Flipping, Flopping, Renting and Selling

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Construction Day 1

Now that we have closed without a hitch, the real work begins.  We all meet at the new house to assess everything and put a little more detail around our budget.  When we walked in the door, I realized I had forgotten just how bad that smell was in the air.  We all agreed the culprit of the odor was the carpeting (sorry for the blurry picture).  This is the living room.  This room clearly needed the carpet pulled.  This is where we started.  To pull the carpet, we do not try to pull up the whole room at a time.  Using a utility knife, we cut it into 2-ft wide strips.  Pulling it and rolling it as we go.  We then band the small roll.  This way, we can put it into the normal trash tote used for pick-up.  Because we do all of the work ourselves, we can usually keep the amount of disposal small enough in a week we don’t need to get a dumpster.  If you were using a crew and demoing everything at one time you would need a dumpster.

Living Room

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The room we call Bedroom 2, also clearly needed the carpet pulled:

Bedroom 2

The first bedroom was more of a challenge, the carpet didn’t look awful so there was a long discussion of whether we could just clean it.  On day 1, we did not pull this carpet.  In the end, we did pull this carpet as well.

Bedroom 1.jpg

 

Closing Day

317The house we purchased was a bank-owned house so it can be a little more complicated than purchasing from an individual.  As described in my earlier post, when we finally found the house we were interested in purchasing, the bank rejected our offer.  They came back two weeks later with a counter-offer we could live with on our budget.  My dear spouse immediately went to Real Estate agent and signed all necessary paperwork and then we waited and waited.  After a week, we called and the Realtor said everything looked good.  They were just waiting for the bank to sign off on paperwork.  We waited. It is now the end of the month and the Realtor calls and says if you will close tomorrow, the bank will give you a $200 credit.

The next 24 hours were a whirlwind.  Although we had all of the cash, it was currently sitting in three different accounts.  We needed to get all of the cash into our business account.  We started the LLC at the beginning of the year, as we had two other accidental rental properties and wanted some protection before we expanded into more houses. What we did not realize yet, is transferring money into a business account is much different than transferring between personal accounts.  Apparently, if you do an online transfer from a personal account to a business account, it can take up to seven days for the funds to be available.  We only had 18 hours, not seven days.  Fortunately, all of our accounts are at the same bank.  Mr. Frugal Princess immediately went to the bank and got everything moved into the business account so funds would be available.  We use PNC Bank for our banking needs and I highly recommend.

After he was finished at the Bank, he immediately contacted our insurance agent and got homeowners insurance on the property to begin the next day.  This is important, as you do not want your new property uninsured.

We now have all of the money together, but we still do not have a closing statement.  Without the closing statement, we could not set up the wire transfer to the title company. Keep in mind, we are at the end of the day and we are scheduled to close at 11 next morning. Friday morning comes, still no closing statement.  We FINALLY got the closing statement at a little after 9 on Friday morning.  We reviewed and made sure everything looked good on the Statement.  Mr. then went to the Bank and did the wire transfer.

I want to take a minute and talk about the wire transfer.  When you get the wire information, do a little due diligence and make sure everything is legit.  If you are working with a reputable title company, there should be no issues.  However, be aware there have been issues with scammers tricking buyers into sending their money to a fraudulent account.  It took my less than 10 minutes to verify everything was legit.

When you are figuring the closing costs, have a small reserve for hidden costs. For instance, the cost of the wire transfer was $78 because it was coming from a business account.

Amazingly, everything came together and the closing went off without any problems.  We now had a new rental property.  Now the real work begins.

 

 

Financing for Investment Property

I want to start out by saying, we personally do not finance our investments.  We believe if you can’t do it with cash, you need to save more.  The way we are able to do this is we worked very hard to become debt-free.  Because of this, all of our income is now working for us – rather than us working to pay off debt.  Keep in mind investing in rental property, flipping, etc. is not really a get-rich quick thing.  This type of investing is just like your retirement investing.  Slow and steady wins the race. (No matter what you may read).

Before you find the perfect property, you do need to know how you are going to pay for this property.  Because there will be an asset attached to this property, you can get financing.  However, you need to be prepared to pay a higher interest rate. Other forms of funding can be found at local Community Banks, Credit Unions and personal lines of credit.

Please keep in mind, with any type of loan you need to make sure your debt-to-income ratio is not too high.  Keep in mind, it is very unlikely whatever property you purchase will be ready to re-sell or rent immediately.  There will be repairs (there are always repairs).  When we were purchasing our property, I estimated it would be eight weeks before we would have it ready to rent.  This means that particular piece of property it is an “alligator” for at least eight weeks.  By the way, an “alligator” is a piece of property that just sits there and eats money.

