I ALMOST got started working on the doublewide project today. Everything started out well, meeting with another investor and friend (Allagash from REIClub) who was passing through Ohio. He brought some good luck with him from Texas, as I finally got my 3 bedroom house rented today!
Then, I got a call from the bank that the renewal of my business line of credit was done and they wanted to complete it by 2pm today to meet the month end. So, I had to drive back into town to sign a small mountain of paperwork. Next, I met with another applicant for one of our duplexes and stopped by my house to do the screening. This tenant claimed to work at a local prison and have a clean record. However, when I started screening her, I found that she had a recent criminal history and that she had been sued by several local businesses. No thanks. Fortunately, I have a Section 8 tenant that is already approved for this unit, although Section 8 has not done the inspection yet. So, it should be rented either way.
After all this, I finally got out to the doublewide project and prepared to cut the tongues off. Unfortunately, I hadn't used my cutting torch in a couple of years and one of the regulators wouldn't work properly. So, I made another trip to town to the welding shop and bought a new regulator. By the time that was done, I was ready to quit for the day. Tomorrow is another day! You know what they say...third time's a charm.
Wednesday, October 31, 2007
Tuesday, October 30, 2007
It's almost always the water!
I left for town this morning with the intention of spending about 15 minutes unclogging a bathtub before I started working on my doublewide project. Unfortunately, these plumbing repairs always seem to take longer than expected. Today, it took a LOT LONGER! What started out as a simple, 15 minute unclogging of the tub turned into a ripping out of the carpet; removing the floor; and replacing the pipes type ordeal.
I started out by trying to unclog the drain with a hand-type snake, which should be fine for all normal clogs. When that didn't work, I tried to use my professional, $400 power snake. I knew that things weren't going to go well when the end of the snake BROKE OFF! With that, I had to remove the carpet and the wood floor to expose the piping. The pipes were very old galvanized lines. I tried to disassemble them, but the fittings were hopelessly corroded together. Therefore, I was forced to cut the pipes off with a sawsall and headed to the plumbing store for the PVC replacements. After all was said and done, I spent about $42 and 3 1/2 hours to fix this problem. I normally only work 3-4 hours each day, so after completing the repair, I decided to call it a day. The doublewide project will be waiting for me tomorrow.
I started out by trying to unclog the drain with a hand-type snake, which should be fine for all normal clogs. When that didn't work, I tried to use my professional, $400 power snake. I knew that things weren't going to go well when the end of the snake BROKE OFF! With that, I had to remove the carpet and the wood floor to expose the piping. The pipes were very old galvanized lines. I tried to disassemble them, but the fittings were hopelessly corroded together. Therefore, I was forced to cut the pipes off with a sawsall and headed to the plumbing store for the PVC replacements. After all was said and done, I spent about $42 and 3 1/2 hours to fix this problem. I normally only work 3-4 hours each day, so after completing the repair, I decided to call it a day. The doublewide project will be waiting for me tomorrow.
Monday, October 29, 2007
Drying Up!
After a week off, with the exception of showing a few rentals, the ground is starting to dry up and I'm planning on putting in some work on the doublewide tomorrow. My goal for tomorrow is to cut the tongues off the end that has yet to have blocks installed. If I can easily cut them loose, we'll just push them under the house and leave them there. If not, then I'll actually cut them in half and haul the steel to the recycling center.
On Wednesday, I'm hoping to finish the blocks on the end. That will complete the block work and nearly complete the project.
On Wednesday, I'm hoping to finish the blocks on the end. That will complete the block work and nearly complete the project.
Sunday, October 28, 2007
Rain, Rain, Go Away!
After being in a drought all summer, we had 4 inches of rain this past week. Unfortunately, all that rain turned my doublewide project into a giant mud hole and therefore I didn't get any additional work done.
In my last post, I stated that I finally found someone that I was able to approve for my 3 bedroom house that is vacant. Unfortunately, they did not come up with the money. I'm showing the house again today to two more couples. I'm still hoping to get it rented for November, but we're starting to get quite late in the month. At any rate, I'd much rather have another month of vacancy that to rent it to a deadbeat that will tear up the house and that I'll only have to evict later.
In my last post, I stated that I finally found someone that I was able to approve for my 3 bedroom house that is vacant. Unfortunately, they did not come up with the money. I'm showing the house again today to two more couples. I'm still hoping to get it rented for November, but we're starting to get quite late in the month. At any rate, I'd much rather have another month of vacancy that to rent it to a deadbeat that will tear up the house and that I'll only have to evict later.
Monday, October 22, 2007
Qualified!
It was bound to happen. I finally found someone that is qualified to rent my 3 bedroom house. This is a young married couple with 5 children and NO CRIMINAL RECORD!!! They say they want the house and we'll see if they come up with the money. Nothing is a done deal until the money is received and obviously I won't hold it for them without a non-refundable deposit. So, I'm keeping my fingers crossed.
