Flip And Grow Rich In South-Eastern Michigan!

The Only Constant Is .... Change!

2009-07-10T12:04:00.003-04:00

As time marches forward and technology continues to evolve, things change. Do you find yourself forgetting about websites you have bookmarked? Do you get easily distracted by all the content online? You're not alone!

Our attention spans are getting shorter every day. Myspace, Twitter, Facebook, LinkedIn, ..... you name it!, they are all taking up our time and attention. And why not? They are quick and simple. People are using these social media sites on their phones in greater numbers.

So, I too need to take advantage of the new media to keep people informed about my activities. When the time is right and when the opportunity is there for those who follow what I'm doing, they will have the means to contact me and jump on board. The only way that can happen is if I stay in front of people. This is the way to do it.

Visit my Facebook business page and, if you like what I'm doing, become a fan and watch as I grow my business.

Marketing: Everyone Does It!

2009-06-12T13:10:00.002-04:00

Twitter, Facebook, Myspace, LinkedIn ... you name it, social media is pervasive. What's it all about? MARKETING! Even if people use these tools simply to stay in touch with friends and relatives and to share pictures and videos, it is still a form of marketing and networking.

There is no way around it. If the word MARKETING makes you cringe and all you can envision is some eccentric guy off in the corner all giddy about the latest glossy brochure he just developed that will make the PERFECT direct-marketing mail piece ever designed since marketing was ever conceived, then you don't understand what marketing is all about. Simply put, it's about building and maintaining relationships.

Granted, these relationships differ (business, friendship, peers, family, etc.) but the main purpose is still the same - positioning yourself in another person's mind so that when the appropriate time comes, that other person will think about you.

So, for example, what if you knew only one person who knows that you are excited about boating? And say that a boating event (boat racing, boat shows, etc.) was going to be coming to your area and that person reads or hears about it. OK, you'd want that person to contact you and let you know about it - right? That's just one person, though.

Now what if 100 people know you're excited about boating? Isn't the likelihood that more than just one person will let you know about the event? Well, the more contact you maintain with those 100 people and the more often your passion for boating is mentioned, the more likely they are to let you know when related events pop up. Got it?

Of course, you don't want to monopolize every conversation with boating, boating, boating! Keep it up and you'll capsize the conversation at least and sink your relationships at worst. Make sure you share a genuine interest in other people and their passions and do the same for them as you would have them do for you - pass along relevant information that might spark their interest. Simple!

Now, I say all that to share with my readership that I am not just marketing to build a list of prospective tenants for my properties (although that is always nice!) or to build a list of hot real estate deals (who wouldn't want such a list?), or to attract an unlimited source of private money investors (who doesn't have this list?), but I'm now also marketing myself for hire. Due to downsizing, I was let go from my sales position with my former employer after six years of service. Yes, I was one of 24 people let go without notice - escorted out of the building without even a handshake or a "thank you for your service"!

So, if you'd like to talk with me about my particular situation, please give me a call! I'd really like to hear from you. Or, you can check my profile out on LinkedIn.

Anyway, I'm on a campaign to reinvent myself and seek out new challenges that will make use of my sales and marketing experience, my technical background in engineering, and yes, especially my management and negotiation skills developed over the years as a real estate investor and property manager (landlord).

The Credit Crisis Explained

2009-04-10T11:15:00.001-04:00

This video presentation by Jonathan Jarvis is a couple months old, but I find that many people still don't fully understand exactly what is happening that is causing so much frustration to people trying to borrow money these days and this video is an excellent presentation. It starts out very, very basic, but then becomes more detailed and you may want to view it several times till you fully understand the concepts. It's not really that complex, but to someone unfamiliar with how investment banking works, this may seem foreign to you at first.

Enjoy, and be enlightened ....

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Thank you, Mark Ijlal!

2009-03-16T21:11:00.002-04:00

In my last post I was giving thanks to the man whom I feel was the inspiration to my interest in real estate from a very early age. Harry Bokano was the example I looked to in order to realize that “regular people” could own more than one house and eventually make a good deal of money over the long haul by doing so.

As the years went by, I always knew that I wanted to learn more about real estate but I didn’t know where to start. I didn’t really think to ask Harry how he got into real estate or question him about being a landlord. I was raised to treat issues like money as a very private and extremely personal matter. So, as a result, I thought it would be rude and intrusive if I were to ask Harry about his business. Besides, Harry was 30 years older than me and I wouldn’t THINK to ask such a think of my elders. Well, that was my loss and I think it was wrong for my parents to raise me that way. What could be more important than learning from your elders, the successful ones that is, about how to make money and invest?

Over time, like so many others like me, I would read books about real estate and eventually I bought the seminar tapes on the Carlton Sheets’ No Money Down program, but even that wasn’t enough to get me started. What really did it for me was learning from someone in my age category and someone who was doing what I wanted to do and doing it in my own back yard - so to speak. That’s where my business coach and mentor, Mark Ijlal, comes onto the scene.

In November, 2005, my wife, Analiza, was taking a 5-week vacation to visit her mother back in the Philippines. Our daughter had not been born yet, so it was just me and the family dog, Adam, staying home thinking of ways to get into trouble. Analiza had only been gone about 2 weeks when I took a step off the deep end!

Let’s take a step back for a moment. You see, a month or so before this time I was scanning the AM radio dial for something new and interesting to listen to. It was a Saturday morning when a lot of “do-it-yourself” shows are on. You know the kind: car repair experts, financial investment experts, nutritional supplement experts, real estate investing experts, etc. Well, you guessed it, Mark Ijlal was on the radio (WDTK, 1400 AM) on a Saturday morning with his real estate investing show, The Real Estate Warrior Show. After listening to him for a few weeks and hearing about his upcoming “Quick Start Bootcamp” for the new and budding real estate investor entrepreneur (me), I had the seeds planted in my mind.

So, while Analiza was away I decided to sign up for the one day seminar and that was the best 14 hours of my life! That is when Mark laid out everything I needed to do to get started in real estate investing. He taught me how to set up my LLC, how to get an employer ID number (which is like a social security number for your LLC), how to get free business cards printed up, how to set up a business checking account and apply for business credit, and how to find, evaluate, and bid on investment properties. There was much more covered, but needless to say more than just the basics were presented to me at that time and I had enough information to go out and get my career started.

When Analiza came back from her vacation, I presented her with what I had done.

ComfyQuarters, LLC was formed (filed articles of organization)
Employer ID Number was assigned (EIN)
Fax line was set up
Business cards were ordered
Business checking account was opened
Business line of credit was obtained

I was now in business!

After seeing all that I had accomplished in her absence, Analiza saw the vision and she was behind me in my mission. I had assigned her as the bookkeeper and accountant (CFO) and she took the position gladly knowing that I was on the right path to make this a successful venture.

So, thank YOU, Mark Ijlal, for teaching me what I needed to know to get started in the business I have wanted since I was a young boy. Mark gave me the actual tools needed to implement the dream.

What are YOUR dreams? Do you know what tools you need to make it a reality? Find others who share your dreams and who are living theirs. Ask them to show you how they did it. Don’t be shy!! Do not hesitate to ask others how they obtained something or have arrived to somewhere you would like to be. If they say no, then ask someone else -- but don’t give up on your dreams. I didn’t. And I still haven’t. I dream every day and I work a little bit more each day toward my goals.

