Real Estate Holdings

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Current Real Estate Holdings:

My real estate portfolio consisists of 6 single family homes. My venture into real estate started in 1994 with the purchase of my home. It was probably the best purchase I ever made. I say this not only because of the price fabulously low price I paid for the house, but because of the lessons I learned when making the deal to purchase that little house.  What I learned from that purchase was to be firm with your offer and to not chase the deal. I have tried to keep the process away from the real estate agent and make it a one to one between the seller and myself. This has allowed me to make offers on properties that were fair and to get instant feedback as the deal progressed.  With an agent, it is a very formal process and you never get feedback from the seller. The feedback is always from the agent. Also, the commission is not part of the deal, so the price can be lower right off the bat. There isn’t someone getting between me and the seller and money talks most of the time. I have used the old adage about a bird in the hand being worth 2 in the bush on numerous occassions with great results.

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Almost all of my properties were estate sales. Seems like when multiple siblings were involved, they wanted to get the process over as quick as possible. Also, I have noticed that when the money is being split multiple ways, it is easier for some of the siblings to make the deal and encourage the others to go along.

The properties were never in pristine condition or even in a condition that a bank would consider granting a loan, but that was the point. I want to get very structurally sound buildings and refinish them. It is amazing what paint, flooring and fixtures will do. They needed way more than that but I hope you get the picture.  A house that is in perfect condition commands a higher price and the seller tends to feel very emotionally attached to it, however, a house that is just part of an estate sale might have been left in disrepair and the costs to fix it would tie up the money that is to be divided and also possibly increase taxes and insurance for those involved.

 

  1. 32– single family home used as my residence. 2600 sq. ft.
  2. 24–single family rental property. 1350 sq. ft. Monthly rent- $1200.
  3. 13–single family rental property. 1850 sq. ft. Monthly rent $1250.
  4. 08–single family rental property. 1200 sq. ft. Monthly rent $1300.
  5. 16 –single family rental property. 2000 sq. ft. Monthly rent $1500.
  6. 83–single family rental property. 1980 sq. ft. Monthly rent when finished will be -$1600.The market is getting really tight around here and prices seem to be going way higher. Since I have the 83 property still in limbo, Any new real estate will have to be an easy turn around. I have one in mind and it is the neighbor on the opposite side of my house from 24. They are getting close to being ready to sell it. They called me to tell me I will have first grab at it and I might jump at it. It can be rented instantly, so it is just a matter of price. I really want it and have been willing to buy it since about 1999.  I have used the same process to purchase each successive property, but who knows how that purchase will go.

Look what I found in the wall of the new house I purchased recently.

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It is a beehive that was about 8 feet tall and about 4 feet wide and all entwined in the wall and ceiling area and soffit. I should have called a beekeeper because the hive weighed about 80 pounds, and it was pure honey.

11 Responses to Real Estate Holdings

  1. The divine dividende says:

    Ooh home made hunny… no more going to the store for sugar for you … haha
    Do not worry I think in time you will finish with most impressive perception yet .

  2. Love the dividend/rental property diversification! With your various rental properties, what is your net cash flow each month? Do you look at that as a supplement to the $150k goal for dividends?

    • The properties are rented but the money is not a guarantee. Lots of issues here and there with getting money. Since I never bought with a mortgage and the prices were so low, the only ongoing expenses are insurance, flood, taxes( city, state, government.) After that, the repairs are on me, but the props have mostly been redone in the last few years, so quite possibly a few years before major stuff and it should be staggered a bit. The rentals are most of my income because I have swapped over from working all day to less of that as more rentals came on line. I keep up with each one and maintain as I go. Actually, the rentals get better care than my own house. The shoemaker’s kids never have shoes rings true for me.

      Keep cranking,

      Robert the DividendDreamer

  3. DividendVet says:

    That is a very impressive real estate portfolio you got there. You say you negotiate with the seller for these properties, how do you avoid the agent? Do you just go up to the house that is for sale and negotiate with owners in person or over the phone? Just a bit curious because I am looking for a property myself at this time and would love get to a bargain.

