A little background. As some of you have read I buy and renovate houses along with my handyman/remodeling business. 6 years ago we bought a fixer upper in the old money area of our town. Nice house, needed work. Spent 4 years or so updating and remodeling. Kinda like Andy C. minus a couple of zeros.
2 years ago I bought a house, real traditional 3 BR 2 story on a corner lot. On the back of the lot it has a 2 story 25′ X 30′ block building that I use for my business and I rented out the house. A year ago we decided to fix up this house, sell the other house and take the profit out since my son is now in college and all.
Of course we sell the other house right in the middle of the biggest job we have ever done and need to move in the middle of another really big job. And the rental house isn’t done. Lots of hours later all is well and we are settled.
Now what the post is about. This week I did the broken finger deal. Today I decide to hook up a phone extension to the shop. Took the wife to lunch and a book store so no problem with her she has seen enough of me. Walk into the shop and notice a funny odor. Wow, whats that around the floor drain. 2 gallons of solid human waste. Man, make my day. So I just spent an hour or so cleaning up the neighbors poop from the backed up city sewer. Neighbor said, yeah that happens once in awhile here. Oh well. DanT
Replies
You're getting several months of the negative stuff out of the way all at once--the rest of your year is going to RULE!!
Look on the bright side of a little human waste. Would you rather have oil gurgling up out of your toilet and all over your carpets like the family in
Texas(?)!!!!
You are the fulfilment of the prophecy from the modern prophet, George Carlin, "#### happens"
Welcome to the
Taunton University of Knowledge
FHB Campus at Breaktime.
where
Excellence is its own reward!
"... the modern prophet, George Carlin, "#### happens"
I thin the PC term is:Defecation eventuates.
Boss,
Good one. DanT
DanT:
I bought and cosmetically fixed up a house in Cleveland, OH. 6 years ago and just broke even, give or take about $300. I bought it and flipped it, but put it on the market in the fall, and didn't sell it 'til summer. I expected about a 20% ($15,000) return, but lost my profit because it didn't sell right away. I probably should have rented it out for a year or two. What do you recommend? Flipping or renting for awhile?
I have the itch to do it again, on a more regular basis. We have quite a number of Sheriff's Sale houses that come up in the Cleveland area (Cuyahoga County) and even a few out east of Cleveland in rural Geauga County where we live. I have been around Real Estate, construction, and remodeling for a long time and read most of the $0-Down books.
Any suggestions? Or should I put my money in the movies and oil stock offers I have received lately?
Itching
Location, Location, Location
How many sheriff's sale homes have it?
Welcome to the
Taunton University of Knowledge
FHB Campus at Breaktime.
where
Excellence is its own reward!
>>Location, Location, Location
Piffin, that's a fallacy for sure .. and conspiracy may be. This is what I learned about making money in real estate more than 10 years ago,
Timing, Timing, Timing.
Well, there are a number of ways to make money in real estate. And there are a couple of guys here that do and have. Tim Mooney and Joe H although I think there are a couple of others. Each has his own method and style.
I typically buy a run down house and rehab it. I buy some real sh-t boxes. I use a credit line I have from a house with decent equity. I buy it, rehab it and then refinance it to pay off the credit line. Using this method I only have my sweat in it, no money. The trick is that I can typically only borrow 70% loan to value so it has to fit in that window for me to consider it.
I have sold a few over the years, one last year for instance that I have had for 20 years and had run out of depreciation, but in general I am a landlord. My goal is to make money monthly, build equity and tax benefits as we are a dual income family. I know some guys who flip houses but they run into the same issue sometimes of having a slow mover that eats up profit. Doing it my way I have never lost money on a piece of real estate, and always made a profit. But, not everyone is cut out to be a landlord so it is a pick your poison deal.