I encourage you to do the same …

Thank You, Harry!

2009-03-04T20:13:00.003-05:00

How I Got Interested In Real Estate Investing

I’m writing this post because I believe there are some of you who also have an interest in real estate investing, but you just don’t realize it yet. Hopefully, my story will spark that “something” within you that propels you down the path I followed and perhaps you will find your passion in life along the way.

So, here’s my short story …

As a young boy, my parents used to take us to see the Bokanos (Harry and Joan). My dad used to work in a slaughter house in downtown Detroit as a calf skinner and Harry was someone he worked with. They were friends outside of work and Harry had a cottage on a lake somewhere up north. I remember how much I enjoyed going there and skipping stones off the dock and even tried water skiing once. That trip ended early, though, when my dad tried to ski on one leg - it ended badly! Well, my dad was OK, besides the bruised ego and the beat red burns from head to toe -- I thought he was doing a trick as he cart-wheeled across the surface of the water -- but that was probably one of the best trips ever!

Anyway, Harry and Joan lived (and continue to do so) well below their means and sunk every extra penny into real estate (rentals). As I grew older and as I would listen to the stories being told, I knew that Harry was doing something very smart, although I didn’t really understand it all back then. But I can say that Harry is the original source of my interest in real estate (I was around 8 at the time) and I knew that it was a way of saving up for the future and that somehow it would mean that Harry would have money to spend when he was old.

Fast forward many, many years. While I was serving in the U.S. Army as an Infantry soldier (1982-1986), I became aware of a No Money Down program being advertised by Carlton Sheets on late night TV. Yes, THAT Carlton Sheets! I was so intrigued by his sales pitch and I new that there was money to be made in real estate so I did like many other investors have done - I picked up the phone, credit card in hand, and I bought the program! (I later sold my Selmer Tenor Sax for $500 to help pay for the program, much to my parents displeasure!)

Well, the program of video tapes and books sat on my shelves for many more years collecting dust (as they did for many other investors like me!) but I knew that money could be made in real estate if I would simply imitate the actions of others who were successful before me and if I would just work hard. I just didn’t seem to have all the pieces I needed to get started. I needed more details!

Next, (around 2001) I stumbled upon Robert Kiyosaki’s books, “Rich Dad, Poor Dad” and “Cashflow Quadrant”, and I must say that these books (among some others) helped change my mindset. I no longer see scarcity, but rather opportunity. There is no lack of money in the world, only lack of knowledge and creativity to move some of the money from the pile into my own bank account. I knew that my biggest problem was that I kept spending my money on things that took more money and didn’t return any. I learned from Kiyosaki that I had to spend some of my money on money-producing assets. That is, I needed to buy something that would produce more money over time than what I spent to acquire it. Does a car do that? Does an expensive closet filled with clothes or shoes do that? Does a swimming pool or big screen TV do that? The answer is, NO! These things take your money (liabilities) and give you nothing in return other than the entertainment and enjoyment you receive from these items.

But I wanted to start buying assets that would generate money, not just consume it. That’s where real estate comes in to the picture for me. I eventually met my business coach and the man who showed me the details I needed to get started, Mark Ijlal. In my next post, I will tell you more about how I met Mark and what he showed me to help me get past my hesitation to launch my business.

Hopefully, you will see yourself in this story at some stage. Perhaps you know deep inside that real estate is the place to invest. I hope my story encourages you to keep exploring, keep reading, and never stop dreaming about where you want to be next year, three years, and five years from now.

Dream, plan, then EXECUTE!

Where Was The Interest Three Years Ago?

2009-02-09T20:58:00.000-05:00

I have been immersed in real estate investing since the end of 2005. I bought my first investment property in the first quarter of 2006, so I’ve been into this for a solid three years now. My business coach always taught us not to be a “secret agent” -- sure, James Bond (007) is really cool, but if no one knows who you are, then no one will do business with you or show an interest in what you are doing.

So, I have headed his instruction and I have been telling everyone what I do. I pass out business cards. Hardly a conversation goes by that I don’t mention that I buy investment real estate. So, where are the excited disciples? Where are the people who have been dying to learn this business? Why are then not asking me question, after question?

Well, actually, until recently, very few people have shown an interest in what I’m doing. But since the extreme decline in the economy, most notably starting in mid-September, 2008, I have had people approaching me and asking for my thoughts on the economy. They are visibly concerned about what is happening all around us. When I tell them that I have been working on a safety net plan since 2005, they ask me what I have been doing. I tell them I buy real estate and that’s when I get the blank stare! “You think now is a good time to be buying real estate?!” they ask doubtfully. And I reply, “Of course! Real estate is dirt cheap - literally! In fact, in some parts of Detroit that I would not invest, you can buy property for LESS than the dirt it sits on -- $1.00. The land itself is worth more than that and that is evident by the tax bill you still have to pay for that piece of dirt.

So, investing in real estate is no different than any other time. You still have to know how to evaluate any prospective property and the area the house is in. But it can still be done profitably in this economy -- in fact, this is the BEST time to buy because you can buy the property at bargain prices (40% - 60% below fair market value) and at historically low interest rates.

I’m concerned that some people interested in what I’m doing now start asking me if I have seen this or that show on late night TV with a special book offer on real estate investing. I have to say honestly that I have NOT seen any of these infomercials because I don’t watch enough TV to catch them. But I tell them they don’t need those programs. They just need ME! They can ask me any question at any time and I’ll tell them what I have learned and what books I have read -- no charge! I am not selling seminars or books. I just want to share what I know with others and watch them duplicate what I have done. So …. ask questions!

Here are some good questions to ask a real estate investor:

1) How did you get interested in real estate investing?
2) How did you get started in real estate investing?
3) How did you buy your first property?
4) How do you set up an LLC?
5) How do you establish business credit?
6) What do you use for a lease agreement?
7) How do you screen applicants?
8) How do you find and hire qualified contractors?
9) How do you manage contractors?
10) When do you ask for a signed W9?
11) When do you issue a 1099?
12) What do you look for when hiring an accountant or CPA to do your taxes?

I will commit to answering these 12 questions in the coming weeks/months if you will commit to reading them and offering up suggestions for improvement or asking questions I haven’t included in this list.

Times are tough right now for many, many people. But times can be unbearable for those who are unprepared when the worst happens. Don’t keep all your eggs in one basket. That includes putting all your trust into one employer. Prepare yourself for what may be next in your life if you find yourself without your current employer. What will you do for yourself and your family if you find yourself out of work due to this difficult economy?

We all need to find what it is that we are interested in doing that could somehow be turned into a money making opportunity. After all, when we learn to earn, we can then help others learn, too.

Don't Let 2009 Pass You By! (BUY!)

2009-01-24T20:51:00.002-05:00

Sure, we may not have hit rock bottom yet. But, maybe we're really close? Who knows? No one does, for sure. There are a lot of experts who consider many variables and make their predictions as to when the bottom will arrive. Many believe that we have another 24 months or so before all the sub-prime adjustable rate mortgages out there adjust and do their final, fatal damage to homeowners around the country.

