Archive for the ‘ Deals We’re Doing ’ Category

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.

Bandit Signs to Generate Seller Leads in Pontiac, MI

 

As we discussed in our previous post Real Estate Investing in Pontiac, MI we talked about some of the marketing techniques we are going to use to generate seller leads on properties in Pontiac.  Today we spent a good amount of time putting up bandit signs, 16 in total, and we wanted to share how we did that.

Location

In our post Getting to Know the Pontiac Real Estate Market we showed you how we were able to research which areas of Pontiac, MI that we are going to target to invest in.  We have established many “Green Zones” in Pontiac and these are of course the areas that we will be targeting with the bandit signs. 

For today, we have targeted two specific neighborhoods, each of which is about 0.25 square miles in area.  To cover these areas, we have placed 8 bandit signs in each neighborhood.

To keep track of where we have placed our signs, we are plotting them in Google Earth as shown in the picture below.  This will allow us to track where we have the signs, and also give us an idea about how long the signs stay up. 

Bandit Sign Locations

In our post Bandit Signs Creat Leads, we talked about looking for tall grass, busy corners and telephone poles.  In previous campaigns, we have placed signs on the ground using sign holders at busy corners.  Using this technique, our experience has been that the signs stay up for about a week.  This is okay to generate a maximum amount of exposure when trying to sell a property, however, in this instance we are marketing to homeowners in specific neighborhoods, so we are going to place the signs right in the neighborhood.  Because we are doing this, it is very difficult to find locations where we can put signs in the ground, so we have decided to put the signs on telephone poles. 

Installation

To install the signs, we have come up with a tool that will allow us to quickly install the signs on a telephone pole, and they will be installed at a height out of reach of someone standing on the ground.  As the video shows, the tool consists of a hammer stapler that is duct taped to a piece of electrical conduit.  The video shows we had a difficult time installing the sign, but this was the first go at it.  Once I had the technique down, it was actually quite simple, and the tool did a great job.

Testing & Tracking

As the video shows, we are trying out two different signs with the following messages:

We Buy Houses
Any Condition
Anywhere
248-812-9348
We Want Your
Pontiac House
-Call Us-
248-812-9713

You’ll also notice that we have two different phone numbers.  These phone numbers were generated using Google Voice.  If you have not used Google Voice before, it is a great service and you should really check it out.  It provides you with a phone number along with a voicemail service and it is completely free.  The nice thing is that when someone calls your Google voice number, you can have the call routed to any phone that you specify.  We have each of these numbers routed to our cell phones, so they will ring when someone calls.  One drawback of Google Voice is that you can only route one Google Voice number to your cell phone.  We have discussed a way around this by routing additional Google Voice numbers to prepaid cell phones.  We haven’t tried this yet, but we plan to in the future.

Using Google Voice with this system is a great option for a few reasons.

  1. We can set up a custom voicemail greeting that will simply ask them for their name, phone number, address of the property and their asking price.  This is a great way for us to screen the callers and put some information together on each property before we act on the lead.
  2. Using the different phone numbers will allow us to easily track how many responses we get from the two different sets of signs.
  3. Using Google Voice numbers allows us to keep our mobile phone numbers private
  4. These are bandit signs, and using Google Voice to screen the calls will prevent any run-ins with the city.

So, with any luck these signs will generate quite a few leads for us.  We will keep you posted… 

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We Have a Deal, But No Money…Just Yet

 3 bed / 1 bath Brick Ranch with Basement & 2-Car Garage

As we talked about earlier in the week, we spent the good part of this past Saturday putting together the numbers on a rehab in Waterford, Michigan, and the numbers looked good.  The property shown in the picture above is a great little 3 bed / 1 bath brick ranch with a full basement and 2-car garage that really just needs some updating.  The house is solid from top to bottom with no structural issues and the roof is great.  Everything is telling us this is a great little property, and so we submitted the offer on Saturday night. 

Since then we’ve been back and forth with the seller, and right now we’re at a bit of a stalemate.  Originally we had planned to put the property under contract with a financing contingency because we were planning to fund the deal through a hard money lender.  With the analysis we have put together I am confident that we could obtain the funding, but I cannot be 100% certain, so we need the financing contingency.  This is a major issue for the seller, and they are requesting a $5000 deposit with no contingencies on the offer.  In addition to this, they are asking that we close in 14 days. 

Unfortunately, we’re not in a position to put the property under contract right now, but if we are able to locate private funding, we could easily snatch this deal up and be off and running with the rehab.

Right now we’ve completed a full analysis of the property and we’re reviewing this analysis with a few private lenders.  We don’t have the funding lined up just yet, so if you are interested in partnering with us on this deal,  we would be happy to discuss the full details with you as well.  For now, here is a summary of the numbers:

  • After Repair Value = $95,000
  • Purchase Price = $38,000
  • Purchase Costs = $1,700
  • Repairs = $21,400
  • Holding Costs = $2,400
  • Selling Costs = $7,600

Potential Profit = $23,900

To see our full analysis, you can download it here.

