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..
Sunday, July 31, 2005
Details on Offer #10
Here's the details of Offer #10. Its a double wide mobile home in a decent part of town. The gal is not really motivated, she's still in school and wants to move soon. Her husband is in Texas. I don't know if they are getting divorced or not. The plan is to go under contract tomorrow and we will close in about a month. By understanding her needs, I helped seal the deal by offering to close when she's ready.
I hope this deal will be a text book Lonnie Scrugg's deal. He's made mobile home investing glamorous. Here's how it works. You buy a mobile home cheap and re-sell to a buyer that is looking for seller financing. Leverage is the key here, you can charge 10, 15, even 20 percent interest when you resell to these guys. When you run the numbers its apparent that yields can be pretty high. The buyer only really cares about monthly payment.
I don't know why the gal hasn't looked at the prices of other mobiles in this park. If she looked on the other side of the park, she would find that one is selling for $14k which is smaller than hers!!
Let's look at the numbers. Below, I ran two scenarios. The first is a simple fee sale which I would make $6100. The second is if I resold on seller financing which I would make $10,476. Not bad considering I would have only $7900 into it.
The monthly cash flow is $273 dollars a month. Shoot, I could buy a house for 100k and put way over 20% down and may not get that much cash flow. This is an important oberservation. I am not getting appreciation but I am getting cash flow.
With older mobiles, the depreciation has hit a threshold, so in 5 years, your mobile is still worth about the same.. So, I stay away from the new ones. They depreciate faster than a car.
There is a little concern on the total monthly payment to the buyer. This park has a lot rent of $307 so the buyers monthly payment will be close to $600 w/ utilities. This seems a little high, so I may need to be flexible.
Another interesting point is I got this one from a birddog. I am going to give him a $500 dollar commision. Unfortunately, he was not happy that he was getting his money only when I close the deal (the first week of September).
So a yield of 33% is not bad at all. If I did just 7 more of these, I would have over 2k in passive income for several years. That would be cool..
I decided to talk to the park manager about this transaction when I've got it under contract. I know some parks are catching on to this investing strategy, so I wanted to make sure the park did not make her an offer. The biggest unknown in this deal is the park manager. I hope I can do what I want and she will work with me. If I can't work with her, and need to back out, I will let the seller know in a week. I have a cancellation clause that takes care of this.
Bginvestor, 9:10 AM
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Thursday, July 28, 2005
An eye opening experience...
Last weekend, I completed my financial statement from top to bottom. What an eye opening experience! The numbers do tell a story, and I highly recommend everyone to do this.
I went the extra mile and created a bunch of pie and bar graphs showing many variables.
I answered the following questions.
- How much do I keep?
- Did my money work for me?
- What's my income after taxes?
- How much did I spend on housing?
- How much did I spend on junk?
We have a long way to go, but I see we're on the right path.
Bginvestor, 3:08 PM
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Wednesday, July 27, 2005
Offer #10 Double wide offer accepted!!
Cool! My offer was accepted today.
I don't have this under contract yet, but hopefully tonight. I'll write more on the details.
I talked to a broker last night that had a 20X40 under contract for 14,000 in the same park. (Actually, directly across from this one)
Mine is bigger and got it for $5750, so this should work out well. I'll break the numbers down later.
Bginvestor, 1:13 PM
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Monday, July 25, 2005
Offer #10 - A double wide..
In this type of market, I'm trying to be flexible in finding deals so I'm looking at everything. I have mix reservations about this, because in general its better to focus on a certain type of REI instead of being a fog light looking at everything. Right now, I'm running numbers on apartments, single family, lot splitting, and now mobile homes.. I am making an effort to run the numbers because ultimately this tells me the story if its a deal or not.
So, I got a lead from my birddog, a young gal got a double wide. She was asking 7k for it. Didn't seem to be a bad price. I looked at it yesterday and its funny, because I felt out of place looking at it. I am use to looking at houses, not mobile homes. Sure the fixtures are similar, but I was still thrown off, so I didn't ask enough questions.
Basically, its in ok shape. The walls need to be painted, but if I can live with the dark brown carpet, its almost turn key. The price of 7k is not bad.., but you know me, I need a great deal so I pushed for lower.
I told her that the mobile home market is saturated, and holding costs are long, so based on fixup costs, I told I would give her 5k for it! She told me that her husband (soon to be divorced) didn't want to go lower than 6k. So, I may be close to a agreement. This gal did not do any market research and doesn't really know the value of it. Hoenestly, I didn't know either til last week.