Many will not be able to afford their mortgage payment once the low, introductory rate evaporates and they are hit with a much higher rate and, as a result, a much, much higher monthly payment than they ever dreamed they would be hit with. As a consequence, many will simply walk away and let their house go into foreclosure. But since Michigan has a six-month redemption period in addition to the time leading up to the actual default, judgment, etc., the house may not actually make it to market as an REO (real estate owned by the bank) for about a year or more after the rate adjusts.

All this means is that there will be a good supply of empty, bank-owned properties waiting to be taken advantage of by the prepared investor for quite some time to come. (Me and you!) Even when the market begins to recover, the values are not likely to just jump through the roof. I would not expect values to just rise as fast as they fell. That's the nature of this popped housing bubble. It inflated over a number of years, but when it "popped!" housing values dropped precipitously. Granted, these values may have dropped artificially low due to the number of foreclosures being sold off at 40-60% of market value. When appraisers started looking at property values for the retail home buyer, they often didn't filter out the "sold" price of the vacant foreclosed property next door.

We are witnessing a huge correction in housing values and we may have seen the market fall a bit lower than the true market value of properties should be. You can expect a recovery beginning in about 36 months and by 2014 you should see reasonable property values once again.

The good news for real estate investors is that you can pick up a ton of houses (REOs, owner occupied, estate sales, etc.) in great condition or that need a lot of fixing up (rehab) - whatever fits your investing style, it's out there!

Don't let 2009 pass you by -- BUY today! If you are new to real estate investing, now is the time to get on the fast track. Read all the books and blogs you can get your hands on and educate yourself. Sell off a bunch of stocks or mutual funds to get the cash you need for a down payment. Whatever it takes, get into real estate now while it's so easy!

If you wait, don't worry. Real estate will always be here. That will never change. What changes are the market conditions and the tactics and strategies you will need to make the best investment. But it boils down to basically two simple strategies: Buy, fix and flip quickly for a profit (best when market is stable or rising), or you can buy, fix and hold (rent) for the long term and build equity.

I like BOTH strategies and I'll continue to do both when it makes sense (cents!) to do one over the other.

Thanks for reading! If you have any real estate related questions, don't hesitate to post a comment. I will be happy to research your question and get back to you with an answer.

Now This Is Ridiculous - But Fun!

2009-01-09T15:11:00.002-05:00

As seen in my recent posts, I recently went to the range and was a bit proud of my marksmanship. But I am actually a LOUSY shot with a firearm. Check out this YouTube video highlighting Bob Munden, the fastest gun ever!

No Recession For Me - Thank You!

2009-01-07T13:33:00.003-05:00

My thanks go out to Brian Kurtz and Dennis Fassett for bringing this link to my attention. Go check it out. LISTEN to the message. CHOOSE your path and run with it. I did.

Go here: NoRecessionForMe

Look, I know I haven't done everything perfectly in 2008. I have made some errors in judgment. I have chosen substandard quality contractors at times. I have over-improved on my properties a bit. I may have expanded more quickly than I should. BUT - I did something. I made choices. I followed through. As a result, I have flipped one property for a profit and I own three others that are rented and generating income. THAT is a pretty good year if you ask me.

So now what? Am I going to let the news get me depressed? Am I going to crawl into a hole somewhere and bury my money inside a mattress? (side note: Have you ever tried to stuff money inside a mattress? For real? Even if you get your hand in there, you might shred it to pieces while pulling it back out - those springs have sharp edges! No, I don't know this from personal experience, I've just heard about it somewhere before.) Am I going to stop investing my money because the talking heads on the news say that no one is lending money and no one is spending money?

No, I intend to keep moving forward and building my portfolio of investment properties. Would you like to join me? Would you like to partner up with me on some deals? Contact me and let's talk!

Serious Business Can Also Be Serious Fun!

2008-12-28T21:18:00.006-05:00

I must admit that 2008 was a very exciting and fast-paced year! I finished this year off with a BANG!, literally! I just completed my concealed pistol license (CPL) class today so that I could apply for my permit to carry a handgun for personal protection when performing my activities as a real estate investor. Several other investors have told me that it’s not only a good idea, but it’s essential to have personal protection when entering vacant properties to inspect them as potential purchases. It hasn’t happened to me, yet, but several others have told me their personal stories of uncomfortable and potentially dangerous encounters with squatters and others found inside the property who should not be there.

So, not only did I want to protect myself if necessary, I also wanted to obey the laws and legally protect my right to keep and bear arms so that I could also protect and defend my family at all times. It’s increasingly necessary in these times of uncertainty. Many people who are out of work or in other ways have fallen on hard times can become desperate and do desperate things. I don’t want my family to be confronted with such a situation. I want to be prepared.

I consider a CPL simply a necessary tool needed by the real estate investor just like a digital camera and a notepad. It’s part of your “utility belt.”

Here is the picture of my range target at the end of the training session.

It might be difficult to tell by the picture, but I put 30 rounds of ammunition at dead center from about 15- to 20-feet. It sounds easy to anyone who hasn’t fired a handgun, but judging from what I saw others doing at the range (many who claim to be regular shooters!) it’s not as easy as it sounds. Accuracy isn’t by accident -- you have to follow the fundamentals if you want accurate results (a tight shot group).

I recommend everyone interested in learning more about the right to keep and bear arms and learn about what it takes to properly (legally) protect yourself and your family to contact Cedric (Rick) Ector, a certified NRA instructor, and take his class. Even if you don’t plan to move forward today and get your permit, at least take the class for the information and the experience of shooting at the range in a safe and professional setting. I can’t recommend it enough!

Here is my certificate:

Thanks Rick! I look forward to further training opportunities with you in the future!

2008-12-01T22:22:00.001-05:00

Wow! Has it been a month since I have posted anything to my blog? Unbelievable how time flies!

What have I been doing? What has kept me so busy? Well, I’ll tell you … I have been working very hard with a new contractor to finish up where the other guy left off - abruptly. In other words, I had to let one contractor go because he just would not perform. I got another gentleman that I know and trust to come in and “clean up” after the other guy. That is never any fun for anyone, but it had to be done and Alan Boike did an excellent job for me - thanks Alan!

Also, I have been advancing my education by pursuing my master’s in business administration (MBA) through Davenport University. I’m at the half way point and expect to finish in early Spring, 2010. So, I expect another very challenging year in 2009, but I am up for it!

I have successfully placed a tenant in my Rosedale Park property in Detroit. They are very excited to move in and start enjoying the beautiful, historic home. Before they do move in next week, I am working with the city of Detroit to get the water properly turned on - finally. The main shutoff valve at the street appears to be broken and we have extremely low water pressure in the house. So, I need to get that corrected this week - no excuses! - so that they can move in with no problems.

I am still searching for a tenant for my property in Mt. Clemens on 125 Grand Ave. Apparently people do not want to pay $875 for a 3-bdrm, ranch home with a HUGE country-style kitchen that has a cathedral ceiling and a huge, clean basement complete with a 2nd bathroom - not to mention all brand new appliances. Well, I will just have to keep marketing till I attract the right applicant.

