Happy All Hallows' Eve!
OK, I thought yesterday's article on MSNBC entitled "Hard Times Costing Many People Their Homes" (http://www.msnbc.msn.com/id/21516354/) was an accidental repeat from months ago. It falls into the category of "Tell me something I don't know."
But then I saw this article, "Home Prices Continued to Slide In August" (http://www.msnbc.msn.com/id/21544362/ ). I think the media was afraid that the nation thought the housing downturn had ended over the weekend. Now that the Southern California fires are over, we desperately need an antagonist. The easiest fallback? Real estate, of course!
Here are some excerpts (with my commentary in red, of course):
NEW YORK - U.S. home prices fell nationwide in August for the eighth consecutive month, offering little hope of a turnaround anytime soon (you're kidding? And I was just about to list my house!)
Things could get worse . . . .There is really no positive news in today's report . . . . At both the national and metro area levels, the fall in home prices is showing no real signs of a slowdown or turnaround. (So, there's no slowdown of the slowdown? And things are getting worse? Hmmm--isn't that what was just said in the paragraph above? Repeat as needed.)
An index of 10 U.S. metropolitan areas fell 5 percent in August from a year ago. That was the biggest drop since June 1991. The lowest ever was a decline of 6.3 percent in April 1991. A broader index of 20 metropolitan areas fell 4.4 percent in August over last year, with 15 of 20 of them reporting that prices fell. (This must be a case of "throw in as many numbers as possible to 1. Make it sound authoritative and 2. Confuse them. Notice that we are far from the lowest ever 1991 percent of decline.)
Housing prices have been a key worry for consumers, and the effect of the slowdown alongside the summer's steep decline in credit availability, has many worried that the economy will go into recession. (Or so the media is hoping--endless possibilities for story lines.)
Notably, eight of the 20 metropolitan areas . . . showed their lowest annual returns ever recorded in August. The report showed drops in Cleveland of 4.1 percent; Las Vegas, 7.6 percent; Miami, 7.8 percent; Minneapolis, 4 percent; Phoenix, 8 percent; San Diego, 8.3 percent; Tampa, Fla., 10.1 percent; and Washington, D.C., 7.2 percent. (So, twelve of the 20 areas have not hit their lowest ever numbers.)
Tampa surpassed Detroit as the worst performing city. Detroit had a 9.3 percent drop over last year. (Yet, it's still not Detroit's lowest ever annual return? Hmmmm.)
And, just in case you're still optimistic about the future of real estate, we have this:
http://www.msnbc.msn.com/id/21548791/from/RS.1/.
Wednesday, October 31, 2007
Tuesday, October 30, 2007
Can I Pay You to Move?
Rental applicants were screened so carefully through the local apartment association background company that I rarely had any problems with tenants. I wrote earlier about the bad tenants we had at one property, who ended up breaking their lease early and left. So I don't have real horror stories, just some interesting anecdotes that I'm sure will come out in future posts.
In 2005, we wanted to sell at the top of the market in order to trade for income producing properties (aka, the fateful apartments). However, we did have the poor timing of listing a couple of homes with leases intact. Initially, we went on LoopNet.com and tried to unload, ahem, I mean, sell them to investors as occupied properties. But, in California, the CAP rate would have been negative 12%, at least. That didn't go over very well. So, we found ourselves in a predicament of trying to sell properties while still under lease to tenants.
The first time we did that, the tenants, who were responsible homeowners waiting for their house to be built, gladly showed the home in immaculate condition, sold it, and agreed to live out their lease in another vacancy of ours. I felt bad, but I also knew that this was a temporary arrangement for them.
When it came time to sell four in order to buy those apartments from h--l, it didn't go quite as smoothly. We tried to convince one tenant to move out early. She wasn't willing to do that. Then I offered her $1,000 to leave. By her reaction, you would think that she just won the $34,000,000 Power Ball. She moved out so fast and cleaned up the place so well that it was worth every penny.
Another tenant wasn't quite as cooperative. They did not want us to list it for sale at all, even though their lease was expiring in three months. Due to the 1031 requirements based on several sales (your time starts ticking at the first sale, which had already occurred), we couldn't wait three months to start marketing the property. I told them that they would receive the required 24-hour notice of entry and that I would be present at every showing to ensure that no one left with any of their furniture (having my agent there wasn't good enough for them). They were less than thrilled and wouldn't cooperate in making the home ready to show.
What's a landlord to do? Throw money at them, of course. Things sold quickly in 2005, so I told them that I would give them $100 for every showing. All of a sudden, the house showed beautifully and there were no teenagers in bed when the buyers came in. It worked and we sold it. Lucky for them, the buyer was another investor who agreed to lease them the property. He should have asked me if they had been paying the rent on time first.
