Why I Don’t Like Foreclosures

Even people who don’t care or don’t have any knowledge (or don’t care to have any knowledge) about real estate know the terms “Foreclosure” and “Short Sale”.

A quick and dirty definition of each:

A foreclosure is when a home owner is unable to pay their monthly payments any more and after a period of non-payment, the bank or other lending institution takes possession back of the property. At this point it is normally put on the market for sale or will go to auction to be sold.

A short sale is the period just before foreclosure when a home owner (sometimes working with their lending institution) tries to sell a home for an amount near what is left on the loan so that the owner can effectively get out from under it.

Now, let me preface what I am about to say with this: My opinion has been formed by the foreclosures and short sales that I have seen over the past ten or so years in my area. Thus, this is the case in the economic and real estate market is central West Virginia. Does this apply to your area or the area where you would like to invest? If not, feel free to ignore me.

Foreclosures simply take too long

As an example, I know of a house just a few miles from where I live. I knew the person who lived there and I knew when he lost his job. After attempting to make the payments that he could not afford, he eventually stopped. After at least a year of not making any payments, he moved out. The bank did not change the locks and kept the utilities on. Eventually they agreed to allow for him to attempt to sell the property as a short sale. There were offers, but the bank consistently took weeks to respond to any correspondence and would not accept or counter any offers. Eventually the listing expired and the house continued to sit there, unoccupied for three years. The utilities were turned off at some point. By the time this house came back on the market as a bank owned foreclosure, it was much worse condition than it was when the previous owner moved out. The gutters are clogged, which has led to water pooling and seeping into the downstairs living area and garage. It is infested with bugs and has several broken windows. This house, when it was first returned to the bank, only needed minor upkeep and repairs. Now, almost five years later, it needs upwards of $30,000 in repairs to make it a suitable home to live in.

So, overall, my complaint is that by the time a house actually comes on the market as a foreclosure any issues that it had have now been exacerbated by it sitting vacant for years. Not only does this make it much more difficult for someone like myself to make the needed repairs and still make money off of the flip, but it hurts the values of properties near it in the meantime. In the years that house has sits there becoming rundown and dilapidated, it becomes an eyesore that no one wants to live near. Are there squatters living there? Are there people using it to do or deal drugs?  Would you be willing to let your child play outside your house when you don’t have these answers about the house next door?

Thus far, we have bought one actual foreclosure. We have tried to purchase quite a few, but it can be incredibly difficult when dealing with a bank or other corporate entity that is selling a property like that. You don’t get timely responses, sometimes you don’t even get responses that make sense.

As another example, we made an all cash offer on a house a few months back. It was a foreclosure, HUD if I recall correctly. Our offer was countered and they requested 10% down. We didn’t feel that the property was worth that much so we walked away. Later, after the house sold I saw that it actually ended up selling for LESS than we had originally offered in CASH. Just doesn’t make sense to me.

Do you have any thoughts? I would love to hear your experiences and opinion from different areas!

 

Manage Your Expectations

Full Disclosure: This is a little bit of a pet peeve of mine.

Who here watches HGTV? Go on now, raise that little hand, don’t be shy.

 

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Is there a chance, however small, that you’re taking it to heart just a little too much? Maybe I speak for myself here, but I am NO Joanna Gaines or Christina El Moussa. I can barely figure out what color my shirt is let alone decorate a house to look like the inside of a magazine.

I think that it is very easy to watch some of these shows like Fixer Upper, Flip or Flop, Good Bones, Home Town, Property Brothers, etc. and quickly start to feel like we could never accomplish what these people do. I could not pick out coordinating paint colors to save my life and my husband (while handy) is not a licensed contractor waiting in the wings with a sledge hammer to start whacking down walls. We don’t have a team of people to help us either.

So, first we have to realize that these are television shows. They are for entertainment. Much of it I am sure is scripted and partially funded by the network. Not to mention the fact that they aren’t showing you all of the not so pretty, sweaty, smelly, gross moments that inevitably happen

Some things to keep in mind:

• The majority of us are not living in an area that is in any way similar to where many of these shows are taking place. Frequently, they take place in heavily populated areas with a high median income and living costs. The real estate markets in Southern California and Las Vegas can not be compared to the markets in small town America.  An average person can certainly appreciate a beautifully renovated kitchen that cost $40,000, but for many Americans, $40,000 is more likely to be equivalent to their yearly salary. Do not price yourself out of your market. 

 

• I can count on one hand how many people I know who have over $100,000 cash on hand to purchase and flip a home. Most people simply do not have this type of capital lying around the house. Taking out walls and fixing structural issues are EXPENSIVE. I feel like sometimes these shows minimize the long term effects that structural issues and water/mold problems can have on a house.