    • Well, the first house that I purchased was my own. I basically heard about it from my brother. It was for sale by owner and I checked it out. I wrote about it in my real estate page. From that purchase, I learned that it is possible to buy a house from someone if you really do not show your hand. By that, I mean you have to show them you want the house enough to buy it, but not so much that you are not willing to walk away. Another thing I learned from that first purchase is that money talks. It is not necessarily the amount of money but it is the fact that they can get it and get it without jumping through hoops. It seems that estate sales are really a good option because the individuals who are selling the property are looking to get money and they really do not seem sentimentally tied to the property. It gets even better when multiple people are involved because some of them just want out as quick as possible and others might have issues where money is needed and they cannot afford to wait to sell or pay new taxes and insurance or upkeep on the property.
      Another thing to remember is that we had a Major Hurricane Katrina destroy a good part of our city and cause disruptions of untold magnitude. Even though most of the areas I am dealing with were not directly impacted, the area was deserted for quite some time because the infrastructure was decimated, and people did not move back after evacuating. Parents were displaced and could not come back resulting in lots of empty housing, then the housing bust came, and that really made things good for the buyers. The deals are still out there, and you can still get deals, but the houses are going to be in disrepair in order to get them at the price you need to make money. I do not believe in taking out a mortgage to finance a rental because a business loan is anywhere between 6-8% as of the last time I checked for a non owner occupied residence. L
      First thing I would do is scour the area for “For Sale By Owners.” Get a feel of what they are asking. If you are serious about buying a house you need to know exactly what amount you can spend –TOTAL!!!— even after all the repairs and taxes and insurance are paid along the way and while it is being worked on until it is rented. Then, I would decide if I could possibly swing the deal with cash or if you could use a HELOC or something that did not require the bank to do all kinds of closing costs. To buy the house, you only need to purchase Title Insurance and pay very little for documentation fees. Try to use your Lawyer so that nothing is thrown in on your side that they should be paying. You have to pay the lawyer either way, so it might as well be one on your side.
      Once you know how much you can spend, you need some kind of knowledge on how much it will take to refinish the property in order to have it ready to rent. Then, you must know what the possible rent would be for a house in that area. Let’s say you could possibly get $1000.00 monthly rent. That is a total of $12,000 for the year- if you collect the entire years rent. So , with that being said, you need to call the insurance company that you would use, and get quotes for insurance and then look up the past taxes on the residence and what value it was taxed at. Let’s say the insurance would be $1600.00 per year and the taxes were $1500.00. Around here, you get one homestead deduction even if you are married, so if this is not your primary residence, the taxes are on you. Now you have $3100.00 before flood insurance. Flood is cheap in most places, but it is going up. Let’s say it is $450.00. Now you are at $3550.00 and you still need Liability insurance. My policy is the same price with 1 home or up to 4. So, if the policy is $900.00 and you only have 1 rental, then it is now at $4450.00 for the expenses. Just to keep you legal and safe. That is about $400.00 per month right there without any possible interest charges added if you are not paying cash.

      I want to post this before I lose it and then finish it in a while if you do not mind.

      Keep cranking,

      Robert the DividendDreamer

      • Next, we have to look at the purchase price and the repairs needed. Let’s say the house is asking $100,000 and for arguments sake the interest rate is 7%. Right off the bat, you have $7000.00 in interest owed right there. Add that to the $4450.00 and you now are spending $11450.00 per year with no repairs or maintenance. Not a good situation to be in for sure. Also, the $100,000 price might not be move in ready. If repairs are needed, then it is that much more money and you still have not knocked down the principle.

        So, here is my take. Find out how much money you can get your hands on. Determine what return you are willing to accept. Remember, the return is only attainable if the rent is collected. Sometimes you are going to get piped, so you need to be on top of it and the property may be vacant in between tenants but the bills keep coming. So, let’s say you want a 15% return. You can only collect a possible $12,000 in rent. 15% of $12,000 is $1800.00. That is $150.00 per month profit if you can get all the expenses to $10,200 and collect all the rent. If that is the case, the insurance and taxes does not change at $4450 but you now can only spend 5750.00 on interest and principle. Now, the most you could pay for the house is about $82,000. That is including sale price and repairs. With that number, it only covers interest and no principle. Now, here is what I would do, I would look at the house and determine the insurance and taxes and repairs and all the expenses in order to make money including the 7% on the loan. No 2 ways about it, that is the absolute maximum you could pay and not loose money, but remember, it will always cost more than this because of repairs and maintenance and you need to be paid for your time to manage it and keep things in shape.