So I played with some numbers to tell me the story. I came up with a graph that tells the cost of the mobile home based on area and year built. The data points are based on recent listing prices from websites and newspapers. These prices assume retail and are in good condition. In general, these numbers are considered only an average using the interpreted line, so I need to be careful not to be unconservative or too conservative. I plan to inlcude more points to make it more accurate, but the trend line is very useful when comps are not available.
Anyway, it should sell for 13k-14k. I expect some holding costs and I need to fix it up so buying it for 5k plus birddog fee seems like a good deal. I could sell it fee simple or do a Lonnie schrugg's deal by creating a note and making twice as much. I'll pay cash for it.
The gal needs to talk to the exhusband and her father. Hopefully, she wants out bad enough. She doesn't seem to be in a hurry since she needs to finish school.
Bginvestor, 12:26 PM
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Saturday, July 23, 2005
Offer #9 - Never go on vacation during a deal!
Ok, so a guy calls me up from my bandit sign and says he is selling his house which is not listed yet. After getting the basic information, he told me that the lot was big. Interesting... I immediately went to the geo-website and saw a sky view of the property and boy was it big. Its over .3 acres and the existing house is placed well.
I went to the city and they confirm that is not in the flood plane and the lot could be split. Good..
I went to see the house and he remodeled it from the bottom up. Its basically a turn key investment. Nice.. He wanted 162k which is full market value. I convinced him that if he sold with an agent and closing costs he would net no more than 93% of 162k, so 150 k. He needed 25k profit which would have brought him to about 155k.
I was negotiating for 150k, but he was confident that if he took it ot the market, he could get what he wanted. And he was probably right. At this point, if I got 150-152k, I could rent out the existing unit with a interest only ARM and get over $100 cashflow. The key to this investment would be to split the lot and build another house and make the real profit on the back side. So, I could buy it for almost market value and still make money.
This is risky for me, because of several factors.
- Its difficult to estimate the appraisal of the house with the lot split.
- I have to estimate the cost of the new build. This was estimated using my buddies construction company that they use. Will they give me the same price for the same floor plan?
- Financing would be difficult when splitting the lot and I would have to add in re-fi closing costs.
- Holding costs are estimated.
- I haven't seen any owners splitting lots in this neighborhood.
- Its not in my farm area.
Ok, at this point, its almost impossible for me to line everything up so I needed a backup plan if the splitting of the lots would not work. The plan would be to rent out the house or better yet sell it on a lease option. IF appreciation stays the same, I would do ok in a year or two. If not, I would break even confidently if I needed to get out. The deal is really predicated on getting the twist (new build) completed. This is essentially buying the property under value because I see the opportunity.
The night before I went on vacation, I offered to put the house under contract for 152k. He told me that its probably better to wait til I get back because he didn't get his official job offer to move out of state yet. Damn!
I called him back yesterday. Guess what? His neighbor bought it for 162k! Turns out he had plans for the land. While I was gone, the seller must of been working it over with his neighbor. I could just imagine the seller saying to the neighbor, " Man, this investor was trying to get me under contract just a few days ago! If you want this property, you better act now, or its going to be gone!!"
The morale of the story is, don't do deals before you go on vacation!
Bginvestor, 11:52 AM
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Friday, July 22, 2005
Back from vacation!!
Well, its back to the grind. I went to the JOB yesterday and man was it painful! At least there's some REI deals that I'm working on right now thats keeping me busy..
