At the moment, this site assumes some knowledge on your part of the basics of buying a house. It's a collection of anecdotal information on buying and selling real estate, and increasing the value of your real estate. I also plan on addressing some ways to get the most bang for your buck when purchasing a home.
I grew up in a construction family. My parents bought their first rental in 1986. I bought my first in 1997. In addition to being a licensed salesperson in CA, I was a building inspector for over 2 years.
I'm trying to cross reference my blogs. New friends welcome
Today I need to list some rental units for a family trust. I think I shall give each of them their own blogspace in order to advertise them in addition to the MLS listing, and then refer them on Craigslist.
My long time best friend who got me into Building Inspections just opened his own consulting firm. He's incredibly knowledgable, with years in the field as a commercial electrician in addition to years as a plan checker and building official.
Check out Codewise Consulting.
I figure you're reading this because you want to know how to use a rooter. If you're afraid of things that typically go down the toilet or have a sensitive sense of smell, don't read anymore.
One of the things you might find yourself doing as a landlord (and maybe as a homeowner) is snaking out your sewer drain. It might be because of roots, papertowels, kid's toys, tennis balls, rags, feminine hygiene products--ok you get the picture. I've found all of the preceding items. Pity me.
Both Home Depot, Lowe's, and Harbor Freight Tools carry plumbing snakes. I bought the one by Ridgid for around $400. Harbor Freight's runs around $250-300, but doesn't look as sturdy or as safe, as it has an open cage design as opposed to the plastic shell that surrounds both the Ridgid at HD or the model that Lowe's carries. Also, buy the PVC gloves that are nearby.
In any case, it generally costs around $200+ for a drain cleaning service to come out and snake the main line. I've heard that Mike Diamond charges $99 for any drain, so that would be a good deal, depending on when his guys are available. Most inexpensive rooter services take at least 8 hours to get to your job, in my experience. So if you've ever had a rooter guy out 2-4 times, you could've bought the tool.
Now that I've blabbed your ears off (eyes off as you're probably reading this) I guess I should stick with the HOW TO in the title:
1. Take off the cap to the cleanout (you might want to be wearing those gloves, eye protection, and shoes you don't care about--I wore my Tevas today, but I knew I could just wash off my feet.)
2. Let water flow out while you go plug in your snake and determine where the best place to put the machine is--that's why you take off the cap BEFORE you bring your snake over.
3. If you haven't put on the PVC gloves yet, now's the time.
4. Place the snake 2-3 feet from the cleanout.
5. Put one of the attachments on the tip--I use the root cutter for most jobs. It's U-shaped. The spade bit is also good, but as this is on a rental I want to see if my tenant is to blame, because then I charge them for my time. There is also a corkscrew/spring attachment, but I don't like this one.
6. Start feeding the metal spring down the clean out by hand. Don't use the motor yet. When you have pushed the spring as far as you can by hand, stop pushing.
7. Adjust the spring so that there's a little slack, but not too much as the spring can form a loop and catch your hands, fingers, or just smack you. The spring can also catch skin, cloth, or your gloves in the grooves, so treat the machine with respect. Then step on the foot switch and hold the spring loosely while the motor turns the snake. Do this for about 15 seconds to one minute. After some practice you'll be able to notice differences in the sound of the motor.
****Safety Warning**** If the snake loops up, you take your foot off the switch. Then put the machine in reverse. Tap the foot switch to unwind the snake.
8. Repeat steps 6 and 7 until the water has drained out of the pipe or you've reach the end of the snake.
9. Put the snake in reverse, but don't push the switch unless you need to.
10. Start pulling the snake back and load it back into the drum.
****Warning**** The snake is a spring that can fling the effluent on you and the end has a tend to whip if you pull it out too quickly. Anything stuck on the end of your snake might get flung at you. Use your imagination.
11. I like to run a hose down the drain AFTER it's been unblocked.
If you're on a septic system and the clog won't come out, your septic tank may be full.