In other good news, I now have the blocks laid on the front, back, and one end of the doublewide project. I have laid blocks around many doublewides, but this was the worst. EVERY SINGLE ONE OF THE TOP BLOCKS HAD TO BE CUT! Many of these blocks required several cuts to fit around beams and other obstacles not typical of more recent doublewides (this one is a 1979).
I just received a call from one of my tenants asking how much the front apartment rented for. They were asking because the front tenant told them he was leaving. You guessed it - I haven't heard a word from him. He certainly hasn't given notice. This is a holdover tenant from the previous landlord and he did not pay a security deposit. The landlord I bought the building from would take just about any story or promise in lieu of a deposit. This is what always happens if you have no deposit. The tenants don't feel obligated to follow the law or the lease because the landlord has no leverage over them. This is the last holdover tenant from the previous landlord, so I won't encounter this situation again soon.
In other good news, I now have the blocks laid on the front, back, and one end of the doublewide project. I have laid blocks around many doublewides, but this was the worst. EVERY SINGLE ONE OF THE TOP BLOCKS HAD TO BE CUT! Many of these blocks required several cuts to fit around beams and other obstacles not typical of more recent doublewides (this one is a 1979).
I just received a call from one of my tenants asking how much the front apartment rented for. They were asking because the front tenant told them he was leaving. You guessed it - I haven't heard a word from him. He certainly hasn't given notice. This is a holdover tenant from the previous landlord and he did not pay a security deposit. The landlord I bought the building from would take just about any story or promise in lieu of a deposit. This is what always happens if you have no deposit. The tenants don't feel obligated to follow the law or the lease because the landlord has no leverage over them. This is the last holdover tenant from the previous landlord, so I won't encounter this situation again soon.
Saturday, October 20, 2007
Cash Crunch!
Cash flow is the lifeblood of any business. If you want to stay in business, you need to have positive cash flow. In fact, the lack of adequate cash flow is the number one reason new businesses fail! I know this and am constantly preaching this to new investors.
To have adequate cash flow, you must buy your rentals at a big discount. Of course, I have done that and all of my rentals cash flow quite nicely. However, in addition to buying right, you must also plan your spending, especially capital expenditures. This month, I did not do this very well and I found myself in a cash crunch. It all started with the doublewide project I am completing. I have been doing this project with all cash and it is nearing completion. That has drained my cash on hand and I will be refinancing later this month to get my cash back. All of this was planned in advance. However, a couple of unexpected events occurred that I hadn't planned for. First, my wife was involved in a major accident. Her Mercedes was totaled and she needed another car. I am a big believer in not using credit for non-income producing assets. In other words, I always pay cash for automobiles. I spent some of my reserve cash on her new Jaguar (2002 Jaguar S-Type). Then, I suddenly had 5 new vacancies, all of which were unexpected. One couple broke up and moved out. Another tenant moved without notice to shack up with her boyfriend. Another long term tenant gave her 30-day notice because she has a new baby and needed a bigger house. Another excellent tenant got custody of a relative and needed a 4 bedroom house. I don't have one available. She gave her 30-day notice last month and moved out this month. Finally, I had to evict another tenant. OUCH!
None of these things by themselves is a big deal. I use cash flow to do projects all the time. The car accident was certainly unexpected, but again not a big deal. Likewise, in the rental business, you can be full one month and then have several vacancies the next month. However, combine all of these events in a single month, and my cash got very low. OOPS! If I had to do it over, I would not have put so much cash on the car. This would have allowed me to keep a better cash reserve level and allowed me to avoid the cash crunch altogether.
Everything has worked out fine. When you have a relatively large rental portfolio, money comes in all month long. Every time you rent another unit, you receive the rent and the security deposit. Also, almost every month at least one new tenant has their first month's rent or deposit paid by one government agency or another. When this happens, that money arrives later in the month. Also, when you evict a tenant, you must put up a deposit for the setout. If you do the setout yourself (I always do), you get that money back later in the month. All told, this usually adds up to another few thousand dollars each month.
The moral of this story is that you must always plan your cash flow carefully and ensure that you don't get overextended. This month was a reminder of that fact!!!
To have adequate cash flow, you must buy your rentals at a big discount. Of course, I have done that and all of my rentals cash flow quite nicely. However, in addition to buying right, you must also plan your spending, especially capital expenditures. This month, I did not do this very well and I found myself in a cash crunch. It all started with the doublewide project I am completing. I have been doing this project with all cash and it is nearing completion. That has drained my cash on hand and I will be refinancing later this month to get my cash back. All of this was planned in advance. However, a couple of unexpected events occurred that I hadn't planned for. First, my wife was involved in a major accident. Her Mercedes was totaled and she needed another car. I am a big believer in not using credit for non-income producing assets. In other words, I always pay cash for automobiles. I spent some of my reserve cash on her new Jaguar (2002 Jaguar S-Type). Then, I suddenly had 5 new vacancies, all of which were unexpected. One couple broke up and moved out. Another tenant moved without notice to shack up with her boyfriend. Another long term tenant gave her 30-day notice because she has a new baby and needed a bigger house. Another excellent tenant got custody of a relative and needed a 4 bedroom house. I don't have one available. She gave her 30-day notice last month and moved out this month. Finally, I had to evict another tenant. OUCH!