Initially, we wanted to sell five homes for the trade. However, one older tenant, who we still have, would cry every time I brought up selling the home. She even contacted our lender to see if she would qualify to buy it. She had taken care of the home like it was her own and paid the rent on time every single month (actually we would receive it several days early). I would call telling her how we needed to sell because the house wasn't providing an income for us and we couldn't afford to keep it anymore. She cried. She would call me . . . and cry. Finally, I told her that we wouldn't sell it at that time, but, if she wanted to buy it, she'd better do it soon. That was 2 1/2 years ago. Now the house is worth about $50,000 less than it was then. She's still paying the rent early each month, and, since her first academy award winning performance, we bought and sold the apartments--and lost almost everything. But we still own her house, which has doubled in value.
I'm glad we have a good rental property with a tenant who isn't afraid to cry.
In 2005, we wanted to sell at the top of the market in order to trade for income producing properties (aka, the fateful apartments). However, we did have the poor timing of listing a couple of homes with leases intact. Initially, we went on LoopNet.com and tried to unload, ahem, I mean, sell them to investors as occupied properties. But, in California, the CAP rate would have been negative 12%, at least. That didn't go over very well. So, we found ourselves in a predicament of trying to sell properties while still under lease to tenants.
The first time we did that, the tenants, who were responsible homeowners waiting for their house to be built, gladly showed the home in immaculate condition, sold it, and agreed to live out their lease in another vacancy of ours. I felt bad, but I also knew that this was a temporary arrangement for them.
When it came time to sell four in order to buy those apartments from h--l, it didn't go quite as smoothly. We tried to convince one tenant to move out early. She wasn't willing to do that. Then I offered her $1,000 to leave. By her reaction, you would think that she just won the $34,000,000 Power Ball. She moved out so fast and cleaned up the place so well that it was worth every penny.
Another tenant wasn't quite as cooperative. They did not want us to list it for sale at all, even though their lease was expiring in three months. Due to the 1031 requirements based on several sales (your time starts ticking at the first sale, which had already occurred), we couldn't wait three months to start marketing the property. I told them that they would receive the required 24-hour notice of entry and that I would be present at every showing to ensure that no one left with any of their furniture (having my agent there wasn't good enough for them). They were less than thrilled and wouldn't cooperate in making the home ready to show.
What's a landlord to do? Throw money at them, of course. Things sold quickly in 2005, so I told them that I would give them $100 for every showing. All of a sudden, the house showed beautifully and there were no teenagers in bed when the buyers came in. It worked and we sold it. Lucky for them, the buyer was another investor who agreed to lease them the property. He should have asked me if they had been paying the rent on time first.
Initially, we wanted to sell five homes for the trade. However, one older tenant, who we still have, would cry every time I brought up selling the home. She even contacted our lender to see if she would qualify to buy it. She had taken care of the home like it was her own and paid the rent on time every single month (actually we would receive it several days early). I would call telling her how we needed to sell because the house wasn't providing an income for us and we couldn't afford to keep it anymore. She cried. She would call me . . . and cry. Finally, I told her that we wouldn't sell it at that time, but, if she wanted to buy it, she'd better do it soon. That was 2 1/2 years ago. Now the house is worth about $50,000 less than it was then. She's still paying the rent early each month, and, since her first academy award winning performance, we bought and sold the apartments--and lost almost everything. But we still own her house, which has doubled in value.
I'm glad we have a good rental property with a tenant who isn't afraid to cry.
Monday, October 29, 2007
Do As I Do
We have kids. As you know if you've read some of my posts, we have lots of kids. What do we want to pass along to them when it comes to business and investments?
We tell our children the following, not just in words, but by our actions (this advice is for those who have completed college--yes, we feel that a higher education is preparation for life, not just a job):
You'll never be financially secure working for someone else. Your job, as much as you love it, is always at risk for many different reasons. Therefore, you need to make your job a bit less important. The only way to do this is to start a business of your own. You can begin small, while you're still working. That way, you will be prepared if your fired, laid off, or the company you work for shuts down.
We live in the greatest country in the world--no offense to my many foreign readers, but I'm sure that you feel the same about your country. One of the advantages to living in America is the opportunity to start any business that we can imagine. Jokes in this country abound about the 7-11 owner from India, the Chinese dry cleaner, middle eastern gas station owner, or the Ethiopian self-employed cab driver. Instead of laughing at them, I think they should be making fun of Americans who take entrepreneurship for granted and don't use it to their advantage.
Where do you begin? A business can be an off-shoot of what you do in your job. It can be what your heart's desire (or vocation) has been, but you didn't pursue professionally. You can start to invest in stocks or real estate. You can buy an existing business. Try to find something that doesn't rely on you to be there every second in order to make money. Also, it would be great to be able to duplicate it in order to multiply your return, like owning several store locations.
