Cleaning Out Old Memories

My apologies for going radio silent, but last week my wife and I were vacationing with her family in Florida and I tried my best to stay away from any form of electronics. The best thing, aside from the R&R, was we closed on our latest rental property! Woo!

What struck me the most during the latest walk-through was the volume of personal belongings left in the house – clothing, shoes, a used toothbrush, partially filled coffee cup, paperwork, unused spices in the kitchen and even an old pair of pantyhose that were drying in the shower. The home smelled of moth balls and vermouth. What should be clear by now is that we purchased this home from an estate. These were all things I overlooked when we first walked through the property – I was too focused on the foundation, electrical panel, leaky basement walls and nearly collapsed garage.

As I was cleaning out all of the personal belongings, I began wondering what the previous owner was like. There wasn’t much to go by, but here is what I could deduce:

An old Italian woman, Mary, lived in the home since 1973. She was the president of the local chapter of the Order of Italian Sons & Daughters. From what I could gather from all Mary’s belongings, she organized fundraisers for the local chapter, was an avid cooker and a presumably a heavy smoker considering all of the ash trays (15+) I found. Her husband passed away many years ago, but she kept pictures throughout the house.

As I was cleaning out all of the belongs (it was mildly depressing), I couldn’t help but look through some of her paperwork. In her desk drawer I found 38 beautiful prayer cards – probably from the funerals of all her friends that passed over the years. 38! Some were young, but most were old like Mary. I wonder if she was the last of her friends to go? It puts all of those part arguments you may have had with friends into perspective.

Anyways, that was my 15 minutes of emotion. The house is now clear of clutter and ready for rehab. Let the fun begin!

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Rehab #1 – Kitchen Design Options

We should formally close on our latest investment property within the next week. We’re trying to move as quickly as possible, but as we’ve come to realize over the last several months the process doesn’t always go smoothly.  There are a few liens on the property that need to be sorted out, but we’re hopeful they will be squared away.

In the interest of being ready to begin rehab on Day 1, we’re meeting with our contractor this weekend to discuss what work needs to be done.   Aside from paint, a new garage, waterproofing and other mundane items, the house is in need of an updated kitchen.

Could I keep the existing cabinets and rent the property as is? Yeah, most likely.  However, my mentor has showed me a fully renovated kitchen can drive a 10-15% increase in rents — at that rate, the cabinets will pay for themselves in less than a year.  Aside from the monetary benefits, such renovations attract a more quality tenant, support higher appraised values and, in general, are a positive for the community.

We’ll likely tinker around with the layout to better accommodate appliances, but for now we’re trying to decide on which style to use.  Our options are below – what are your thoughts?  I’m leaning towards the first option, but with a different flooring / backsplash combination.

Cambridge Cabinets

Cambridge Cabinets

Soho Cabinets

Soho Cabinets

Sonoma Cabinets

Sonoma Cabinets

 

We Have a Deal!

Last week I wrote about how I adjusted my strategy to better compete with professional investors.  Well, it seems as though it’s worked!  My very patient Realtor send me a one line email this morning that read, Congratulations we have a deal! I will have a signed contract back to you today!”  

My response? “Well, I guess we should go check out the property to see what I’ve gotten myself into!” 

The property in question is located in a working class suburb with a decent school system.  I know the area well as I lived just a few blocks away until I was six.  It’s not the most ideal neighborhood to flip as property values have not recovered materially since the real estate crash, so we intend to rent this one out.

Since I haven’t walked through the property, fingers crossed the rehab is only cosmetic.

Photos after the jump.  You say dingy, I say opportunity 🙂

Ohio Cash Flow Properties

Seller recently updated the siding. Cute!

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Cabinets were recently updated, but I’m not a fan of the color. Replace or stain? 

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Cute built ins! Carpet has to go!

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Ugly now, but looks promising!

 

The Definition of Insanity

For the last several months, my process has been such that I would look for properties on Zillow or the local MLS Mon-Fri and have my Realtor schedule showings on Saturday or Sunday.  Of the 5-7 properties we’d see most weekends, 2-3 would fit my acquisition / rehab criteria. From that short-list, I’d submit a bid on the best candidate – all cash, 5 day contingency – and then wait to hear back.  More often then not, I’d get the following response from the selling Realtor: We received your offer and Seller has it.  There is another offer on the table from another Realtor.”  Well damn.  I’m now the backup offer. And since the other investor ahead of me is likely a Pro, it’s unlikely that the deal will fall through.  From there, I’d place a bid on the #2 property on my list.  Same thing…too slow.  Then #3 on the list.  Same thing…too slow.  See a pattern?

Rita Mae Brown noted in her novel Sudden Death that, “Insanity is doing the same thing over and over again, but expecting different results.  Too true – this whole process has driven me insane over the last several weeks. So, new strategy!  Bid first, ask questions later.  

I’ve seen enough properties over the last several months to know what a property at a certain price point should look like.  Not only that, but most Cleveland suburbs require pre-sale inspections which list any major updates / fixes that need to be made within six months of title transfer.    Between the two, I have a good sense of what I’m getting into.

