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real estate musings

December 26th, 2011 at 03:46 pm

Happy Holidays everyone! I enjoyed reading everyones Christmas blog and hearing about their family celebrations.

BB's father came down here to GA for a week and we spent the day watching movies. Relaxing day for sure.

On the real estate front, I last stated that we were going to look at a property for a rental income.

We went and saw the place that day, it is very impressive. I call it "The Chocolate House". It is painted a chocolate brown with white trim. It is a duplex and with 4300 sq ft it is huge! One of the biggest duplexes I have seen in the city. The upstairs is 5 bd 2 bath, and the downstairs is 4 bd 2 bath. It needs to be cleaned up, fresh paint and it'll be ready to rent.

It's a foreclosure listed at $189,900. We put in an offer for $165,000 with 10 day closing. The bank countered at $185,000 and asked for 10% earnest money.
We have countered at $170,000 with 10% earnest money. We are waiting to hear what the response is.

We went out and looked at it again 2 days ago to double check everything before we countered. We went over it as thoroughly as we could. It has been winterized, so the water and electricity is off. But assuming those areas are good, for work we found:

Thorough cleaning/touch up paint needed
Washer/Dryer upstairs needs to be replaced
Stove downstairs needs to be replaced
Upstairs toilet missing
Upstairs kitchen sink faucet needs to be replaced
Some porch boards needs to be replaced

The biggies is the roof and siding.
The roof might be leaking in spots. Because there are water stains along the outer edges of the ceiling. It is either the roof or the gutters are not working. We'll get a roofer up there if we go under contract. If it can be patched for a year, we'll be ok. If not, then we wont buy the house.

The siding. The paint is peeling pretty bad. It could use a paint job today. But can wait a year or two. The siding has not yet been impacted by peeling paint so no rot.

The numbers:
We think we can rent the upstairs for $1600 a month, and the downstairs for $1400 a month. With a $3,000 income, we will put $1k a month away for future repairs, $400 for taxes and insurance, and that will leave $16oo cash flow for the investor.

If we save $1k a month for 9 months, we can put on a new roof. After that, if we save $1k a month for another 7 months, we can repaint the whole house. So the big items will be taken care of in the next 1.5 yrs.

The next big question is the electric/plumbing/HVAC.

We feel that paying $170k plus $5-10k in repairs/closing costs is the very top of what we can afford. So if any of the systems are out, we are not going to go forward.

The reason we feel good about this house is because a very high end investor owned the property and restored it before he went into foreclosure. He had a reputation to use high end rehab materials and saw his projects as a restoration of the community. His vision was in line with mine, to have a quality product that will last a long time and add to the value of the area.

So we feel optimistic about the systems.

In the meantime, to keep BB from having his heart set on this property, we have tried to find back up properties.

We found one yesterday that we thought had already sold. We saw the "For Sale" sign out front and checked online. It had sold in Nov, but the deal fell through so it's back on the market.

The duplex had belonged to a contractor friend of ours in 2009. So now we refer to it as "Jason's House" We had dinner there once. He lived in the top floor with his wife and son. A few months after we met him, his wife got a job in another state and they moved.

The house did not sell and went into foreclosure.

The current owner bought it for $130k and now has it listed for $200k.

We walked around it yesterday and looked at the pics online, it does not need anything to make it renter ready. Actually, the bottomn floor is already rented for $1400/month. It's 3300 sq ft.

BB called our realtor today and learned that the new owner put alot of updates into the house, and thats why they are asking $60k more than they paid for it.

So thats a bit of bad news. We were hoping there was a lot of negotiating room. Noneless, we are going to look at it today.

If the numbers figure that the Chocolate House and Jason's House are the same all in, then we'll be on an even playing field and I'm not sure what we'll decide.

But having Jason's House enter our conversations has really calmed BB. He is much less into the Chocolate House now and he's being more conservative with what he is willing to pay for it.

Thats exactly what we needed, so even if Jason's house is a no go, it accomplished my goal of showing BB that there are new opportunities everyday and we dont have to be fixated on one place.

California Property is going up for sale

December 4th, 2011 at 12:13 am

I have decided to sell the CA property. BB and I went out to visit it last week and decided selling was the best option.

We went out to CA for 5 days. We spent 3 days in the city, staying on Haight street. It was great, but expensive! But great.

Then we headed a little south and spent 2 days in San Mateo to see some old friends of mine.

I met with the long term tenant in the condo, and she has not found a job yet, no promising prospects.

I met with a realtor and we discussed next steps.

The condo is in surprisingly good shape, and surprisingly huge!

The realtor said we need to paint it nuetral, fix the heater, paint the cabinets, clean the carpets and stage it before putting it on the market. Maybe get some new light fixtures too.