Hope this helps. If you're afraid to do this yourself, my buddy or I will do it for a couple hundred dollars if you're in the High Desert. :-)
There are a number of places you can go for do-it-yourself (DIY) and home improvement ideas. Some are run by stores that want your business, and some are green and encourage you to recycle, and some just like to share ideas. I'm going to post links here from time to time, so please bookmark this entry of my blog and check back from time to time.
Commercial: (1) True Value
Rismedia has a great article about investing in property in today's market. After you read the article, come back and read my comments.
1. Location is the number one rule of investing in real estate. Because the market for rentals in the suburbs of declining areas is contracting, it might be better to invest in cities that don't have much appreciation, but do have positive cashflow.
2. It's good to not go overboard, but as you're buying for the long term, buy long lasting components like ceramic tile, tiled baths and showers, and go with low cost granite countertops. If you are handy, these are fairly easy to install yourself and save a ton of money, plus the saws that you use for large tiles can be used on granite backsplashes. Here is a True Value project site.
If you use drop-in stainless steel sinks (get deep ones if your units are older and don't have dishwashers) you can use a 4" wet saw or grinder to make cuts in the granite. Bullnosed 8' granite slabs can be bought for around $100 and will last longer and look better than a $50 formica countertop. As an added bonus, it won't be hurt by cigarettes. If you start early in the morning, this is only a one or two day project; you can do it on the weekend.
3. Appreciation really depends on your market. California is always cyclical. Southern states, and the Northeast have cashflow without much appreciation. Flipping at this point can be done if you have a lot of cash and can find a really ugly fixer that noone else wants.
4. Historically properties have been appreciating faster than inflation. These days, much of the difference is eaten up in new fees and regulations by the local jurisdictions (Rental license, Code enforcement inspections and tickets, proposed Fire Marshall Inspections for smoke detectors) and public utility rates have been rising with public employee union wages, which rise even when the private economy is contracting. If you have lower income rentals you won't be able to pass these fees on, so avoid low income rentals. The government also competes directly against you with low income housing projects. (Remember #1)
5. Cash is best. While leverage is great, less debt is better. Just protect your assets with corporate structures and insurance. A dollar in your pocket is better than a $0.37 tax credit on your interest write-off.
6. Cost of ownership is a big one. See #4. What are the utility costs? If the utilities are not paid by the renter, can the utility company recoup from the owner ? In California, water bills go against the property. Are there MelloRoos or other bonds that increase the tax rate? Ask your agent.
7. It's amazing what can be done by ripping out nasty carpet (I'm a huge fan of laminate flooring, ceramic tile), scrubbing the walls, replacing the countertops (cabinets if necessary, but refinishing is cheaper and usually works), and upgrading some of the lighting fixtures (adding ceiling fans and outdoor lighting) for comfort and security.
8. Hiring of professionals is great if you can afford it. A lot of minor plumbing and electrical jobs would be prohibitively expensive if done by a professional. There are a lot of great how-to and DIY sites online, as well as books in the library for free advice. (Don't take a library book to a plumbing job). I don't like to kneel, so I hire some help for my flooring. If you're paying $40-80 per hour, you have to calculate how many hours you'll have to work to pay the professionals. If you have renters that want to move in, then you have to determine whether you or the professionals can get the job done on time. I've had it go both ways: professionals could do it faster, or pros didn't show up and the renter went elsewhere.
9. Always. Read some of my posts. I like background checks in addition to credit checks. I don't rent to anyone that I can't do checks on. All adults must be checked. All teens must go on the rental agreement once they turn 18. I just had a lady call and tell me that her husband has no papers and ask if that was a problem. Yes it is--do you want someone selling drugs or pimping out of your house? I had it happen once because I accepted a personal reference.