None of these things by themselves is a big deal. I use cash flow to do projects all the time. The car accident was certainly unexpected, but again not a big deal. Likewise, in the rental business, you can be full one month and then have several vacancies the next month. However, combine all of these events in a single month, and my cash got very low. OOPS! If I had to do it over, I would not have put so much cash on the car. This would have allowed me to keep a better cash reserve level and allowed me to avoid the cash crunch altogether.
Everything has worked out fine. When you have a relatively large rental portfolio, money comes in all month long. Every time you rent another unit, you receive the rent and the security deposit. Also, almost every month at least one new tenant has their first month's rent or deposit paid by one government agency or another. When this happens, that money arrives later in the month. Also, when you evict a tenant, you must put up a deposit for the setout. If you do the setout yourself (I always do), you get that money back later in the month. All told, this usually adds up to another few thousand dollars each month.
The moral of this story is that you must always plan your cash flow carefully and ensure that you don't get overextended. This month was a reminder of that fact!!!
Friday, October 19, 2007
0 for 4
I had another woman apply to rent my nice 3 bedroom house today. From the time I talked to her on the phone, I wasn't impressed. She was just...wierd. Her mannerisms were odd. I know that's not very objective, but I trust my instincts.
When I met her at the property, my suspicions were only amplified. She WAS wierd. She brought a plastic grocery bag with dozens of her "husband's" pay stubs. In addition, she brought three envelopes - one with $600, one with$80, and one with $100 (which wasn't the amount needed to rent the house anyway). Wierd! Why was she trying so hard to prove she could afford the house?
At any rate, I MIGHT not deny someone for being wierd if everything else is OK. So, I had her fill out an application. As I reviewed the application with her. I noticed that she had listed 3 addresses in 2006, including a house she claimed to have bought and then sold. When I asked to see her driver's license, I noticed it listed yet another (4th) address and that it was issued in 2006. I questioned her about all of these addresses and she admitted to moving 4 times in 2006! That is not a good sign that she will stay a long time in my rental.
When I got back home, I ran her screening. She didn't have any criminal activity - GOOD! Her "husband" (shack up boyfriend) had several domestic violence and other criminal activity, but all if it was at least 6 years old. I called her current landlord. He said that she had not paid the October rent and that her lease ran through March. The applicant said that she was moving because the landlord would not fix her water heater. I asked him about that and to my surprise he said "THAT'S RIGHT!" He went on to explain that she didn't pay the gas bill and had her gas shut off. When the gas company came to turn it back on, they wanted this and that fixed before they would turn it back on and he wasn't in any hurry to help her out. That was good enough for me! The pieces of the puzzle were now all in place.
She had violated her current lease by not keeping her utilities turned on. She had not paid her October rent. She was trying to leave before her lease was up. She was wierd. I denied her application and told her that I wouldn't take a tenant who has cheated another landlord!!!
When I met her at the property, my suspicions were only amplified. She WAS wierd. She brought a plastic grocery bag with dozens of her "husband's" pay stubs. In addition, she brought three envelopes - one with $600, one with$80, and one with $100 (which wasn't the amount needed to rent the house anyway). Wierd! Why was she trying so hard to prove she could afford the house?
At any rate, I MIGHT not deny someone for being wierd if everything else is OK. So, I had her fill out an application. As I reviewed the application with her. I noticed that she had listed 3 addresses in 2006, including a house she claimed to have bought and then sold. When I asked to see her driver's license, I noticed it listed yet another (4th) address and that it was issued in 2006. I questioned her about all of these addresses and she admitted to moving 4 times in 2006! That is not a good sign that she will stay a long time in my rental.
When I got back home, I ran her screening. She didn't have any criminal activity - GOOD! Her "husband" (shack up boyfriend) had several domestic violence and other criminal activity, but all if it was at least 6 years old. I called her current landlord. He said that she had not paid the October rent and that her lease ran through March. The applicant said that she was moving because the landlord would not fix her water heater. I asked him about that and to my surprise he said "THAT'S RIGHT!" He went on to explain that she didn't pay the gas bill and had her gas shut off. When the gas company came to turn it back on, they wanted this and that fixed before they would turn it back on and he wasn't in any hurry to help her out. That was good enough for me! The pieces of the puzzle were now all in place.
She had violated her current lease by not keeping her utilities turned on. She had not paid her October rent. She was trying to leave before her lease was up. She was wierd. I denied her application and told her that I wouldn't take a tenant who has cheated another landlord!!!
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