I believe strongly that rental and rehab real estate is one of the last areas that an average person can still start with little and end up with something. It takes work and some savy but you can still do well with the sweat of your brow and a decent credit rating. As far as location goes. That is true for equity position and resale but with rental real estate you can rent almost anywhere, its just who you may have to deal with that might drive you away. DanT
Sounds like your shop needs a little more rehabilitation = backflow preventer. Sends the poop on upstream to the first neighbor without one.
Dave
DanT,
Thanks for the info. I think renting makes more sense, because of the appreciation factor over time. If you buy & flip, you have to really get a house at a good price (i.e., practically steal it) in order to make money. I've been a landlord previously, but only for a short time. I have experienced some of the downside. My first rental, was a recent renovation by others. I got a call from the lady who lived in the lower level (slab on grade apartment). Normally, she took showers but decided to take a bath one day and flooded the apartment. It turns out that the tub/shower drain had never had the final hookup to the sanitary, as the shower water (not much) would just drain into the 12"x12" hole in the slab below the drain outlet and directly into the soil. But when she drained the tub, it was too much for the soil to absorb all at once, and it overflowed onto the vinyl and carpeted floor! Lucky for me, I was able to get the previous owner to pay for the repair and drying out of the carpet.
"make money monthly, build equity and tax benefits" that could be my mantra/slogan.... thanks!
I do have a nice line of credit on my existing residence, which makes is easy to get started. Thanks again for taking time to respond.
If you are ever in the area (in Geauga County, east of Cleveland, Ohio) please give me a call, perhaps we can meet for coffee or lunch.
David
440-338-6006 Office/Fax
Ark,
Again I don't think one way is the best, just what fits your needs the best. That is one of the major reasons for my liking real estate. The way the tax laws are written if you invest 10k rehabbing a property it doesn't matter whether you borrowed the money or not you get to deduct any repair money ( usually the majority of the 10k) against the income. That throws it into a loss and any loss up to 25k is deducted against your personal income. Thus the tax savings. I try to do one a year, sometimes two. I figure the initial savings is 3-5k.
If you figure the initial saving of say 4k. Then add the equity position of say 5k, which is a pretty low figure I can't remember not ending up with 12k in equity. Then add in the first year of positive cash flow say 5 months at $150 a month then you are really close to 10k figure which is usually the minimum most flippers shoot for. But once in awhile I find one that has flip written all over it and do.
I was just up in your neighborhood last weekend looking at a motorhome. I live north of Columbus about 30 miles. DanT
DAnT,
You are probably right, no one way is best. Different situations call for different measures, strategies, and tactics. Interesting points you make about the tax laws. That is one aspect I haven't paid much attention to. My ultimate goal in real estate would probably be to own commercial property, such as office buildings. I currently have a small interest in a group of mini-storage facilities in the southern Ohio, W Virginia and Kentucky area. The initial goal was to own it for 3 years, then 1) sell or 2) refi, and take out our original investment and continue to own it. Unfortunately, we purchased it not long before 9/11 and it has gone through a tough period. It is starting to come back, I should know more this week when I receive my K-1 income tax form, just how we are currently doing. There are a couple of us smaller players who definitely want to get our money out and invest it elsewhere. This is the first time I have put my trust in someone else's real estate expertise and am not sure I would do such a thing again in the future. I think it is like stocks or mutual funds, you really put a lot trust in past performance.
When I flipped my first house, I had visualized a potential $15K return.
Although I have never owned a motorhome, if I were in the market, I would seriously consider used ones. It is my understanding that the new ones depreciate quite a bit. If you ever have a real wanderlust, you might consider a trip to Alaska via the AlCan Highway. It has improved a lot over the years, although it isn't a 4 lane freeway and the scenery is supposed to be spectacular. My parents used to go from Washington State about every other year and spend a 4-6 weeks living in the motorhome and salmon fishing on the Kenai Peninsula. Alaska is the prettiest state in the Union in my opinion, and Washington State a close second....
David
Ark,
I think we are going to go a different route on the motorhome deal. We are going to buy a semi tractor, have the frame stretched and have a company build a motorhome box on it. Horsepower, gears, manly looks GRRRRRRRR!!!!!!!!!