We discuss all business matters in front of our children. Most of the time, they don't seem to be paying attention or they're not interested. However, over the years, it's apparent that much of what we've talked about has sunk in. My 17 year old is very adept at understanding mortgages, equity, and most of the general aspects of real estate and management. I know this because, after 7 years, he's starting to ask pointed questions about the way to purchase and sell property. He talks about things that most people don't know until after they've bought their first home, or later. We didn't set out to teach him, he merely observed what we do.
I hope that by watching us succeed and fail, my children will not be afraid to venture into a business endeavor of their own one day. They also know that, even with the best research and planning, if they don't make it the first time around, it won't be the end of the world. That they get back on that entrepreneurial horse and start over again--the next time not repeating the same mistakes as before.
Most importantly, do not continually spend your money on depreciating assets. Buying too many "things" has the potential of robbing you of your financial goals. Save some money. Each time you have enough, buy a stock, or a condo, or a small retail strip. In the end, these investments will buy you so much more than the "things" you sacrificed in the first place. They may even be able to gain you what money can't buy: time, peace of mind, security.
We'd never be capable of encouraging our children to become financially independent, if we didn't set the example ourselves.
We tell our children the following, not just in words, but by our actions (this advice is for those who have completed college--yes, we feel that a higher education is preparation for life, not just a job):
You'll never be financially secure working for someone else. Your job, as much as you love it, is always at risk for many different reasons. Therefore, you need to make your job a bit less important. The only way to do this is to start a business of your own. You can begin small, while you're still working. That way, you will be prepared if your fired, laid off, or the company you work for shuts down.
We live in the greatest country in the world--no offense to my many foreign readers, but I'm sure that you feel the same about your country. One of the advantages to living in America is the opportunity to start any business that we can imagine. Jokes in this country abound about the 7-11 owner from India, the Chinese dry cleaner, middle eastern gas station owner, or the Ethiopian self-employed cab driver. Instead of laughing at them, I think they should be making fun of Americans who take entrepreneurship for granted and don't use it to their advantage.
Where do you begin? A business can be an off-shoot of what you do in your job. It can be what your heart's desire (or vocation) has been, but you didn't pursue professionally. You can start to invest in stocks or real estate. You can buy an existing business. Try to find something that doesn't rely on you to be there every second in order to make money. Also, it would be great to be able to duplicate it in order to multiply your return, like owning several store locations.
We discuss all business matters in front of our children. Most of the time, they don't seem to be paying attention or they're not interested. However, over the years, it's apparent that much of what we've talked about has sunk in. My 17 year old is very adept at understanding mortgages, equity, and most of the general aspects of real estate and management. I know this because, after 7 years, he's starting to ask pointed questions about the way to purchase and sell property. He talks about things that most people don't know until after they've bought their first home, or later. We didn't set out to teach him, he merely observed what we do.
I hope that by watching us succeed and fail, my children will not be afraid to venture into a business endeavor of their own one day. They also know that, even with the best research and planning, if they don't make it the first time around, it won't be the end of the world. That they get back on that entrepreneurial horse and start over again--the next time not repeating the same mistakes as before.
Most importantly, do not continually spend your money on depreciating assets. Buying too many "things" has the potential of robbing you of your financial goals. Save some money. Each time you have enough, buy a stock, or a condo, or a small retail strip. In the end, these investments will buy you so much more than the "things" you sacrificed in the first place. They may even be able to gain you what money can't buy: time, peace of mind, security.
We'd never be capable of encouraging our children to become financially independent, if we didn't set the example ourselves.
Saturday, October 27, 2007
I'll Just Wait Outside
I promised to write about one of the more interesting folks that I've come in contact with while showing our rentals to prospective tenants. Before I get started, I want to make it clear that I don't feel showing a vacant house is the most safest thing to do--whether you're a landlord or an agent. So, if I had to meet a caller alone, I would never, and I mean never, enter the house with them--regardless of their gender or whether or not they were accompanied by children.
I only show our homes when they are vacant and rent-ready. Therefore, I don't have to safeguard a tenant's belongings. I would open the door, let them pass me in, and say, "I'll just wait outside. Let me know if you have any questions." Besides this being the safest thing to do, I think it's a good marketing ploy. This gives them the opportunity to open the closets and medicine cabinets, to talk, and take their time imagining themselves living in the home. Have you ever been to a FSBO showing and the guy follows you around and tells you about every special light bulb that he has installed in the house and every small improvement he's performed in the last 20 years? It's so annoying. No time to think. All you want to do is get close enough to the front door so you can make a run for it. I don't want to transmit that aura to people.
