Let’s talk abut 2008 for just a bit….

I am incredibly thankful for your comments and suggestions.  And I hope that you are enjoying this blog as much as I am.  I plan to focus much more on blogging my experiences in 2009 - so stay tuned.

I’m also thankful for the mentoring and friendship I received from Steve Cook and Pete Giardini.  Without their ability to see things in me, that I sometimes don’t see, I would not be where I am today.

I’m thankful for all my Club mentoring students.  I have learned more from you all than you have learned from me.  We will continue to grow, learn and prosper together.

And to my lovely wife Tracy who has stood by my side and supported me even when my backbone stood like over-cooked spaghetti, I am thankful to truly be the luckiest husband and father in the world.  Without Tracy, I am nothing.  She knows when I need support, she knows when I’m lacking focus, she knows when to confidently guide me when I’m lacking confidence - and she knows how to kick me in the butt when it needs kicking.  We all need a Tracy in or lives.

Did 2008 bring you all you wished for?

Maybe 2008 wasn’t as good for you as you had hoped.  Look - truth be told, I struggled for the first half of the year.  It wasn’t until a lot of people smarter than me, (including my wife) recognized that my focus was about as scattered as thoughts of a crazy man.  I really was all over the board in terms of my business vision - and that in turn took a serious toll on my personal vision.

Folks - you cannot succeed in business until you first know what you want out of your personal life.  Write that down and take it to the bank.  Its so true.  Like rats in a maze, so many of us blindly run through life looking for a way to find the cheese only to find that we really don’t like cheese.  Make sense?  If not, we’ll talk more about this in the months to come.

So, I ask you - how was your focus in 2008?  And, if you didn’t get all out of the year that you had hoped for, was it because of a lack of focus?  Was it because you really don’t know what you truly want?  If so, you need to stop right now - and focus on you and what you want from your life.

My Goals for 2009.  This is Scary!

Its a proven fact that successful people write down their goals, AND more importantly, successful people surround themselves with others who hold them accountable.  So guess what, I’m about to do something that I thought I’d NEVER do.  I’m gonna pull back the curtain and let you all in on my goals for 2009.  And I’m asking you all to hold me accountable!

Here they are:

1.  Be in the best shape of my life physically, by the end of 2009.  I will lose 40 pounds by religiously going to the gym, and severely cutting back on my caloric intake.  That fat guy below will be gone by 12/31/09.  I cannot be the best father I can be if I’m too fat, too tired or too lazy to play with my kids.  This is a very personal goal that has been a life-long struggle - and I’m making the solemn commitment to all of you to commit to myself.

2.  I will become debt free.  And folks, let me tell you - this is a number that exceeds $220K, when I include mortgages.  Don’t let anyone fool you into thinking that there is “good” debt and “bad” debt.  Its all bad.  Face it - our debt rules us.  It tells us where we work, when we work, how much time we spend on vacation, where we live…etc.  Think about it.  Its true.   I want to be 100% debt free by December 31st, 2009.  How dramatically would your life change if you had no debt?

3.  I will continue to be the best husband and father I can be.  For my wife’s undying support, I will strive to make her life easier and happier.  My children will have a father first, and a Dad who loves real estate second.  Time spent with them will be exactly that; no laptop, no cell-phone - just pure undivided attention.

4.  I will be the very best teacher I can be.  My students will work hard and they will understand that there is no free-lunch, but I will reward them with even better mentoring, and support.

5.  My business will grow exponentially as a result of focusing ONLY on wholesaling, mentoring, and rehabbing.

All The Best!

I sincerely wish you all the very best in 2009.  Please chime in with your thoughts and comments - and look for some crazy, amazing updates in the coming weeks.  My student; Prencella “PJ” Hall just started on an $80,000 rehab in Park Circle and I just started on a small “6-weeker” that should be INCREDIBLE when complete.

I’m always looking for good deals so if you come across anything you don’t want, or if you’re looking for a partner, please call me first.  I have the ability to get things done quicker than most.

Talk about a trash-formation, uh….transformation!  This complete-gut rehab turned out so much better than I could have dreamed.  There are plenty of pictures below, but lemme’ tell ya - they simply do no justice to being there in person.  The place is truly amazing.