10. For about $350 you can do your own eviction in San Bernardino. For about $550 you can have a lawyer do it. Go with the lawyer. This could take 2-6 months in California.Or depending on your rent offer the person money to move out (as long as the place is clean and undamaged) as you just want to start earning money. Do not offer to give a good reference. Lying to other landlords will eventually ruin your reputation, maybe faster with new technology.
11. Lower densities tend to have better behaved populations. Once you get 5 units, you need a commercial loan (higher rates and less money could be taken out of a property) and you usually get an added inspection by the health department.
12. Absolutely. If you buy a rental in a resort location you can even right off trips to the area. Vegas market is down, so it's a good place to buy right now. I like Reno a bit better; it's close to the snow and is not entirely entertainment driven.
One of my clients called to see if I wanted to go out to Johnson Valley to go rock crawling. That was nice, but I'm a little busy today. Maybe next time. I do like offroading and have a 1986 Toyota 4runner. That's it above.
This post is meant to be more informational than alarmist.
Many of the REO (repo) properties out there need some work. Fannie Mae has a site where they list some of their REOs for sale. The homes need varying degrees of work. Fannie Mae offers loan which have additional money for repairs. The difficulty comes from the way the loans are put together.
Here's the short version of where we are: Client makes an offer, we wait, we get a counter offer with an addendum by the bank, which we sign and send back. That's when things become a little different.
We got a verbal 'conditional acceptance' from the listing agent. So we are not in escrow, but now have to get estimates for any needed repairs. So now my client has to hire the various inspectors and see what is needed. Then we can get estimates.
The septic inspection turned up that we need a new seepage pit ($2000). The home inspection turned up a new roof, dryer venting, and some small electrical work. So now it becomes a little harder, because my client has to get estimates on all this from licensed general contractors. Here is where we start having problems.
A lot of contractors have left the High Desert area of California (and probably other areas as well--Our legislature is not friendly to business and the boom is over), so there are fewer contractors to choose from. The contractors out there, understandably, are reluctant to give estimates on houses that my client doesn't own. Then there is the fact that some who say they will come out and give an estimate never show up.
So now my client is looking at switching the type of Homepath loan he can get (the standard one gives up to $7000 for costs--this house just needed more) and use a credit card for repairs. He's doing this to get the $8000 first time buyer tax credit, which expires November 30, 2009.
As I've mentioned before, I think prices are likely to fall in California after the tax credit expires. There is a similar vein of thought in Britain as a forecasting group speculates that rich investors are causing the present uptick in prices.
Faststone. This was provided by some of my inspector friends. I haven't used it, yet, as I have other software, but I intend to.
For those of you who don't know, a resizer will allow you to decrease the resolution and/or size of you picture, which will allow it to be uploaded to sites faster. http://www.faststone.org/index.htm
In 1916, a minister and outspoken advocate for liberty, William J. H. Boetcker, published a pamphlet entitled The Ten Cannots:
You cannot bring about prosperity by discouraging thrift.
You cannot strengthen the weak by weakening the strong.
You cannot help the poor man by destroying the rich.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away man's initiative and independence.
You cannot help small men by tearing down big men.
You cannot lift the wage earner by pulling down the wage payer.
You cannot keep out of trouble by spending more than your income.
You cannot establish security on borrowed money.
You cannot help men permanently by doing for them what they will not do for themselves.
First and foremost, a thank you. As part of the Fix Housing First coalition, you helped win the $8000 first time homebuyer tax credit in the stimulus bill last February. Without the collective voice of home buyers, homebuilders, realtors, suppliers, manufacturers, etc., this never would have happened. But now we come to you with good news and bad news.
First the good news: The tax credit is working. In addition to some positive numbers on increased sales and decreased inventories there is a bunch of anecdotal information as well. The only provision in the stimulus bill targeted directly at individuals, it is helping people realize the dream of home ownership. And, just as we had predicted, these benefits have spread to everyone connected to the housing sector - designers, manufacturers, realtors, etc.
Now the bad news: Unless Congress acts, the credit will expire on November 30 of this year. In our view, this will stop the housing recovery and slow the economy's momentum just as it is beginning.