The realtor is really fixated on staging, saying its really important.

I dont know, if you walk into an empty condo- does staging really compel you to put in an offer? Wouldnt taking the $2k to stage it maybe be better spent on a granite countertop? Or would nice furnishings be a better bang for your buck?

The realtor also said if it does not sell within a month, to increase the realtor commission by 1% to get realtors to work hard on bringing buyers in.

Regardless, the tenant is moving out in January, and BB and a contractor friend of his is going to fly in to complete the fix ups. He'll stay at the empty condo for 2 weeks and do all the necessary remodeling with the realtors input. She said she will go to Home Depot with BB and pick out the fixtures and stuff for him.

So we are hoping the remodeling is $5k, flights for the men $1k, food for the men $500, rental car $300 ...and then staging $2k.

So thats the plan...right now. pics of the place are below. Input appreciated!

Capital Gains Question

December 2nd, 2011 at 02:17 pm

Hey guys,
I have a financial question. I have heard that the current regulations regarding taxes and house selling is: no capital gains taxes are paid from the first $250k earned from the sale of a house.

I have heard this before, but it just sunk in for me last week.

My question is: does this apply to me too? (In essence it boils down to that.)

Regarding my Impulsive Purchase that BB and I bought last year:

We bought it for $160k and put $120k into it. So one way or another we have paid $280k for the house. If we sell it for $400k…we are almost at the $250k appreciation level from the sales price even though half of the appreciation is from money we put in?

I guess my question is- is the $250k appreciation a “free and clear” appreciation (accrued from property value up to $530k), or will I just get the benefit of not paying capital gains on money I put in and invested in the property?

I am guessing the $120k I put in counts towards the first $250k appreciation break.

Was there a loophole that I could have utilized to ensure that my $120k counted towards the cost of the house and not towards an upward appreciation?

We are not planning to sell! I just want to know how it all works, now that I have a grasp on the concept.

Closed on "The Impulsive Purchase"

February 27th, 2010 at 02:19 am

"Prepare to enter the poorhouse- you little b*!^h." -That line from the TV show "Entourage" has been playing through my mind all day long.

I know it's because I closed on the "Impulsive Purchase" today. It was very anti-climatic and I really feel somewhat- I don't know- disappointed maybe.

BB wasn't here to go through it with me so the responsibility was on me. I was so afraid something would go wrong I refused to let myself get excited about it. I really wished BB was with me- maybe it would have been more exciting. And since it is currently rented I didnt get the satisfaction of walking into the building after the closing.

I just cleared out my bank account, signed all the documents and handed over almost $12,000.00 for what feels like nothing in return. The realtor didn't even bother to bring the keys to closing, telling me he will drop them off "later" (he lives next door to me so it's not shady- he can just be lazy sometimes). After I handed over the big giant check I was given some papers and told I was done.

On the way home I drove by the property. "Yup- that's the house- it's still standing" I thought as I drove by it.

What worried me was that the seller (also the selling realtor) did not bring me the $1000.00 in rent deposits the current tenants paid. I was expecting the money at closing- as some sort of perk me up. But nope. The woman waited for me to bring it up and just nonchalantly goes- "oh yeah. Ok. I'll get that to you."

I was kind of thinking- "When!? When will you get it to me? And How?!" But it seemed like everyone had their own agenda at the closing. My realtor was busy checking to be sure all his docs were in order to present to his real estate company- the lawyer was monotonously handing me papers to sign- and the seller/realtor was bantering with my realtor.

So I let it go and tried to trust her.

I have to chase her down anyways because 1 of the renters is Section 8 housing and the housing authority said it is too late in the month to re-route the rent check to me. The rent for March is going to the old seller who will need to give me the money.

Nobody brought up the 2 days of prorated rent that she owes me either. I was going to let it go I guess. It's $85.00 which hurts me to lose but I feel like I am already going to be chasing her for the $1000.00 deposit and the March rent- so might be better to let the prorated rent thing slide in my pursuit of the bigger money.

It makes me nervous. But BB called my realtor and asked about it and was reassured that if I don't get the rent money and the deposits by the end of next week- we can go and try to revoke her real estate license.

I don't want to revoke anyone's real estate license. I just want to build my bank account back up.

So I thought today would be fun and exciting like it was when we bought our first place- but it wasn't.

I am also annoyed because although I put down $5600.00 on the loan- the loan only reflects $2898.00 was paid towards the principal because an FHA charge was wrapped into the mortgage. And no one told me about it. Sneaky sneaky these mortgages are. So I handed over almost $12000.00 to see $2898.00 come off the principal.

