In the thirties and forties this week. In the thirties and forties next week. The East coast got leveled with a massive snowstorm that completely missed Smalltown. Oh yeah, I am really enjoying this winter! Anyway, Monday night was my monthly dinner with Damon.
After months of ignoring my advice, Damon finally hired a real contractor and his Vacancy Bank (VB) property should be finished by the end of this week. And it’s about damned time. Damon bought the place in March, and then started paying worthless handymen in June. From June until this month, that’s eight months of paying the monthly $1,000 for the rehab loan. My goodness! After it’s finished, VB inspectors walk through and make sure that all the repairs on their list have been done. Then the lien will be taken off the property and he can finally start the process of refinancing and moving a tenant in to help pay the rehab loan bill.
Damon paid $10,000 for the property, then took out a loan for $30,000 to make repairs. He used $17,000 of that to pay off his credit card debts and the remaining to repair the house. Including February, Damon will have spent another $9,000 in monthly rehab loan payments. He hopes to get the value of the place up to $60,000 which, if he gets a cash-out refinance at 90% LTV (loan-to-value), would give him $54,000. Doing the math (54,000 – 9,000 – 30,000 – 10,000), Damon would make a profit of $5,000. And that's only if he can get it appraised for $60,000, which a big "IF". He also hopes to get tenants who will pay $950 a month through subsidized housing. With a mortgage of $54,000 and the taxes relatively low, he’s looking at a monthly payment of around $700 (high estimate). Take out $150 a month for minor maintenance issues, and he’s looking at a monthly profit of $100. $5,000 cash and $100 a month. Ugh. I don’t really have an issue with the monthly income, as long as he doesn’t have to come out of pocket. But for $5,000, was it really worth it? Hopefully he’s learned his lesson, and I’ll make sure to get his contractor’s contact information just in case.
The conversation turned to me, and I let him know about my dealings with VB and that I’m trying to stay the fuck away from them. He agreed that VB puts investors through a lot of unnecessary bullshit, but that I should keep my options open. If the numbers work and the property is solid, the bullshit may be worth it. Hmm... I suppose he had a point. He then mentioned something interesting.
This dilapidated building is adjacent from Damon’s property, and construction will soon begin to build luxury apartments here. That means a bump in property value for many of the surrounding properties and higher quality tenants in the area. If I can find a place in that area that’s affordable, it may be worth it to buy and hold for a while. I would have to pay for the repairs myself, as it would make no sense to take out a rehab loan and refinance before the construction is completed. I’ll keep an eye out for anything. Hmm. You know, there’s another building with luxury apartments going up in my own neighborhood. I really have to stay informed about things like this. Every city has its own government website that shows what kind of construction is going on. Knowledge like this can help me make purchases that will yield big profits. I just saved Smalltown’s online newspaper and government websites on my phone’s internet bookmarks.
I had only 2 plates of food at the buffet, which was interesting since I hadn’t eaten all day and I usually have three or four full plates. All in all, this was a good dinner and I’m glad Damon will be moving on to the refinance stage of his first refinance property. At each stage I learn from his mistakes, so his progression is mutually beneficial.
After months of ignoring my advice, Damon finally hired a real contractor and his Vacancy Bank (VB) property should be finished by the end of this week. And it’s about damned time. Damon bought the place in March, and then started paying worthless handymen in June. From June until this month, that’s eight months of paying the monthly $1,000 for the rehab loan. My goodness! After it’s finished, VB inspectors walk through and make sure that all the repairs on their list have been done. Then the lien will be taken off the property and he can finally start the process of refinancing and moving a tenant in to help pay the rehab loan bill.
Damon paid $10,000 for the property, then took out a loan for $30,000 to make repairs. He used $17,000 of that to pay off his credit card debts and the remaining to repair the house. Including February, Damon will have spent another $9,000 in monthly rehab loan payments. He hopes to get the value of the place up to $60,000 which, if he gets a cash-out refinance at 90% LTV (loan-to-value), would give him $54,000. Doing the math (54,000 – 9,000 – 30,000 – 10,000), Damon would make a profit of $5,000. And that's only if he can get it appraised for $60,000, which a big "IF". He also hopes to get tenants who will pay $950 a month through subsidized housing. With a mortgage of $54,000 and the taxes relatively low, he’s looking at a monthly payment of around $700 (high estimate). Take out $150 a month for minor maintenance issues, and he’s looking at a monthly profit of $100. $5,000 cash and $100 a month. Ugh. I don’t really have an issue with the monthly income, as long as he doesn’t have to come out of pocket. But for $5,000, was it really worth it? Hopefully he’s learned his lesson, and I’ll make sure to get his contractor’s contact information just in case.
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| I took this picture of Damon's VB Property crooked, so it's not sinking on one side or anything. But a $60,000 value? I dunno about that... |
The conversation turned to me, and I let him know about my dealings with VB and that I’m trying to stay the fuck away from them. He agreed that VB puts investors through a lot of unnecessary bullshit, but that I should keep my options open. If the numbers work and the property is solid, the bullshit may be worth it. Hmm... I suppose he had a point. He then mentioned something interesting.
 |
| Another one of Smalltown's run-down brick buildings |
This dilapidated building is adjacent from Damon’s property, and construction will soon begin to build luxury apartments here. That means a bump in property value for many of the surrounding properties and higher quality tenants in the area. If I can find a place in that area that’s affordable, it may be worth it to buy and hold for a while. I would have to pay for the repairs myself, as it would make no sense to take out a rehab loan and refinance before the construction is completed. I’ll keep an eye out for anything. Hmm. You know, there’s another building with luxury apartments going up in my own neighborhood. I really have to stay informed about things like this. Every city has its own government website that shows what kind of construction is going on. Knowledge like this can help me make purchases that will yield big profits. I just saved Smalltown’s online newspaper and government websites on my phone’s internet bookmarks.
I had only 2 plates of food at the buffet, which was interesting since I hadn’t eaten all day and I usually have three or four full plates. All in all, this was a good dinner and I’m glad Damon will be moving on to the refinance stage of his first refinance property. At each stage I learn from his mistakes, so his progression is mutually beneficial.
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