What are my next steps? Well, I have to wait till I have at least six month’s “seasoning of title” before I can seek a cash-out refinance on both properties I am currently working on. In layman’s terms, I need to show that I have owned the properties for at least six months before most (or any) banks will consider extending a mortgage. So, once February 2009 rolls around (less than 90 days from now, can you believe it?!) I will be able to seek a 30-yr. fixed-rate loan on both properties (125 Grand Ave. in Mt. Clemens and 14866 Faust Ave. in Detroit) and cash out in order to pay off my business lines of credit that were used to acquire and renovate the properties as well as pay for all the holding costs. Once I do this cash-out refinance, I will be positioned to purchase again in early Spring 2009.

However -- this is where it gets truly exciting. I can only have a maximum of four mortgages and my primary residence counts as one. So, I can only carry three investment properties on a 30-yr. fixed rate mortgage. And, since my business lines of credit are limited, I will have to start looking to private sources for funding future investments.

So --- if you are reading this and are interested in investing in real estate for better returns than you’re getting now in the stock market, or if you know someone who would be interested, please let me know. I’m really excited about the opportunity to share with others what I am doing and together we can benefit from this real estate market while others are running for the boarder!

What A Difference A Day Makes!

2008-10-29T22:03:00.002-04:00

It is so good to have your rehab project in the hands of a skilled and knowledgeable contractor! I loathe having to replace a contractor for low quality or for failure to perform, but sometimes you just have no choice. No matter how good you do your homework (due diligence) you can still get burned and you need to be prepared to respond quickly when that happens to you and salvage your deal.

That's the case for my project on Grand Avenue in Mount Clemens. After taking sufficient time to walk through the property with Allan and specifying exactly what needed to be done to get the property to the level needed to satisfy the city inspectors, we discussed the entire scope of work, timing, price, and signed a contract and got to work. Things are already starting to take shape and I expect all the major items (Heating Ventilation and Cooling (HVAC), Electrical, Plumbing, and attic insulation) to be completed by the end of the week and then a laundry list of other items (let's call it final trim work) will be completed by the end of next week.

I expect this home will be quite nice when Allan gets through with it. He's done many properties for himself and he's a very conscientious person. I have no doubt that my next tenant will be very pleased with the results and very comfortable for some time to come.

Lessons Learned - Top Three Warning Signs Your Contractor Isn't Performing

2008-10-27T21:23:00.002-04:00

I have experienced a delay in my rehab project for my property in Mt. Clemens. I have been stacking up tenant applicants and missing out on opportunities to generate cash flow because of the delay. But, this is what happens when you mess up like I did. Don't worry though, I have dismissed my contractor and have hired someone I trust to get things done properly and quickly. I'll be back on track in a couple weeks.

But what did I do wrong? I paid my contractor too much money before completing an appropriate amount of work. That’s right! I did everything else right, but paying too much money before enough work is completed is the “kiss of death” to any rehab project. Even though I used this contractor in the past and I knew what to expect, and even though we had a very detailed scope of work written out, and even though I had an iron-clad contract signed, I still guaranteed failure by paying too much, too early.

What are the top three warning signs your contractor is going to be a problem? Here is what I have observed over time:

The first sign of trouble that your contractor is going to be a problem is that he or she starts letting your phone calls go to voice mail. Now, don’t be paranoid here. Just be in tuned for a significant change in the pattern of communication. If you normally get right through to your contractor over the phone and discuss the plans for the day or for the following day and all of a sudden you start getting voice mail and it takes a couple of attempts before you receive a call back, that’s something to be concerned about. The first time it happens may be nothing - we all get busy. But if you start to get that “feeling” that you’re being avoided, something may be wrong.

The next thing you want to watch out for is a sudden change in scheduled hours. If your contractor is usually on site at 8-am and stays hard at work till around 4-pm on a daily basis, but suddenly seems not to be on site till around 10- or 11-am, you should ask questions. Also, you should be inspecting the work on a daily basis to check their progress. Until you develop a strong relationship with a contractor and really can trust them to do what they say they’re going to do, you must inspect their work regularly. This will help you detect warning signs early.

Finally, when you start noticing delays in your project due to “unexpected” problems, you need to be concerned with the capability of your contractor. Sure, you may encounter the occasional “surprise” during the rehab, but I have learned that there is nothing that cannot be corrected pretty quickly. Any more than a day or two delay for anything except for maybe the most serious things like structural problems not identified during the initial inspection should have you seriously concerned with your contractor’s ability to complete the job.

So there you have it. My “lessons learned” as I continue down the path of real estate investing in south-east Michigan. Hopefully you will not make these mistakes if you are starting out. Learn from those of us who have learned the hard way.

I’m enjoying the process. I’m looking forward to continued successes. I’m excited about the ongoing opportunities to invest here in Michigan. It’s a tremendous opportunity outside of the typical IRA, 401(k), KEOGH, or other investment vehicles. After all, I have lost over 46% of the value in my 401(k) I have at work. I will not rely on that alone for my future retirement years.

If you have pulled your money out of the stock market or mutual funds and are interested in putting it somewhere more secure over the next 2-5 years, send me a note. I would like to talk with you about how you can partner up with me and make a positive and almost guaranteed return on your investment!

The Sky Is NOT Falling!

2008-10-21T17:27:00.000-04:00

With all the hoopla about the economy, environment, politics and global unrest in general, it might be easy to get depressed. In fact, recent talks about GM considering a merger with Chrysler resulting in a number of plant closings and over 30,000 jobs lost – one might conclude that Armageddon and the end of the world must be just around the corner.

In fact, many people are pulling their money out of stocks, money markets, and even banks and putting their cash under their mattresses. Not a good idea! In fact, if you’re in the stock market and the value of your account seems to be down about 40% you should probably be doing two things. First, leave your money where it is!! It will come back. The number of shares you purchased is still the same and when the market rebounds, your balance will increase. Second, now is the time to be buying more shares and adding to your portfolio. Look at Warren Buffett, for example.

My friend Dennis, however, has been completely out of the stock market for the past three years. He cannot stomach the roller-coaster ride of the market. Can’t say that I blame him! He’s doing something else. And that’s OK! We all have our own approach to things in life. Be a leader, not a follower. Make your own rules rather than follow everyone else’s.

What is Dennis doing? He’s doing what many of us have chosen to do – invest in real estate! That’s right. Many of us have decided to put our money into something we can see and touch. Something we can analyze in terms we can understand. Everyone needs to live somewhere. Many people like the benefits of home ownership without the long-term commitment to a mortgage. So, these people are perfect candidates to rent a house.

I have been buying houses, fixing them up, and putting renters in them while I hold on and let the housing market recover. My tenants get the benefits of home ownership while I get the benefits of increasing home value (in terms of equity as the mortgage is paid down), tax deductions from my income (interest on the mortgage is tax deductible as well as all the maintenance costs, etc.), monthly income from rents that exceed all my expenses, … you get the idea. Ten years or more down the road, I will be sitting on tons of equity in the properties.