But we own it. It's not completely cash flow positive but close. If the 2 units collect the rent the owner says they do- I will have to cover a gap each month of $83.00. Neither unit has an existing lease- 1 family has lived there for 14 years and the other tenant has been there since 2002. The seller was sneaky and listed in her advertisement that the place was collecting $1700 a month- a good $500 a month more than what she disclosed after our offer was accepted. But looking at the property appraisal- it says that the building collects $1350 a month- which would pot me in the profit margin of $55 a month (which I would take!) So now I just have to wait and see what the rent money is when it's handed to me I guess. Because the seller has been so conflicting with the information-I don't really trust her at all.

Closing on the 'Impulsive Purchase' tomorrow

February 25th, 2010 at 10:29 pm

I have taken to calling the new duplex/townhouse our "Impulsive Buy". It was impulsive- having looked at only 1 other property and putting in an offer on this place 3 days after we decided to start looking. And the place is currently a duplex but we live in a duplex so it gets confusing calling it a duplex. So it has come to be known as the impulsive purchase house.

We close on it tomorrow. Almost 13 months after we closed on our current home (It's still my dream home). I want to record my experience with the closing cuz I found it so helpful to go back and read my entries from our last home purchase.

This time:
Our closing costs are $5770.00 ($2130.00 less expensive than last year)

Interest rate is 4.875% (less than 5.5% interest rate of last year)

We were accepted for the loan on the first try! (different lender than last year too)

But this time they needed different documents than last time. This time the bank asked for proof that there is no mortgage on the CA property. Well how do you prove that? They did a title search on the property and found no liens on it-they ran my credit report and saw I was not responsible for paying a mortgage on it. They saw my bank statements for the past 2 months and saw I never made a payment for a mortgage on it. ...not good enough. They wanted more proof. They also asked for this info on Tuesday. Closing is on Friday. That left me scrambling. But we got through it.

This time BB is in FL for baseball during the closing. The lender was supposed to FedEx him the papers to sign and have him send them back. The plan was to send the documents by 11am Wedensday morning to ensure a timely trip for the documents. No they did not get sent out at 11am. Or 1pm. Or 2pm. About 3pm I get an email saying the documents will be emailed to BB when they are ready and he will need to sign/notorize and send them back.

BB does not have a computer in FL. (We thought he would get a free one through the team but it never panned out...he doesnt need/want one anyways.) So I called/emailed the lender that this was a new plan and BB has no computer. If the lender wanted this new plan to work she would need to call BB when the docs were emailed so he could drive to a printing place like Kinkos and print them out. The lender emails back that she thinks she can send the docs through FedEx in time to get them to BB. So she FedEx's them at 6pm (7 hrs later than planned!). But then she emails me that she forgot the Truth in Lending disclosure and will email that to BB in the morning (today)(Totally defeats the purpose of mailing them- dont cha think?).

BB got the package about 2pm today, drove to Kinkos and printed out the last document. He was annoyed because the lender never marked where he was to sign anything. So he told me he is hoping he signed everything but will not be surprised if he missed somewhere.

BB went to FedEx the paperwork back but the shipping label the lender included for BB to use is not an overnight label. So BB had to purchase an overnight delivery label (for $50.00!)and I am really ticked off because I know they built the label into a price somewhere. So we paid for a label we couldnt use- and had to purchase a new one.

So hopefully the documents make it back before the closing. I am a little ticked off that everything waited till the last possible second- it would have been nice if BB had more than a 3 hr timeframe to review everything before he had to ship it back.

But what can you do- at least we are closing.

Not listed as

February 8th, 2010 at 03:30 pm

Things between me and BB are back to normal. Things were normal again 2 days later. The fight helped to clear the air and we are back on board with each other again.

Regarding the new townhouse we are purchasing: The selling realtor (who is also the owner) wont list the house as "under contract." She still has it up for sale. She is afraid our financing will fall through- or she wants higher offers. My realtor is fuming mad over this. He is first a friend of ours- but since he is a realtor we used him to buy the place. He got tipped off that something was off when the owner/selling realtor called him ansd asked for the keys to the place because she was showing it. Then over the weekend our realtor got several cash offers for the place and he is sure the owner/seller has received about the same volume. But together we double checked our contract and as the seller- she signed and dated everywhere- so it's binding. We got the place. The mortgage appraisal is today.

In other news- someone somewhere got hold of my credit info and started buying things in France. My CC company was great in alerting me and shutting it down.

Thats about it. Off to read all of your blogs now.

I dont wanna go

February 3rd, 2010 at 03:37 pm

So BB and I had a heart to heart last night. About the new Townhouse purchase.

Over the last few days it has quietly dawned on me that I am really really in love with our current house and the idea of moving out of it causes me to cry.

