They Start Them Out Young
My daughter is 4 years old and she will be getting her tonsils out soon. Yesterday, the doctor gave her a comic book that explains the procedure. Apparently, they are preparing her for a career in the adult entertainment industry. Check out the title...
Tulsa House Is Likely Rented!
I say likely, because it's not official yet. A potential renter saw the property on Saturday and wanted to make sure I was ok with his dog before he signed a lease. Actually, he asked if I was ok with his malamute. My first thought was what is that, a ferret or something? A quick wikipedia search showed me what he was talking about. This dog doesn't bother me. I charge a $250 pet deposit, which should be enough to cover the extra cleanup that will need to be done when he moves out. (I'm expecting this dog will shed lots of hair.)
The management company is contacting him again and hopefully, I'll have a signed lease soon. He is paying the higher $800 rent, so I'm making some extra cash there. That will come in handy because my previous glee at finding out I was being charged a lower property tax this year turned out to be short lived. Over the weekend, I got an updated property valuation notice that my property tax will indeed be based on my purchase price, not the lower purchase price of the previous owner. This was to be expected and I used the higher tax amount in my analysis when I bought the place, but I thought I was going to get an extra year of the lower tax. No such luck.
I don't think this guy is a Section 8 tenant. I gave the management company the go-ahead to accept Section 8 tenants, but I think this guy found the place before the Section 8 inspection / approval process was finished. I'll have to verify this the next time I speak with the management company.
The management company is contacting him again and hopefully, I'll have a signed lease soon. He is paying the higher $800 rent, so I'm making some extra cash there. That will come in handy because my previous glee at finding out I was being charged a lower property tax this year turned out to be short lived. Over the weekend, I got an updated property valuation notice that my property tax will indeed be based on my purchase price, not the lower purchase price of the previous owner. This was to be expected and I used the higher tax amount in my analysis when I bought the place, but I thought I was going to get an extra year of the lower tax. No such luck.
I don't think this guy is a Section 8 tenant. I gave the management company the go-ahead to accept Section 8 tenants, but I think this guy found the place before the Section 8 inspection / approval process was finished. I'll have to verify this the next time I speak with the management company.
Slow February
It's been a slow week, mostly because I caught some sort of bug that knocked me flat on my back for a couple of days. I'm still getting over it, but the worst appears to be behind me. My energy level is still pretty low, however.
No new news on the apartment deal. I suspect the principles are working away busily as escrow is set to close at the end of the month.
I also had a couple of leads on two new potential hard money lending deals, but those fell through. The people didn't need hard money after all. Too bad, as these would have both been 12% net to me. I'm on the lookout for others though.
My Rental #1 is still empty. I've got a call in with the management company to see how things are progressing towards getting a Section 8 tenant in there.
I'm getting antsy without any cashflow checks coming in!
No new news on the apartment deal. I suspect the principles are working away busily as escrow is set to close at the end of the month.
I also had a couple of leads on two new potential hard money lending deals, but those fell through. The people didn't need hard money after all. Too bad, as these would have both been 12% net to me. I'm on the lookout for others though.
My Rental #1 is still empty. I've got a call in with the management company to see how things are progressing towards getting a Section 8 tenant in there.
I'm getting antsy without any cashflow checks coming in!
Flipping LLCs Having Hard Times
Time for another update on the four LLCs I am invested in that flip foreclosures in the San Fransisco area.
Times are indeed hard in the California real estate market. I received a letter from the LLC manager stating what everyone already knows - the market sucks. Prices are depressed due to a flood of inventory, especially REOs and short sales. The LLCs have not been able to sell any properties. Since the companies are paid by taking 25% of the sales profits, no sales means no profits which means no income for the companies.
They have now exhausted their working capital. They are laying off about 60% of their workforce and those that remain will be taking a pay cut. They will also be moving to smaller, less expensive offices. They are asking the members to vote to change the operating agreement of the LLCs to allow the collection of a 4% annual maintenance fee to fund their ongoing operations. In return, they will forego their 25% stake in the profits. This will allow them to continue servicing the properties and give them additional time to seek alternative sources of income.