If you are interested in partnering with us, please feel free to contact me at todd@michiganpropertybuyer.com or give me a call at 248-917-4416.

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Status Update on Our Deals…

Welcome back. Today we just wanted to give you an update on the deals we’re working on. We’ve had a lot of activity over the last week, and we just want to catch everyone up. So here goes…

Pontiac Turnkey Opportunities

As we have been talking about in recent blog posts, we have been focusing on our business plan to set up turnkey rentals in Pontiac.  We have been focusing on a number of different aspects of setting up this business including finding properties.

Last week we started on Monday and went through the following progression to find deals.

  1. We had our realtor send us a list of properties that met specific criteria that we were looking for.  The list she send had approximately 30 properties
  2. We reviewed this list and found about 15 properties that had “potential” based upon their size, price, condition and most importantly location.
  3. Kelly did a drive-by on these 15 properties and we decided to look at 4 of them.
  4. Of the for, we have submitted offers on 3 of them and we’re waiting to hear back on the offers.

This week, we have begun the same process although the list we start from will be smaller because there aren’t as many newly listed properties on the list.

Rehab Opportunity in Waterford

Kelly was approached last week by another investor that contacted her through one our ads on Craigslist.  Initially we didn’t like the property because of the list price, but the investor then told us they would take considerably less and gave us a target price to shoot for. 

So, we ended up doing a complete analysis on the property included determining the repairs necessary, conducting a market analysis of the property, and determined our return on investment.  After all of t his we were able to submit an offer on the property lat Saturday evening.

The numbers we have are looking pretty good, and we submitted a full price offer, so stay tuned to see how this one turns out…

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Turnkey Rental Properties in Pontiac, MI

In today’s blog post we are just going to give you an update on some of the things we have been focusing on over the past couple weeks.  We are changing our focus a little bit and we’re developing a business model for turnkey rental properties.  Our focus will be on Pontiac, Michigan, but we will look at any property in Southeast, MI.   So here’s what we’ve been working on to build this business…

Focus on Systems

First off, with everything we are doing in setting up this business we are focusing on systems.  Our plan is to have multiple properties in various stages of the turnkey process (negotiating, buying, rehabbing, tenanting, selling), and to manage all of this we need systems in place to ensure our operation runs smoothly.

Business Plan

Our first step is to lay out our business plan.  This plan has our ideas organized on all of the following:

  • A description of the product we are selling – Turnkey Rental Properties
  • Our pricing strategy for selling
  • A description of the “Target Property” we are trying to buy
  • Locations for where we want to buy
  • The price we need to buy for
  • Our formula for rehab
  • Our plan for how we will sell the properties

Marketing

We are putting together our marketing plans to generate leads for buyers.  We are going to focus on out-of-state and international buyers because they will benefit the most from what we’re doing.  Because of this, the majority of our marketing for buyers will be online.

Market Research

As we wrote about in our post “Getting to Know The Pontiac Real Estate Market” we are spending a lot of time researching the Pontiac market.  We are looking at homes, studying the rental market, and determining the best areas to invest in Pontiac.

Meeting With Investors

To fund our deals, we need money, and to do the kind of volume we want to do, we are going to need private investors backing us.  To communicate our ideas, we have put together a business plan that we are sharing with investors, and we are working with them on an equity sharing relationship in the business.

Business Structure

As with any business, you want to be setup correctly to maximize your tax benefits, and minimize your exposure to liability.  We are meeting with CPA’s to develop our business structure to accomplish these things.

So as you can see we’ve been very busy getting a bunch of stuff setup.  Stay tuned for more…

Getting to Know the Pontiac Real Estate Market

Last week we told you about our plans for Real Estate Investing in Pontiac, and over the weekend we spent a good amount of time getting to know this market.  So, how did we do that?   Well, quite frankly we got in the car and we started driving around, and boy were we surprised!  For those of you that know Michigan, and particularly Pontiac, please put an image in your head of what the average house in Pontiac looks like.  I pictured seeing neighborhoods filled with run-down homes, with boarded up or broken windows, and lots of overgrown weeds and tall grass.  Houses like this:

Well we did find houses like that, and in fact that picture was one of the houses we saw.  But like I said we were surprised…we were surprised because we also found houses like this:

In fact, we saw whole neighborhoods filled with houses like this.  Now, I’m not going to sugarcoat things.  We did find areas of Pontiac that were exactly what we expected, but the big takeaway was that there really are some great areas of Pontiac to invest in. 

So, having all this first hand knowledge is great, but it’s really easy to forget the areas we drove around in, so we spent a lot of time documenting the various areas we drove through.  Here’s how we did it:

  • We systematically drove through neighborhoods covering many parts of Pontiac.
  • As we drove around, we noted all of the vacant properties and the homes that were for sale.  For each of these homes we took the address, phone number (if listed), recorded comments about the house, and took a photograph.
  • After we got home, we put organized all of this information into a spreadsheet

So, this was helpful, but it still didn’t give us a clear indication of where the good areas of Pontiac were.  We essentially had a list of properties and comments about them, but it was hard to really put it all together.  So how could we make better use of this information to make it immediately clear where the good areas of Pontiac were?