Knowing how much to borrow is also important.  You do not want to get half way through your project and run out of money.  Real estate investing is hot right now, and I can’t tell you how many houses we see around our community where someone starts and then simply does not have the means to finish. There is nothing wrong with starting with a small project first and building up to the big money projects.

Below is back side of new property.

back of north street

 

 

 

So You Want to be a Real Estate Mogul

north street listing picWe all watch those shows on HGTV showing how easy it is to buy, renovate and sell a home.  Now you think YOU want to be a house “flipper,” a landlord, or whatever.  This is all about the reality vs. TV.

We are going to start by talking about finding property. It is nothing like what you see on TV.  You don’t just look at three properties and pick one.  To find the right property, in the price range you are going to look at 50+ listings.  By the way, the 50+ number is conservative.  When we are looking at properties, we look for a good deal.  This means in many cases we are looking at bank owned homes, or homes sellers are trying to get out from under.  We try to find houses we can get for 70-75% of their appraised value.  Because of the current market, this does mean we really are going through a lot of listings.

We started our search by using Zillow.com (all bank listings), Hudhomestore.com (HUD listings), and Homepath.com (Fannie Mae listings).  We would sit down on Saturday morning and make a list of all of the houses we thought looked promising.  We would then get in the car and do a drive-by.  The drive-by is very important, as it allows you to see not only the condition of the house, you also can see the neighborhood. While on these drives, we looked for any other houses we may have missed or empty non-listed house.  We would write these down to research.

When we would find a house in hour price range and in the right area, we would contact our Realtor to really take a look at the house.  I cannot emphasize enough if you are new to this, you need to use a licensed realtor.

In early Spring we found a house meeting all of our criteria.  The listing price was decent and in our price range.  The neighborhood is going through a re-generation.  Although the house had been empty for 18+ months, it did not appear to have any structural damage.

We made an offer. The seller REJECTED our offer, so we walked away.  We felt we had made a fair offer for the condition of the house.  Although we were disappointed, we knew there would be other offices.

Two weeks later (near the end of the month), the seller came back and accepted our offer if we would pay some of the closing costs.  We accepted and waited…..

Next Up Financing



 

Blessings

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Today is my darling granddaughter’s first birthday.  I had always heard what a joy grandchildren are for their grandparents.  I now blessed to know this feeling.  Having a grandchild makes you really think about the important things in life and what kind of legacy and world are we leaving to the children. Part of the legacy in my mind is spending time with family and teaching the ways of the world prior to millennials.  Teach the values of learning to read (and real a lot), good English, working hard and having a positive attitude as much as possible.  Unfortunately, my son and his beautiful family live about five hours away and I do not get to see them as often as I would like.  Because of this, I have a determination to set new goals for myself to afford me the ability to spend time with them whenever I want.

To accomplish this goal, I need to refocus my energy on saving and frugal living.  When you are blessed, you sometimes forget what it took to get you to a financially secure position.  My Dear Hubby and I have been discussing this a great deal over the last few months and have begun setting our goals for 2017.  The first goal is to finish our savings plan to set aside the money for a  new (to us) car in two years. This goal has been on our radar for a couple of years and we have been saving when we could.  However, it  is now the time to become more focused.  I have set a goal for us to have this fund completed by the first of June 2017.  In an effort to kick-start our savings plan in January, we have decided to go on a spending freeze.  We will have our normal budget for bills and work related travel expenses.  We will also have a small budget for perishable groceries.  My hope is if we can plan well, I will be able to add an additional $300 to the car fund, getting us a little closer to our goal. Over the next several weeks, I am going to document how we did on these savings and share.

We are also taking a serious look at our cable and entertainment options.  We have started looking for better deals and will likely make a big change in January.   As I set my goals for 2017, one goal will be to visit this site more often.  I do love to write, I really want to share, but I am really neglectful.

Back at Again

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It has been months and months since I last posted anything on this page.  Over the last several days, I have thought about how I have neglected this blog and what I am really trying to accomplish from sharing my thoughts.  Thinking about all of this took me back to the why:

The WHY is at the age of 49, I started my life anew.  I divorced after 29 years and 11 months of marriage.  This was hard, very hard.  However, it was something I needed to do.  I have often said, people under the age of 20 really have no clue what they want with their lives and it is far too young to make a commitment to someone for the rest of your life.  Now I know some of you are going to say I know so and so and they got married when they were in their teens and they are very happy.  For those rare gems, I say congratulations.

I made this very hard decision just a month shy of my 49th birthday.  The day before my 49th birthday, I started my new single life.  Over the next year, the realities of what was occurring set in.  The first is for the first year or so after I left, I paid the expenses for both homes.  I did this not only because I was able, but because I felt an obligation.  During this year, my youngest son got married and there were of course expenses.  Also, during this time I racked up credit card and other stupid debt.

