Sunday, March 25, 2007

Flip This House

Our Leila Court Property in PA

I just watched about 4 episodes of house flipping on TLC, which got me all energized and finally ready to write an entry about our Leila Court property. But first a word about that show. In short, I think that show can be seriously hazardous to one's financial well-being. IMHO, it's totally misleading in terms of how it makes flipping houses seem like a get-rich-quick scheme that's easier than switching to GEICO ("even a caveman...").

In all, it just paints a picture that, simply put, ain't very realistic. Case in point, there was a couple who bought a house to flip and at the end of the episode, we're left with big smiles and a graphic that says they profited about $80,000 (sale price - purchase price - repairs). However, the credits on the episode started to roll without anyone pointing out the following:

Given that the house sold for about $475,000; you'd have to factor in your realtor fees (3% buyer / 3% seller in many places). That 80K then drops by $28,000 to $51,000. OK... now lets talk taxes. This being a short term investment, it'll be taxed at their usual income tax rate. Lets say 28%. So the previous number of $51,000 now gets cut by almost two-thirds to about $36,700. Ouch. What happened to my 80 grand?

OH! Did I mention that the initial repair schedule was only 3 weeks? Well, it took about FOURTEEN weeks to get it all done. Also factor in an additional month on the market, plus another month for closing. So what's that? Four months including repairs? Lets figure they may have to carry the mortgage on the home for 3 of those 4 months until closing. So now we're down to about $28,000. Hmmm... but what about the utilities that they'd have to pay during the (a) repair process (b) selling time and (c) closing month? At 3000 square feet and with your fair share of power tools sucking up juice all day; I'm guessing that the utility bills by themselves will be a BEAST! And if they had to borrow money for the repairs, how about the interest on that loan? ... wait. Did we ever factor in closing costs from the initial purchase loan?

Okay, so all of that aside (ha!) assuming they sell, they'll eventually get back to the closing table. Now the question is, will they have to offer a sellers assist? Will they have to honor a "requested repair list" from the buyers? What did they overlook that will come out once an inspection is done? And the cherry on top: $475,000 was the price that the realtor / appraisal gave BEFORE the house went on the market. $475,000 can turn to $460,000 in a heartbeat if the market ain't right or the original comp numbers were off by just 2 or 3%.

Compound that with the 49 other factors I don't even know about since I've never completed a flip; and the moral of the story is that with most flips, there's a very thin line between a potential (imaginary?) $80,000 profit and having to pawn your sneakers to buy dinner from the dollar menu.

And with that oh-so-cheery and optimistic prelude completed, I'm happy to announce that repairs are scheduled to begin on our Leila Court property tomorrow. So far, the first 3 major expenses [purchase price, closing costs, repair estimate] have come in a combined $6000 *under* expectation; so we at least have reason to still be optimistic.

As for the house itself, I think it's going to be quite nice once it's done. With a $118K purchase price, a fantastic $600 in closing costs, and $20K in repairs; we're hoping to turn it around within 3 to 6 weeks and smack it back on the market for as close to $175K as we can get. It should help that the house has plenty of curb appeal and offers a product that simply isn't available at this price & location (5 bedrooms under 200K). But factor in all of the insanity that I mentioned in the previous paragraphs (because this is real life, not a tv show); and it's obvious that our first foray into "flipping houses" won't exactly be a big splash in the water. But it'll be a learning experience, and should yield us at least a few dollars. And every little bit helps when it comes to diaper money.

And in case you missed it, yes, I did mention that it'll take an estimated 20,000 borrowed dollars to get this property turned around. The very thing that will be our ace in the hole at selling time (5 bedrooms, 4 baths, 3000 square feet of living space) is the same thing that's killing us is at the front end of the deal. All of that space sends the price of full-house tasks like flooring and painting spiralling out of control. And overall, the current condition is straight-up disastrous in there. It took us going thru three different general contractors and a 1/2 bottle of Tylenol before the 3rd handyman panned out as someone we were satisfied with in all 3 dimensions: price, time line, and professionalism... heavy emphasis on the latter.