Some prospective tenants were downright scary. I met an appointment at the scheduled time at one house. The man was with his young daughter. You'd know why he brought his daughter if you saw him. He was a small man in his fifties with a long braid that went down the middle of his back, a bandanna on his head, a leather vest, and so many tattoos that I couldn't see his skin. Not that I wanted to see his skin. As I waited outside, I scolded myself for being so judgemental. After all, it's what's on the inside that counts. He was a very nice man. He liked the house and gave me $500 in cash (from a giant wad he pulled out of his pocket) to hold it until he and his wife could complete rental applications.
I called the background company that I used to screen all applicants and gave them the man and his wife's social security numbers. I was told that that guy's number belonged to a 70 year old man and the wife's number came up with nothing. I called the prospect and said that there must have been a mistake. He said, "Of course, my daughter filled this out for us and got the numbers wrong. Here try this one." He proceeded to give me a totally different number. I called and this time his SS number belonged to a dead man. Well, well, well.
I reviewed my options: rent to him anyway, ask for yet another (fraudulent) number, call the police. I decided that I really didn't have a good reason to call the police, plus I feared for my life. So, I called the gentleman back and said, "I can't seem to prove who you are. Until you get this cleared up with the Social Security Administration, I won't be able to rent you the property. However, when you do straighten this out, give me a call and, if it's still available, you can move in (NOT!!)."
But I had another problem now--remember the cash? I had to return it and I didn't want to put cash in the mail or issue a check (I didn't want him to know where I lived). I wanted to get rid of it and him. I called back. Now, he wouldn't talk to me (he was probably packing to make a quick get away if a knock came to the door). His very unhappy wife growled that I should meet her in a parking lot to return the money. Ok, so I'm literally shivering in my boots.
My husband had a conflict and would not be able to accompany me until the meeting time. I pulled into a parking space, looking for the car described to me--and for my husband. I didn't need him to come out with me, but I did want him to watch my back. He's nowhere to be seen and up pulls the "lady," again with the daughter that they assume gives them reams of credibility. I exited my car, shakily returned the money, and burned out on my way home. I saw my husband as I was leaving, but I didn't stop for anything.
Lesson learned: Never accept cash from a prospective tenant to hold a property.
I only show our homes when they are vacant and rent-ready. Therefore, I don't have to safeguard a tenant's belongings. I would open the door, let them pass me in, and say, "I'll just wait outside. Let me know if you have any questions." Besides this being the safest thing to do, I think it's a good marketing ploy. This gives them the opportunity to open the closets and medicine cabinets, to talk, and take their time imagining themselves living in the home. Have you ever been to a FSBO showing and the guy follows you around and tells you about every special light bulb that he has installed in the house and every small improvement he's performed in the last 20 years? It's so annoying. No time to think. All you want to do is get close enough to the front door so you can make a run for it. I don't want to transmit that aura to people.
Some prospective tenants were downright scary. I met an appointment at the scheduled time at one house. The man was with his young daughter. You'd know why he brought his daughter if you saw him. He was a small man in his fifties with a long braid that went down the middle of his back, a bandanna on his head, a leather vest, and so many tattoos that I couldn't see his skin. Not that I wanted to see his skin. As I waited outside, I scolded myself for being so judgemental. After all, it's what's on the inside that counts. He was a very nice man. He liked the house and gave me $500 in cash (from a giant wad he pulled out of his pocket) to hold it until he and his wife could complete rental applications.
I called the background company that I used to screen all applicants and gave them the man and his wife's social security numbers. I was told that that guy's number belonged to a 70 year old man and the wife's number came up with nothing. I called the prospect and said that there must have been a mistake. He said, "Of course, my daughter filled this out for us and got the numbers wrong. Here try this one." He proceeded to give me a totally different number. I called and this time his SS number belonged to a dead man. Well, well, well.
I reviewed my options: rent to him anyway, ask for yet another (fraudulent) number, call the police. I decided that I really didn't have a good reason to call the police, plus I feared for my life. So, I called the gentleman back and said, "I can't seem to prove who you are. Until you get this cleared up with the Social Security Administration, I won't be able to rent you the property. However, when you do straighten this out, give me a call and, if it's still available, you can move in (NOT!!)."
But I had another problem now--remember the cash? I had to return it and I didn't want to put cash in the mail or issue a check (I didn't want him to know where I lived). I wanted to get rid of it and him. I called back. Now, he wouldn't talk to me (he was probably packing to make a quick get away if a knock came to the door). His very unhappy wife growled that I should meet her in a parking lot to return the money. Ok, so I'm literally shivering in my boots.
My husband had a conflict and would not be able to accompany me until the meeting time. I pulled into a parking space, looking for the car described to me--and for my husband. I didn't need him to come out with me, but I did want him to watch my back. He's nowhere to be seen and up pulls the "lady," again with the daughter that they assume gives them reams of credibility. I exited my car, shakily returned the money, and burned out on my way home. I saw my husband as I was leaving, but I didn't stop for anything.
Lesson learned: Never accept cash from a prospective tenant to hold a property.