Anyway we were looking at one that was completed a year ago to see the quality of the product. We have a Blue Bird currently and are selling it to build this new one. We have been out west numerous times, Canada, Maine from the top down, Florida. Not the Northwest or Alaska but have plans to do so.
I think the problem with co-ops or REIT are they are run at such low risk to keep everyone happy no one really makes much money. So I don't do those. And my personality type is one that relies on my own judgement. Sink or swim I like to call my own shots. The only group investment I own is some mutual funds. Office building can be a good money maker and stable if located correctly. Never been involved in one though I have looked at a few. Ever visit CREONLINE. COM? Might try it for more info. DanT
What brand semi tractor are you looking at? Have you looked at any Sterling or Freightliner products? I know a few people at Sterling. Sterling is doing a fair job of taking market share from some of their competition, for a 6 year-old company.
David
Ark,
I am not quite to the point of being brand selective. Been learning about transmissions, engines, options, cab styles etc. I have read good things about Sterlings. The unit I looked at was based on a Freightliner. Also sifting through the new or used decision. Really enjoy learning it all though. DanT
I don't know who you have talked to but you might try one of Brian O'Donnell's three stores in this area, one on Canton (330-639-1100), one in Cleveland (215-524-2400 )and one in Brookpark. Valley Sterling Trucks of Cleveland 4985 W 150th Street, Brookpark, Ohio 44135, 216-767-4800 Off 216-267-5334 Fax. VSTC is right off I480 I believe. You can see his sign from the freeway. They handle Sterling and Freightliner. You also might want to look at the Acterra Sport Chassis. I think it can be custom-built or put a custom built box on it. It is Sterling's medium duty model and I believe it will fit on the Freightliner frame as well. The salemen there can probably fill you in better than I can. The General Manager probably wouldn't remember my name I have only talked him once or twice on the phone but he would probably recognize my wife, Ann Demitruk, as she is the Marketing & Advertising Manager for Sterling Trucks which is headquartered in Willoughby, Ohio.
Ark,
Well I guess that explains that mystery. I'm thinking "who in the world is this that has such a strong opinion about what brand of truck I should buy?" LOL pretty good laugh. Anyway I will keep that info at hand. I am still waiting for the place that builds the back to get back to me about actual requirements in terms of suspensions and such. I haven't spoke to anyone about the truck itself. The guy I went to see has one of these units built by a company called Showhauler and I wanted to see one that was complete and not in the showroom. This guys unit is a year old so it gave me a chance to see how it was dealing with wear and tear.
I had just read some background on the Sterling trucks and there design feature over the weekend. I was impressed at the amount of comfor research that went into them. Thanks again for the info. So are you an architect? If so say so quietly here as the walls have ears. DanT
DanT,
I just tried to send a return note and I think I blew it.
Again,
I think your system of renting makes more sense from the appreciation angle. If you buy and flip, you have to steal the house when you buy. I always maintain that you make your money when you buy, not when you sell. Its not always true, but it worth keeping in mind when making an offer or a bid.
you comment "make money monthly, build equity and tax benefits" would make a good mantra/slogan.
Renting has its downsides I know. My first rental (I purchased completely renovated duplex) was interesting. One day, shortly after moving in, the first lady-tenant living in the lower level flooded the place. She normally took showers, but finally took a bath one day. The tub/shower had no final hookup of the drain. There was a 12"x12" hole in the concrete slab floor directly below the drain outlet. A shower didn't put enough water into the soil to completely saturate it to the point of overflowing, but a soak in the tub and subsequent draining cause an overflow. She managed to flood the unit, both the vinyl and carpet floors. Luckily, the previous owner(renovator) was an honorable man and paid for the repairs!
Thanks for the info, I will probably use the line of equity I have on my home and follow your plan....
If you are ever in the Geauga County area (east of Cleveland, OH), please give me a call and perhaps we can do coffee or lunch.
David 440-338-6006 Office/Fax