My student Joann has turned out to be a complete pro.  From picking the colors and the finishes, to design ideas, to working the contractors - I think she’s a natural.  RE investing is not for everyone.  Some people are naturals, some learn to be great, and some just can’t stomach the pressure and the roller-coaster.  Joann is a pro.

This was an $80,000 rehab that was completed on time and on budget.  In fact, our contractor completed the job in just at 3 months.

Click Here for the 1st installment of the story

We ran into a few surprises along the way, but nothing that we couldn’t easily fix.

So what did we get for our 80-large?  How about all new EVERYTHING!  Starting with six 30 yard dumpsters of trash and debris, a new porch, new roof, new and larger dormer, new framing, new windows, insulation, new plumbing, electric and HVAC.  The entire house was sheetrocked, and a bathroom was added to make two full baths.  We increased the ceiling height of the 2 second

story dormer rooms, and we pushed back the walls to give them a bigger feel.  We added a sweet kitchen, 2 new stairways, all new lighting, and we tightened up the landscaping by adding a few beds, new sidewalks, and grass seed.

Gee’s 80-grand adds up fast huh?

Look at the place!  Its an insane change, is it not?

Its now on the market at a very fair price of $204,000. (UPDATE - $199,900)  If a potential buyer walks into this house, and they have a budget of 200K, I have no doubt they will fall in love.

THE SUCCESS FORMULA

Your challenge in this market and the secret to success is as follows:  You MUST create OVERWHELMING VALUE.  Average is no longer acceptable - not in this market.  The MLS is littered with average listings.

First you have to first find deals in areas where people want to live.  There are many places in the City where homeowner’s are no longer buying.  I’m telling my students to stay away from anything that ends in Park or Hill - i.e Federal Hill, Reservoir Hill, Patterson Park - etc.  Those places are not hot!  They’re played out!

Second, you must buy your deals right!  If you’re not buying at 60% or less on the dollar (minus repairs) - you’re paying too much and you’re setting yourself up for sure failure.  Be patient.  Great deals are out there!

Third, you have to do a rehab on a budget that will allow you to sell the house for LESS than the comps in the neighborhood.  That’s right!  Not only do you have to make the house super-sweet, then you have to turn it around and sell it for less than the others in the neighborhood.

Its fun being an RE Investor, huh?  Sure - its just like “Flip This House!”

Click on the tasty toilet below for all the juicy “AFTER” Pics!

When you do a rehab you always walk a fine line (especially in this market) of doing too much.  You have to constantly ask yourself, will this upgrade pay for itself.  I generally go overboard in my rehabs, and I’m often criticized for doing too much.  I’ll take that criticism, because I know my houses sell faster than average and for more money EVEN in this market.  My motto is, “Deliver Overwhelming Value.”  When a potential buyer walks through the door, I want their only questions to be, “Can I afford this? and Where do I sign?”

Seriously folks, there is a lot of crap on the market these days.  To rise above the junk is not difficult, but to really differentiate you must deliver a great product at a great price.

So what did we spend?  About $52,000.

That got us a new roof with all new plywood, demo of all the ceilings in the house and the kitchen and baths.  We upgraded the electric panel, opened up the kitchen, removed the skylights in the family room, and gutted the baths.  We vaulted the hallway ceilings as well as the baths.  But for the windows, sliders, and exterior walls, the place is basically brand new.

Showings have been very positive and we’re expecting a contract soon.  I’ll keep you posted.  Until then, I hope you enjoy this stunning transformation.

Refresh your memory.  Before pictures are HERE

See all the AFTER shots by clicking below.

For the first installment of this rehab go here:  5204 Wesley Rd - Part 1

How about that new dormer and front porch?  Both are 100% rebuilt.  Nothing was salvageable.  Just about the only the only things we saved in this house were the roof joists, the exterior walls, some interior studs and the floor joists.

The second floor of this house has been totally transformed, from basically an attic to a REAL floor with two nice bedrooms, and a spacious full bathroom.  To make the transformation, my student Joann opted for a much larger dormer to create the bath space.  The bathroom ceiling will be vaulted to create an even bigger feel.  We also rolled backed the walls 16 inches to create more space in the dormer bedrooms .  And most important, we created more ceiling height by raising the ceiling trusses by about a foot.  It doesn’t feel like a cavern anymore.

CHECK THE PICS!

The first four photos of the set below are essentially exterior shots of the new porch, new roof, and new dormer.

The next four photos show the first floor framing and how we’ve opened up the first floor to create a more modern feel and functionality.