Friday, October 26, 2007
Sign, Sign, Everywhere a Sign
(This is my last post about the fires. We are experiencing much smoke here in Wine Country Temecula due to the Poomacha fire on Mount Palomar. It does not seem to be a threat to us in any way. Due to the decrease in wind, it appears as though most of the fires will be contained soon. Then begins a boon for contractors in rebuilding the devastated areas. If anything changes, I will let you know.)
Everything seems to have stopped this week due to the fires. I think that if I were marketing one of my rental homes today, it would stink that no one would be calling. Another week with a vacant property--and probably too late for anyone to move in by the first of November and the next mortgage payment. I am not in this position now, but I have been in the past.
We closed our second property just a couple of weeks before 9/11. The entire world seemed to stop for a month after that. I was worried that everything would change and no one would be calling about the rental. I was wrong and someone moved in during the month of October. Whew!
My preferred mode of advertising was the paper. It is kind of costly. I would put an ad in the largest paper in this area that covered many cities in the Inland Empire. I placed the ad only in the weekend editions. Back then, it cost almost $40 for those two days. If the house was vacant for 6-12 weeks, which some were at times due to the glut of investment properties, it could get costly.
We started using signs at one point. We didn't know any better, so our signs read, "For Rent, 4 Bdrm, 2 Ba" and our phone number. Can you tell what's wrong with that sign? We were inundated with calls from people looking for a $1,200 rental. It was $1,595. We wasted our time, royally. When you have seven kids, and everything needs to stop when you answer the phone, you don't get too happy about dead end calls. So I learned my lesson.
The next sign we posted said, "For Rent, 4 Bdrm, 2 Ba, 1985 sf, $1,595." Did we get less calls? Yes. But we also showed it more and were able to rent it. The only problem with the signs were that we would lose many of them. Either gardeners removed them or the wind blew them away.
Signs in a prime location for one of our rentals kept disappearing. One day my husband and I were driving past the area when we saw a kid from the school near by walk over and pull it out--and chase another kid with it. We followed the boy in our car to his house in the same neighborhood as our rental. My husband knocked on the door. No answer. As he returned to the car, he noticed the sign laying on the lawn. He just picked it up and returned it to its place on the street. Note to self: don't place signs in the path of a school.
We closed on our third house directly before a neighbor's young girl (Danielle van Dam) was kidnapped and brutally killed by another neighbor of mine in Sabre Springs in the beginning of February, 2002. Our street was turned upside down for months, with our house being searched over and over. We also provided moral support for the parents during this trying time, all the while doing our best to dodge the ever-present media.
Again, I agonized over whether or not I would have the time and the energy to rent out the house. It was a resale and needed a little bit of touch up here and there. It was also in Temecula, and I lived 45 minutes south. However, even with all of the upheaval, I was able to find tenants. It's just took a bit longer.
Now that I write this, I should have seen a pattern with disasters happening around the time of the last two homes we purchased. I can tell you that the road blocks didn't stop us from buying more. By the end of 2002, we had contracts on two new homes in Lake Elsinore, one of which we still own. I'm glad that I'm not superstitious. These two homes were 60 minutes away from our house in San Diego. That meant that if someone stood me up for a showing, I would have wasted a total of three hours or more, depending on traffic and how long I waited in front of the rental. We would always try to price the rentals just at or below market so that they would not be vacant long and I didn't have too much driving to do. Sometimes we missed the boat and would have to bring the price down until we hooked a live on.
In my next post, I'll tell you about one of the more interesting prospective tenants I've come across during the marketing of our rentals.
Everything seems to have stopped this week due to the fires. I think that if I were marketing one of my rental homes today, it would stink that no one would be calling. Another week with a vacant property--and probably too late for anyone to move in by the first of November and the next mortgage payment. I am not in this position now, but I have been in the past.
We closed our second property just a couple of weeks before 9/11. The entire world seemed to stop for a month after that. I was worried that everything would change and no one would be calling about the rental. I was wrong and someone moved in during the month of October. Whew!
My preferred mode of advertising was the paper. It is kind of costly. I would put an ad in the largest paper in this area that covered many cities in the Inland Empire. I placed the ad only in the weekend editions. Back then, it cost almost $40 for those two days. If the house was vacant for 6-12 weeks, which some were at times due to the glut of investment properties, it could get costly.
We started using signs at one point. We didn't know any better, so our signs read, "For Rent, 4 Bdrm, 2 Ba" and our phone number. Can you tell what's wrong with that sign? We were inundated with calls from people looking for a $1,200 rental. It was $1,595. We wasted our time, royally. When you have seven kids, and everything needs to stop when you answer the phone, you don't get too happy about dead end calls. So I learned my lesson.
