It appears I've been tagged not once, not twice, but three times for this particular topic. Thanks, I suppose, to Building An Empire, Savvy Saver, and TheLandlordBlog for this dubious honor :-) Sorry about the delay - my day job company shuts down for the week between Christmas and New Years, so I fell behind in my blog reading for a while and just now found out about this. Wait, does that imply I only read blogs while at work? Umm.. That's not what I meant at all! Anyway, on to the five things you probably don't know about me...
1. I've got a bachelor's degree in Electrical Engineering with an emphasis in Computer Design (as in designing actual computers, not designing things with computers), but I've been working in the software / database field for the last 10 years or so.
2. I'm a foodie. I love to cook and try new recipes, but my food experiences are limited because I hate seafood - except for clam chowder and fish sticks. I actually read more food blogs than real estate blogs (15 versus 10).
3. I own a $600 ice cream maker (which was paid for entirely with passive income *grin*).
4. My deepest, darkest secret - I'm a lapsed Debbie Gibson fan. Excuse me, a Deborah Gibson fan. Shake your love!
5. I'm pretty shy. I have a hard time meeting people. And since so much of REI is about building relationships and networking with other investors, I tend to make things hard on myself by doing more things on my own than I should.
So there you have it... Five things you probably never wanted to know about me! My turn is done. Time for Eric, and Gualberto.
MSNBC.com Story on HomeVestors
Newsweek spoke with John Hayes, CEO of HomeVestors in an msnbc.com exclusive interview. It's a bit of a fluff piece, but he does briefly address the real estate slowdown, TV shows like "Flip This House", and the misconceptions of people wanting to flip houses.
The point I find interesting is that he says a franchise costs $49,000 plus an additional "couple hundred thousand" in capital to get started. Since this is a franchise, franchisees will also be required to pay a percentage of their profits back to HomeVestors. Personally, I think this is a bad deal for anyone wanting to flip houses. You can do the same thing on your own and save yourself the $49,000 franchise fee and the ongoing payments to HomeVestors. If you use hard money, you can even get started without the "couple hundred thousand" capital investment. What HomeVestors really offers is marketing - their signs are all over town and their "We Buy Ugly Houses" slogan is well known. However, I think anyone can spend some time locating and networking with other investors in their area and come up with enough deals on their own.
One good thing Mr. Hayes mentions is that it is a misconception that you are going to make $50,000 on a house and that a more reasonable profit to expect would be in the $15,000 range. He states a franchisee might buy 25 to 30 homes a year, which I find a little on the high side. If you follow the 100-10-1 rule of house buying (look at 100 houses, make offers on 10, buy 1), you're not going to buy that many in a year. Given his figures, I think his system might encourage the purchasing of properties with marginal profit potentials.
(I like the pictures at the start of the article.. Notice the satellite dish looks good in the "before" picture and broken in the "after" picture! Also notice the trees in the background. The "before" picture looks like it was taken in winter because the trees have no leaves. The "after" picture has trees with lots of leaves, so it was probably taken in spring or summer. In case anyone thinks rehabbing is a quick job, this picture should show it takes at least a couple months.)
The point I find interesting is that he says a franchise costs $49,000 plus an additional "couple hundred thousand" in capital to get started. Since this is a franchise, franchisees will also be required to pay a percentage of their profits back to HomeVestors. Personally, I think this is a bad deal for anyone wanting to flip houses. You can do the same thing on your own and save yourself the $49,000 franchise fee and the ongoing payments to HomeVestors. If you use hard money, you can even get started without the "couple hundred thousand" capital investment. What HomeVestors really offers is marketing - their signs are all over town and their "We Buy Ugly Houses" slogan is well known. However, I think anyone can spend some time locating and networking with other investors in their area and come up with enough deals on their own.
One good thing Mr. Hayes mentions is that it is a misconception that you are going to make $50,000 on a house and that a more reasonable profit to expect would be in the $15,000 range. He states a franchisee might buy 25 to 30 homes a year, which I find a little on the high side. If you follow the 100-10-1 rule of house buying (look at 100 houses, make offers on 10, buy 1), you're not going to buy that many in a year. Given his figures, I think his system might encourage the purchasing of properties with marginal profit potentials.