The next 9 pictures are of the second floor framing.  There you will see all that we’ve done to create the great new space that is the 2nd floor.

The final four pictures are pretty cool.  I’m often asked, “What do you do with uneven floors that are often found in old houses that have settled over time?”

The answer - We jack up the floors and make them even again.  When you’re doing a full-gut rehab, this is a very easy task.  If however you are doing a rehab where you are not removing all the plaster or sheetrock, plan on doing some serious wall repair if you jack up the floors.  Look closely at the final few pictures and you’ll see that we used blocks of treated lumber to bring these floors up 1-3 inches in some spots.  Pretty cool.

Even better - look at the last two pictures.  That should give you some indication as to why the floors were so uneven.  This is one of two rotted columns trying desperately to hold up up the main beam in the basement.  To give you an idea of how bad each column was - my contractor needed only a good kick with his boot to remove them!

Not shown in all the pictures is the new electric, plumbing and HVAC.  Today, we’re waiting on rough inspections.  Once we get the green light from Baltimore City, we’ll insulate and start hanging drywall.

So, that’s it for now.  I’ll have a lot more to show you in about a week.

Click for all the latest pics!

The big question is, how does a man who has made as much money as Ed McMahon wind up in foreclosure?  Poor money management?  Greed?  Lifestyle out of control?  Seems to me that even at 85 years of age, Mr McMahon must have thought he would continue to bring home the bacon forever.

Why would an 85 year old man have a FOUR MILLION DOLLAR mortage?  Someone please shoot me if I ever have a mortgage at that age!  Seriously, look me up on this blog, and come shoot me.  At 85, Ed McMahon is still a slave to the bank.  How sad.

The Donald’s rescue plan however has a funny twist.  I like Donald Trump.  I think he’s shrewd, I think he’s brash, I think he’s one heck of a marketeer - but lest we all we believe there wasn’t a buck to be made by getting his name plastered all over this high-profile story.  One, it keeps his name in the news.  Two, most lemmings will believe The Donald is just being a “good-guy.”  Three - he makes a boatload (chump change for him) when Big-Ed joins Johnny at the desk in the sky.

Brilliant.  Except there might be a fly in the ointment.  (By the way Maryland readers - the deal Mr Trump wants to make with Ed McMahon would be completely against the law in Maryland.  Can you tell me why?)

The listing agent for Ed McMahon’s heading-for-foreclosure house in Beverly Hills said yesterday that the property is now in a “multiple offer situation.”

Last Thursday, billionaire developer Donald Trump announced that he had made the lenders an offer and expected to be able to buy the house and lease it back to the onetime “Tonight Show” sidekick. But it now appears that Trump has competition.

Alex Davis of Hilton & Hyland, Beverly Hills, said a second buyer who wishes to remain anonymous is interested. The junior lien holders have agreed to a short sale at $4.6 million, Davis said, and “that’s the number we need to get to.”

In a statement yesterday Trump, who said last week he wanted to help McMahon, said that if there was another potential buyer he wished them luck.

Here’s the rest of the story

The Headline:  “The Short List”  (OK, so I don’t get that.  But I’m not too smart.)
The Sub-Headline:  “Despite the downturn, some houses are not staying on the market for long.”
The Sun’s intrepid reporter: Andrea F Siegel

Well bless Andrea’s little heart for spreading the good word.

Its a 3 page story but the gist is, some houses are selling quickly, and at full-rpice, EVEN in THIS market.  Yet, this is something I and all my students have known for months.

TIP:

Folks, if you want to sell your houses quickly, here;s what you need to know:

1.  They must be in desirable areas.
2.  They must be near perfect in terms of condition
3.  The must be priced just under the comps in the area.
4.  If they are professionally staged, they will sell faster.

Follow these simple guidelines and you WILL sell your houses fast.  I always practce what I preach, and I’m telling you, I always follow 1-4 above.

Good luck.

Here’s the Sun link

For those of you new to this story, we picked this property up off the MLS  (see this link for my 1st installment).  Let this be your guide - you can find great deals on the MLS right now.  This property sat for 588 days as a bank owned REO.  The bank originally listed the house at $299,000.  Then, like Ron Popiel selling a Veg-O-Matic, the bank reduced the price from $299,000, to $279,000, to $249,000, to $229,000.