I was going to write a little bit about our trip, but my wife had already wrote a nice summary, so here it is! I highly recommend Kauai!! It was awesome!"We just got back to the mainland today. Boy, words do no justice to the beauty and essence of Kauai. So far, in the 30 years that I've walked this earth, I haven't had as much fun in any place than the Garden Isle (Kauai).It's summer time there and the temperatures stayed inthe 80's. The humidity was also in the 80's but sinceI'm used to humidity in the Philippines, it did notfaze me at all. Surprisingly, Brian wasn't bothered bythe high humidity either. Try viewing the slideshow from the link below...http://travel.yahoo.com/p-travelguide-191501919-kauai_vacations-iWe got to Kauai on Tuesday, the 12th and the very nextday we spent Marlin fishing. We decided to go onBrian's birthday hoping for some luck. Kauai's watersare rough. We had 4 to 8 ft waves during the entireday of fishing. Needless to say, the dramamine did nothelp out in the morning and we felt queasy not havingbeen raised with "sea legs." We got skunked in themorning (zero fish for all 5 tourists), so Brian and I braved it into the afternoon seas. We did not want to give up. The afternoon fishing was more fun. We did not get sick this time and even though we did not landa Marlin, Brian hooked into a 30+ lb Ono (Wahoo). Itwas beautiful and pretty heavy when I picked it up. Ithad razor sharped teeth. The link below has a goodpicture.http://www.state.hi.us/dbedt/seafood/ono.htmlThursday we drove up to Waimea Canyon, the "GrandCanyon" of the Pacific. It was GORGEOUS up there. We also saw one feralpig (wild) and wild chickens everywhere. Thehens/roosters were very entertaining. They wereEVERYWHERE!! Check out the chickens and Waimea Canyonbelow. We also stopped by at Jojo\'s Shave Ice on theway to Waimea. Excellent shave ice at Jojo\'s---one ofthe popular tourist stops.http://www.hawaiiweb.com/kauai/html/sites/waimea_canyon.htmlOn Friday we took a helicopter tour of the wholeisland. This activity is a triple must!!!!!!!!!!!!! WE were in awe. Neither of us has ridden on a heli andit was one of the best views of the island. We saw NaPali Coast (can only be accessed via foot or catamaranor seen from a helicopter). You can't drive to Na Palicoast but for the serious hikers, it\'s definitely awonderful trek. Check out Na Pali....http://www.hawaiiweb.com/kauai/hiking_and_camping/NapaliCoast.htmSaturday we went to the Marriott north of CoconutMarket to experience our first Luau. It was a greatexperience. Luau is definitely worth doing at leastonce. Good entertainment and great food.Sunday we went to the Kauai Coffee Plantation andsampled a LOT of different coffee varieties. They\'recoffee is definitely on the strong side. We also sawone of the falls (Opeaka\'a) and the Wailua River. Wedid not go to the Fern Grotto since there was so muchto see....maybe next time...From the website below, not only will you see thefalls but also a photo gallery of Kauai worthchecking out...
If I was gonna retire and had mychoice, Kauai would be up there. We also saw one feralpig (wild) and wild chickens everywhere. Thehens/roosters were very entertaining. They wereEVERYWHERE!! Check out the chickens and Waimea Canyonbelow. We also stopped by at Jojo's Shave Ice on theway to Waimea. Excellent shave ice at Jojo's---one ofthe popular tourist stops.http://www.hawaiiweb.com/kauai/html/sites/waimea_canyon.htmlOn Monday, we got to see one of my most favoritebeaches in Kauai --- Ke\'e beach. At Ke\'e, we snorkeledand swam with the sea turtles. It was scary at firstsince they were huge but the turtles were so friendlyand was not bothered by all the tourist attention. Sowe got to touch them and they did not even bat aneyelash.http://www.hawaiiweb.com/kauai/beaches/default.htmWe also went to the north side of the island andvisited Princeville. This is a haven for golfers andyuppies. Definitely the more affluent side of town...http://www.hawaiiweb.com/kauai/html/sites/princeville.htmlGood food in Kauai:
Keoki - fresh fish/seafood
Brick Oven - PizzaBubbas-HamburgersOno Charboil Brugers - Brugers
On Tuesday we packed, drove to Wailua Falls, and started our red eye flight back to the mainland. Mahalo!"
Bginvestor, 2:29 PM
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Monday, July 11, 2005
Off to vacation!!
I'll be marlin fishing at Kauai this week!! So there will be no posts in the next 9 days, however, check back next week because I've got lots to tell..
Almost went under contract on a deal that I'm putting together where I'm buying it with a 3 year fixed ARM (thanks steve) and splitting the lot in the future to build a new house.
Even if the lot splitting doesn't work out , I should be able to make 20k in one year.
The city has given me thumbs up for the lot split. Handling the financing will be might be real tricky.
Anyway, I'm only a few thousand dollars off from agreeing on a price with the homeowner. Stay tuned..
Bginvestor, 8:25 PM
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Sunday, July 10, 2005
About Kiyosaki's Cashflow 101..
I played this game for the first time last night. What can say, it was awesome! My friends started playing about 3 years ago, and its helped them think about how to get out of the rat race.
To get out of the "rate race" your passive income needs to exceed your liabilities. The game is played mostly on a ballance sheet. You roll dice and get or lose opportunities. Very cool..
Remember in my long term goals , I stated that I wanted to test my strategy with this game. Because I was learning the game, I didn't quite follow my strategy, however, I think it would have helped me get out of the rat race to minimize by liabilities.
Anyway, I was surprised that my wife enjoyed the game so much. She's kinda of competitive so she enjoyed kicking my butt. ;-) She said, that's the most fun I've done with real estate yet.
If your into real estate, I recommend this game. I checked ebay and you can get decent deals on the game.
So, goals today are:
- Write a letter to the gal who has the big lot to express my interest in purchasing it. I need more details before making her an offer.
- I have another guy who called me that has a big lot. This might be better than the first one.
- I will do a walk through w/ a double wide today. Apparently she's asking a pretty fair price.