The problem all of us investors run into is the issue of money. There just is not enough of our own personal money to go around and buy up all the properties that are out there. Additionally, there is a limit to how many mortgages (currently it’s 4) any one person can have in their own name. So, the next level investors turn to is private money sources. There are some people out there who choose to invest their money in real estate rather than stocks but they have neither the time or desire to find, buy, fix, and manage properties for themselves. So what do they do? ……

These investors with money and no time or no desire to do the nitty-gritty, use people like me to help them with their investment goals. They basically serve as the bank and fund the investments with their own money while holding a first lien position. This is about as secure an investment there is!

If this sounds like something you would like to be involved in, contact me! I would love to work with you. The opportunities right now are almost unlimited!

The point is this. The sky is not falling. For some, times may seem unbearable difficult. But that is only because this change in circumstances has caught them unprepared! Don’t let this happen to you. Keep learning new skills, keep improving on your communication skills, keep building your network of friends and professional contacts. You never know when you will find yourself making a change. Be prepared. That is the lesson to be learned from today’s newspaper headlines.

Do not be afraid, just be prepared.

A Very Sad Day ...

2008-09-21T00:53:00.002-04:00

Saturday, September 20, 2008 was a very, very difficult day for me. I had to make the unfortunate, but correct, choice to surrender my dog, Adam, my cherished companion for the past seven years, to another family in order to ease my daughter’s chronic allergy symptoms. It turns out my daughter has a severe allergic reaction to peanuts, tree nuts, eggs, cats … and yes, her own dog, Adam!

I circulated posters for four days and then I had to pull them down because I received a tremendous outpouring of support from so many people. It was tough to decide who to award custody of my friend but I had to make a decision. Finally, I made my selection. I selected a husband and wife who lived way out in the countryside. They had a 9-year old beagle named Lucy who had just recently lost two companions herself - Snoopy (13) and Cuddles (15). Lucy was home alone all day and seemed very lonely. This, so I thought, ought to be the perfect fit!

A few short hours after a very emotional hand off, I received a call that Adam was really much bigger than they had realized and that it really wouldn’t be the best fit. I had to go back and get Adam and start the drama all over again!

Fortunately, I had a waiting list of caring dog lovers standing in line just waiting for the opportunity to take Adam. I contacted Jennifer and I brought Adam to her and her daughter, Claire.

Claire and Adam hit it off like you wouldn’t believe. The neighborhood is filled with a bunch of other labs and I just knew Adam had found the perfect retirement home. Not only would he be walked every day and get a huge, fenced yard to run in, but he also inherited a summer cottage on Lake Erie that he would be able to roam and swim … I’m a bit jealous!

So, tonight is my first night without my companion. I do hope he is adjusting well to his new home. I’m sure he is -- after all, he is the PERFECT DOG!

Many thanks go out to all of you who circulated flyers and spread the word that Adam needed a new home. This has certainly been a wonderful demonstration of a community filled with caring folks showing love and support to people and pets alike.

Adam will be sorely missed but never forgotten!

Back From California Vacation - Ready To Work!

2008-09-05T22:31:00.003-04:00

I am back from a ten day trip to California for a family reunion - both my wife's side and my own. My wife has a lot more family than I, but it was a very, very good time to visit those I haven't seen in thirty years and those whom I have never met. It was a great time of food, family, and fun!

Although it's great to take some time away from the grind of work, work, work ... there is something exciting about returning from that time of refreshing and getting back to the work that brings fulfillment. For me, that is real estate investing!

There are many challenges that I face as a new investor. Some are expected and you work to overcome them. They are the obvious things like negotiating with the bank for the greatest price discounts so that your numbers "work", getting bids from a variety of new contractor sources until establishing your "inner circle" of trusted vendors and contractors, networking with like-minded investors to build relationships and potential business deals, etc. But these are the known and expected challenges that we face as investors with every business transaction. I'm talking about unexpected challenges like the two I have faced recently. For example, as you know from my previous posts, I am working for the most economical solution for the repair and maintenance of the steel windows in my project in historic Rosedale Park - a beautiful neighborhood located in the north-west portion of the city of Detroit. I made the mistake of purchasing this home without knowing that the area had been designated historic just three years before. Shame on me! But I will overcome the challenge and move on.

Another challenge has popped up today. My project in Mt. Clemens is coming along just grand! (pun - it's located at 125 Grand Ave. in Mt. Clemens) The exterior work is almost complete (a few minor details remain) and now the interior work is well underway. The rough plumbing is being done but the water department didn't want to turn on the water until the supply line was pressure tested. Sure enough - it failed the test indicating that there is a likely break in the supply line under ground between the street and the meter in the basement.

CAN'T I CATCH A BREAK?!

Fortunately, this is likely the only "surprise" I am to encounter as this is mostly a straight forward rehab. I am waiting to hear from the plumber what the proposed cost will be to dig up the line and replace it. I have some room in my budget for contingencies, but not a huge amount. I'll wait for the quote before making any decisions on what adjustments to make elsewhere.

With regard to the above question - can't I catch a break? - the answer came just today a few hours later. My current (and only) tenant called me today to ask if I had anything available for a friend who needs a place to rent. It's quite possible I may have a renter for this property well before I have it renovated and ready for occupancy. That would be awesome if it can work out. I look forward to talking with this person to see what their need is. I'll do my best to help.

So may vacation is over and, in two short days I am back into the thick of things right up to my neck - just the way I like it! (Feel the rush?)

Things Are Warming Up!

2008-08-21T22:39:00.001-04:00

I am under a time crunch! I have to finish up ten homework problems for one of my MBA classes that are due Saturday night, I have requests at work piling up that MUST be satisfied tomorrow afternoon no later than 3-pm, I have to show Faust Ave. to a very interested and serious buyer, I need to arrange to have someone open Faust on Saturday to receive the dryer (that's another story!) and, oh, did I mention I'm leaving Sunday morning for a 10-day vacation to Los Angeles? I'm feeling the crunch now!

Things have been moving along nicely. Faust is now finished according to the original agreement. There are a couple of final items that I have requested as part of a change order that will be completed next week while I'm away on vacation. When I return, the lock-box and security codes will be changed and I will be officially complete with all rehab (almost). I'm still debating on what to do about the windows. With this current potential buyer who is courting me, I just may give a concession for the windows and sell as-is.

I'll post my progress (and pictures or video) after I return from vacation.

Have a great Labor Day weekend everyone!

If You Could Only See Me Now!

2008-08-15T13:42:00.003-04:00

Awesome! That's all I can say about this project. Other than a few minor details to be finished in the next couple of days, Faust Ave. is now ready to go! The finished product is beautiful. I need to take some pictures and do a walk-thru video soon and get them online.

The appliances will be delivered tomorrow and installed and then I can start proudly showing this property to prospective buyers and get this property "SOLD" before Fall settles in on us.

Where Does The Time Go?

2008-08-03T09:18:00.004-04:00

It's been too long since my last blog update - what happens to the time? What have I been doing? Well, here's the short list:

- Almost finished with rehab at my investment property on Faust Ave in Detroit.
- Started using social networking tool, Twitter - Do you twit?
- I have secured a closing date for investment property in Mt. Clemens.

