Self-Directed Roth IRA

Does anyone have any experience working with a self-directed IRA (Roth or otherwise)? I'm looking to head down this route and I have questions about the day-to-day operations - does it need a custodian (other than me), does the custodian write the checks and sign contracts, etc.I've heard about using self-directed IRAs for several years, mostly about how they can be used for investing in real estate. I was always intrigued by this, but never really...

Strategic Mortgage Defaults Revisited

Back at the end of September, I wrote about strategic mortgage defaults - purposefully defaulting on your mortgage on a property that has a mortgage for more than the property is worth. A story in the L.A. Times reported that these types of defaults were on the rise.Now, University of Arizona law professor Arizona Brent T. White has published a paper (pdf) stating, contrary to news reports, not many people are doing this - but they should. He cites...

Windows 7 Calculator Tip

I've just upgraded to Windows 7 and am still exploring all the new features, but one thing I noticed that could be of use to real estate investors is a new function in Calculator. Now Calculator can easily figure out any one of the following items given values for the others: Monthly Payment, Purchase Price, Down Payment, Term (Loan Length), and Interest Rate. No more messing around with spreadsheet...

Another Hard Money Loan Starting And One Wrapping Up

Got some emails yesterday for two new hard money opportunities from my partner in California. I only have the funds available for one right now, unfortunately.The deal I chose is a first mortgage on a property in Castro Valley, CA. The property is a 1,500 square foot duet, built in 1979. (A duet is similar to a duplex in that it is two units that share a common wall. However, unlike a duplex, the units can be owned by different parties.) The property...

Existing House Sales Prices for Q3 2009

The National Association of Realtors has released their list of Median Sales Prices of Existing Single Family Homes for Metropolitan Areas. (Couldn't they have come up with a better title?) Here is a link to the list (warning: it's a PDF file). Prices in some areas are still declining, while other areas are beginning to see a rebound. This list could be used two ways - if you are a bottom feeder and looking to buy in places that might be bottoming...

Foreclosures Still Happening All Over

RealtyTrac has put out foreclosure statistics for September. While the number dropped 4% from August, it is 29 % over a year ago. In my state of Arizona, one out of every 53 houses is in foreclosure. The worst in the nation is Nevada, with one in every 23 houses in foreclosure. There's a big sexy graphic representation he...

Double Update

I haven’t reported on the Houston apartment complex for the last two months, so here’s a two month recap:August occupancy was 95% and revenue was $228K or, excluding a payment from AT&T for having them become the complex’s preferred phone provider, $196K.Total cash flow was $40K.The economic woes hitting the rest of the nation have finally started to creep into Houston, which had been somewhat spared from the slowdown before.In September, occupancy...

Kiyosaki Joins The Crowd

My interest in real estate investing started with my discovery of Rich Dad, Poor Dad in a local bookstore. After reading that, I read the next several books by Robert Kiyosaki, went to see him speak, and even got to meet him a few times. I liked his approach - namely that wealthy people thought about money and investments differently than most people and that he would teach us how to think like they did. Whether or not he really had "two dads" or...

Strategic Mortgage Defaults

The L.A. Times reports that a study shows borrowers with good credit are actually more likely to default on their mortgages than borrowers with lower credit scores. These "strategic defaults" appear to be done based on a simple business analysis and with full knowledge of the consequences: if the property is seriously underwater, just give it up.When I first read this, my thought was the defaulters were mainly people who bought investment properties...

The Next Mortage Crisis: Option ARMS

Now that the subprime loan debacle is pretty much behind us, the next threat on the horizon for the mortgage industry are Option-ARMs and Alt-A loans. Alt-A loans are loans made to people just above the sub-prime cutoff. Option-ARMs are loans that allow the borrow to choose from a variety of different payments each months, including payments that are less than the interest that has accrued during the previous month. As the graph here shows, a large...

The Hard Money Blog?

It appears this blog is turning into a blog about hard money lending. This was not a conscious decision on my part, but just an evolution caused by the real estate market collapse and my relative lack of free time. When the real estate bubble burst, flipping houses because financially more dangerous. With prices dropping steadily, it was difficult to find a house at a low enough price that could be rehabbed quickly and sold at a profit some time...

Hard Money Loan #9

Just got into a new hard money loan today. The borrower is the same person who was the borrower for hard money loan #7. That loan only lasted two months, but this one should be a bit longer - we're guessing 6 months. (The legal document says the loan is for a maximum of 1 year.)The property was another one bought at a foreclosure auction in the northern California area. We have a first mortgage in the amount of $160,500. Investors are getting 10%...