Personally, I'd like to refuse this request. One of the LLCs I am invested in was supposed to have closed a year ago and the investor's principle have been returned. That LLC is still operating because the properties left in inventory have not yet sold. I know they market is bad, but I have a hard time believing it can take a year to liquidate their inventory. I suspect they are still holding out for top dollar or close to top dollar. These properties were all bought at big discounts, so they should have some room to drop the prices for a quick sale. Of course, that's easy for me to say when I am not in the area and don't know all the details...
So despite my feelings, the reality is I have to approve this request. They currently have about 70 properties in their inventory, spread over 5 counties. It is in my best interests to allow them to continue to use their knowledge of the properties to get them sold.
Times are indeed hard in the California real estate market. I received a letter from the LLC manager stating what everyone already knows - the market sucks. Prices are depressed due to a flood of inventory, especially REOs and short sales. The LLCs have not been able to sell any properties. Since the companies are paid by taking 25% of the sales profits, no sales means no profits which means no income for the companies.
They have now exhausted their working capital. They are laying off about 60% of their workforce and those that remain will be taking a pay cut. They will also be moving to smaller, less expensive offices. They are asking the members to vote to change the operating agreement of the LLCs to allow the collection of a 4% annual maintenance fee to fund their ongoing operations. In return, they will forego their 25% stake in the profits. This will allow them to continue servicing the properties and give them additional time to seek alternative sources of income.
Personally, I'd like to refuse this request. One of the LLCs I am invested in was supposed to have closed a year ago and the investor's principle have been returned. That LLC is still operating because the properties left in inventory have not yet sold. I know they market is bad, but I have a hard time believing it can take a year to liquidate their inventory. I suspect they are still holding out for top dollar or close to top dollar. These properties were all bought at big discounts, so they should have some room to drop the prices for a quick sale. Of course, that's easy for me to say when I am not in the area and don't know all the details...
So despite my feelings, the reality is I have to approve this request. They currently have about 70 properties in their inventory, spread over 5 counties. It is in my best interests to allow them to continue to use their knowledge of the properties to get them sold.
Tulsa Rental Update
I finally got a few minutes to call my management company yesterday to see what the status of Rental #1 is. As I mentioned before, I noticed that they had raised the asking rent from $775 to $800. The $775 figure was itself a raise from the $750 it was rented at previously. So the place was empty during November and December when I was asking $775 and I was wondering why they raised the rent again, if it could rent at $775.
Turns out, they were meaning to contact me about this. They wanted to know if I was okay with renting to a Section 8 tenant. They think they can get $800 a month from Section 8 for this property, so that's why they raised the rent. If I was managing the property myself, I don't think I would do it. There is just too much work involved in getting the property qualified for Section 8, as Trisha found out. But since I've got a management company to handle all the work, I figured I might as well give it a shot. The only downside is I expect to get some more repair bills once the Section 8 inspectors check out the property.
Oh, and the woman I was speaking to at the property management company said she had been by the house a couple of times and it seems the neighbors like to sit outside and drink. Not a problem. Except they also like to throw their empty bottles into my yard! She talked with them about it and told them if they kept doing it, she'd call the police.
I know the previous tenants left the property right before the holiday season, so I expected some vacancy time, but I can't help but wonder if this has something to do with the property still remaining vacant. I know the previous tenants were Hispanic. Trisha has also noted how the new law has affected the companies she deals with in the area.
Turns out, they were meaning to contact me about this. They wanted to know if I was okay with renting to a Section 8 tenant. They think they can get $800 a month from Section 8 for this property, so that's why they raised the rent. If I was managing the property myself, I don't think I would do it. There is just too much work involved in getting the property qualified for Section 8, as Trisha found out. But since I've got a management company to handle all the work, I figured I might as well give it a shot. The only downside is I expect to get some more repair bills once the Section 8 inspectors check out the property.
Oh, and the woman I was speaking to at the property management company said she had been by the house a couple of times and it seems the neighbors like to sit outside and drink. Not a problem. Except they also like to throw their empty bottles into my yard! She talked with them about it and told them if they kept doing it, she'd call the police.
I know the previous tenants left the property right before the holiday season, so I expected some vacancy time, but I can't help but wonder if this has something to do with the property still remaining vacant. I know the previous tenants were Hispanic. Trisha has also noted how the new law has affected the companies she deals with in the area.
