This will be my personal journal to document my failures and successes during my real estate experiences in Arizona. All stories, thoughts, and successes will be documented..
Tuesday, May 31, 2005
No grass growing under my feet..
Real Estate Investing (REI) in the last month has been like playing tennis with one player. Its hard to play the game when you hit the ball and no one hits it back!
In the interest of getting my phone to ring again, I am increasing my marketing. If this doesn't reach my goals, I will increase my marketing again until it happens.
- Business cards everywhere
- Bandit signs (at least 100 signs a month, placed in good locations that stay up for while)
- Letters to preforeclosures in my farming area.
- Magnetic sign
- Dirty 30 (letters to vacant/or worn down properties that I see in neighborhoods)
- Min of 3 letters to preforeclosures.
- Now sending out to a divorce list (more letters)
- Submitted classified ad in local paper
- Translate my letters into spanish for certain zip codes.
So, more work, and an extra hundred bucks a month in marketing..
I'll tell you folks, I feel that this still isn't enough to reach my goals. We'll see..
In addition to the marketing changes, I am changing my paradigm on prescreening the owners. Typically, I try and screen them to the point that I pretty much know If I can make a deal when I come over to the property.
I haven't gone to very many houses in the last few months, so I haven't made many offers. No offers , no potential to buy. SO, I am now going to fully work over my leads as if they were gold. After I confirm some level of motivation and the basic numbers, I will get off the phone to do more research. After getting comps, I will run through the numbers and create at least thre ways to buy the property. If the seller is interested, I will than go straight to the house and negotiate!
Bginvestor, 12:12 PM
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Notes from Full time investor...
Last week, at one of the sub groups of the AZREIA meetings, there was a guy who talked to the group about his REI business here in town. This was a local investor and was very forth coming with how he approached his business. He's pretty successful, he has bought 10 houses year to date..
Here's some notes:
- He sold all 40 of his properties in the past years to do his new strategy: fix & sell
- 1 or 2 bedroom are not appealing because they have high turnover rates
- He buys directly from owners, no MLS.
- Several kinds of marketing is necessary to be successful
- He places advertisements where only a few competitors are
- Provide multiple offers
- Average profits: 40-50 gross margins 20-25 gross net
- Bought 15 houses in 2004
- Year to date, 10 homes
- 20% are in bad shape..
- Higher the price, the easier it is to get to the Maximum Allowable Offer (MAO)
Price break down:
-4k selling commision ($1000 + 3% to buyers agent for a total of 4%)
-4k closing costs
-4.25k Interest taxes insurances (6 months start to finish)
$ 52,5k Maximum Allowed Offer (MAO) WOW he's buying property at 55 cents on the $$
- Price to buy --> Rule of thumb .70 (price of house) - repairs
- 8 full time employess
- 100 houses --> 10 offers --> 1 deal
- His deals median -- buying 80 k ... selling 120 k
Bginvestor, 9:49 AM
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Sunday, May 29, 2005
Birddog contacted me..
Finally, a guy found one of my business cards, and wanted to be a birddog until he could raise enough cash to invest. A birddog is a someone who finds properties to investors and get paid on a commision basis. They are not ready to take the risk of buying yet and they are quite happy to get $500-$1000 for deal.
Well, maybe not this guy, he balked at my $500 fee. He seemed sincere, and I told him to go to my website www.azbuyhouses.com
and look at the birddog section for details of what I expected. He said he will call me back and guess what, he never did!
Bginvestor, 9:43 AM
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Saturday, May 28, 2005
Where's my leads???
I'm embarrassed to say this, but I haven't got a call from a seller in almost 2 weeks!
What the heck is going? I'll tell you, Tucson's market is kicking my butt! The buzz is everywhere in town now and every realtor will tell you that houses sell in days.
If you remember from my previous posts, I keep in communication with with realtors that focus on REOs. They are hurting too. Inventory is low, and they have no leads for me.
Basically, my current marketing focuses on: letters to preforeclosures, door knocking, bandit signs, and business cards.
What is the solution? Market harder!!