 

• I know I touched on this above, but your average investor (just like me) is not an interior designer. We do not have warehouses full of antiques nor do we have a few thousand dollars to call in a staging company. While staging can make a world of difference in how a potential buyer views a home, it is simply not an option most of the time.

 

• About that team of people who swoop in to tear down walls or re-paint the entire exterior of a house? How many people do you know that have the capital to not only buy a house to flip, but to pay the utilities, AND afford a team to come in and do the work? Every day that you own a flip property it costs you money. So the more people you have, the quicker it will be done. I don’t know about you, but I don’t have the resources to hire a team right now.

 

These shows that we see so often are great for motivation and to get new ideas, don’t get me wrong. But we need to realize that these are not directly applicable to each of us in our own journey of real estate investing.

 

Duplex Dreams

If I had a nickel for every time someone told me that they had considered buying a duplex as their first home, I could have paid for my first home in cash (nickels, to be exact).

We have actually owned two duplexes thus far. One we ended up flipping and the other we still own and rent out.

I do think that purchasing a duplex as your first home can be an absolutely excellent investment strategy. It can also be an exhausting and daunting task if you have never owned a home or been a land lord.

 

My tips for purchasing your first duplex?

1- Know your market. Yes, I harp on this point. But being aware of the types of homes around you, the comparable rentals nearby, average rent cost, etc. will be incredibly important. Is the area family oriented or are you near a college town? What about the median home prices in the area?

2- Inspections. Having an inspection done by a professional and/or conducting your own thorough inspection is always important. This becomes especially important in a duplex because you will not only be responsible for upkeep of your own unit but of your rented one as well. Check sinks and disposals for leaks, windows for cracks, roofing for leaks, piping, electrical etc.

3- Familiarize yourself with normal home upkeep. Small things that you can learn to do yourself to keep your property in tip top shape. Not only is this important to keep your home looking nice and functioning well, it is part of being a good landlord. Small upkeep can allow you to catch an issue you otherwise would not have noticed to prevent them from becoming large (expensive) issues. My husband has renovated all of our properties so far and still often turns to YouTube to learn how to do specific tasks. Information is never far away!

4- Figure out the tenant situation. When we bought (and sold) our first duplex, there was already a tenant in the lower unit who had been there for a number of years and wanted to stay. He was a great tenant and we got quite lucky with him. Is there already a tenant in one of your units? Did the current owners do background and credit checks? How long have they been there and/or do they want to stay? Do YOU want them to stay?

5- If there is not a tenant in place or the current tenant will be vacating before you purchase the property then you will need to find a new one. Now, you always have the option of using a property manager (for a fee of course) or you can advertise and rent the unit out yourself. If this is the case it is very important that you screen your tenants well. We require an application, then a background and credit check before we considering signing a lease.

6- Lastly, you’re going to have to take a leap of faith. I have never purchased a home and not had some nerves, so your first few purchases will be (and should be) a crazy yet exciting experience. There is a lot of uncertainty when purchasing a new home, let alone technically purchasing two or more at a time so there will always be some level of anxiety, which is completely normal. Just know that no matter what the issue is you have a world full of people and information at your fingertips to help you through any situation and more importantly to help you learn through it.

What are your best tips for purchasing or owning a duplex?

Have you ever lived in a duplex?

Broadway Gardens AKA “Know Your Market”

The first property purchase that I consider “real” for us (that we planned to hold) was a townhouse in a little complex in our small town called Broadway Gardens. My older brother had recently moved out of our parents house and bought one. My mother had just started selling real estate full time and noticed that another townhouse in Broadway Gardens came on the market in the building across from my brother’s.

Point #1- Listen Carefully. Especially to those familiar with your target market.

I remember very clearly my mother’s offhand comment when we went to look at the townhouse. While she was unlocking the door she looked around at the other units and the full parking lot and said “This place is a goldmine”. Now, should you take every word that someone says to you to heart? Obviously not. But with a little critical thinking, listening to the thoughts and comments of people who are educated about your topic can open you up to new perspectives and ideas.

For instance, in the case of Broadway Gardens, when I heard my mom make that little comment it made me start thinking. I saw how quickly my brother’s townhouse sold after being listed. I have lived in this town my whole life and have known multiple people who lived in Broadway Gardens. The complex was only a few blocks from the high school, football field, the town library, as well as the public pool. I have seen the school buses stopping outside Broadway Gardens and watched dozens of little kids get off. I did some googling and calling around and found out that the units in the complex that were being rented out had rents that were significantly higher than other locations.

Spoiler Alert: She was right. That little pace was a goldmine. The units were always rented and I usually had multiple people in line when one became available.

Point #2- Do Research. Even if you’re already familiar with the area.

We were lucky. We started buying properties in and around the town that my husband and I both grew up, heck my parents grew up here too. So I know this place like the back of my hand. My mom’s (albeit surface level at the time) real estate knowledge was incredibly helpful and I have been able to continue to learn from her as she has grown into her new career.

