Mortgage Relief Anyone?

OK. I need to breathe and think before I reply.

It's no secret that I have 4 toxic assets in 2 of my portfolios. Today I got a very interesting proposal from my bank. I've been going back and forth with GMAC on one property that I'm having a tough time selling. It's been on the market for almost 3 years and last week I asked them about a short sale. Surprisingly, they told me to go ahead and submit the offer first. Usually I would have to submit my financials first to get the short sale approved, but this was very different. My realtor assumed the rep had made a mistake. We let it go and resumed marketing the property.

Today, I got Fedex from GMAC with a very interesting offer. GMAC is willing to satisfy the entire obligation for about 50% of what I currently owe. If I send in a certified check for the amount they are proposing within 30 days, they will release the lien and cancel the note. No short sale required. Did I read this correctly?

I had heard that GMAC had halted all of their foreclosures and was reviewing all of those accounts, but I never expected this offer. My realtor is currently working with a cash buyer, so if the buyer puts an offer in next week, I can be done with this property by Halloween. Amazing. I'm going to wait until this cash offer is with my attorney before responding to GMAC. I'm still in shock.

The Yosemite Fiasco

Here is an eviction that went from bad to worse. The tenant is not the sharpest pencil in the box, but she is a puppet to a drug addicted boyfriend with nothing to lose. A very bad combination. We ended up settling in court, but the damage to all parties was huge. The biggest expense? The attorney and his $285/hour rate. I could rant about how all attorneys are bloodsuckers, but it would exhaust me. This eviction ended up costing me $1500.

Now the clean up begins. The tenant had called the city inspector during the eviction so now we have to clear the violations before we can get the unit rented out. It will be another $600 in repairs before that happens.

The front unit moved out, so I have to clean that up and get somebody in there ASAP. We removed the carpet from one room and found termite damage. Ugh. We treated the area and put in the new flooring. The walls had mildew from the damaged roof and the kitchen had grease all over the walls. $1000 later, it's ready for new tenants.

My focus right now is to get tenants. I need income in that place ASAP.

Neighborhood Revitalization

It seems like I haven't done anything in the last few weeks, but the truth is that I've been preoccupied with 2 major tasks: Taxes and Neighborhood Revitalization. The first is obvious. With so many LLC's, I've been bogged down with closing books and moving Quickbook files to the CPA as quickly as possible. My investment partners are really on my case to get these done.

The other is a very interesting animal that I discovered last year, but has been around for a long time. Various cities and counties all over the nation are granting funds for the purpose of repairing low income housing. These grants may not be widely publicized, but the money is there. In one of my markets, I've set a goal to repair a total of 4 properties this year and I am currently on my 2nd project. Roofs and windows will be replaced, fresh coats of paint will be applied, falling fences will be repaired, and landscaping will be automated with new sprinklers. This type of financial assistance always makes me do my "happy" dance. They also make me feel alot better about all the taxes I pay each year.

Visit my Projects page at JumpStartREI.com to see the progress of these revitalization projects.

Looking for Deals

I went to look at a REO house today. It seemed like a good deal at first, but here the analysis:

The asking price is $45K and I estimated the repairs at about $5K. The ARV is $65K and the holding time is estimated at 6 months. Marketing cost to resell is $4K and closing costs will be about $1K. This leaves a profit margin of only $10K, which is too narrow for me. I like having a spread closer to $25K.

Cash flow is also out of the question. There is a swimming pool in the back and this is the main drawback. Although the cost to repair the pool is under $500, the annual insurance is higher and the monthly power bill is higher. As a rental, the higher pool expenses will cut into the cash flow because renters will not want to take on these higher expenses.

I believe that the best option for this property would be to lease it for $925 with a purchase option for $70K. Even with this option, the profit is too low and the risk is too high for me. NEXT!!

Sale Updates

The short sale in California is complete. That book is closed.

The sale in NY is still not done. I have not heard from the attorneys or the realtors. Very frustrating because this is the deal that I had money coming in from. Boo hoo.

I am NOT stupid

Today I am really upset about a proposal for the closing of one of my properties. OK, so the seller messed up on their financing and now cannot close on time. They now want to lease option my property for a year before taking over the title.

The terms are $1000 up front and $303 per month for a year. Are they kidding? That will not even cover the mortgage, AND I'm still on the hook for taxes and insurance! Then, in 12 months they will give me an option down payment of $12K and in 24 months the remaining $36K.