So what's happening on Faust? At my last post I had just discovered that I had purchased a property in a historic district and that I couldn't put in vinyl replacement windows. So I am investigating my options and, so far, I don't like any of them! I have a quote to refinish/repair the existing windows -- $25,000!! A quote to install Pella wood frame windows -- $20,000! Each option destroys any profit margin I would have expected to have in this property.

I'm meeting with someone on Monday to give me another bid on replacement of "like-kind" windows at a more reasonable price. I would expect to pay up to $10K, but any more than that will really start to hurt. We'll see how this works out.

As far as marketing the house on Faust, I have a sign out front. This sign has been generating at least one and as many as three calls per day. Unfortunately, every call so far has been from someone who needs to rent, not buy. Worse than having no credit, they all have had bad credit - foreclosure, bankruptcy, behind on bills, etc. This is a reflection of two problems in Michigan at this time: unemployment or under-employment. Many people have either lost their jobs due to downsizing by the automotive companies (OEMs and suppliers, both) or, they simply have not improved their income earning through job promotions. Many people get into an entry level job and never move up from there. That makes it very difficult for them to purchase a home.

I just recently started using a social networking tool called Twitter. This is a way of keeping in touch with your circle of friends and business contacts with short little updates about what you're doing, how you're feeling, etc. It's a great way to keep that network fresh and engaged. It's also a great way to meet new people who would be potential friends or business partners. If you are not twitting, you need to check it out!

I'm finally scheduled to close on my investment property in Mt. Clemens. This one should be a breeze and a simple flip or rental. I am so tempted to keep it as a rental, but I really need to just flip right now. I need to pay off my business lines of credit and start building some cash reserves. So, I need to stay focused. I know I should have more cash flow properties in my inventory, but it's too early for that. I need a handful of flips behind me to get that real momentum I have been desiring. Also, I'm not sure I want a bunch of separate single-family homes as rentals. There is more maintenance and more risk due to vacancy loss. When you have a single renter in a single-family home (say, a 3-bedroom, ranch with one family) then you only have one rent check coming in. If your tenant experiences a problem and stops paying rent, you still have to pay the mortgage. It's equivalent to a 100% vacancy situation. At least if you have a duplex fully rented, you have two rent checks coming in. Perhaps one tenant's rent covers the expenses and the second tenant is bringing in the positive cash flow. A four-unit building is even better. Did you know that you can have up to four families in four separate units of one building and it is still called a single-family residence? That's just the rules of the trade. It's the definition of a single-family house.

Where the real wealth resides is in commercial residential real estate. That would be five units or more under a single roof. I would like to get a 12-16 unit building for my first commercial property and I hope to do it in the year 2010. My first goal is to flip a few between now and then to have enough cash built up for the down payment. I could use my business lines of credit now, but then I'd have to make interest payments while also paying the mortgage. I'm sure I could cash flow enough to make all payments, but then I wouldn't have the business lines free to do other deals until I could refinance the apartment building to pull out enough to pay back the down payment.

So the plan is set. Let's move forward with a few more flips, build capital, and then look for the commercial building for positive monthly cash flow. Flip for capital, commercial real estate for residual, passive income. THAT, ladies and gentleman, is the formula for success in Michigan residential real estate.

Are you following me? This is an awesome adventure! If you'd like to learn more about what I'm doing and how I got to this point, please leave a comment and contact me. I'd love to talk with you about it.

You may be thinking, "Gee ... he's light-years ahead of me! I'll never get to where he is now." Don't think that way at all! I know people who are multiples of light years ahead of me -- I know them personally. I use their success as motivation to keep me going. I would like to be that person for you, too. Let's talk! Let's do business together!

2008-07-03T22:45:00.001-04:00

Interesting developments in the past two days.

Happy 4th Of July, by the way! This is the celebration of our independence -- for me, I might as well be celebrating independence from my money! Read on and discover why ...

Yes, it's official -- Faust Avenue is now part of a HISTORICAL DISTRICT and now I have to be careful with the exterior renovations. Specifically, I have to be careful with the kind of windows I put in -- I can't get away with an economical vinyl replacement. Will (my General) is going to investigate further for me and negotiate with the appropriate agency to minimize the expense needed to maintain the demands of the historical society. This could get very interesting. That's right, Rosedale Park has officially been designated a historical district just about the time I closed on the property.

OK - I like to make mistakes - no, really -- I do! I learn so much from them!! [sarcasm] Believe me, I'm not buying homes for the sole purpose of providing a humanitarian service to the local community, restoring and beautifying the neighborhood while profits are being made by everyone involved in the transaction -- except me! I do gain satisfaction knowing that I’m helping to revitalize a community; that’s a great result of my investing. But, as a firm believer in capitalism, I believe the sole purpose of owning a business is to MAXIMIZE PROFITS for the shareholders. All the other positive things that come as a result are just added bonuses. By the way, my wife and I are the only current shareholders of my business and I’m not the only shareholder unhappy about this latest development.

Sigh .....

OK, it's not over till it's over! The pity-party-express has left the station and I'm NOT on that train! So, on a positive note, since this is now officially an historic district, perhaps I can market this property as a beautifully restored historic home and perhaps it will hold more value than if it were not in an historic district. The property value certainly could not have declined further once the subdivision was designated an historic district. Also, I'm sure there are creative ways to meet the society's requirements in an economical manner. Time to put on the thinking cap and get creative. Alright class, Problem Solving 101 is now in session and I don't think I have enjoyed the first lecture! Oh well ...

The fun and adventure continues ......

Faust Avenue Is Now Underway!

2008-06-30T21:35:00.003-04:00

Today was the closing on Faust Ave. When I walked into the title company, I was greeted with a smile and a handshake and then I got that “feeling” … you know, déjà vu! I recognized the face and then I asked, “You look familiar, have we met before?” Then suddenly I realized that Leo had done the closing for the purchase of my last project, Curie Court! It’s a small world. I bet Tri-County Title Agency handles a lot of these REO closings.

It was just Leo and me in the conference room. I left the lockbox from Faust with Leo who promised he would drop it off with my Realtor, Jay, when he drops off some other paperwork later in the week. It was so fast and so convenient I could hardly believe it. Leo even records the deed at the county for me as a courtesy! My first closing on my first project two years ago took about an hour - painstakingly going through every line of every document, yawn ...

My second closing was about 30 minutes, with half of the time spent chatting and joking with Ray Reck (the broker) and Leo, himself. There really aren't that many forms when buying an REO property.

Of course, this was my third purchase so it’s becoming old hat now! Leo and I breezed through the signatures, made copies, and I was on my way in about 20 minutes!

I didn’t waste a minute moving forward on this project. Will started the work the same day of closing and the landscaper has already done his part, too -- except for the retaining wall in the front yard. I’m holding that part off till the roof is complete, which, hopefully, will be done by the end of this week and then Jeremy can finish the retaining wall next Monday, July 7. That's the same day, by the way, that I'm going to set my For Sale sign on the front lawn and start my marketing campaign to attract buyers.

This project is expected to take 6 weeks (more or less) with a contractual agreement to a “drop dead” completion of Saturday, August 16 as a grace period to handle any contingencies that may pop up.