        Here is what I would now do. I would determine that it would cost me $4450.00 to cover the 1st house for taxes and insurance. Then I would see that I would gross at most $7550.00 if the house was paid off. How much would I be willing to come up with to get that $7550.00. Well, since labor is the most costly of all expenses, I factor my labor into the final equation. The house was going for $100,000 and I need to spend $35,000 to get it in perfect shape to be rented. That means that the most I could pay is $65,000. So that would be the price I would want them to be offering it to me, not the price I am offering to pay—follow? Now, I would determine that if I am serious about the offer, I would definitely lowball them and offer $35,000 cash. They would probably be insulted, but this is business and not personal. To that, they are going to have something to say, but I would lay it all out to them and tell them that I am in this to make money not to find a place to live. If they are serious about selling, there might be a comeback at $90,000. Now we are not at a $65,000 spread, but at $55,000. I might tell them that they can see the numbers and I have to pay someone to fix this (even though I will do it myself) and they might start to see the light. Then they might go to $80,000. I would probably tell them something like there is no real estate agent to deal with and that alone is worth about $3000.00 right off the $80,000 and bring there price to about $77,000. At this point the spread is only $42,000. Now, I might go to about $37,000 and they might again be insulted, but if they are still talking to me, the spread is only $40,000. If they are still talking and have not sent me on my way, they are still willing to deal. you need to stay in control of the deal because, remember they need your money. So, if they come back with the, “Ok, I’ll take $75,000,” I would probably let them stew a while and just walk around the house looking at cracks and closing doors and kicking tiles and wiping drips. Then, they might say “Alright, I’ll let you have it for $70,000.” To that, I would probably just keep looking around and doing nothing but listening to them and looking like I am ignoring them as they wait for an answer. Then, I would probably know that they are willing to deal and deal a heck of a lot more than me because I barely moved on my price. Remember, you can never go back down on an offer, you can always go up. So, we are at my offer of $40,000 and their price of $70,000. If I really wanted the house, I might start to go with the cut to the chase lingo and give them the “Let’s split it down the middle because that is as far as I am going with this” line and be done with it at $55,000- but it has to be a great deal and once it is finished, it has to have a ton of equity built right in. It can’t be a price that is just enough to cover my labor and supplies and taxes and insurance and interest(even if I pay cash). It has to be a price that benefits me or now you for that matter. Now, if the house will not commend a premium, the bantering will have to go on a little longer because the price might still be too high. Paying too much for a rental is not a good idea. I want this to be a money maker and not a money pit and so should you.

        I will answer anything else you need. I think the best way to do real estate is to actually ask and look at properties and see what the neighborhoods draw and the potential prices for rent in that area.

        Keep cranking,

        Robert the DividendDreamer

  4. DividendVet says:

    Hey, I really appreciate for the detailed answer. Those are some awesome strategies, tips, and techniques. I will keep them in mind and jotted down next time I find a property that is for sale by owner. Thanks for taking time.

    Take care.

  5. Nuno says:

    Great answer! With that approach, how many sellers would go down on price? 1 out of 10? As you said, it has to be a great deal so to makew money. Cheers!

    • Thanks for stopping by. I had really big dreams for real estate and my goal was to have 8-10 rentals. Since my dad died, I am scaling that back a bit as of now. However, if the rentals are both cheap and in good shape, I might take on more. Lots of work needed to rehab a property, and there is even more if you have another job. So, with the kids in activities and regular work, not a ton of time to put towards other projects. Good luck and keep in touch.

      Keep cranking,

      Robert the DividendDreamer

  6. Vivianne says:

    This is some serious real estate porfolio you’re holding. You blow MMM or Financial Samurai out of the water 😛 hehehe Forget about water front property, getting rich quietly in nice solid house where the cost for buying the property is low, and rental is “high” is the way to go. Nice work. You should blog more about housing.

    • Thanks for the compliment. I got lucky with a few of the purchases. Plus, my father helped me so much that I cannot begin to tell you. It was so easy to just buy a house no matter the condition when he was around. It just got done. Since he died, my life has been very busy with having to stay with my mother and still do everything with my family-had to be in 2 places at once. So, not a lot of time for my projects as I used to have. I will give some extra effort for the housing blog. Thanks for the encouragement in that direction. I hope to be able to learn a little( a lot ) about being more businesslike as a landlord. Currently I am too friendly, and you know what that leads to. Good luck on your project. Multi units are the way to go. Keep up the good work.

      Keep cranking,

      Robert the DividendDreamer

      Keep cranking,

      Robert the DividendDreamer

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