Last but not least, for those who like to count every marble and turn every stone, here's the initial list of expected repairs:

Overall Repairs
Replace all flooring in house (carpet, tiles, linoleum)
Paint entire house (walls and ceilings)
Cleaning / Replacement of some heating baseboards.
Install GFI Electrical Outlets.
Replace / Repair / Paint / doors and trimming around all doorways
Replace door stoppers throughout home

New stove, dishwasher, and refrigerator
Repair kitchen walls (new trimming, etc)
Refrigerator moved to original location (is currently next to stove)
Cabinets relocated to accommodate moving fridge
Repairs in laundry room (Walls and exhaust system)
Replace the ugliest light fixtures I have ever seen

Main floor
Chimney sweep
Replace missing window

Main floor ½ bath
Remove unfinished panelling and Redo walls

Full Bath
Repair toilet leak
Tile floor
Install new sink

Main floor bedroom #1
Tear down current false walls, reframe door entrance & hallway
Add a 3x2 closet

Master Bed & Bath
Patch hole in ceiling
Replace sink
Repair / Replace tub fixtures
Repair / Replace closet door
Tile floor

Replace two broken windows
Plaster / Paint area
Repair / Replace doors
Check water heater and pray that it won't need replacing
Get basement heating system (can't remember the type) checked and repaired if necessary

Demo ceiling
Insulate ceiling and insulate all walls adjoined to house.
Replace cement below garage door

Replace missing spindles on rear deck
Remove bee hive / wasp nest inside the house

May the games begin.

Friday, March 23, 2007

Karate Kid

V is convinced that the baby is going to kick a hole through her stomach. I mean, this baby is ACTIVE. At 26 weeks and only a shade under 2 pounds, the amount of force that it's generating in there is kind of crazy. At first I had to put a hand on her belly to feel the baby move... and even when I did, it was bearly a twinge (She would say "did you feel that?"... and eventually I'd just get tired and say "Yep... sure did".... and then walk away thinking, "whaaaaatever")... But now I don't even have to put my hand there to experience the baby. I can just watch her stomach when she lays down. It's like a reverse punching bag; it's crazy. I can actually see the little jabs from the baby boxing with her insides. It looks like spasms almost... but not quite. It amazing... but also scary to think that it'll still be in there (jabbing away) as it goes from 2 pounds to over 7. To me, that's *really* crazy. At this rate, if the kicking keeps up like that, I'm thinking that in a few weeks from now I might pull up V's shirt and see a toe popping out of her belly button or something.

Yep. We've got ourselves a kicking baby!

And as if feeling the abuse from the inside wasn't enough, V has recently taken to drifting to sleep while she listens to the "baby listening gadget" that my parents got us for Christmas. It's basically like of like a stethoscope with headpones. I thought it was kinda gimmicky at first (couldn't here a thing), but it's actually kinda neat. I still don't hear the heart beat like V does... but the baby's workout routine on the speedbag is hard to miss. Laying there and hearing all the thumps and thuds just makes the whole thing even more like "WOW... there's really something in there". And from the sounds of things, it seems very ready to come out.

In other news, we closed the on PA property this week. That was exciting, but of course not without it's share of drama (which I'm hoping to get finalized and put behind us by noon tomorrow)... but overall it was great to get that done. Once we turn the key over to the General Contractor, we can really just throw that one on auto-pilot and get back to our lives. But I'll write more on that later. In fact, now that we've closed, I guess its time to dedicate an entry specifically for that property with pictures and all. Maybe I'll take a few moments to write about that tomorrow.

As for SC, our rental ad for that property ended this past Sunday without us securing a tenant. The bad news is, we have no tenant and no ad running now. The good news however is that I can finally stop talking to clinically insane individuals over the phone. Oh My Gosh, it was just total frustration dealing with such a wide scope of cRaZy PeOpLe all week while trying to rent the place out. Wow. Is this what it's like to be a landlord? I don't know why I continue to get baffled by the lack of professionalism, common sense, and courtesy of the general public, but I do. It's frustrating, man. It's like, you want to constantly ask yourself, can people really be that... (fill in the blank.... crazy? inconsiderate? ghetto? country? ... whichever shoe fits). But then before you can answer the question, the next phone call comes in, and in just two minutes of conversation you now think of 10 more adjectives to add to your list (unprofessional, slow, irreverant, ...)