TIP: When making offers on bank owned properties, wait for the bank to reduce the house in price (assuming that the original price is far more than the property’s worth).  When the bank reduces, make your offer.  It doesn’t matter if your offer is ridiculously low.  It should be!  Let me give you an example - the bank lists the property for $299,000.  You wait and notice on day 31 of the listing, the price drops to $249,000.  MAKE YOUR OFFER - and wait for a counter from the bank.  Let’s assume your offer is $179,000. We’re finding most times, banks will counter with something ludicrous like, $245,000.  At this point most investors would just give up - but not you, because you’re reading this killer tip.  The bank is testing you.  They want to see if you are serious.  So don’t give up.  Counter back.  I would come back at $184,000 - and tell them that’s your best and final.  You’ll see.  I guarantee most banks will come back and say, “OK, take it at $184,000.”  And when they do - you owe me lunch!

What would you pay for this house?  But wait - there’s more!”

(said in my Rod Roddy voice) How about some mold?

Ooooo…..banks hate mold.  No kidding, the remarks in the MLS listing actually said, “MOLD.  DO NOT ENTER THIS HOUSE WITHOUT A FACE MASK!”  How great is that?

Well, that was all I needed to see.  The house is less than 10 minutes from where I live, so I rode over to take a look.  Upon opening the door, I could tell this house would make a great humidor.  It was more humid inside the house, then out.  You know I’m liking it already.  Before crossing the threshold I was greeted with a pretty unfriendly stench of mold.  Some also call that the, “smell of money.”

I could see that a major portion of the ceiling was missing in the living room, and I could see the mold. Over the past five years, I’ve been in the ugliest of ugly houses.  I’ve even seen mushrooms growing out of carpet (still wishing I would have snapped a few pictures of that).  Maybe it was the scary listing remarks, maybe it was the humidity rushing from the house, but I high tailed it out of there before even putting a half of my size 12 shoe in the door.

It took me only a matter of minutes to put the offer together.

THE DEAL.  Tell Us The Deal!

Are you ready?  Are ya sure?  How does $189-grand grab ya?  It must have grabbed the bank pretty good, because they accepted the offer without a counter.  So, I am the proud new co-owner of this lovely house.

Here’s the details:
Purchase Price:  $189,900
Rehab Costs:     $  48,000
Description:      Old-school Columbia, MD.  James Rouse must have loved this house in its day.  There’s just no other architecture like this anywhere in Maryland.  Quirky exterior, weird roof lines, a funky carport.  Its just hideous.  The house sits on a crawl space, and its only floor contains 3 beds, 2 baths, a living room with fireplace, dining room, kitchen, and a huge family room that could also double as a bedroom.

Lemme’ just say this.  If you are looking for a great rehab story, you’ve found it.  We’ll spend close to $50,000 making this place better than new, and its really just a heavy cosmetic rehab.  So, there will be some serious eye-candy for you all to look at - and I can’t wait to show you.

click on the picture for tons more pics!

So as I was eating crabs on the back deck at my in-laws today, I noticed the following article underneath my perfectly seasoned crustacean.

“Overview of Housing Tax Credit” - by Kenneth Harney

If you are rehabbing houses that you will ultimately sell to homeowners, you must read this story.  In a nutshell the federal gov is offering home buyers a $7500 credit from April of 08 - to June 30, 2009.  This credit proves however that there is no free lunch as it must be paid back over 15 years so long as the home buyer remains in the home.

There’s more to this law and I’m no tax guy, but I do know a thing or two about marketing.  I should think this would make a pretty good selling point when marketing your next house for sale.

Mmmm…just look at that sweet piece.  Does that look like opportunity, or what?

My student, Joann; a mother of three girls,  a wife, and now part-time real estate investor, picked-up her very first rehab after joining our investment club less than 3-4 months ago.  And as her coach and mentor - I am proud as a peacock.   I’d hate to play poker with Joann, because she strikes me as the quiet calculating type; and unflappable at times when others would crumble.

Well, we’ll just see over the next few months how Joann keeps it together, cause’ folks - this is one serious rehab!

Address: 5204 Wesley Ave, Gwynn Oak, Maryland 21207  Google Map
Purchase Price:  $50,500
Rehab Amount: $80,000

Description:
This craftsman style house was purchased from a wholesaler - who tried to pull a few fast one’s on Joann, but with my help, she successfully navigated through the bull-hockey being thrown by the wholesaler.  Look at the pictures and you will see the house needs everything, including many dumpsters to haul away all the trash left by the previous owner.