I've increased my preforeclosure letters to more zip codes. This is why I haven't been writing so much anymore.. No time! Remember, I'm a part time investor so time is the most precious thing I have right now.
Last month, I got my strategies in line to match with the current market place, but I forgot to think about my marketing.
I need to tweak my marketing. One thing for sure, more of what I'm doing is only going to help me, but should I be doing something else? I'll have to think about that one.
Bginvestor, 9:31 AM
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Sunday, May 15, 2005
Another door knocking session...
I hit the streets yesterday and unfortunatley I didn't get to go inside one house. :-( Here's the break down of yesterday's session.
Door knock #11 - No answer
Door knock #12 - No answer
Door knock #13 - working w/ investor
Door knock #14 - No answer
Door knock #15 - Sent check
Door knock #16 - working w/ investor
Door knock #17 - Planning to pay
Door knock #18 - Check will be sent
Door knock #19 - No answer
Door knock #20 - This one is interesting. After talking to the neighbor, turns out that the guy left the wife after 20 years of marriage. He moved to Phoenix and has 4 mortgages on the property. Its been vacant for months!! Too bad, its a nice house.
Door knock #21 - No answer
Door knock #22 - Send check
Door knock #23 - Gave card to kid
Door knock #24 - No answer
Door knock #25 - File bk , talk to bk
Door knock #26 - No answer
Door knock #27 - Sent check
Door knock #28 - He can save house, no plan, didn't want to talk
Door knock #29 - No answer
Door knock #30 - No answer
So, 20 door knocks with little results.
Out of the 20 doors, I only talked to 7 owners! As far as I'm concerned, I really only door knocked 7 houses. Without talking to the owners, you can't do business. Its amazing the excuses, oh, he's sleeping right now, or she's trying to decide what to do, etc.. I need to rely the importance of getting the problem solved.
Marketing is strange. For this type of marketing, you can get business right away, a week from now, or in 3 months. Thats why its important to repeat your marketing so they don't forget about you. I will send repeat letters and door knock the nice properties.
Bginvestor, 9:32 AM
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Friday, May 13, 2005
MLS here I come!
As part on my path of least resistance, I'll be setting up some criteria for an agent to send me daily feeds of new listings on the MLS.
If I'm going to do this, I need to take it seriously and work fast. If there's an opportunity, I need to jump it or else it will be gone in a few hours or days...
I'll set up four different criteria for different type of deals.
1) Houses with land that can be split
2) Apartments, fourplexes, etc that has land that can be split
3) Fixer uppers in specific parts of town
4) Nice houses in a specific school district
Let's see how it goes..
Bginvestor, 7:00 AM
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Tuesday, May 10, 2005
I'm starting to run away from REOs..
I looked at yet another REO last night and confirmed my intention feelings on REOs.
Price: 117 k
After Repair Value (ARV): 140-150k
The condition was ok for a rehab, but the problem was the floor plan. The house has taken on 3 different remodels and floor plan is a disaster! Imagine a house inside of a house. Its now a four bedroom and has only one bathroom! The floor plan is just nuts.
Every room needs tons of work from bottom to top. The lender finished the roof w/ a warranty. The guy did tons of electrical not to code, A/C not hooked, water heater not hook up although looks new.
The amount of time and cost to straighten out the electrical to code and making a new bath room is just crazy.
Guess what? There's four offers on it thats over asking price. Let's say you sold it for 150k full asking price and used a realtor. You sitting at 138k after closing and realtor costs(150*.92). If you bought at asking price, thats 21k for all buying costs, repairs, and profit.
Am I the only logical and rational investor in Tucson?
I'm going to track this one for the next year and see if the investor will make money. I'm afraid that investors are confusing the comps with another neighborhood thats almost across the street. Thats considered another world compared to this neighborhood. I bet the new owner will be burned.. I've seen it before.
Bginvestor, 6:52 AM
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Monday, May 09, 2005
My buddy had a bidding war!
