Stir Crazy

So last weekend Dad and I found a house as we were walking around a neighborhood we liked. I took note of the address to look up the tax records, and lo and behold the house was listed and expired about a year ago. My hopes started going up, and over the past week I have become obsessed with this house.

Every time we have been interested in a house in the past there has always been something insurmountable. The price is too high, or the houses in our price range have a steep driveway, are next to a freeway or railroad tracks, are on a small lot, have no room for a garage, etc. I really want the next house we move into to be a long term house that we can grow into, but I also am desperate to get out of our tiny house in our crappy neighborhood. This house seemed like the perfect solution. It would be affordable, it’s not updated but it’s the mid-century style we want, and it’s on a large level lot with a 2 car garage.

There is, however, a glaring insurmountable issue. The woman who lives there isn’t motivated to move. She’s very old and according to the prior listing agent couldn’t find a place she wanted to go.

The problem with us waiting is that Dad would have to qualify for the loan. We are about 60k upside down on our primary residence so we can’t sell.  I cannot qualify for both mortgages. Currently, Dad would have no problem qualifying with his salary. However, last week we agreed that he would quit on the 16th of this month to make some headway in his own business. We have enough savings to last a few months while he gets off the ground. However, once he’s self-employed it will take 2 years of history before he qualifies again for a loan. So basically we have to move now or we’re stuck in this house for another 2 years.

We’ll see if any developments happen with this house over the next few days. Dad is willing to not quit if we can move towards closing on this house, but that seems unlikely. If the owner wants to move in 6 months, we’ll either have to pass up the deal or get really creative. Arg.

February Equity Numbers

Numbers as of 2/1/2012

Total Cash $65,000.00

Total Real Estate $270,000.00 (140k Primary Residence, 60k Rental 1, 70k Rental 2)

Total Retirement $12,300.00 (Vanguard Roth IRA)

Total Mortgages $201,000.00 (Primary Residence, upside down 176k, Rental 1 35k)

Total Other Debt $15,600.00 (Student Loan)

Total Equity $130,700.00

The Deal’s Off

So, the house that I almost pissed my pants over when I bid on it has gone defunct. We were supposed to close in December, they have asked us to extend till February 10. There was also some vandalism from some very irritating idiots. Good job stealing the copper lines from the AC condensors to the heating units and not taking the condensors themselves or pulling apart the units to get the scrap from there!

My partner and I after much consideration terminated the deal. It was just getting too difficult, too time consuming, and there was another lower comp that came up in the neighborhood that might have affected our appraised value.

Sometimes you just have to walk away and move on to the next one. If you have a manager, once the property is rented it becomes almost completely passive. Getting there, however, can be anything but.

2012 – Best Year Ever?

December was a crazy month. There were the holidays of course, B’s first Christmas, New Year’s Eve, a trip to CA to visit Dad’s family.

My brokerage let me know they were closing on December 31 so I have had to scramble to get into a new brokerage and get my listings transferred. I’m a firm believer that everything happens for a reason, though. My new broker has a much larger vision. The firm does bulk deals and new construction, a far cry from the 30k properties I currently sell. While things are in the beginning stages, I feel confident that my business is going in a new, better, more lucrative direction.

This brings me to my New Year’s Resolutions:

-Buy 4 rentals

-Complete one multimillion dollar transaction

-Stay physically active

That’s it. Nothing else. Of course, each of those large goals involve a lot of little ones, but I figure that’s pretty straightforward and sufficiently ambitious.

January Equity Numbers

Numbers as of 1/1/2012

Total Cash $66,400.00

Total Real Estate $270,000.00 (140k Primary Residence, 60k Rental 1, 70k Rental 2)

Total Retirement $11,200.00 (Vanguard Roth IRA)

Total Mortgages $202,000.00 (Primary Residence, upside down 177k, Rental 1 35k)

Total Other Debt $15,700.00 (Student Loan)

Total Equity $129,900.00

December Equity Numbers

Numbers as of 12/01/2011

Total Cash $62,000.00

Total Real Estate $270,000.00 (140k Primary Residence, 60k Rental 1, 70k Rental 2)

Total Retirement $11,200.00 (Vanguard Roth IRA)

Total Mortgages $202,000.00 (Primary Residence, upside down 177k, Rental 1 35k)

Total Other Debt $15,700.00 (Student Loan)

Total Equity $125,500.00

Pet Peeve – When People Say “I need more write-offs!”