And so we will be asking you once again to help us convince Congress that the tax credit needs to be extended to September 30 of 2010 and expanded to include all buyers --not just first timers. We'll be coming back to you with more information and requests for action in the coming weeks.
We are updating the website, www.FixHousingFirst.com, and encourage you to visit the site to view current information on how the tax credit is working.
In the meantime, we have two requests:
1. We want to hear your story. Congressmen and Senators have seen the reports on housing but they need to understand the personal stories of how the credit has helped individual American families. If you or anyone you know has used or benefited from the $8000 homebuyers tax credit, please let us know. Did you buy or sell a home? Did you hire more people as a result? Do you have a picture of yourself or your clients in front of their new home? Email us at itworks@FixHousingFirst.com; tell us your story - buyers, sellers, small businesses, movers, realtors, anyone connected with the housing sector. We will feature them on the website. Please include as many details as you'd like - as well as your zip code, so we can share these stories with your Member of Congress, to let them know it's working.
2. Help get the word out. This coalition grew to almost 50,000 people who took action through the website last time. Please help spread the word about our new effort to friends, family, co-workers, neighbors, customers, suppliers, etc. You can also follow us on Twitter @FixHousingFirst.
Again, thank you. We look forward to working with you again to extend and expand the home buyers' tax credit, and to continue to jumpstart the economy.
If you no longer wish to receive e-mail from us, please click here.
The $8000 tax credit for first time buyers will expire at the end of November. First time buyers are defined as people who haven't owned a home in the last 3 years. That means that there is only about three weeks to get your home under contract if you're going to close in time, and probably less as there will be a lot of pressure on all the loan underwriters toward the end of next month, though maybe they'll be given extra time like the 'cash for clunker' dealers were to complete the paperwork.
If you don't get done in this time, there is talk of extending the program. There is also talk of expanding the program to everyone, and possibly increasing the credit to $15,000. Should you wait?
Homes in the Victor Valley can still be bought for less than they cost to build. Interest rates are still low, but that isn't like to stay if the Fed keeps printing money. If we end up with 'Stagflation' of the 70's a $15,000 credit will make little difference once factored against a 12% mortgage. A $120,000 house payment would go from $720/mo to $1240/mo, so you'd be losing over $6000/year in payments.
As I've mentioned before, I still see prices trending downward. The $8000 tax credit may be erased by decreases in property prices, and a lower house payment save you the interest on the difference in price over 15-30 year loans.
I would still say it's a good time to buy, if you can get a better house than your rental for about the same monthly payment (or less). One of my clients is looking at moving up from a 875 sf duplex to a nearly 1700 sf house on .75 acre with 2 sheds, and mature landscaping with a sprinkler system for $100/month more than the rental.
It's a really good time to buy, especially if you are getting financing. If you've got cash, make a low offer and wait. If your credit and down payment need work you've got some time to get them in order before rising interest rates offset or exceed the drop in home value.
Here's a link to an article encouraging buyer's to get a home inspector lined up before the end of the year to capitalize on the $8000 tax credit. Unless you're a construction professional, with experience in the field, I can't emphasize enough, how important it is to get an inspection. I was a building inspector, and I found a bunch of things wrong with a property that my client and I have a conditional acceptance on, but the inspector pointed out that the dryer was being improperly vented to the attic.
After 12 years as an investor, with some lessons learned from my parents experiences, I'm thinking of writing a book. I am trying to motivate myself. I have plenty of stories--especially about mistakes I have made--and I've made enough that I could weave a cautionary tale out of shredded income. Perhaps, something on "How to lose a million dollars in real estate" or "Handbook for throwing away money" and, yet landlording has done well for me, I just made plenty of mistakes along the way.
On this fine Labor Day, I was out at a rental, doing some last minute cleaning and organizing, and praying for a good renter. During the prepping, I opened the oven and realized we hadn't cleaned it, or finished cleaning it.
