Over the past few months, we’ve been ramping up our consulting and agent work. Specifically, in the past three months, we’ve managed the renovations on a dozen other investor rehabs, staged and listed about a dozen rehabs for other investors and even helped two other investors buy several properties. In some cases, we consulted or helped on all aspects of the flip.

From handling all the contracts, paperwork and schedules to having my project manager deal with the contractors/rehabs to my wife doing all the design consulting, staging, listing and marketing, it’s been a hectic couple months for all of us. But, it’s allowed us to improve many of our processes, as well as build some new relationships with suppliers and contractors, so all the extra work has been beneficial to the business, in addition to generating some extra income.

We haven’t decided if we want to ramp up these extracurricular even more — or if we want to scale back and start focusing more on our own projects — but we’ve gone from helping two investors to getting consulting requests from another half-dozen or so in the past couple weeks. So, we’ll be making some decisions over the next couple months.

In the meantime, we’re looking for some more of our own projects and I’ll try to ramp up the posts here on the blog…

I’m not really sure why I decided to get my license or what I’ll use it for; as most of you probably know, my wife is already licensed and is awesome at all the selling, marketing, and negotiating tasks, so my having my license if somewhat redundant. But, even if it means being able to take some of the work off her shoulders or being able to do a couple deals a year outside our business (the stuff my wife has no interest in doing), it will probably be worth it.

The last step in the process is actually setting myself up with a broker…until I do that, my license is inactive and there’s nothing I can do with it. I’ll probably do that once I figure out why I spent a year working on getting my license…

We’ve made quite a few offers over the past couple weeks, but haven’t gotten anything under contract. We’re not surprised — over the past several years, we’ve noticed that this time of year there tends to be a lot of competition for REOs, and most are being bid up higher than what we’re willing to pay. That said, many of our offers have been on short sales, which take several weeks to get a response from the lender, so we have several potential deals in the pipeline should those offers get accepted.

In the meantime, we’ve been keeping busy providing support to other investors in our area. Over the years, we’ve had several investors ask if we’d help them with their rehabs — everything from helping to analyze the deal to putting together a Scope Of Work to picking out rehab materials to getting contractor bids to managing the project to completion. We finally agreed to do this for a local investor who had three projects in our area and have completed those projects over the past two months.

I’m happy to say that the investor seems to be very happy with our help, as he’s asked us to do three more projects of his over the summer. In addition, we’ve talked to other investors about doing the same for them, and will likely have a couple additional projects this summer. I like this business model, as not only does this allow us to keep busy (which is especially important for my project manager, as much of his salary is based on commission), but it also allows us to keep our contractors busy, as we generally retain them to do the work on these projects.

If there is enough interest, we may decide to expand this part of our business in the future…

Also, my wife agreed to list and market a house for an investor friend of ours who just finished a rehab in our area. She was planning to stage his property for him anyway, and he asked if she’d be willing to do the listing as well, as his agent is on the other side of town. She gets this request all the time, and has always said no, as she has very little interest in selling other investor’s properties; but, this is an investor who has done a lot for us recently, and she was happy to do this for him.

The best part is that, after making several phone calls and sending some marketing emails to local agents we typically work with, she was able to get a full-price offer after about 3 days on the market. I don’t expect she’ll be doing much of this in the future (she spends a lot more time listing/marketing than I’m guessing most agents out there do, and she just doesn’t make enough money doing it that it’s worth it for her to take time away from other things), but we’re always glad when we can help other investors who have helped us.

Lastly, I’ve been working part-time on getting my real estate license for about a year now, and will probably take the state exam this week. I don’t know if having my license will change anything about our business, but I’m one of those people who likes to try different things, and I like the idea of being able to consider other aspects of investing without having to ask my wife to do a bunch of random work as the only licensed agent in the family.

Over the past several months, she’s been asked on several occasions to stage and market properties for other investors. And she has been just as successful helping them sell their properties as she has been selling ours.

So, with lots of furniture now on-hand and lots of investors asking for her services, she has decided to officially launch her staging business for investors. Feel free to check out her website here: LISH STAGING.