When the divorce was finalized, it was necessary to split what assets were accumulated during this marriage.  Because I did have a better job situation, he ended up with 60% of the assets.  This does not make me unhappy, nor do I bear any grudges.  The reality was though, when I took inventory after all of the dust had settled, I somehow had gotten myself in almost $40,000 debt — without a house payment.  I really was starting from scratch — and I needed to do something about it NOW!!

The good news though is from all of this, I realized I needed to make some changes in my spending and savings habits.  I had to learn how to be disciplined with my money and get back on track. After all, by this time I had turned the BIG 50 and I didn’t have so many working years ahead of me any more to right this ship.  Luckily, someone very dear to me recommended I read Dave Ramsey’s book “Total Money Makeover”.

I knew to pay off this small mountain of debt I needed to make some drastic changes. The first thing I did was take a true inventory of my income and expenses.  I wrote everything down. I also tracked everything I spent for several weeks to truly see where my money was going. I then did the first honest budget I had done in years. Some of my previous posts talk about the zero-based budget. I plan over the next several weeks to do a new series of posts about budgeting and discuss how I was able to pay off this debt and the successes in my life since.

Feeling Motivated

I hear and see on social media (a lot) from people who say they can’t eat healthier because it cost more, or they can’t exercise because it cost too much to join a gym, on and on.  I realized this weekend, just like all MY excuses — this is exactly what you are hearing excuses.

This time of year is the BEST time of year to eat healthier.  Even if you don’t grow your own garden — all the fresh fruits and vegetables are in season.  Also, in addition to your local farmers market (a big trend in all areas) — lots of communities now have community gardens (even in big cities).  We; however, do grow our own favorite vegetables and supplement others we want occasionally from the Market.

So now we have our veggies…let’s talk about what else we are eating.  Meat — we as Americans love meat.  The thing about meat is it is helpful to us in small portions (3 ounces or less).  We have gotten so used to huge portions, we don’t even know what three ounces is any more. Below is a good image of what 3 ounces looks like (photo credit to: community.ihealthlabs.com)

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Also, at least in my part of the Country (the heartland) — meat has gotten very, very expensive.  So to counter-act the rising costs and in the hope of eating better; we have not only reduced the amount of meat we are eating we now try a couple of times a week to have a “meatless day”.  So for instance, last night we had some peppers and onions from the garden we needed to cook.  I took the peppers, onions, a can of mushrooms and sautéed in butter (yes real butter).  I added a bit of taco type seasoning.  We then ate this on the Aldi brand of Fit and Active flatbread, with a little grated cheese and a little low-fat sour cream.  This whole meal (including butter, cheese and flat bread) was about 264 calories and tasted delicious (wish I had taken some pictures).  My point is this meal was good, feeling and healthy…we had plenty to eat and it cost us less than $5 for the total meal.

This afternoon, I’m going to spend some time cleaning vegetables and putting them in nice containers so I have healthy choices at hand for my lunch and snacks all week.  I am also working on the quality of the foods we buy and as I have brilliant finds and ideas, will share more.

If you eat local, in-season and cut down your meat — this should not impact your budget too much.  You do need to trade some of those packaged foods for fruit and vegetables.  Look online for recipes — I have found lots of recipes I can through together in less than 20 minutes and have a much healthier, more delicious meal.

The next excuse is the dreaded “EXERCISE.” Believe me, I am not by nature an athletic person.  However, I know if I want to live a healthy life into my elder years I need to get healthier and more fit.  I also know from experience, the only way to get fit and feel better is to exercise (which has the added benefit of making you feel better).  Again, this time is a great time of year because you can get all the exercise you need without any gym equipment or much added expense.  You can walk.  Funny thing about walking, you can do it anywhere — big city, out in the country, small town — anywhere. You just to make time, not excuses.

I am fortunate, in the community I live there is a “rails to trails” trail-way.  It is close to our house and from where we start to the heart of our City it is a little over three miles.  We also are very lucky to have a great park systems with lots of paved trails, making walking easy.  When we first started the healthier journey, I was lucky to be able to do 1.5 miles.  However, over the last month we have greatly stepped up our game and this morning we pushed ourselves to the wall and did 6.1 miles.

Because it is the end of July, it is blazing hot and 99% humidity. So, to make sure we didn’t get to hot or dehydrated we started our walk around 8:00 in the morning.  Although it was hot when we finished, we did finish.  We also took water with us and stayed very hydrated.  There are also water fountains along the trail where you can refill your water if you need.

To track what I am eating and exercise, I am using My Fitness Pal.  It is free and very easy to use.  MFP has lots of tips, a huge database of foods and makes it easy.  You can either use it on a computer or on your phone.  Again this is FREE at http://www.myfitnesspal.com.  There are other similar sites, but this is my favorite.

So the point of all this — just get started, NO EXCUSES.

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