Gotta Love 'Em.

At least that's what I'm told.

Thursday, March 15, 2007

Sunday, March 11, 2007

Glen Willow

Very Weird. In a word or two, that's how I'd describe finally closing on our first rental property.


But weird.

I did my usual multi-state commute: leaving Virginia around 2am Wednesday morning for a 9am meeting in South Carolina. Traffic was phenomenal, and so I made it with about 30 minutes to spare. I met Jesse the Realtor at the house for the final walk-thru before closing. Everything was in tiptop shape (the sellers had agreed to do ALL repairs), and so we proceeded to the 10am closing without a complaint. In all, the house was a done deal by 11:15am; and V and I were officially homeowners twice-over. Signing 10,000 forms during the closing not only once, but twice (for me, and also for the absentee and very pregnant V) was not exactly fun, but once a few hours passed and I realized that the numbness in my fingers and hand was not permanent damage, I got over it.

The absolute great news was that this house needed next to nothing else to be done to it in order to prepare for the first tenants. They could've moved in the next day. Even I had to laugh at the shopping list required to get the house move-in ready:

1) a double-A battery for the downstairs thermostat, and
2) a 4-pack of toilet paper

All for a whopping $3.65... a world of difference from the $18,000 we'll have to borrow to get the PA property repaired and ready for resale. With that done, I still managed to spend a good amount of the next 2 days just finalizing minor stuff around the house (tidying up the garage and the backyard, mainly). And of course, the cleaning services came and left the place absolutely spotless. I was thoroughly impressed... except for the part when they rounded 2 hours and 12 minutes to 2 1/2 hours for billing purposes. But after that is where the weirdness began.

It got weird when everything was done, and there was nothing left for me to do but to walk away. I don't think I can capture it in words (especially 3 days later, with the weirdness worn off)... but to buy such a beautiful home, invest so much time and energy into it over two-months time, get it 100% clean, sanitized, and totally ready to move into... and then to lock the doors behind you, walk away and never see it again until who knows when... man, that was just a very awkward feeling. I felt like I was abandoning a baby or something.

I'm sure that as investors, people who do this get to the point to where the emotional attachment is zero, and it all becomes business. But as a person who bought his first home only 2 years ago, and wouldn't mind swapping my own primary home for this one... it just felt weird to leave it behind and drive home to VA empty handed, so to speak, as if nothing ever happened. All day Thursday & Friday, I kept feeling like I wanted to go back to the house before hitting the highway... thinking to myself that there *had* to be something more to do (it just felt incomplete)... but nope that was it. Totally anticlimactic, I guess... and indescribably bizarre.

Maybe you had to be there.

But either way you slice it, our first investment property is officially in the books! It cost me my entire spring break, but it doesn't take a genius to realize that ultimately it was well worth the sacrifice. Now, we just have two major things on our plate: finding a tenant for the SC property, and closing on the PA property that we plan to flip by summertime (closing is a week from Tuesday). For every minute that I wasn't in the SC property this week, I was either on the phone sorting out the details of the PA property, or discussing the prospect of renting the SC property. In addition to the ad in the paper, we also set up a website, which only cost us 10 bucks, but has been priceless in the response that it has gotten so far. In all the week was tiresome, to say the least... but I continue to keep in mind that these are definitely good problems to have. I'm not 100% sure where V and I are ultimately headed career-wise, financially, etc... but I'm starting to at least feel pretty confident that we're well on our way to someplace good.

And speaking of someplace good, it's great to be home. Didn't quite get things done around the home front like I wanted to, in terms of carving out an easy path to a worthwhile second 1/2 of the semester... but the usual routine of taking it day-by-day, getting on top when and where I can, will just have to suffice once again. For now I'm just enjoying these last few non-work related moments of the weekend before I'm required to hit the ground running at work tomorrow.