It is my hope to have a buyer locked in a purchase agreement by the end of August or mid-September at the latest. (Just like I did with Curie Court!)

Let’s watch and see if I can have a repeat performance with a slightly better return on investment. This property qualifies almost as a “junker” according to Mark Ijlal because of the amount of water damage to the property and the amount of mechanical repairs and upgrades being put in. There are too many properties on the market, Mark contends, that need only carpet and paint - why waste time and effort with any rehab project more than $20,000? Well, if the profit margin is acceptable to me and since I'm not actually picking up a paint brush or a hammer, then I’m comfortable with doing things differently. If I find a good property during my searches that needs only carpet and paint, then maybe I'll do that one. But I'm not going to spend all my time hunting for the perfect Easter Egg before I make a purchase decision and start moving forward. Different approaches for different investors.

Stay tuned ...

My Investment Criteria

2008-06-24T18:47:00.003-04:00

Have you ever thought about what makes a good investment? Do you have any idea what kind of property you should buy if you wanted to invest in real estate? If someone offered you a 3-bdrm., brick ranch with 1,100 sq. ft. of living space for $139,000 how would you know if it was a good investment? Is that a good price? Too high? Too low?

The best time to think about these things is before the opportunity presents itself to you. So, if you're thinking of getting into real estate investing, you really have to study the neighborhoods in which you plan to invest and you need to know what the houses are selling for right now -- not what they sold for 8 months ago.

Many investors have their own personal criteria for investment purposes. There are different criteria for rentals and different criteria for flips. I have outlined my criteria for flips (see below), but these aren't etched in stone. I can be flexible on some issues while rigid on others. But it's very important to have a starting point so that if you're going to use a Realtor to find houses for you, they know what you're looking for.

Here is my list ...

After Repair Value (ARV) = $100K - $180K (based on recent (90-120 days) comps.)
Located INSIDE subdivision (no major roads)
Basement (no slabs or crawls)
Garage
Brick Exterior
Ranch, Colonial, or Cape Cod
3-4 Bedrooms
1-1/2 Baths

Areas of interest:

As far west as I-275
As far east as Jefferson
As far as 4 miles north of I-696
As far as 4 miles south of 8 Mile Rd

Also interested in the following specific areas:

Clinton Township
Mt. Clemens
St. Clair Shores
Fraser
Roseville
Warren
Center Line
Sterling Heights
Oak Park
Rosedale Park (Detroit)

NOTE: I live in northern Clinton Twp. (M-59 and Romeo Plank) but I work in Novi (8 Mile and I-275) Therefore, I have a wide range of possibilities for investment because I drive past such a wide range of cities.

If you happen to find something that fits these criteria and you don't have an interest in investing in it for yourself, please let me know about it. If it seems like a good deal and I purchase it, I'll gladly give you a "finder's fee!"

Curie Court Deal Review

2008-06-23T05:00:00.001-04:00

The following three video clips show me discussing my overview of Curie Court while attending a monthly meeting with fellow real estate investors. I am a member of Mark Ijlal's Inner Circle group and we discuss all aspects of real estate investing on a monthly basis. This was my first opportunity to share with the group my experience with my first successful real estate flip.

Enjoy!

Inner Circle June 2008 David Deal 1 from Mark Ijlal on Vimeo.

Inner Circle June 2008 David Deal 2 from Mark Ijlal on Vimeo.

Inner Circle June 2008 David Deal 3 from Mark Ijlal on Vimeo.

The following graphic is referenced during the presentation and may help in following the analysis: (click on it to enlarge.)

.

Find Out What The Top Two Reasons Are That Make Property Inspections Absolutely Necessary!

2008-06-21T22:50:00.005-04:00

It’s been a week now since the bank has accepted my offer to purchase Faust. Since that time, I have been able to talk with my contractor and continue negotiating the scope of work to ensure that I only perform what is absolutely needed to make the property clean, comfortable, and in move-in condition. I have been accused of having the tendency to overdo my renovations while others would stop short of what I like to do by about 25%. However, after reading several books by or about Donald Trump, I believe the key is to over deliver and under charge. This gives your client the WOW factor that makes it impossible for them to pass up on your product or service. And it will bring you endless dividends through the positive word-of-mouth advertising you will receive when treating people fairly.

HINT: (Side note) All of you contractors and other service providers out there beware! This practice of over delivering and under charging not only works for me selling real estate, it works for your business as well. How many of you feel like you are getting the best service for your dollar when you go to the store? Everything is self-serve. You can even do your own check-out at many stores now. You’ve seen them: “You Scan” check out lanes for those of us who just don’t want to smile at the cashier and say nice things that you don’t really mean. I was SHOCKED the other day when I went to fuel up and get a car wash. As I jumped down from my awesome, full size, 2005, 4x4 Dodge Durango SUV (I love that truck!) I was greeted by a smile and a handshake by the pump attendant. That’s right, you read that correctly -- PUMP ATTENDANT! He informed me that this was a FULL SERVICE station and that he’d be happy to pump it for me. “Regular or Premium?” he asked me. I could hardly believe it! I gladly handed him my debit card and said, “Fill ‘er up, regular! … And thank you, sir!”

I felt like a VIP! And that’s how your clients and customers will feel, too, when you over deliver and under charge. You will not only continue to make money, you will build lasting business relationships. Then there’s the word-of-mouth advertising that you will get as a result of your superior service. High quality, specialized service at an affordable price will guarantee that your customers will brag about you to the whole world. Think of it this way. If you go somewhere and get lousy service, don’t you want to warn everyone to stay away from “that guy” or “that place”? Why do you do it? Because you hate the person who treated you badly? Yes, but more importantly, you care about your family and friends and you don’t want them to make the same mistake you made.

On the other hand, if you go somewhere and get the royal treatment don’t you want to tell your family and friends about that experience too? Why? Because you are now in love with the pump attendant that filled up your SUV for you? Not really, but because you care about your family and friends and you want them to get a great deal, too. But there is a better explanation that is more self-serving that I think goes to our very core as people. We all want to be liked and admired. We also want to feel like we have specialized knowledge and can add value to our friends and family. That is why we tell them about that “special place” that we have found, or that “special inspector” who goes above and beyond and is so detailed in their inspection reports (like John McAuliffe) resulting in better discounts from the bank. That is why we tell others about this awesome contractor (Will Curry) who acts as a trusted advisor and who provides honest and reasonable prices to investor clients realizing the value of win-win contracts. Or that real estate agent (Jay Alasphemy) who negotiates for you with the bank to get the best investor’s price possible and handles all aspects of the purchase process so that things run smoothly and on schedule.

I can go on and on, but you get the idea. Treat others in business as you want them to treat you and you will make good, lasting business relationships. And when you do find those special people, share them with others and everyone will benefit greatly.

Now … back to my story….

Even if you are a seasoned investor and you know everything there is to know about property -- even if you are a builder -- you should NOT pass up the opportunity to have a qualified inspector inspect your investment property. There are two reasons for this that may not be obvious at first.

The first reason is that you may be too close to the deal to be objective. You are emotionally tied up and invested in the deal and you will try to make it work any way possible. That is why you want John to inspect your property. It’s his job to convince you NOT to buy this property. If you decide to buy it anyway, at least you are aware of every potential problem you may encounter when trying to restore the property.