So, in the interest of not perpetuating my insanity, I just sent my Realtor bids on two properties.  If the talks go well, I’ll go see the properties.  If not, I’ll submit more bids.  All told, I currently have three bids outstanding.  Here they are:

Ohio Cash Flow Properties

Ohio Cash Flow Properties Ohio Cash Flow Properties

 

Affordable Frames for a Picture Wall

Our house looks like its straight out of a catalog.  Unfortunately, it’s for all of the wrong reasons!  Like some of our favorite catalogs, we have plenty of wall art, but none of it is personal.     That is, we barely have any photos of our family.  And by barely, I think the exact count is eight.  Yes, EIGHT photos of our family.  Our parents must be miffed when they come over.  I certainly would be.

The quickest way to go from a grand total of eight photos to twenty or more is through the use of a photo wall, like those pictured above.  While I love the gallery feel of more uniform layouts, the two spaces we’ve dedicated as our photo walls – the stairwell and den – are better suited for a more collaged look.

While the final product is beautiful and can do wonders to liven up a room, many people write off the idea of a photo wall because of the wide variety of frames and, in many instances, their prohibitive cost.  While you can certainly splurge for gallery-quality frames, you don’t have the break the bank for ones that are right for you. If you’re looking for a more random look and don’t care too much about uniformity in size or style, your local estate sale, flea market or re-purposed furniture store is the best place to start.  In that these may be worn, be sure to look for ones that are sturdily built and can be freshened up with a coat of paint.

Should you be more interested in a uniform look, we’ve put together a list of some quality frames at affordable prices.

  1. Multipack Templates for Hanging Frames – If you don’t feel like measuring, this is a perfect product at just $9.99.  It allows you to quickly lay out a template, which can be adjusted, before drilling any holes in your wall.  I bought two.
  2. FJÄLLSTA or RIBBA Frame, like the rest of Ikea’s offerings, are cheap and sturdy.   While we love that each comes in various sizes, they’re made of cheap-looking plastic rather than glass.
  3. Feeling a little lazy? Try the Pinnacle Create a Gallery Set from Walmart.  It comes with seven frames of varying sizes which, like the multipack templates above, can be hung in various formations.  The quality is surprisingly good – real wood and glass – and the frames are sturdy.
  4. Urban Outfitters isn’t just for graphic T’s and summer concert gear. They offer a set of 10 frames, which come in varying sizes, for just $39.  The primary downfall with these is the lack of sizes in the 10-pack, so these frames may be more suitable for a kids rooms or smaller wall.
  5. If you don’t mind spending $100 for three frames, the offering from CB2 is tremendous.  The frames are clean, well built and really do give off the professional gallery vibe.  Mix and match with some frames from Crate & Barrel to complete the look.

Of course, you can never go wrong with Michaels.  Just time your purchase with their regular 40% off sales.

 

The Search Continues…

Oh no!  After being under contract to purchase our first flip, we had to back out of the deal after the general inspection brought to light some serious issues!

I mentioned in a previous blog post that trying to buy a home in the winter is miserable.  With foreclosures, typically the heat and power are switched off, the driveway is covered with a foot of snow  and the overall condition of the home is questionable.  Aside from those physical unpleasantries, the snow in particular makes inspecting the exterior of a home problematic.  If I can’t see the driveway, roof or enter the garage, how will I know if they’re in need of repair?    I do rely on Google Maps satellite view to a certain extent, but even that is only somewhat helpful given that the photos may be a few years old.

To ease our minds, we hired a general inspector (as any homebuyer should) to get their take on any major issues with the home.  And wouldn’t you know, there were quite a few big ticket items!   The biggest of which was the $14,000 needed to build a brand new garage – something we didn’t get to inspect ourselves due to a large mound of snow blocking entry into the structure.  A slight oversight on our part, but alas that’s what inspectors are for.

Regardless of these issues, the home was still a great opportunity – but not at our initial offering price.  So, we went back with a meaningfully reduced offer, which they didn’t even consider.  The search continues!

We put in our sixth offer in the last three months on a beautiful two-family property earlier this week.  It’s a short sale, so it may take some time to close, but negotiations have been going well thus far.  It needs quite a bit of work, but we’re excited by the opportunity to restore the home to its former glory.

How We Find Our Flips

A few of you have asked how we found our first flip.  Finding a suitable property is pretty easy; that hard part is seeing it before another investor has already placed a bid on the property.

To actually find the homes, we use both Zillow and the local MLS (Multiple Listing Service).  While Zillow is a powerful tool, it usually updates a day or two after the MLS.  As an investor, timing is key because some of the most desirable properties will have multiple bids within the first several days.

The MLS system sends us an automated email each morning with newly active listings in our target market. These listings are filtered based on our criteria, like the city, number of beds/baths and square footage.  While important, I look at those later in the process. The first metric I look at is price (can I make a profit?) and the description (does it read: TLC-needed, DIY special, updates needed, foreclosure, etc).   Oh, and the pictures.  I look at the pictures.  The uglier, the better.  From there, I build my list of potential investments.  It’s time consuming, but I typically do it over a glass of wine.

Once we have a list of properties we’d like to see, our Realtor schedules a marathon showing session.  We spend less than 30 minutes in each home, mostly because touring foreclosures (no power / no heat) in the Cleveland winter is miserable.  Check out a few of the properties we’ve toured and bid on, but ultimately lost to other investors:

FML, indeed!

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The kitchen in my college house was nicer

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Grandmas house

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Not bad, but it still needed some love

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