This just doesn’t make any financial sense. Why do you need more write-offs? To me, this is just a fancy way of saying that you need to find things to buy that you don’t really need that happen to be tax-deductible.

It’s like when one of my good friends told me I need to buy a bigger house with a larger mortgage for the larger write-off. Let’s say my mortgage write off now is $1000 per month (basically saving me $300 per month on taxes). She thought I should get a $3000 per month mortgage so I’d have a bigger write-off. Ok, so I’d save another $600 per month on taxes but spend an extra $2000, essentially still spending $1400 MORE per month!

Or another friend of mine who bought a new computer for business even though her old one was working fine because she NEEDED the write-off! Instead of saving $500 on taxes she could have had $2000 in her pocket.

Yes, my numbers are simplistic. Yes, you should take all the write-offs the government allows. But you should NEVER buy something simply because it’s a write-off! It makes no financial sense.

Money Chart

This is pretty awesome, especially some of the stats. The value of a solid gold toilet over time? Something I never thought I wanted to know but now I’m glad I do!

Click HERE to view.

Barbara Corcoran – If You’re Listening I Want to Talk!

I just read this book Shark Tales by Barbara Corcoran. She was a real estate mogul in New York City in the 80s and 90s and sold her company for tens of millions of dollars. She’s now on the ABC show Shark Tank and is investing in other people’s businesses.

You have to love Barbara. She’s brash, honest, simple in her approach and is also utterly charming. I’m not sure if the techniques that worked so well for her brokerage 20 years ago would work the same way today, but maybe that’s just me making things more complicated than they are.

I’d love to get an interview with Barbara. The people who get on Shark Tank generally seem to take for granted that they are standing in front of 5 people who could change their life forever. Believe me, if I ever got face time with Barbara I’d come out of it with the knowledge to make millions. So, Ms. Corcoran, if you’re listening, please drop me a line. I’ll meet you anytime, anywhere.

Learn It Here – DO NOT Make Large Financial Decisions Without Your Spouse

Great. I’ve basically been in freak-out mode since Monday morning. There was an online auction for properties. I told Dad there was a property I was interested in but that it was going to be too expensive for us. I watched anyway. And guess what…I bid. And guess what…I got the property. For $72000 plus the buyer’s fee of $3600. I really didn’t think no one would out-bid me. I really didn’t. I only clicked the stupid button once.

Here’s a pic of the house:

So now I was stuck. I would have to cough up the down payment of $3700 and walk away, or try to figure out a way to buy the damn thing. Since I only have 40k in cash right now for property I would have to borrow the rest. The house is a good deal, not a screaming deal but a good one. Here’s the numbers:

Comps in immediate neighborhood

Last sale 126k (with basement mine is on a slab with slightly larger square footage)

Current pending contract in subdivision 115k under contract in one day

Mine needs about 10k in paint, carpet and appliances to look great. So:

• Purchase Price $75,600.00
• Fix up cost $10,000.00
• Sales price $115,000.00
• Closing costs/broker fees $7000
• Total upside potential $22,000

The problem was I didn’t discuss this with Dad before I did it. I felt horrible. I’ll admit it I peed in my pants a little when the auctioneer said my number won. Dad was upset, but said he trusts me. This is my business. I know I can do it and make a profit, I just shouldn’t have done it this way. I’ve learned my lesson and will never, never do anything like this again.

Also, flipping was never in my plan. I just want to buy properties under 50k and rent them long term.

In the end  a real estate agent friend of mine agreed to go in on it with me 50/50. We’ll both put in half the cash and split the profit when it sells. Personally I can’t wait for the day.