The next sign we posted said, "For Rent, 4 Bdrm, 2 Ba, 1985 sf, $1,595." Did we get less calls? Yes. But we also showed it more and were able to rent it. The only problem with the signs were that we would lose many of them. Either gardeners removed them or the wind blew them away.
Signs in a prime location for one of our rentals kept disappearing. One day my husband and I were driving past the area when we saw a kid from the school near by walk over and pull it out--and chase another kid with it. We followed the boy in our car to his house in the same neighborhood as our rental. My husband knocked on the door. No answer. As he returned to the car, he noticed the sign laying on the lawn. He just picked it up and returned it to its place on the street. Note to self: don't place signs in the path of a school.
We closed on our third house directly before a neighbor's young girl (Danielle van Dam) was kidnapped and brutally killed by another neighbor of mine in Sabre Springs in the beginning of February, 2002. Our street was turned upside down for months, with our house being searched over and over. We also provided moral support for the parents during this trying time, all the while doing our best to dodge the ever-present media.
Again, I agonized over whether or not I would have the time and the energy to rent out the house. It was a resale and needed a little bit of touch up here and there. It was also in Temecula, and I lived 45 minutes south. However, even with all of the upheaval, I was able to find tenants. It's just took a bit longer.
Now that I write this, I should have seen a pattern with disasters happening around the time of the last two homes we purchased. I can tell you that the road blocks didn't stop us from buying more. By the end of 2002, we had contracts on two new homes in Lake Elsinore, one of which we still own. I'm glad that I'm not superstitious. These two homes were 60 minutes away from our house in San Diego. That meant that if someone stood me up for a showing, I would have wasted a total of three hours or more, depending on traffic and how long I waited in front of the rental. We would always try to price the rentals just at or below market so that they would not be vacant long and I didn't have too much driving to do. Sometimes we missed the boat and would have to bring the price down until we hooked a live on.
In my next post, I'll tell you about one of the more interesting prospective tenants I've come across during the marketing of our rentals.
Thursday, October 25, 2007
The Conveyance Advantage
Short update: Fire statistics from the Office of Emergency Services in Sacramento,CA, as of 8 a.m. yesterday:
My husband (the eternal optimist) reminded me tonight of all of the wonderful items that we have been able to pillage, I mean, convey before selling our rentals. As I write this, I am adding up the worth of these items. Since I wasn't able to sell the Lousy T-shirt on the unmentionable auction site (see http://whinecountryrealestate.blogspot.com/2007/09/looks-nice-doesnt-it.html), maybe I'll find comfort in knowing that we have recouped part of the approximately $700,000 that we lost.
In one new home that we sold six weeks after we bought it (for $40,000 more--those were the good old days--and the cause of the slump), we really made out. I was able to take the solid Corian cutting board that the developer makes out of scraps in order to prevent the homeowners from cutting directly on the counter. It's very heavy and we use it everyday.
Monetary value: $20
Useful value: Priceless
In that same rental, Lennar gave us a GE Profile refrigerator. Now, I've owned GE in the past and swore I'd never own another. However, this was free. Need I say more? We figured that it was worth at least $500.00. After all, it's a Profile, which means that, when installed, the front sits flush with the cabinetry and doesn't stick out. Therefore, it's a tad smaller than a standard refrigerator.
We had intended to remove it at the same time that we moved. However, we listed the house first, and, specifically, said nothing about the fridge conveying after the sale. A very young, newly married couple purchased the home and assumed that it came with the refrigerator. They neglected to ask us for it or to put it in the contract. The agent begged us to reconsider. No can do. We allowed the buyers' parents to enter after funding, but before the transfer of title (this translates to about 2 days before the close of escrow) in order to paint the interior with designer colors.
Unfortunately, we went to pick up the fridge while the parents were there. They begged us to reconsider and offered to write us a check for the fridge so that it could be there when daddy's little girl moved in. No can do. We needed it that day. The agent ended up splitting the cost with the dad. "After all," we asked, "how much can a small GE refrigerator cost?" Later, we decided to check it out.
Monetary value: $1,200
Useful value: Hey, it's our REFRIGERATOR (it also came with a three-year extended warranty.)
In another resale home that we bought and sold, we were able to pull out a very nice built-in (not anymore) garage unit. We had learned our lesson and took it before we listed the property. It sits in our garage today.
Monetary value: $800
Useful value: Are you asking me or my husband?
Our very first, and one of our best, tenants had to leave in a hurry. We think that some business associates of her fiance had threatened them, but we're not sure. Well, they left the house in excellent condition. I attempted to refund her entire security deposit, but she left no forwarding address and I couldn't find her anywhere. Her mother acted like I was a terrorist when I asked where I could send the check. She didn't want it either.
This same tenant left many nice furnishings in the garage--probably too much to take while fleeing in the middle of the night. We have been kind enough to "store" these items for her for free until her return. At which time, we will be happy to release them to her. Did I mention that this was five years ago?