Bginvestor, 6:30 AM
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Thursday, July 07, 2005
No grass growing under my feet..
Ok, so I sent a letter to gal that has a huge lot... She called me back and told me that she would be interested in selling if the price was right. This is good..
I showed this lead to my buddy and we drove by the property. He was interested in pursuing this with me. My job now is to create a business plan and run some numbers. We'll do a peer review (analysis) of this plan and make adjustments. At the end of the week, we will go down to the city and verify the possibilities of handling the property.
This is excellent.
IF everything works out, I will call this gal up and negotiate a deal. With some help, we will make a lot of money!
This is a huge break for me because its difficult for one person (me) to acquire a property and in 6 months make 60k from new construction. It takes a team of people and it takes knowledge and time to acquire this team. My buddy is willing to help me and I am very grateful.
Wish me luck!
Bginvestor, 3:09 PM
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I did get a call from a gal that was selling two houses, a duplex, and a fourplex (Out of state owner). I am looking forward to running the numbers on these!
Bginvestor, 8:31 AM
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A got a second call back from a guy in foreclosure. The first time was almost two months ago and he wanted to stay in the house. I said, ok, and talked about some solutions. He was interested at first and than he suddenly didn't return my phone calls. I was in the neighborhood and and knocked on his door one day. He told me that he was working with the banks and he was not interested in working with me. I said ok, and left him alone.
Well, he called back last night and wanted to sell his house to me. The trustee sale is August 1st!! So I need to handle this property in 3 weeks..
We discussed the numbers again (didn't look pretty) and told him that I need to see the house. We made an appointment for 7:30 this morning. He was very excited about the meeting because he did not want to ruin his credit.
So, did he answer the door? Nope.. I knocked at 7:30 and no one answered. I left a message on his cell phone. This amazes me because if I was this guy, I would have had the coffee ready and hoping that he would show up. This guy probably heard the door knock but was too lazy to get out of bed to answer.
I just don't get it!
Bginvestor, 8:21 AM
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Tuesday, July 05, 2005
My current plan to retire..
Everybody should have a short term, middle term, and long term plan. This is the official long term plan. Subject to change, however, this idea just makes so much sense to me right now, I can almost touch it!
After absorbing numerous conversations with investors about wealth building and REI strategies, I have a path to retire that makes a lot of sense to me and I wanted to share it with you guys.
Goal is to retire in 5-8 years.
To get there is simple. I need cashflow every month, and it needs to come in without me doing anything. This is called retirement!
I have placed a XX number on Cashflow. The number isn't important, because once you understand how much you need , you just go out and do it.
Every successful investor that I've read about always has one thing in common for long term wealth building. Its called apartment buildings! IMHO, apartment buildings are always in successful investor's portfolios. Why is this? Because the cashflow is undeniable.
So, here's how I'm going to get there.
Step 1: Eliminate all debt -I expect my land deal to come through this year, which will allow me to pay off my house and other property investments. When this happens, I'll be completely debt free! I won't owe one dime to anybody. Not having a mortgage will be huge. After that point, I won't be working to survive, I'll be working to invest.
I've already accomplished the goals of being debt free (w/o mortagage) years ago. For those who need assistance to reach this step, I highly recommend Dave Ramsey. www.daveramsey.com Listen to some of his radio shows online and you'll be hooked.
Step2: Create Cashflow through investments - Will I quit my job? Hell no.. I will have my wife work for the next 3-4 years to generate income. I will work at least another4-5 years. Our income to expense ratio will be huge.. We will use this money to make down payments into solid investments.
I will look for apartment buildings that I can increase in value! If I have to do some 5-6 rehabs or 5 twists to create down payments, so be it. With the combination of earned income and buying low, and a given investing time frame of 5-8 years, we should get there.
I'm thinking about one apartment building a year.
Once the goal is reached, I will be officially retired. The pay downs from the mortgages will create more and more equity, so I will become more wealthy as I'm retired.
This plan is simple, effective, and realistic. I'm getting excited already! I'll be focusing on the first mile stone which is to become totally debt free. I'll be testing this strategy with the Kiyosaki's cashflow 101 game.
My first milestone we be when I sell the land deal. I need to cross my fingers that this will happen this year.
Bginvestor, 11:25 AM
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Monday, July 04, 2005
Briddog bringing in new leads..
Happy 4th of July!!
I got a call from the birddog again and he has a couple of leads. One is a double wide and the owners need to get rid of it quickly. The other is a twon house worth 150k and she is asking 135k. If I can get her down just a little bit more, this might be a great deal.
We'll see what shakes out..
Bginvestor, 10:50 AM
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