If you’re an investor in the Atlanta area and are interested in her services, just let me (or her) know. Because she owns all of her own furniture, there are no monthly rental costs. And because she understands the cash flow issues that many investors face, she is willing to negotiate a payment schedule that allow most of the payment AFTER the property sells. Yup, pay a small furniture moving fee upfront, and then don’t pay anything until your house sells.

By the way, she also does design consulting for investors…so if you need help picking colors, finishes, floor-plans, etc, she can help with that as well…

I’m planning to change that, and will be starting to send a regular newsletter within the next couple weeks or so. I plan to include tips, industry news, how-to articles, etc, that won’t be available on the website (I need some incentive to get people to sign up, don’t I? ).

Now, while I’ve gotten a lot of sign-ups over the past year, I don’t want to assume that everyone who has signed up is still interested in getting email from me (I know how much I hate getting unsolicited email). So, I’ve scrapped my entire Newsletter Subscriber List, and I’m rebuilding from scratch. I’ll be using a popular email management service that will help me keep the list organized and will make it easy for subscribers to opt-in and opt-out of the emails.

So, if you’re interested in getting the 123Flip.com Newsletter, please subscribe again either through the form in the column to your right, or go to this Subscription Link.

Thanks, and I look forward to getting the first Newsletter out soon!

We ended up submitting three offers Sunday night. The first one turned out to already be under contract, the second one is scheduled for auction next week and they were only accepting “pre-auction” bids, and the third one we’re still waiting to hear back on.

Normally, we would have made many more offers, but we noticed that many of the properties we were interested in were scheduled for auction, and I have a feeling that we won’t be able to acquire these unless they don’t sell at auction. So, hopefully in a week or two, we’ll be able to submit offers on those as well. In addition, a relatively large percentage of the low-priced REOs listed in our area are houses that were flooded last September during the “500 year flood”.

While I have no issue with buying flood houses that have been stripped down to the studs, they do present several concerns:

1. Most of these houses are not currently in a flood plain, but could get reclassified at any time, which would seriously hurt the short-term resale value;
2. Most of these houses are in subdivisions that were completely wiped out, so it’s unclear that we’d be able to find any retail comps to support an appraisal;
3. Along with #2 above, because most of the houses in the subdivision have been flooded, most are empty (owners didn’t have flood insurance and therefore would have to pay for repairs out-of-pocket). This means that the neighborhoods will likely go downhill and more of the surrounding houses will end up in foreclosure over the next 12 months

I had lunch with a fellow investor today, and she made the suggestion that we should buy up large parts of these subdivisions, turn the houses into rentals, and hold them for a few years. She made some good arguments for doing this, and we’re planning to discuss some partnership opportunities around this idea.

So, things are moving along, albeit slowly at this point…hopefully I’ll have more exciting news about finding some properties soon…

I haven’t really spent much time looking at the MLS, so I have no idea what kinds of deals are out there, and whether prices have increased, decreased or stayed the same since we stopped buying. So, the first order of business is to start scouring listings to find out where the market has gone and start evaluating deals based on current buying and selling trends.

We also need to decide if we’re going to focus our time on flipping or finding some rental properties that we can hold long-term. This will be greatly based on the kinds of deals out there. If we can find some great opportunities on properties that we wouldn’t mind holding long-term, we’ll definitely start acquiring rental properties.

I’ll have more to say in a couple days once we get back down to business…

I’m finishing up my taxes for last year, and thought it would be interesting to see exactly how much different our bottom-line would have been had we had no income or expenses relating to the purchase or sale of our own properties. This includes all the commissions we earned when purchasing our properties and all the commissions we saved (assuming we would have paid another agent 3%) when selling our properties. And subtracted from that, all the fees associated with my wife having and keeping her license, such as brokerage dues, cost of signs, cost of lockboxes, etc.

Simply put, thanks to the fact that my wife has her license and we’re able to purchase, market and sell our own houses, we earned about $42,000 in extra income last year!

Add on top of that the extra income we received by selling our houses for higher prices (my wife markets much better than any agent we’ve previously worked with) and the extra control we have over our deals (we can communicate and negotiate directly with other agents, mortgage brokers, appraisers, inspectors, closing attorneys, etc) and it’s clear that — for us at least — the trade-off between the extra work involved in managing our own deals and the extra income and control is generates is well worth it.