(I like the pictures at the start of the article.. Notice the satellite dish looks good in the "before" picture and broken in the "after" picture! Also notice the trees in the background. The "before" picture looks like it was taken in winter because the trees have no leaves. The "after" picture has trees with lots of leaves, so it was probably taken in spring or summer. In case anyone thinks rehabbing is a quick job, this picture should show it takes at least a couple months.)
10 Cheap Home Value Boosters
With all the rehab I've done, I think I have a pretty good idea of what fixes you should make to a house to get it to sell quicker and for a higher price. However, just to show you can never know everything about a subject, an article on MSN taught me a few new tricks. Some things I didn't know:
Tip #2: I normally replace the appliances in my houses, but if the existing ones are still in good shape except for cosmetics, I didn't know you could just flip the panels over.
Tip #5: Add a closet to a den to make it another bedroom. This is an interesting one. It adds another bedroom, but it decreases the bathroom-to-bedroom ratio. I wouldn't want to turn a 3 bed, 1 bath into a 4 bed, 1 bath, but turning a 3/2 into a 4/2 might be worthwhile.
The other stuff they list is pretty much standard info.
Tip #2: I normally replace the appliances in my houses, but if the existing ones are still in good shape except for cosmetics, I didn't know you could just flip the panels over.
Tip #5: Add a closet to a den to make it another bedroom. This is an interesting one. It adds another bedroom, but it decreases the bathroom-to-bedroom ratio. I wouldn't want to turn a 3 bed, 1 bath into a 4 bed, 1 bath, but turning a 3/2 into a 4/2 might be worthwhile.
The other stuff they list is pretty much standard info.
Trading One Job For Another
I've been thinking about this for a while, but when I read the latest post on one of the real estate investing blogs I follow regularly, I had to write about this.
I follow several blogs of people who got started in real estate investing. Over the past several months, three of them have decided to get their real estate license and become Realtors. It seems to me that this is just trading one job for another. I will admit there are some advantages to being a Realtor, but I don't think they are advantages that couldn't be gotten other ways - such as having a working relationship with a good Realtor.
I remember an article I read in the Arizona Republic earlier this year about the glut of real estate agents. Referring to the real estate boom, the article stated:
It goes on to say that 80% of new agents quit within a year and 90% quit within 3 years. From my point of view, being a Realtor is even worse than having a 9 to 5 job because agents tend to work a lot of weekends and are on call basically all the time.
I really do hope that all my blogger friends enjoy success as Realtors. Perhaps their REI-based viewpoint will help them succeed where others so often fail. For me, however, I'll stick with being an investor.
I follow several blogs of people who got started in real estate investing. Over the past several months, three of them have decided to get their real estate license and become Realtors. It seems to me that this is just trading one job for another. I will admit there are some advantages to being a Realtor, but I don't think they are advantages that couldn't be gotten other ways - such as having a working relationship with a good Realtor.
I remember an article I read in the Arizona Republic earlier this year about the glut of real estate agents. Referring to the real estate boom, the article stated:
Suddenly, helping other people buy and sell houses looked like an easy way to make money, maybe a lot of money. How hard could it be? With investors amplifying demand, houses practically sold themselves, often for thousands of dollars more than the asking price.
People poured into the real estate business: The number of licensed agents in the state increased from 53,478 in July 2002 to 80,210 at the end of March [2006], according to the state Department of Real Estate. But now that the market has cooled and the prospect of quick money is gone, the newbies are starting to pour out, brokers and agents say.
It goes on to say that 80% of new agents quit within a year and 90% quit within 3 years. From my point of view, being a Realtor is even worse than having a 9 to 5 job because agents tend to work a lot of weekends and are on call basically all the time.
I really do hope that all my blogger friends enjoy success as Realtors. Perhaps their REI-based viewpoint will help them succeed where others so often fail. For me, however, I'll stick with being an investor.
2006 Financial Year In Review
The end of the year is fast approaching and it is looking like I'm going to be too busy for the remainder of the month to get much going in terms real estate deals, so I thought I'd look at how I did in 2006.