Bike: $120
Trundle Bed with Mattresses: $400
Misc. things that I can't remember: $50
The pillaging doesn't end with useful items. Oh no! When you pay for the flooring and blinds in a brand new home, frequently there are many materials left over--for patchwork or whatever. We now have a shed and garage rafter stacked with carpeting, tile, blinds, and blind slat replacements that we will never use.
Monetary value: $100
Useful value: -$100 for storage space
Let's add it all up now:
Cutting board made of counter scraps: $20
Refrigerator taken from the clutches of young newlyweds: $1,200
Garage storage unit that I never see: $800
Total "borrowed" items from fleeing tenant: $570
Left over carpet, etc: 0
Total of value of items: $2,590
Approximate amount of money lost: $700,000
Total amount of money left to recoup: $697,410
Now we're getting somewhere!
- 18 fires burning
- 426,236 acres burned
- 8,884 firefighters on site
- 40 reported injuries
- 3 reported deaths
- 1,664 structures destroyed
- 25,153 structures threatened
- 51 shelters open with a population of 22,195
- 321,000 evacuees
- Aircraft and personnel from the following states: Nevada, Arizona, Oregon, Colorado, Washington, Wyoming, North Carolina and New Mexico.
My husband (the eternal optimist) reminded me tonight of all of the wonderful items that we have been able to pillage, I mean, convey before selling our rentals. As I write this, I am adding up the worth of these items. Since I wasn't able to sell the Lousy T-shirt on the unmentionable auction site (see http://whinecountryrealestate.blogspot.com/2007/09/looks-nice-doesnt-it.html), maybe I'll find comfort in knowing that we have recouped part of the approximately $700,000 that we lost.
In one new home that we sold six weeks after we bought it (for $40,000 more--those were the good old days--and the cause of the slump), we really made out. I was able to take the solid Corian cutting board that the developer makes out of scraps in order to prevent the homeowners from cutting directly on the counter. It's very heavy and we use it everyday.
Monetary value: $20
Useful value: Priceless
In that same rental, Lennar gave us a GE Profile refrigerator. Now, I've owned GE in the past and swore I'd never own another. However, this was free. Need I say more? We figured that it was worth at least $500.00. After all, it's a Profile, which means that, when installed, the front sits flush with the cabinetry and doesn't stick out. Therefore, it's a tad smaller than a standard refrigerator.
We had intended to remove it at the same time that we moved. However, we listed the house first, and, specifically, said nothing about the fridge conveying after the sale. A very young, newly married couple purchased the home and assumed that it came with the refrigerator. They neglected to ask us for it or to put it in the contract. The agent begged us to reconsider. No can do. We allowed the buyers' parents to enter after funding, but before the transfer of title (this translates to about 2 days before the close of escrow) in order to paint the interior with designer colors.
Unfortunately, we went to pick up the fridge while the parents were there. They begged us to reconsider and offered to write us a check for the fridge so that it could be there when daddy's little girl moved in. No can do. We needed it that day. The agent ended up splitting the cost with the dad. "After all," we asked, "how much can a small GE refrigerator cost?" Later, we decided to check it out.
Monetary value: $1,200
Useful value: Hey, it's our REFRIGERATOR (it also came with a three-year extended warranty.)
In another resale home that we bought and sold, we were able to pull out a very nice built-in (not anymore) garage unit. We had learned our lesson and took it before we listed the property. It sits in our garage today.
Monetary value: $800
Useful value: Are you asking me or my husband?
Our very first, and one of our best, tenants had to leave in a hurry. We think that some business associates of her fiance had threatened them, but we're not sure. Well, they left the house in excellent condition. I attempted to refund her entire security deposit, but she left no forwarding address and I couldn't find her anywhere. Her mother acted like I was a terrorist when I asked where I could send the check. She didn't want it either.
This same tenant left many nice furnishings in the garage--probably too much to take while fleeing in the middle of the night. We have been kind enough to "store" these items for her for free until her return. At which time, we will be happy to release them to her. Did I mention that this was five years ago?
Bike: $120
Trundle Bed with Mattresses: $400
Misc. things that I can't remember: $50
The pillaging doesn't end with useful items. Oh no! When you pay for the flooring and blinds in a brand new home, frequently there are many materials left over--for patchwork or whatever. We now have a shed and garage rafter stacked with carpeting, tile, blinds, and blind slat replacements that we will never use.
Monetary value: $100
Useful value: -$100 for storage space
Let's add it all up now:
Cutting board made of counter scraps: $20
Refrigerator taken from the clutches of young newlyweds: $1,200
Garage storage unit that I never see: $800
Total "borrowed" items from fleeing tenant: $570
Left over carpet, etc: 0
Total of value of items: $2,590
Approximate amount of money lost: $700,000
Total amount of money left to recoup: $697,410
Now we're getting somewhere!