Do they think I'm stupid? What kind of moron would even offer something so lame? I am really pissed at my attorney who is supposed to be looking out for me. At this point, I'd rather take their good faith deposit and move on. I will NEVER agree to this BS offer.

TIP: Never get emotional about a deal unless it's this lame. In this case, get mad.

UPDATE: My attorney called tonite saying that this contract was for format only and he asked me to email all my terms to him. I will do that tonite.

Frustrating

Two deals that should have closed by Dec. 31, 2009 have still not closed. Since I am the seller, I am annoyed because I need that money. The unfortunate thing is that both deals are in the hands of the buyer's lender, so who knows when these will close now?

In the meantime, I have been keeping an eye on the market prices and I am still seeing a slight increase in prices in my market, a slight decrease in prices in the market just South of me, and a large decrease in the market just North of me. Tenants are tough to find in that market, so I'll have to pass on it despite the low prices.

TIP: Low property prices do not guarantee cash flow. If cash flow is your strategy and tenants are scarce or not available, the asset will not perform and you could lose money.

Flipping Properties for Fast Cash in January

It's a new year and I enter it with a debt load that I wasn't counting on. My first order of business for 2010 is to flip one property for $5000. I need to jump start this year with some quick cash. I have 5 investors that I am working with and they all want me to find them Califonia cash flowing properties. This is a good time to find those, so here we go!

This week I will be looking at all MLS properties that are priced under $75K. I use this number because the market rents in this area can go as low as $850 and I need to make sure we can cash flow. If your market can rent for more, your price can be higher. I'll be looking at the price, the cost of repairs, and the rentability of its location.

TIP: Remember that flipping properties is all about the buyer's list. If you are flipping to investors, get familiar with them and what they are looking for. If you are flipping to homeowners, make sure the market has a good amout of buyer activity. The last thing you want is to buy a property that no one wants to buy from you. Find your buyer first!

Top 10 New Year's Resolutions for Real Estate

As I think about the last 8 years that I have been investing here, I think about all the mistakes that I've made and how much money they've cost me. Tons. For that reason, I want to put up the top 10 things that I will do differently in 2010.

1. Do not hire relatives. If I do, it will be because I did not know that we were related.
2. Get a written estimate on a Statement of Work before starting any job. This is such a basic rule, but it's amazing how comfortable I get with my workers once I get to know them.
3. Hire a property manager that speaks Spanish. I'm in California's Central Valley for crying out loud! My current management company refuses to service my Spanish speaking clients, so I'm not giving them any more business.

4. Buy more California properties. I bought 2 rehabs in 2009 and then life happened and I slowed down. My goal this year is to buy at least 6 more properties with partners.

5. Flip more properties. I had alot of deals come through my hands that I could not close and could have flipped. Lack of time and attention cost me thousands. Not in 2010.
6. Complete my ebook on flipping properties and make it available on my website by February 1. Procrastination is my crime here because that book is 90% complete. Shame on me.
7. Complete the online course, "Jump Start your Real Estate Investing" and make it available on my website, www.JumpStartREI.com by February 1. Again, that course is 90% completed. Double shame on me!
8. Wear makeup and high heels more often. It sounds unrelated to real estate, but the frumpy look is very common when you're fixing up a property and I hate that look. It makes me lazy. I resolve to do all my walk throughs in high heels and full makeup in 2010.
9. Speak at as many Real Estate Investing Association meetings as I can book and promote my online education products. I can wear my makeup and high heels there too.
10. Have more fun. This business has its ups and downs, so I need to make sure I'm always having fun.

There you have it.

Short Sale at 29th Road

This is a project that I am coaching. This is an interesting one because it really illustrates what short sales are really like for banks. This property has a first lien of about $385K and a second lien of about $40K. The bank accepted a short sale offer for $160K. The buyers took longer to get their loan and in the meantime, the bank had to pay an additional $5000 in property taxes.

As the new closing date approached, the property was hit with 3 new liens from the owner's debts. The owner paid off one and the realtor negotiated the 2nd one down to 30% and is planning to pay it from her own commissions. The final lien is in negotiations. The bank refuses to pay any more money, but they did agree to not charge the seller's a closing per diem as long as this did not take too long. Now it's up to the realtor to make it happen. We'll see what happens next.

What I like about this deal is that the obstacles kept coming and all parties kept perservering. The buyers kept getting stuck with lending and kept knocking on doors until someone said YES. The realtor kept getting hit with financial obstacles and kept negotiating them out. She now has a good experience in dealing with banks on short sales. It's all good.