Real Estate:
I rehabbed only one house this year. My goal was to do at least two, so I fell short there. In my defense though, I was asked by my investors to stop for a while until I could conference with them. That took me out of the market for a bit. I am still waiting on the additional funds they said they would invest, but those funds are coming from a probate trust and it is taking longer than expected for that to settle.
I had wanted to buy at least one rental property this year and I did not achieve that goal. However, I did make an investment that provided two firsts for me: my first out of state real estate investment and my first commercial property investment. I have invested in part of a $1.75 million dollar first mortgage on package of commercial properties in Louisiana. Income from that investment has been on-time and there have been no problems so far.
Personal Finance:
I increased my financial education by attending a meeting in March of other real estate investors and fellow RichDad.com community members. That was an eye-opening experience and actually led to the commercial investment I just mentioned.
I experimented with person-to-person lending via prosper.com. I've pretty much soured on that concept: two of my loans are delinquent and two are current. However, it was an interesting idea and I thought it was worth a try. I might be ok for other people, but it's not for me.
The blogosphere also taught me a new investing technique called reverse merger arbitrage. I'm two for three on these deals so far and am up about a thousand dollars. I've got two more plays in the works and I think this will be a technique I continue to use throughout the next year and beyond.
This year also saw the retirement of our only car loan, which was paid off a couple months ago. The $300 a month that was going to that is now going into our savings account to be used for our next investment. I also continued to save 15% of both my and my wife's paychecks, which will also go towards our next investment. Of course we continue to pay into our 401(k), although only enough to get the full company match.
Next year:
I have a couple of goals for next year. First, I want to rehab at least two properties. This is the same goal as last year, but this time I'm going to achieve it :-) I think I've got the contacts now of people who can get work done in a timely manner, so the only thing that may cause me to miss this goal is if the houses take longer than expected to sell.
I also want to either buy a rental property or make another real estate-backed paper investment, similar to the one in Louisiana. I haven't decided which yet. I like the rental property because of the tax benefits it gives, but the paper investment requires a lot less effort on my part. Time available to me may be an issue because my daughter is turning three and there seems to be more and more things to do with her that require my time. (That's not a complaint though!)
Real Estate:
I rehabbed only one house this year. My goal was to do at least two, so I fell short there. In my defense though, I was asked by my investors to stop for a while until I could conference with them. That took me out of the market for a bit. I am still waiting on the additional funds they said they would invest, but those funds are coming from a probate trust and it is taking longer than expected for that to settle.
I had wanted to buy at least one rental property this year and I did not achieve that goal. However, I did make an investment that provided two firsts for me: my first out of state real estate investment and my first commercial property investment. I have invested in part of a $1.75 million dollar first mortgage on package of commercial properties in Louisiana. Income from that investment has been on-time and there have been no problems so far.
Personal Finance:
I increased my financial education by attending a meeting in March of other real estate investors and fellow RichDad.com community members. That was an eye-opening experience and actually led to the commercial investment I just mentioned.
I experimented with person-to-person lending via prosper.com. I've pretty much soured on that concept: two of my loans are delinquent and two are current. However, it was an interesting idea and I thought it was worth a try. I might be ok for other people, but it's not for me.
The blogosphere also taught me a new investing technique called reverse merger arbitrage. I'm two for three on these deals so far and am up about a thousand dollars. I've got two more plays in the works and I think this will be a technique I continue to use throughout the next year and beyond.
This year also saw the retirement of our only car loan, which was paid off a couple months ago. The $300 a month that was going to that is now going into our savings account to be used for our next investment. I also continued to save 15% of both my and my wife's paychecks, which will also go towards our next investment. Of course we continue to pay into our 401(k), although only enough to get the full company match.
Next year:
I have a couple of goals for next year. First, I want to rehab at least two properties. This is the same goal as last year, but this time I'm going to achieve it :-) I think I've got the contacts now of people who can get work done in a timely manner, so the only thing that may cause me to miss this goal is if the houses take longer than expected to sell.
I also want to either buy a rental property or make another real estate-backed paper investment, similar to the one in Louisiana. I haven't decided which yet. I like the rental property because of the tax benefits it gives, but the paper investment requires a lot less effort on my part. Time available to me may be an issue because my daughter is turning three and there seems to be more and more things to do with her that require my time. (That's not a complaint though!)