Wednesday, October 24, 2007
Read Between the Lines
(Very quick (for those who couldn't care less) fire update: Yes, Southern California is still on fire. Some of it is headed toward the coast, which is unusual. I have a view of the Poomacha fire on Mount Palomar. It looks like it's still in San Diego County. We're finally getting some smoke as it drifts north, but we have sunny skies, too. Hope it stays that way!)
After I sent the apartment association in Kentucky an amendment two days ago to the complaint that I filed last week against my prior property management company, I was sent the following e-mail (my comments in red):
Mrs. Maxwell (Schmuck),
I just wanted to follow-up and let you know that our Executive Committee (those who would like to think they know something about investment properties) will be meeting in the next week and will review this complaint (you don't have a chance of being believed). I apologize for referring you and your husband to ###### Property Management (and I'll kill them for causing me this extra work) and for the problems you have experienced with their company (although I'm sure that they're all your fault ). I assure you we screen our members (the same way as your PM screened tenants--see prior post) and verify as much information as we can about them (by asking them if it's true) before accepting their membership (for life--no matter what). They have been a member of our organization since July 2005 (and we've regretted it ever since) and this is the only complaint (that I'm telling you about) we have received against their company (but as individuals, well, that's another story).
Again, I am sorry (psyche!) your experience was not favorable with ###### Property Management (and you are not favorable to me) and I will follow-up with you (when pigs fly) as soon as our Executive Committee meets (for beers) regarding this complaint (why did you ever think that we'd listen to you when we have such an honored board member in your property manager?).
Sincerely (please drop dead),
###### #######
I'll keep you updated on this.
Anyway, my sitemeter went berserk yesterday! This blog started exactly one month ago tomorrow. I've had hits from almost every state in the country and from many other countries: Israel, China, Italy, Brazil, Spain, Canada, Hungary, Germany, Japan, UK, Philippines, Switzerland, South Africa, France, Costa Rica, Chile, Australia, New Zealand, and places I can't spell or pronounce. You know what this means--it must be easy to accidentally access a blog that you have no interest in reading.
If you are one of my three loyal readers or if you are some of the many who are new to my blog, please pass this along to someone who may be interested in reading, sharing, obsessing, venting (not at me, I hope). You may know a person or two who have talked about RE investing for years, but have never done it; or a successful seasoned investor who needs a good laugh at someone else's expense; or someone who has lost money on their rentals, or have gone into foreclosure on their investments or a primary residence. Let's get a good discussion going!
Appeal to the voyeur in them, and ask your friends to join us and make my sitemeter blow a fuse.
After I sent the apartment association in Kentucky an amendment two days ago to the complaint that I filed last week against my prior property management company, I was sent the following e-mail (my comments in red):
Mrs. Maxwell (Schmuck),
I just wanted to follow-up and let you know that our Executive Committee (those who would like to think they know something about investment properties) will be meeting in the next week and will review this complaint (you don't have a chance of being believed). I apologize for referring you and your husband to ###### Property Management (and I'll kill them for causing me this extra work) and for the problems you have experienced with their company (although I'm sure that they're all your fault ). I assure you we screen our members (the same way as your PM screened tenants--see prior post) and verify as much information as we can about them (by asking them if it's true) before accepting their membership (for life--no matter what). They have been a member of our organization since July 2005 (and we've regretted it ever since) and this is the only complaint (that I'm telling you about) we have received against their company (but as individuals, well, that's another story).
Again, I am sorry (psyche!) your experience was not favorable with ###### Property Management (and you are not favorable to me) and I will follow-up with you (when pigs fly) as soon as our Executive Committee meets (for beers) regarding this complaint (why did you ever think that we'd listen to you when we have such an honored board member in your property manager?).
Sincerely (please drop dead),
###### #######
I'll keep you updated on this.
Anyway, my sitemeter went berserk yesterday! This blog started exactly one month ago tomorrow. I've had hits from almost every state in the country and from many other countries: Israel, China, Italy, Brazil, Spain, Canada, Hungary, Germany, Japan, UK, Philippines, Switzerland, South Africa, France, Costa Rica, Chile, Australia, New Zealand, and places I can't spell or pronounce. You know what this means--it must be easy to accidentally access a blog that you have no interest in reading.
If you are one of my three loyal readers or if you are some of the many who are new to my blog, please pass this along to someone who may be interested in reading, sharing, obsessing, venting (not at me, I hope). You may know a person or two who have talked about RE investing for years, but have never done it; or a successful seasoned investor who needs a good laugh at someone else's expense; or someone who has lost money on their rentals, or have gone into foreclosure on their investments or a primary residence. Let's get a good discussion going!
Appeal to the voyeur in them, and ask your friends to join us and make my sitemeter blow a fuse.
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