In other news, V had to go to her first Ob/Gyn appointment without me since the pregnancy began (so much for my streak), and no news is good news; so things continue to go great with the pregnancy. I got V to commit to taking some more maternity pictures on Wednesday in the "studio", so look out for that in a few days.

Also, we did get the car back before I left for SC and everything looks great. Well... almost everything. The only comical thing is that now I have to contend with having mismatched headlights since the one on the passenger (accident) side of the car is spankin brand new, while the other looks like it needs some tartar control crest. I didn't realize how totally awful it looked until I had something to compare it to (kinda like replacing old sneakers... they never seem quite that bad until you get new ones). It's no wonder we couldn't see anything when driving at night. I'm guessing that very little light was getting thru that layer of dirt. In fact, I'll probably look like a motorcycle coming down the road at night now. But anyway, I bought some stuff that is supposed to shine it up like new, so we'll see how it goes.

Never enough hours in the day. And I guess that's especially true today; shortest day of the year with the clocks being turned forward an hour, giving us a total of only 23 ticks on the clock today. And I can't say that this has ever made a difference before, but this might be the first year that I can truthfully say... after a non-stop not-so-restful spring break... I'm gonna miss that 24th hour.

Saturday, March 3, 2007

23 weeks

I can't remember whether or not midterm week at work is always this insane (I'm getting worse and worse at remembering from one year to the next). Even if it is, I think that poor planning on my part made midterm week this year a little bit over the top. For starters, I totally underestimated how hard it would be to make up three new exams in the midst of everything else I had going on. And from there it just snowballed. Long hours and committee meetings were the norm every day, and I felt like I was scrambling all week just to make ends meet. By Wednesday night, the workload had hit me so hard that I fell asleep by 5 o'clock, and still managed to sleep until FOUR the next morning. Man, that's like 11 hours. I don't think I've slept that much since 3rd grade. But anyway, besides an absurd amount of papers to grade, the week is now done, and Spring break has officially arrived. Where's the champagne? I think we should toast to that... And then we should take a nap.

Anyway... other than the perils of teaching, the focus this week on the homefront was definitely the pregnancy. Faster than you can say pass the ketchup, V made the swift transition from being "quietly pregnant" to being a potential model for a maternity magazine (see the photo from Saturday). We have no idea exactly when it happened, but there's no doubt that last week marked the last of her being discreetly pregnant. On Tuesday we went to dinner with some friends that had not seen us in months, and to their disappointment, you couldn't tell much from looking at her that we had already passed the 5 month marker in the pregnancy. Actually, it was pretty amazing how small she still was. But by Saturday, when it came time to blow out her belated birthday candles, her stomach was looming over the cake like it had been there all along. It was crazy. It was like, BAM, out of nowhere. I guess we blinked, because we totally missed it.

So with this new belly to contend with, I surfed the web for picture-taking advice and home studio set-ups so that we didn't miss anymore moments... but I found that the set-up I had in mind was way too expensive. And so eventually I just made a trip to see Sam the Man, and got the hook-up when he let me borrow his portable studio set (thanks Sam). I thought we'd have plenty of room for it in the baby's room, but man that thing is huge. But I cleared the room out, and it's up and running now... so let the maternity photography begin! I have no clue what I'm doing, but still I look forward to trying to document V's pregnancy with some photos now that we've got a backdrop to work with. As always, the toughest part will be getting the ever-shy V to relax in front of the camera and not be so shy about her body. I'm all about sharing the miracle that's going on inside of her, but of course that's easy for me to say since I'm not the one who can't see my feet anymore. Anyway, I'm still hoping to convince her that this is a time that we will never get back (1st pregnancy moments) and can never duplicate, and so we've got to milk it for all we can.

As for the baby itself, accordng to our 23 weeks update from, the baby is more than 11 inches long now and weighs just over a pound. V also noticed this week that her feet are getting bigger, which was confirmed by a paragraph on swelling that we read in the newsletter... and unlike the temporary swelling of her breasts during the pregnancy, the swelling of the feet is supposed to be permanent... which at least benefits her because she gets new shoes out of it (good grief).

If only I could pick and choose. The swelling of the feet wouldn't be the permanent one. That's for sure.