This blog is a little about cleaning and a little about time management. I'm also going to go out on a limb and say that, "if you don't have a cleaning service, they stronger partner should usually clean the oven," and this is usually going to be the man. I cleaned the oven fairly easily just using soap and water and bit of elbow grease.
I had oven cleaner at the unit, but didn't want to breathe the fumes, so I decided to experiment. I started by filling a sink with soapy water to soak the stove grates. I took a sponge with soapy water and squeezed it onto the oven door and surfaces and let the solution soak in for a bit while the sink was filling.During this time it's good to remove the oven door if you know how--it'll be easier to reach inside the oven.
I soaked a sponge in the soapy water and squeezed it onto the interior oven surfaces. I spread it out and let it soak for a bit. While it was soaking I went and cleaned some other surfaces and swept and vacuumed. Then I would return to the oven and use a green scrubby (Scotchbrite ) to break up the grease and crud. I'd soak up the nastiness, rinse under the kitchen faucet, then repeat my soak, clean something else for a while, come back and scrub routine. I did this about 5 times over an hour and got the oven usable.
I don't think I had to scrub that hard. I also didn't have to use any harsh chemicals. I just used a soap with a degreaser. If you want to use a harsher degreaser that's natural, white vinegar is good, but pungent. You can also use lemon juice. I was left with a nice lemony oven, and I got most of the rest of the house clean.
Finally, after a bunch lot more emails. I guess the lawyers letter helped.
Thank you for your business. We enjoyed having you as a member. While we are sorry to lose you, we do hope you will consider us again should your business require lead generation in the future.
I also got a personal email from my customer service manager, but it was full of it, and I don't want to raise my blood pressure looking at it and rebutting it on a paragraph by paragraph basis. Most of it stems from the 'value' of their service and how it was presented by their sales staff.
I spent the last couple years as a building inspector. I know a lot of the contractors who are local. I know which ones tend to get things right the first time. I am also familiar with a lot of the pricing structures.
I just arranged for the septic, home, and termite inspections for my client. I got some of the lowest prices, and because I tend to repeat with the same people I got small discounts for my client. Many of the REO's are going to need work, and Fannie Mae and the FHA 203K loans require licensed contractors to do the work.
Contact me if you're in the market for an REO.
I've gotten another half dozen or so 'leads' with contact info that is either incorrect or belonging to people who are not interested in buying or selling property, or who don't meet the criteria I mentioned to the company when I signed up. So much for the one or two a week that I was told when they were usual--maybe this is just an anomaly.
From the attitude of the "customer service rep" (insert extreme sarcasm) I should probably be happy that I might, someday, be able to be of service to these "leads". It is not the fault of the people, they have to provide information to browse Reply!'s site. Then, if they have not been prudent and faked their input, they get contacted by professional subscribers who got duped into joining the site.
Reply! did not credit me for two of the other 'leads'. I've sent it on to my lawyer, and contacted the fraud department at my credit card company, so perhaps they'll sue me and I'll counter-sue them. We shall see.
Sometimes the upgrades on a house make it worthwhile. This is especially true when the housing market is down.
When the price per square foot is down, you're going to get more bang for your buck on a repo. I just saw a house with a $60K upgraded kitchen and a $5K in flooring, and another couple thousand in crown molding, sell for $50K more than a similar house down the street that had been a rental. I'm a handy guy, but kitchen remodels are notoriously laborious. They take a lot of time and usually a lot of money. The house was basically on sale with a $17,000 discount. The other house also had rental grade lighting and bathroom fixtures. The difference in the houses had everything to do with how much the house was cared for and loved by the owners.
The difference in price, works out to about $300/month with today's interest rates. Sure, not everyone can afford the difference, and some people don't want the extra debt. When the market recovers, the house will be worth that much more, and be that much more attractive to a buyer.