The second reason is the least obvious of all, but the most important. You need John’s report as LEVERAGE when negotiating the final purchase price of the house you are considering. The more you can identify that is wrong with this property the better off you are when negotiating your purchase price. You can either ask for more money off the price or you can ask the bank to do a number of the repairs before you buy the property. Either scenario will work for you and will save you thousands of dollars in the end. Don’t overlook the benefit of a good, quality home inspection. (Call John!)

That’s what I did! I contacted John to come out and inspect Faust so that I don’t overlook anything serious and move ahead with this purchase not fully knowing what I am getting myself into. John met with me Friday evening at the property at 5-pm. John is very flexible in his scheduling to accommodate his investor clients. I crawled all through this property with John all the way up into the attic. (I did NOT go up on the roof as that is one of the two things I will not do. The other thing I will not do is go into a crawl space. In fact, I will not even consider a property on a crawl space - nor a slab, for that matter.) This is about a 3-hour process but John is very thorough and he will explain to you along the way what it is he is looking for and what he is observing. He talks into a small MP3 recording device making audio notes to be transcribed later into his full, detailed report. He also snaps a huge number of pictures to refresh his memory when writing up your report.

I should be receiving John's written inspection report by Monday. He discovered two things I feared the most and that I overlooked in my initial walk-thru -- the roof and drains need extensive work. The roof has four (4) layers of asphalt shingles on top of the original wood shingles, there is inadequate venting, there are several water entry points resulting in extensive water damage and .... [gasp!] there is evidence of MOLD!! (some of it even looks "black").

Due to the lack of running water on site, John couldn't fully inspect the drain system as he would like. But he did notice a lot of evidence of water issues due to a great deal of dampness all around the floor near the exterior walls. Also, he could observe that there was high, standing water in one of the drains. John was so concerned about this situation that he referred me to Mark Collins of Down Under Plumbing (313-291-7255) and suggested that I get that looked into more thoroughly before I wind up with a HUGE repair bill.

So, I called Mark Collins first thing this morning (Saturday) and he arranged to send one of his guys out to the property at 3-pm this afternoon. Now that is responsive service! Ed showed up just shortly after 3-pm after finishing up at a previous client site and Ed inspected inside and out taking the time to explain what he was looking for and observing. Ed was extremely knowledgeable and he taught me a great deal about the sewage system and it’s anatomy under the ground. While explaining his every action, Ed ran a small camera down the drain system and discovered extensive root infiltration causing slow draining (or non-draining) of sewage and rain water.

Ed explained that the best-case scenario would be to snake out the roots all the way to the city line at the back of the property and if the crock was not damaged, then we're only looking at a $500 service call for the snaking. The worst-case scenario would be a broken crock requiring the back yard to be excavated and the crock replaced. The worst-case cost in that situation would be about $5,000 or $6,000!!!!

Ed promised that a full report will be written up and faxed to me on Monday. Between John's report and Down Under Plumbing’s report based on Ed’s observations, I am prepared to ask the bank to give me a $15K concession so that I can fix the roof, the drain system, and remediate the mold. The other option would be for the bank to fix both the plumbing and roof themselves and perform the mold remediation.

I will explain to the bank that I have already invested significantly in this property (the bank’s property) by paying these inspection fees to uncover these deficiencies that they failed to disclose and that if they are not willing to grant the requested concession amount, I will have to walk away.

That’s BAD NEWS to the bank! They don’t want to hear the words “walk away.” They want and NEED to sell this property. Every day they have this property on their books is another day of property management expense and taxes. But unfortunately for them, I have now discovered these deficiencies and I have made them known to the bank property management. They would now have to disclose these items to the next potential buyer or risk being sued. Fortunately for me, the bank knows that when they disclose these conditions to the next potential buyer, they will run for their lives, shaking and sweating from their foreheads with anxiety and fear over the extent of the damage!

The bank knows that only the strong and the brave will stick this through and take on such a challenge. They know that only the seasoned real estate investor can help them out of their predicament by buying this property and fixing it up while also doing their small part to revitalize the city of Detroit in the process. This is a win-win-win proposal the bank just cannot pass up. They win by getting rid of this liability, I win by getting an opportunity to make a reasonable return for my efforts, and the community wins by getting a renovated home that is once again beautiful and charming bringing warmth and class to the neighborhood.

The bank HAS to accept my offer or the house will sit and continue to deteriorate. The bank could refuse my offer only to have to face another aggressive investor offering even LESS than I did. But if they grant the requested concession, they will get out of their liability and be done with it.

I'm in a strong negotiating position. Even if the banker reads this blog, he would have to agree with me and grant the discount. It’s a “no-brainer!”

Based on the findings, Will is re-working his quote to take into consideration the added expense to fix the roof and the sewage line. He is going to have new numbers for me on Monday so that I can submit his scope of work (without the numbers, of course!) along with the plumbers reported findings and John’s property inspection report.

I have decided that I will just gut the basement, paint the walls white and the floors battleship grey, and make sure the basement is clean and bright with a lot of lighting. I think that will save a significant amount on the renovation rather than finishing off the basement. I have to make sure there is no more mold present behind any of the dry walled surfaces anyway.

Come back soon … I'll let you know what happens as I move forward with this exciting project!

Introducing Faust Avenue - Rosedale Park, Detroit

2008-06-14T22:30:00.014-04:00

This will be my second flip since establishing ComfyQuarters. Curie Court was a moderate success since my margins were tight, but I learned a great deal and there is a very happy couple as a result.

I'm satisfied with my first flip but I'm excited to do even better on this project!

This is the view of the house from the street:

I first saw this home while attending a Foreclosure Bus Tour hosted by Mark Ijlal on a Saturday afternoon two weeks ago (May 31). William (Will) Curry of Fourth Dynasty Enterprise, LLC was one of Mark Ijlal's expert guests and Will was walking through the home with the group and explaining what improvements he thought would be best to bring this property back to life and put it back on the market for a quick sale.

On Monday morning following this tour, I called Nora Ijlal for the contact information of the listing agent for this property, Jay Alhashemy, so that I could place an offer on this home. I didn't know it at the time, but a young woman also on the bus tour also put in a bid on this property and we ended up in a bidding war over this home.

It turned out that I wasn't willing to go past a certain price point and she actually out bid me by only $1,100 -- so she got the house. A couple days after I was given the bad news that I lost the house to one of my fellow club members, I got a call from Jay. He informed me that although her offer was accepted she was unable to raise the cash needed to actually close the deal so I got the house, instead.

The moral of this story is that you need patience! I did have several offers out on other properties, though. You can't put offers on one property at a time and wait to see if you get it. You have to put offers on several at a time till one is accepted. I withdrew my offers on two other properties when Faust was accepted, but I still have an offer out on a home in Mt. Clemens that I think will make a great rental investment. In fact, I already have a tenant lined up so I really need to get that property. I'll share more on that one if I am able to win the bidding war on it.

Now, back to Faust. Walk through this house with me (virtually) and see if you can see the great potential as we talk about it ...

FIRST FLOOR

SECOND FLOOR