I’m still not saying that getting your real estate license is for everyone, but it something I think most investors should at least consider…

For those not familiar with the concept, there’s a form of real estate investing often referred to as “Lonnie Deals.” A Lonnie Deal involves purchasing a mobile home (MH) in a mobile home park, doing some minor rehab to get it into move-in condition, and then reselling it to an owner occupant looking to buy a MH to move into. The key to Lonnie Deals is that the reseller also finances the purchase of the MH. When I say “finance the property,” I mean that the reseller will actually play the role of the bank/lender, and allow the buyer to make monthly payments until the home is paid off (generally less than 5 years).

Because it can be very difficult to get bank financing on a MH, and because a lot of people who live in MHs have sub-prime credit, there is a huge demand for MH sellers who will finance the properties for their buyers. For example, while it may be difficult to sell a particular MH for $6000 in cash, it may be relatively easy to sell that exact same MH for $10,000 if it is financed. This is because very few sellers are willing to finance the sale of their MH (they want/need the cash as soon as they sell), so buyers who can’t pay cash for the MHs don’t have very many options.

A typical Lonnie Deal involves buying a MH for anywhere from $1,000-6,000, doing minor rehab (or no rehab, if it’s not needed) and then reselling for at least double the total cost, with owner financing and interest rates around 10-13%. If you run the numbers, you’ll find that Lonnie Deals provide a tremendous return on investment, with yields often over 100%!

Here’s a good example:

Let’s say you find a MH listed for sale by owner for $5000. Because the seller is unlikely to find a buyer who can get bank financing, and is even more unlikely to find a buyer who has $5K to put down on a home, you are able to negotiate him down to $2000; this is actually a very common scenario. Now, you go in and make sure the plumbing, electrical and HVAC works, you make sure there are no roof leaks or floor damage, etc. All of this minor repair may cost $500 on a typical MH. You now have an investment of $2500 into this home.

Then you list it for sale for $5500, and offer to owner finance it for $500 down, and $250 per month. At 10% interest, this works out to exactly 22 payments before the MH is paid-off. If it’s a decent home in a decent mobile home park, you will likely get a lot of interest at these prices.

So, what’s our return if we can sell this MH for $500 down, $250 per month for 22 months? According to my calculator, the yield is over 135%! I don’t know about you, but compared to the 2% I’m making off my savings account, that’s pretty darn good…

Digging a little further and you’ll notice that the original $2500 investment is paid back in 8 months ($500 down-payment and the first 8 payments of $250), and then the next 14 payments of $250 are all pure profit (minus taxes, of course).

So, what happens if the buyers stop paying on their loan or decide to just move out? Well, that’s actually a great scenario for the seller. Let’s say the buyers default on the loan or move out after one year — the seller will have collected the $500 down-payment, plus $3000 in loan payments. He’s already made a $1000 profit, and can then turn around and resell the same home to another buyer! Best case scenario is that the buyers keep defaulting on their loans, the seller can keep reselling the property…over and over and over again…

And nicest thing about Lonnie Deals is that you don’t have the headaches you have with a lot of types of real estate investing. Because you are turning around and selling the home (sometimes just hours or days after you buy it), you don’t have to deal with all the hassles of doing expensive renovations, being a landlord, etc. You are essentially playing the role of the bank, and as you can imagine, that’s a pretty easy job.

As you might have guessed, given the theory behind Lonnie Deals, I’m very interested in seeing how well it works in practice. Starting this week, my wife and I have teamed up with my brother and another investor-friend of ours, and are looking for mobile homes. I have no idea if it will be a profitable venture or not, but as I’ve always done, I’ll keep you updated on my progress, whether successful or not…

About a month ago, I was contacted by a journalist writing an online article about how to buy short sale and foreclosure properties. I offered her some of my thoughts, and then today, while looking around to see if her article was ever published, I found it. Not only did she use some of the information I provided, but she quoted me about a dozen times in the article and mentioned our little company.

It’s funny…back in the corporate world, I used to do marketing presentations in front of billionaire CEOs, interviews and panel forums in front of thousands of customers, and yet because this is our own little business, getting Lish Properties mentioned in a small, online article is a whole lot more satisfying to me…

If you’re interested (again, don’t get too excited), here’s the article…