Well, the answer was to put the information on a map.  Now, we had approximately 75 different properties that we documented, so it was going to be pretty tedious to map each of them, and I figured there had to be a web application out there that would map multiple properties at once.  Well, as it turns out there is.  I found a great little website called BatchGeo.com.  This website allows you to take your list of addresses, copy them into the website, and it maps them all at once.  And, as if that wasn’t helpful enough, you can also add categories of information (i.e. our comments about the houses) that will show up on the map when you click on each map points.  So, after using this site, we ended up with a map that looked like this:

This worked out perfect great!  We now have a map that we can really start to analyze.  But it got even better when I noticed something.  See that little button that says “Google Earth KML”.  If you click this button it allows you to save a file of the plotted addresses that is readable by Google Earth.  If you haven’t heard of Google Earth, click on the link and download the software.  It’s free, and I think it’s one of the coolest pieces of software that Google has put out. 

So I saved the file, and then loaded it into Google Earth and it worked!  All the addresses were plotted perfectly in Google Earth.  This was a big step forward because now we have a map that we can continually update as we learn more and more about the Pontiac market.  The other great thing is that Google Earth has lots of cool features that allow you to customize your maps.  So, to help us visualize where the good areas were, we started to look at our notes about each property on the map, and we were able to see the patterns of where the good areas were.  So using Google Earth we started to draw red, yellow and green zones on the map using the “Polygon” feature.  This feature allows you to outline areas, and you can color-code these areas with a transparent color.  So here is what our current map looks like with all of the zones we have researched: 

Note: the actual map has the zones color coded red / yellow / green to indicated the bad / questionable / good areas of Pontiac.

This was an excellent exercise for us because in a relatively short amount of time, we were able to learn a great deal about the Pontiac market.  Plus, we now have a great tool that we can use anytime we come across a new property.  We can just map the property in Google Earth, and we’ll know immediately whether we want to consider investing in the property.

So stay tuned…more to come on Pontiac investing…

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Real Estate Investing in Pontiac, MI

Hello, welcome back.  Today, as the title indicates, we’re going to talk about real estate investing in Pontiac, Michigan.  When Kelly and I first got started, we probably would have told you that there was no way we would ever want to invest in Pontiac because let’s just say it’s not the best area of Oakland County.  And, in fact, many people we have talked to have tried to shy us away from investing in Pontiac.

However, our experience to date with Pontiac has been pretty positive.  As you may know from this blog, the latest property we bought was in Pontiac, and we think it is an excellent investment property.  The price of the property was very low ($21 per square foot) but the rent we collect is very similar to what we would collect if the same sized home was in a different area.  These two factors make the return on our investment very high.

So, if your main goal is cashflow, it absolutely makes sense to look at investing in Pontiac.  There are many great deals, and because the prices are so low, you can generate a lot of cashflow by purchasing properties in Pontiac.

Unfortunately, our main goal right now isn’t to generate cashflow but rather we are trying to build capital by buying and sellering properties we invest in.  This means that we really need to be buying for a low price and selling for a higher price, and until now, we really haven’t figured out how you could do this in Pontiac.

About 2 weeks ago, we were approached by an out-of-state investor and they were really interested in the investment activities we had in Pontiac.  We had a brief telephone conversation and they mentioned that their company’s main focus was to produce “Turnkey Rental Properties” that they could sell to their buyer list.  This week we set up a conference call with them, and discussed in more detail exactly what they’re doing, and how we could help.  Essentially, the way they work involves the following steps:

  1. Purchase the property at a discount
  2. Rehab the property
  3. Put a tenant into the property
  4. Sell property with tenant / property management in place

This company has been very successful at doing this.  In fact they have been so successful that they are approaching investors like us to help them find more properties.  So for now, we are going to be acting as a bird dog for them to send them properties and collect a finder fee for any properties that they end up purchasing.  So using what we have learned to date about marketing for properties, we are going to set up the following marketing plan to find properties in Pontiac:

  1. Use bandit signs in the areas of Pontiac that we are targeting
  2. Use yellow letter campaigns to target specific properties
  3. Post online classified ads indicating that we are looking for properties in Pontiac
  4. Search online classified ads for properties in Pontiac that meet our criteria
  5. Generate website leads by setting up squeeze pages
  6. Hand out business cards in and around the areas of Pontiac we are targeting
  7. We’re going to drive the neighborhoods looking for properties
  8. Network with real estate professionals that are focused on Pontiac

We think this is a comprehensive marketing plan, and as you can see, we will be using many of the things we have talked about in our blog before.  This will be a great way for us to continue to apply the things that we know work, and in the process we will be learning a new investing technique from a well established company.  Eventually, I think we are going to try out a few turnkey properties for ourselves because, just like the Lydia property, the numbers just make sense.

So, stay tuned, we will definitely have more discussion on this topic…

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