There is money to be made when the parts are worth more than the whole. This is similar in concept to the corporate pirates of the 1980's did, and what salvage yards do on a regular basis. Find something where the pieces are worth more than the whole. Obviously, you're not going to split up the house. But, if you have similar house, with dissimilar prices, it might be worthwhile to estimate how much the upgrades would cost if you plan to make them in the future.
Over the last week, the subject of where prices for housing is going came up a lot. It was coupled with the increase in vacancies that I've seen in the rental market, both residential, and commercial.
Along with the conversations, I mentioned that the rental market is really competitive at the moment, and someone asked if I ever looked into subsidized housing, sometimes known as Section 8. I have looked into it, and decided not to get involved for several reasons. I'm going to tell you why.
Over the years, I had an opportunity to pick up some older duplexes in a low-income neighborhood. The units had few tenants, and some of the vacant units were emptied of the easily removable contents--doors, toilets, cabinet knobs, faucets, and compression plumbing under the sinks.
I started by renovating and renting the empty units. During this time, money was short, and I was working part-time and temp jobs during the day, and the units at night, and doing a variety of paperwork early in the morning. It wasn't unusual for me to be up at 5am and not in bed until somewhere between midnight and 2am. I would often get a nap at lunchtime, but I was doing a lot of 16 hour work days, 6 days a week, with a 'short' 8 to 12 hours on Sunday.
During this time I got a lot of people wandering by to ask when the unit would be ready. I had several ask me if I took Section 8. I was fairly new to the business, and told them I hadn't looked into it. When asked, I told them the rents were about $650 and nearly all of them told me that Section 8 would pay me $850 and that we could "split the difference" or something to that effect. That sort of dishonesty helped put me off. Well, I guess they were honest with me, but not with Section 8. I have an abiding antipathy to liars. However, I would give them an application if they wanted.
I also was questioned as to why I was making the places 'so nice' by applicants. I replied, "If it looks like a sty, only pigs will want to live here." Those people never brought back the application I gave them. In the words of Dave Ramsey, broke is a condition, poor is an attitude.
Emotionally (I know I shouldn't get emotional about property--that's fodder for another article) I am a bit attached to these properties that I've spent so much time renovating. I've spent a lot of time and money, and literally blood, sweat and tears on these units. All of the landlords who do their own work that I've talked to, feel pretty much the same. All of them that have had Section 8 renters have had problems with damage to the units. The overall conclusion is that the extra money is eaten up in the repairs.
As it happens, the local paper had a trio of staff writers cover the subject. In my opinion, the comments section will give you better insight than the article itself.
Though Section 8 pays higher than average rates, there is a flipside with subsidized housing (brought up by one of the above commentators) in that it devalues real estate in the area. The people building subsidized housing are able to charge rents that are lower than market rates (affordable). This brings down the rents of neighboring units, especially, or maybe because of, the added units cause a surplus of housing. This drives the rental housing prices down. So the government causes taxpayers to subsidize a few large construction companies that are in competition with them.
The purpose of the subsidized low-income housing is to deflate housing prices. This unfortunately for investors, also deflates the value of their property. So it's likely, that in the near future, as bailout money gets used for subsidized housing, it will accelerate the decrease in your investment's value. Your property will become worth less faster. This is going to be especially true in larger cities.
If you drive around neighborhoods or down the freeway, you're likely to see a lot of commercial property vacancies. There are more coming. As rents go down, commercial properties are worth less. Unfortunately for small business owners, there is a lot of uncertainty as to what new taxes are in store for them and what existing taxes are going to be raised. That economic uncertainty is going to contribute to unemployment. So there are going to be less Americans compteting for housing in California.
All this makes me think housing hasn't bottomed out yet. This is especially true in outlying areas and suburbs. Though, prices are still at lows that I haven't seen since the 90's, and you can pick up housing for less than it costs to build, and less than it would cost to rent. It still might be good to buy, knowing that your purchase will lose value over the next few years, then increase after positive changes in the economy.