Houton Apartment 6 Month Update

The second semiannual conference call for investors in the Houston apartment complex was last night. We have now owned the property for just over one year.First, the management gave an overview of the situation in the Houston market in general, and then in our district, and then, finally, our specific property. The Houston job market actually gained 54,000 jobs in 2008. So far in 2009, it has lost about 31,000 jobs. This is in line with the top 100...

Payments Coming In

Escrow for the property securing hard money loan #7 closed on Monday. I should have my interest payment by the end of the week. My partner is looking for a new loan to invest my principle in.I received another quarterly payment from the Houston apartment complex today. Back in March, they said they expected they would be able to increase the quarterly payouts over and above the guaranteed 9% return because the property was performing so well. Well,...

More Details on Newest HML

Last week, I wrote about the latest hard money loan I made. I have some updated details now.The original analysis was done figuring the units were bringing in a total of $3,550 in rent per month. The actual amount is almost $4,000. The borrower is a retired attorney. She plans to "season"* our note for 6 months and then refinance via a conventional bank loan. This means we will likely be out of this investment in 6 months rather than 1 year.* To...

That Was Quick

We got the payoff demand for hard money loan #7 today. That didn't even last two months. Oh well. Better than no money. And we knew going in that this would be a short one. Escrow should close in a day or two. I'll letting my partner keep my funds again for the next de...

Another Hard Money Investment

I have entered into another hard money lending investment, which seems to be my preferred investment type lately. This is a first mortgage on a property that was bought at the courthouse steps (i.e., at a foreclosure auction). Purchase price was $181,000. The buyer put up $100,000 of his own money and we (myself and some other investors) are pooling our money to create the $81,000 difference and write a first mortgage. This is a 1 year only note,...

First Payment on HML #7 Received

The first payment on Hard Money Loan #7 has been made. It was made on time too, which is a nice way to start things off. As an added bonus, Les, my partner, included an extra half month's worth of interest. This is because when HML #6 ended, I elected to just let him keep my principle while he looked for another investment, rather than mail it back to me and then have me send it back to him when he found one. At the time, he stated I would not earn...

Another Boring Month of Profits

I remember reading somewhere (I forget where), that generating wealth through real estate investing is boring. If you've got a good investment, the checks just roll in each month. I'm starting to feel that way with my Houston apartment complex investment. It's been almost a year since I first invested in this complex and each month, report has been very similar - vacancies are down, profit is up, etc. Last month was no exception. I continue to have...

On Being An Accidental Slumlord

Newsweek has a good article this week titled "How I Became An Accidental Slumlord." It does a good job at presenting the conflicts a landlord feels when renting to lower income famili...

Things Turning Around?

I've haven't spent a great deal of time investigating, but from the signs I am seeing and the news I am hearing, I am starting to think it's getting close to time to get back into local real estate investing. Prices in my area seem to be coming back down to "normal" levels and I am seeing good deals again, especially on foreclosed properties. I am also seeing a large number of "bank owned" for sale signs around town. Of course, you can't just look...

Your Home Is A Bad Investment

Many people believe their home is a good investment. Using Robert Kiyosaki's definition of an investment as "something that puts money into your pocket," it's obvious it is not. Now the Wall Street Journal is reporting that, even by the conventional definition of investment, your home still may not be a good investment.Using housing pricing data for the last twenty years in ten major cities, housing prices produced a real return of between 1.15%...

Moving Forward

Things are moving forward on several fronts.The property that I had the mortgage on for Hard Money Loan #6 has been sold. Escrow closed last week. I'll be getting my final interest payment from that this week. I've elected to let my partner hold on to my principle for reinvestment in another loan. He thinks he can find another suitable investment in two to three weeks.The Houston apartment complex had another good month in April. Occupancy remained...

Free Annual Credit Report Time!

It's that time of year again - time to get free copies of my and my wife's credit reports. Normally, I spread the requests throughout the year, getting one report from each of the three credit reporting agencies every four months, so I have fairly continuous monitoring. Last year, I was a bit lazy and did not request any reports. I had previously reviewed the reports and corrected all the errors, so I wasn't too concerned about what was on there...

If It's Not One Thing, It's Another

After being out of work for almost 5 months, a couple weeks ago, I was able to get a job on a 4 month contract. I've another company that is interested in me for a full time position as well, but that is taking a bit longer to play out. As you might imagine, when I was not working, expenses had to be cut back and plans put off until later. I was living the classic case of "deferred maintenance" that many real estate investors know about from looking...

In Escrow Again And Web Faxing

I got the word yesterday that the property I am a mortgage writer on in California has once more gone into escrow. Last time, it fell out of escrow, so maybe this time things will go better. Not that I need the loan to be paid off. I've been getting on-time payments and have no worries about the borrower.I also started testing out web faxing options, as mentioned last month. I purchased JotNot for...