You certainly don’t have to have lived in an area for the past 20 years to understand the market though. Don’t be afraid to do research and even more importantly don’t be afraid to call realtors in your area. Call around and find someone who is willing to talk with you about what you’d like to do and who is happy to share their knowledge. Pair the information that you can get from professionals in the field with your own research and form your own personal opinions.

Real estate in West Virginia is very affordable, comparatively. You also have to understand though that the median income in this state trends significantly lower than even surrounding states. We have also seen a our population deflate over the years. A quick google search can give you great information about the state you are looking to invest in and even particular information about certain areas you’d like to focus on.

Point #3- Use Your Eyes.

All the analytical data and advice from professionals isn’t going to help if you don’t use the information right in front of you. Start paying attention to what areas are selling and at which price points.

For example, 10-12 years ago Cross Lanes was where many people wanted to live. It is about 15-20 minutes away from the Charleston and had multiple schools, a community pool and tennis courts, and had recently gotten a new shopping plaza. Over the past two years though, the drug activity and crime rates have gone up significantly in the area and the traffic has become an issue now that so many people moved in rather quickly. I can watch a house that would have sold immediately 10 years ago for upwards of $200,000 sit on the market for the better part of a year with a price closer to $175,000.

So watch the trends. Ask around. Question why you are seeing the things you are and get other’s perspectives in order to better form your own opinions.

So get out there and start gathering information friends!

 

Starting Out

I have this thought that keeps popping into my head. For like, the past 6 years now.

I always think it’s kinda funny but when I say it out loud no one else really seems to.

But I’m just waiting on the day that we are sitting at a closing, or signing papers to buy or sell another property, or I’m speaking with someone at a bank, and all of a sudden someone looks around and asks why everyone is letting this little girl make all these decisions.

On one hand I feel really proud sometimes of what we have accomplished and what we will accomplish and of all the things that we have overcome to get to this point. But on the other hand I still feel like 80% of the time I’m just winging it.

And that, ladies and gentlemen, is the best description I have of how we got started. We decided that we were going to do this, and we just went head first winging it the whole way. I’m still a complete newbie to the world of real estate investing, even after 6 years. I am also a tiny tiny little fish in a massive sea full of sharks and whales.

I remember reading a book on owning rental properties when I was a teenager. For some reason it always stuck in my mind and now I don’t remember even wanting to do anything else.

The first house I ever bought was my grandma’s house. She was moving in with my aunt and lived in a tiny 2 bedroom house that was built in the 40’s. There was carpet in the kitchen and after you had been inside the smell of cigarette smoke on your clothes and in your hair was so strong you had to change and shower. My mom had just started selling real estate about the same time (she is a retied first grade teacher). So we cleaned the house out (and may have gotten black lung in the process) and my mom quickly found a buyer. I think we made 8-10k on it maybe? It has been so long I don’t even remember the exact number.

After that we bought a townhouse, then three more townhouses in the same complex over the nest 5 years. All bought with cash, all fixed up and rented out. I will make a separate post explaining those purchases more in depth.

In between those, we also bought and flipped a townhouse and the house next door to us.

Lastly, and the straw the broke the camel’s back you might say, we bought a duplex. We originally planned to just rent it out and keep it, but we ended up deciding to sell all of our rentals at that time. I will also create a post on that topic.

Currently, we have just purchased 11 units. This includes one three-bedroom, three two-bedrooms, and seven one-bedrooms.

Whew, alright that was wordy. But that in a nutshell is the story of how we started and where we are right now. I will create more posts to explain more areas in depth this week!

Here goes nothin’

Hello Hello!

Long story sort of short-

I’m Lindsey.

I’m a 30 year old, working, husband having, average as hell girl from a small town in West Virginia.

But I’ve always wanted more. Not in a greedy way, I swear. I just always felt a need to DO SOMETHING. Which is again, average.

I’m basically only good at one thing thus far in life. I’m really really good with money. Like, money is my thing. My husband and I have great jobs, but we don’t make anything crazy. We just work hard and we know how to NOT waste our money.

So, at 30 years old we have a completely paid off home, two paid for new vehicles, and a boat that we were able to pay cash for.

Most importantly though, in the past 6 years we have bought and sold over 9 properties. Single family homes, duplexes, townhomes, some were rentals and some were solely flip properties.

We currently own 11 rental properties.

I want so badly to be able to share our journey, the things that we had learned and the things that we will learn with people who want the same things.

I see people our age (and people younger and older) who constantly struggle to keep their heads above water. My advice will not always be what you want to hear, but it will be what you NEED to hear.

Stick around, I promise I’ll make it worth it to you! We’re gonna make it guys, we’re gonna make it!