I have a friend that bought a house for 160-170k two years ago. He did some fixups (5k-10k), but decided to sell for another investment. He listed his property late friday night (5/6)and sold it on Sunday(5/8). He asked for 220k and the bidding war started! After four to 6 counters between other buyers, they sold it for 257k! Good for him!
I love real estate ;-)
Bginvestor, 11:46 AM
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Ok folks, here's one of my latest leads...
Got a call from a guy that wants to stay in his house. This guy makes $12 an hour and he got a loan for zero down at 8% interest! Crazy! He bought way too much house and now he's in trouble..
Property: 133k Bought in Nov 2004
Owes: 133k +4k closing costs+ ?arrears
Repairs: needs a new roof
This is an awesome red brock house right down the street from one of my other properties. This would be good one. He's pretty much upside down.
Unfortuanately, There's not much equity. My new strategy won't work becuase his payment is $1200 which is $300 over current rent comps. So, if he didn't work out and I evicted him, I would take on a huge negative cash flow. Not good !
At first, I didn't think there was much hope for him, however, I have a plan that will work. I will offer to do a short sale. If this works, I can buy the property w/ 20% equity which will give a monthly payment that will reach current market rent. He will like this because he will now have to pay only $950 a month in rent.
This will not be an easy short sale because the note is so new and the house is not really trashed. We will need to work fast because its gone in August through a trustee sale. I haven't done a short sale in over a year so this will be a good one.
Bginvestor, 11:32 AM
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Thursday, May 05, 2005
Land selling over over 75k an acre!
We've invested in some land in Ferley Nevada that is about 30 minutes outside of Reno. The prices of real estate in the small town is just amazing!! Land is selling 50k -180k an acre for development.. We have some next to a gulf course ;-)
Well, my partner in Reno told me that we have a cash offer for our property. Its not the asking price, however, its a good starting point. We plan to counter and see what shakes out.
P.S. I already got a phone call from my new marketing strategy. This is a good sign. Hopefully, we'll meet and I'll be able to help this homeowner out. Stay tuned..
Bginvestor, 9:12 PM
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Sunday, May 01, 2005
Notes from the bankruptcy class..
This class kicked ass! I left the meeting with my head hurting which meant I got my money's worth..
The instructor went over the new rules that are going into effect this October 2005. Things are changing quite a bit later this year.
The main point I want to make is that it WILL be much harder to FILE Bankruptcy in the near future.
Here are the "new" requirements
- Allow more time to file
- Require credit counseling
- Show tax returns - i.e, 1040's, 1099, laest W-2s
- Qualify for bankruptcy - last 6 months of spending , proving that you can't pay 25% of unsecured debt OR $167 a month
- You have to keep all spending records before filing - ALL expenses for 2 months
The new law essentially makes a chapter 7 (liquidation) into a chapter 13 (reorganization of debt). The "stay" will not happen until they qualify for bk. This will allow the credit card companys to get more money before any debt is discharged.
- Homestead act (Arizona) is up to 150 k (equity) so this is off limits in a chapter 7. Chapter 13 will allow you to keep the property if arrears can be made up.
- Chapter 7 has trustees, Chapter 13 has receivers
- Chapter 11 is usually for businesses
- Chapter 13 are harder to complete because of the payment plans
- 95% complete a chapter 7
- Health is #1 reason for bk
- You can't eveict a tenant if he has filed bk! You have to receive $ even if its not the full amount
- The "stay" ends when case is closed /dismissed/discharged A stay is when creditors are directed to leave you alone
- Things that don't go away in a bk - 1) criminal files 2) student loans, 3) fines to government, 4) damages - willful injury, 5) spousal /child support, 6) income tax, 7) property tax, 8) medical melpractice, 9) willful tax evasion, 10) co-sign debt
- Go to keytlaw.com for good bk resource
The main buying strategy that the instructor recommends is to contact the trustee of a chapter 7 and offer him to buy the property directly. He would of done this anyway since he will take the proceeds to pay the creditors. First, you want to make sure its a property that he is planning to liquidate (exceeds homestead). There's a federal website that allows you to find his contact info. This works well for commercial, land, and luxury homes.
Bginvestor, 8:34 PM
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