AT&T Discount Plans

Not real estate related, but I had to pass on this huge money-saving tip!Last week, I purchased iPhones for my wife and I. Previously, we had cell phones on the Sprint network and were billed separately. As part of my cost-cutting hunt that led me to eliminate my landline phones, I switch our cellphones to a family plan from AT&T where we share minutes. That saved us about $30 a month. Then, I found an even better discount.AT&T has apparently...

March Updates

It's been a good week!I received another interest payment for the hard money loan I made on the property in California. I also received another on-time payment from my hard money loan to my (former) co-worker. And last, but not least, I got a great monthly update on the Houston apartment complex.Total revenue for the month of March was $199K, the highest amount so far. Management also collected some bad debt that they had previously written off as...

Houston Apartment Update

The monthly report for the Houston apartment complex was positive once again. As mentioned last month, occupancy for February was at 96% (not quite the 97% they estimated, but still darn good). Income for the month equaled their highest month ever. Repair costs were higher due to the quarterly unit inspections, which resulted in more repairs than normal.I wrote last month about the income from telephones and wondered if that was all really from people...

Need Faxing Solution

I'm looking to join the growing number of people who no longer have a home phone line (landline) at their house. I was looking at my bills the other day and realized I'm paying close to $50 a month for two phones lines that I almost never use - one line is my standard home line and the other is for a business fax machine. I make and receive almost all my calls on my cell phone now, so I don't see a need to continue to have and pay for a landline.I...

Final Prosper.com Loan Paid Off

I received notification today that I have received the final payment on my last outstanding loan with Prosper.com. I'm now finally through with that experiment. I made a total of four loans and two of them defaulted. One was paid in full over the 3 year loan period and one was paid in full early - about 10 months ahead of schedule. I lost about $350 of my $500 investment.I've said it before and I'll say it again. Lending through Prosper isn't for...

Apartment Complexes Being Abandoned By Owners (Updated)

This article on msnbc.com today brings up an interesting subject: apartment complexes that are being abandoned by the corporate owners as they go into foreclosure. The examples in the article are all in the Phoenix area, which caught my eye since it's where I live. I've passed this info on to my friend who deals with apartment investing to see what he thinks. He already owns some apartment buildings in Phoenix and knows the area well. Could be some...

Fell Out Of Escrow

The property that is the collateral for hard money loan #6 fell out of escrow and is now back on the market.Nothing much new to report. I've been working on getting my paperwork together for my taxes. The four flipping LLCs I am invested in in California all reported losses last year. The amount ranged from 1% to 3% of my investment. I'll be taking the losses as deductions on my taxes. On the positive side, the people running those have some other...

Update

Time for another monthly report on the Houston apartment complex! In short, everything seems to be going according to plan. Income and expenses are pretty much on-budget, once the repair expenses from the hurricane are reimbursed from the renovation impound account. Also, the hurricane repairs are now complete, so there will not be any more of those expenses going forward. Management is working on...

Hard Money Loan #6 Wrapping Up

It was just a short couple of months, but Hard Money Loan #6 is closing sometime this month. No late payments and everything is in good standing. We got a call from a title company asking for a payoff amount, so the property is in escrow and will be sold. I should have my funds back by the end of the month.There is also another apartment investment opportunity on the table right now. This is another apartment complex in the Houston area and is being...

Apartment Update

Last night was the first of our biannual conference calls regarding the apartment complex in Houston. The managers gave us a general overview of the Houston economy and then of the property itself.Nationwide, occupancy rates are easing and rent growth is cooling. The Houston market is also expected to cool, although not as much as the rest of the nation. There are many new A-class (higher end) apartments...

My Ebook Is Available!

I'm pleased to announce my ebook, A Flipper's Diary, is finished and now available for purchase! What does it contain? I'm glad you asked!I've taken two of my flipping projects that I've presented here and presented them in chronological order (unlike the reverse chronological order of the blog) and added additional comments and information that I have learned since I worked on those first projects....

Lost Some Free Advertising

I lost some free advertising over the weekend. I used to have license plates frames that said "I Buy Houses" and listed my phone number. On January 1, a new law here in Arizona went into effect that says you cannot cover up the word "Arizona" on license plates. The word is printed between the two upper mounting holes on the license plate, so almost all license plate frames that have writing on the upper portion cover the state name. To comply with...

General Update

Well, the holidays are over and things are settling back down to a normal routine.I received another on-time payment on Hard Money loan #4.I received another quarterly profit distribution for the apartment complex in Houston. Again, the distribution worked out to our preferred 9% annual ROI. After five months of rising, the occupancy rate dropped, but only by one percent back down to a more normal 96%. I knew the 97% rate from last month wouldn't...