to sign the contract with the new addendum.  Having seen how this negotiation had gone, let’s just say I was a little suspicious of the bank, so I sat down and started to read the addendum.  As I read through it, it contained the most of the standard boiler plate clauses, but then I got to the clause about prorations.  The clause again was pretty much boiler plate stuff, but then right at the end of the clause they had the following statement:

Seller shall not be responsible for homeowner’s association assessments that accrued prior to the date Seller acquired the Property.

Now quite frankly I was a little perturbed at this.  The bank was not upfront about this at all, and this statement was buried in the addendum.  There was no statement about how much was owed to the association, just that the seller would not be responsible.  So I read on…

There was more boiler plate fair, and then I came to the clause about transfer taxes / tax stamps.  The seller added a clause exempting them from paying transfer taxes and tax stamps.  Again, there was no estimate of what cost they were passing on to me the buyer, and it was a backhanded attempt to win back some of the money they had conceded when accepting my offer.

Needless to say, I have not signed these documents.  I spoke with my agent, and asked her to talk with the selling agent about these clauses, and quite frankly she has been less than successful at obtaining a clear answer from the selling agent.  The selling agent said that these things are normally taken care of by the seller and it should not be an issue. 

Well, there’s just one problem with this….THAT’S NOT WHAT THE CONTRACT SAYS!

So this is pretty much where we stand at this point on this deal.  We are not going to be moving forward on this deal because quite frankly we have completely lost trust in the seller.  If they are using these tactics to extract money from us, what else about this deal aren’t they telling us about?  We’re not going to get involved because quite frankly something stinks.

So the point of this blog post is to remind you to read the fine print on your real estate contracts.  In this negotiation it was clear that the seller was going to use whatever tactic necessary to extract as much money from us as possible.  You would like to think that every negotiation partner you deal with will conduct themselves with a good moral compass, but that is probably just too much to ask for.  So please, read your contracts…

Our Strategy to Provide Turnkey Rental Properties at Michigan Turnkey

As many of you know, we have been actively working at putting together our new company Michigan Turnkey, LLC.  We have been receiving a lot of questions about what exactly we are doing, so today we are going to dedicate this blog post to explaining our strategy with Michigan Turnkey.

So here goes…

In August of this year Kelly and I kind of stumbled into the Pontiac real estate market when we found a deal on a condo that we later ended up purchasing.  The numbers on this property were phenomenal compared to what we were accustomed to looking at on other rental properties.  Specifically, we saw the following:

  1. The cashflow on the property comes out at $442 per month which is about $300 per month higher than what we had been looking at in other areas.
  2. The purchase price was $17,500 which is less than 50% of what we had been looking at in other markets.
  3. The area we bought in was actually a really nice neighborhood (so nice, Kelly and I have seriously considered moving into the neighborhood). 
  4. If we had purchased for cash, our return would have been 30%…we leveraged financing on the property, and our return has skyrocketed to 68%.

So, we began to look at this and we are truly in love with this deal, and we want to find more.  So we began to look at the Pontiac market a little closer.  By evaluating more deals in Pontiac, we were able to figure out pretty quickly that we had gotten a pretty sweet deal on the condo we purchased.  However, we also found out that while most of the deals were not quite as good as the one we purchased, they were not that bad either.  We are finding that putting together a profitable deal with the following numbers is not too difficult at all to find:

  • Purchase price $25,000 – $40,000
  • Return on Investment 10% – 20% for a cash sale (leveraging financing nets higher return)
  • 3 bed / 1 bath with basement in nice areas of Pontiac

After looking at these deals, we decided that Pontiac was truly the place for us to be.  As we talked about in out article Getting to Know the Pontiac Real Estate Market, we started studying the market.  We wanted to find what areas of Pontiac were areas we should be investing in, and what areas we should be staying away from.  So, over a weekend we set out driving around Pontiac and we got a real good idea of where the nice neighborhoods were, and where the not-so-nice neighborhoods were.  We developed a “Green Zone” map in Google Earth and this serves as our first layer of evaluation for any property we look at in Pontiac.

Now, our strategy is quite simple.  We will take any property that we find in the green zone and apply the following process to it:

  1. Purchase the “Green Zone” property
  2. Rehab the property
  3. Conduct comprehensive tenant screening and place tenant into the property
  4. Place management company with property
  5. Sell property as a performing asset with tenant and property management in place

It is really that simple.  Now, we’re really not picky as to the status of the property when we purchase it.  If the property is vacant and in need of repair, we will buy it.  If the property is rented and in no need of repairs we will buy that one too.  In fact, if a property is in any state between these two scenarios, we will buy them.  The only thing that is going to vary is the purchase price we offer.  Obviously the more work we have to do to the property, the lower the price we are going to be able to offer.  It is really just a numbers game because in the end we have a targeted profit we’re looking to make on each property, and we want to be able to sell the property and provide our end buyers with a return on their investment of between 10% – 20%.

So, if you have properties to sell in the Pontiac market, please contact us.  We ARE buying.  Likewise, if you are looking for cashflowing investment properties that net between 10%-20% ROI and will cost you less than $40k to purchase, please call us.  We have properties that will make great investments for you.

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