Got a request from an escrow company for a payoff amount on hard money loan #17, so that should be closing soon. Another short loan - just 5 months.
Got an update on the Houston apartment complex a couple of weeks ago for the month of August. It wasn't a good month. Our occupancy stayed stable at 93%, but expenses were up. The main culprits were higher utility bills during the summer - water and electricity are running about $10,000 more per month than they cost in the winter months. The good news here is that those bills should start declining. Management has said the September bills are running about $7,000 lower than August.
Another expense was an "extraordinarily high" number of counter top resurfaces for the 22 units that were turned over. Not sure if these were just really destructive tenants or if these units were just getting to the point where this needed to be done after several tenants had lived there. And, as mentioned previously, our loan payment has switched from interest only to principle and interest, so our mortgage went up. All these factors combined to create a negative $18,000 cash flow for the month - the largest monthly lost so far this year. And for the year to date, the property has a $10,000 loss. Unemployment in Houston is creeping up again and management is warning that we may start seeing higher turnover as tenants move out due to lost jobs.
HML #18 Closed Yesterday
Supposedly HML #18 closed yesterday. My partner should see the funds hit his account today. This was a pretty short loan - only 3.5 months! On to the next investment!
Hard Money Loan #19 Started
My loan #16 was paid off last week, so my partner was on the lookout for a new loan to make. He found one almost immediately. This new property was bought at auction by one of our regular borrowers. He was the only bidder. He got the place for about $63,000. My partner estimates current value to be about $95,000 and after repaired value to be $120,000. Our loan is for $42,000, giving us a LTV of 44% based on current value and 35% at repaired value. The borrower, again, one of our best borrowers, is personally guaranteeing the loan. My partner was willing to fund this one with all of his own money, but since I had some on hold, he gave it to me. His mother also has a small share of the loan.
The property was a rental and has an unfriendly tenant that might need to be evicted. The area isn't the best, but it's not the worst either. It is near a freeway however, so that's a drawback. The house is a 4 bedroom, 2 bath built in 1912. The interior condition appears to be average with some updating needed. The exterior paint is peeling and the siding may need some work. Again, the location isn't the best, but the exceptionally low LTV makes this a loan I am comfortable doing.
I'm referring to this one as Hard Money Loan #19.
I also got some good news from the Houston apartment complex. July occupancy averaged 93% and turnover declined to just 23 units. These two factors increased monthly revenue by about $13,000 and gave the property its highest monthly revenue figure of the year. Rent concessions also declined.
While that was good news, the bad news was the property was still in a negative cash flow situation for the month. This was due to a couple of factors. As mentioned previously, our mortgage has now switched from interest only payments to interest and principal, meaning our mortgage increased by about $8,000 a month. The hot summer months have also caused the utility payments to be higher than normal. As we enter into the fall and winter months and utility bills decline, the higher revenue should easily offset the higher mortgage payment. On a year to date basis, we are still actually about $115,000 over budget.
The property was a rental and has an unfriendly tenant that might need to be evicted. The area isn't the best, but it's not the worst either. It is near a freeway however, so that's a drawback. The house is a 4 bedroom, 2 bath built in 1912. The interior condition appears to be average with some updating needed. The exterior paint is peeling and the siding may need some work. Again, the location isn't the best, but the exceptionally low LTV makes this a loan I am comfortable doing.
I'm referring to this one as Hard Money Loan #19.
I also got some good news from the Houston apartment complex. July occupancy averaged 93% and turnover declined to just 23 units. These two factors increased monthly revenue by about $13,000 and gave the property its highest monthly revenue figure of the year. Rent concessions also declined.
While that was good news, the bad news was the property was still in a negative cash flow situation for the month. This was due to a couple of factors. As mentioned previously, our mortgage has now switched from interest only payments to interest and principal, meaning our mortgage increased by about $8,000 a month. The hot summer months have also caused the utility payments to be higher than normal. As we enter into the fall and winter months and utility bills decline, the higher revenue should easily offset the higher mortgage payment. On a year to date basis, we are still actually about $115,000 over budget.
HML #16 Paid Off
My hard money loan #16 was finally paid off last Friday. That was a relatively short 8 month loan. My partner is looking for another opportunity now.
July Update
Things have not been too eventful lately.. Hard Money Loan #16 was supposed to be paid off a week ago, but apparently that sale fell through. My partner contacted the escrow company a couple times to try to give them a payoff amount, but his calls were never returned. And we just received another regular loan payment, so all indications are the sale fell through.
Also received a payment on hml #17. Payments have been coming in on that one like clockwork.
Unfortunately, the Houston apartment complex has had another not so good month. After having an occupancy of 90% in May, June's figure rose slightly to 91% but that came at the cost of increased concessions. June also experienced high turnover along with the increased costs that brings (marketing, cleaning, etc). Management expects July's revenue to rebound to about $7,000 more than June.
Expenses actually declined a bit, although the utilities cost rose due to the higher temperatures of summer. Our management company has deferred their fees to help improve the bottom line. Our mortgage switches from interest only to interest plus principal in July, which will raise our monthly payment by about $10,000.
Management is still cautiously optimistic about the second half of the year and they do feel like the overall market is improving. However, the concessions given to attract tenants tend to delay those improvements from showing up in the bottom line for a bit. For the first six months of this year, we are actually running about $105,000 ahead of our budgeted net operating income, although 10% of that amount can be attributed to the management company delaying their fees.
In other news, tomorrow marks the seven year anniversary of this blog!
Also received a payment on hml #17. Payments have been coming in on that one like clockwork.
Unfortunately, the Houston apartment complex has had another not so good month. After having an occupancy of 90% in May, June's figure rose slightly to 91% but that came at the cost of increased concessions. June also experienced high turnover along with the increased costs that brings (marketing, cleaning, etc). Management expects July's revenue to rebound to about $7,000 more than June.
Expenses actually declined a bit, although the utilities cost rose due to the higher temperatures of summer. Our management company has deferred their fees to help improve the bottom line. Our mortgage switches from interest only to interest plus principal in July, which will raise our monthly payment by about $10,000.
Management is still cautiously optimistic about the second half of the year and they do feel like the overall market is improving. However, the concessions given to attract tenants tend to delay those improvements from showing up in the bottom line for a bit. For the first six months of this year, we are actually running about $105,000 ahead of our budgeted net operating income, although 10% of that amount can be attributed to the management company delaying their fees.
In other news, tomorrow marks the seven year anniversary of this blog!