I have been fighting this feeling because logically- moving to the townhouse is a big step up. Plus I was initially excited about the whole thing and never told BB in the beginning that I dont want to leave. So I have kept quiet.

But last night I just kept bursting into tears every time I thought about something in the house that I would miss.

Last night it was the thought of leaving all the huge oak trees that line our street and the crepe myrtle tree directly in front of the house. It is so fun to watch squirrels running up and down those large oak branches in the summer.

The new street has 1 large oak tree and the rest is all skinny sapling trees.

So I confessed to BB that I dont want to move. I dont love the new townhouse- at best I Kind-of-Like-It. I explained that I put everything into this house- every decision with this house was heavily pondered and I always wanted to use only the best materials because I love the house and considered every expense a long term investment. My heart sings when I pull up to this house after work and this house makes going to work everyday worth it.

The new townhouse is good. I dont love the house- but I do love the location. But I cannot say that I wont have fits of regret leaving our current house.

BB surprised me. He loves our house too! He completely understands and he said he feels very similar. He is excited for a big kitchen. He is excited for more room and to live in a reletively safe neighborhood. But he much prefers our house to the townhouse.

But he feels very strongly that moving into this townhouse is a step towards increasing our net worth. I actually agree. The townhouse purchase price is insanely low. It's in the worst condition of a completely renovated middle class location. If we renovate and upgrade it- we should have no problem selling it for a profit.

We dont want to try to "flip" it because that seems risky given the market and numerous flip failures everywhere.

Plus- this might be a one time opportunity to really make some money and we dont want to be impatient and lose a very marketable property by selling in a down market.

Plus- if we do "flip it"-we are still living in a house in a bad neighborhood. Though I personally love the neighborhood and the city is making strides to crack down on crime in the area- it's still one of the best houses on the block. BB wanted to wait a few years for the market to rebound and our neighborhood to improve before putting more money into it.

So thats the decision we came to. We will go forward with our plan to renovate/ upgrade and move into the townhouse. We will live in it a few years and wait for the market to improve. When renovations on the townhouse are done, BB and I will talk about the potential future value of the house. When the townhouse hits that pre-determined value- we sell. Meanwhile- the craftsman home duplex will be earning rent and still be ours. We then take the money and re-asses the craftsman home neighborhood. If we want- we return back so I can enjoy the oak trees and coffered ceiling.

I just had to make BB promise me I would not get "trapped" in the townhouse. He has been so excited about the place I could not determine if it was the thrill of the deal-the idea of demo and renovation, or if we were going to be constructing his dream home. I was worried that BB would enjoy the townhouse so much that he never wanted to leave.

Luckily- BB is on board with me- and see's this as a temporary adventure to get us to a more secure future.

2010 goals- SQUASHED

February 1st, 2010 at 09:21 pm

So I am not too huge a fan of this rental property deal. I am still coming to terms with all the events and regularly go from excited anticipation to anxiety/worry. I still love this 1st home and consider it the ultimate betrayal to move out- even if we are not selling it, and plan to return to it one day.

BB is SOOOOOO excited it is as if he has hit the lottery. I am not so sure why he is so excited. I know he is tired of no dishwasher, and a tiny bathroom...but really? He is that sick of our small unit that he is nearly dancing at this project?

I think it's the chance to be Mr. Handyman. It's all about the demo and reconstruction.

And I think he is excited to go back into the shopping spree mode we were in when we first bought this place.

When I think of the long term consequenses of buying the property I am happy. In a year from now construction will be done and we will be enjoying it. Our networth will be up and we will be able to plan better for the future.

But short term- my financial Mojo is all messed up.

THIS WASNT IN MY BUDGET! This was not a part of my 2010 plans or goals. I had everything nailed down to the dollar and cent for this upcoming year. Now everything is screwy.

Now I have to spend $1k in ernest money this month, $12k for closing costs and down payment next month, and $400 for a home warranty.

BB keeps adding on expenses after expenses and he is in full blown planning mode. I am tired of babysitting him. I feel like he logically cons me. He lays out a logical plan about how "the roof needs to be replaced within a year but the home warranty will pay for it."

I say: "Huh? Home warranty? I forgot we need one of those. How much is it?"

BB: "$400.00"

Me: "ok. Well if it will replace a roof I guess we should get it."

Him: "If there is a big storm that comes in the first year then the warranty will replace the roof. Theres only a $500 deductible."

Then I get off the phone feeling like..."Wait. what just happened? I thought the roof was fine?"

So you see folks? He just managed to get me to commit to a new roof, a home warranty, and to a $500 deductible all in the span of a few minutes.

He never once talked about how HE would pay for any of this. Grrr...

I think I need to have another talk with him.