The house has an unfinished full basement.  On the main level; living room, dining room, very small kitchen, bathroom, and bedroom.  Walk up the stairs to the second floor and you’ll find a dormer attic with two small bedrooms.  So that’s 3BR / 1BA.

TIP:
Always be ready to walk from a deal as you should always remember there will be another coming!  If you feel like someone or something in the deal stinks like a skunk, then the whole deal stinks!  You’ll find that some investors/wholesalers like to pull last minute stunts that increase your costs, and their total profit.  It’s called the “puppy dog close.”  Why do you think those pet stores in your local mall let you play with the puppy before they tell you how much cute little Fido costs?  Because they want you to fall in love with that cute little pooping ball of fur before they slam you with the bill only after you already have visions of little Fido cuddling up next to you in bed!  That’s what this wholesaler tried to do to Joann.  Folks, never fall in love with a deal!

The Plan:
We are going to turn this craftsmen out!  We’re talking full-gut rehab back to the studs.  The budget allows for all new everything, with the exception of a finished the basement. We’re gonna tear out walls, add a big dormer, and totally change the functionality of this house to bring it into this century.  Just wait.  You’ll see.  This house is going to be an absolute stunner!

So here’s the pictures of Joann’s very first day of demo!  Enjoy, and check back next week for more progress.

Click this picture for more photos

Lori Montgomery of The Post writes, “TheEighteen months ago, Reservoir Hill was a prime example of the progress that cities across the country have made reclaiming blighted neighborhoods as a nationwide housing boom helped lure homeowners and chase away crime. Now the mortgage crisis threatens to reverse those gains as foreclosures multiply, house prices plunge and vacancies rise.”

The Post goes on to say, “The plight of the cities has become the focus of intense negotiations over a far-reaching housing bill pending in Congress. In exchange for their support for a Bush administration plan to rescue ailing mortgage finance giants Fannie Mae and Freddie Mac, Democratic leaders are demanding $4 billion in emergency aid to stabilize hard-hit communities by purchasing vacant and foreclosed properties.

But the White House as recently as yesterday threatened to veto the bill (to rescue Fannie and Freedie) unless the money is removed. “It is astonishing to me that the Democrats would want to say, ‘Oh, that’s great. Now that we have them over a barrel, let’s use this as an opportunity to get spending in the bill,’ ” said White House spokesman Tony Fratto. “This is a wasteful program that will not help the housing correction and will primarily serve as a bailout to those very lenders who foreclosed on homeowners.

“They don’t understand the market dynamics here at all,” said Paul Graziano, Baltimore housing commissioner. “We can let the market adjust and see the last seven or eight years of investment go down the tubes. Or we can intervene now to reclaim this inventory and protect these neighborhoods.”

Here’s the link for the entire story, but The Washington Post is a free subscription site.  You have to can sign-up to read the entire story.

So what do you think?  Was Reservoir Hill to be the next great resurrected Baltimore neighborhood, like Canton or Federal Hill or was it all hype?  I had many opportunities to invest there over the past few years, and was almost swayed by the wonderful bones of the houses in that section of Baltimore City - but I passed on every one!  Why?  Because I instinctively knew that the asking prices of these humongous houses (once rehabbed) didn’t match the amenities of the neighborhood.  This place, long ago, one of the poshest spots in Baltimore City, is now a dump!

The officials at Baltimore City Hall now wash their hands of the mess they’ve perpetuated and attempt to absolve themselves of any responsibility by blaming the White House for the downturn of this neighborhood rather than reaching out to investors and potential homeowners to start a real grass roots effort to make Reservoir Hill great again.  Shame on Baltimore City officials like Paul Graziano who are attempting to divert the spotlight on their failed policies or lack of action and vision.

The final word here folks:  Do not invest in areas where there are no grocery stores, or malls, or nice restaurants for people to dine.  Why would a homeowner sign the line on a $300,000 mortgage note, only to find that his new house sits among drug dealers, and blight?  This type of investing is investing in sure and certain failure.  Especially in this market, you can’t simply be swayed by an area full of horrible houses with great bones and the promise of all those amenities.  Why?  What if those amenities never come - as has happened in Reservior Hill?