fliprent

I’m sure this is only the beginning of a painful process but I finally received a letter from the city that they would like to acquire my interest in the Hopkins area project.  I have no idea why it took so long but at least I now know for sure that they intend to acquire it.  During my research, I read that I was supposed to receive a certified letter from the city prior to an appraiser contacting me.   I assume an appraisal will be the next item on the agenda.  Just to add to the confusion it appears that the post office either lost the letter, delivered it to the wrong address or something else happened.  The letter was dated back in May but the first delivery notice that I received was today.  The funny thing is that someone was here but the doorbell never rang.  I don’t think that the mailman even bothered getting out of his truck.  Can anyone just do their job? 

I am not sure what’s going to happen from here but I’m hoping that they will compensate me fairly for all the money and effort that I have put into this property not to mention how poorly this situation was handled from the beginning.  In one hand I have a bank that gave me a time limit to complete the rehab.  In another hand the city telling me that I must complete the rehab according to the vacant property violation.  A third hand the corporation representing the city trying to keep me from rehabbing the property.  Meanwhile Im paying monthly a monthly mortgage,  contractors to pay, insurance to pay, etc, etc etc.  What a mess!!  This all could have been avoided before I acquired it but that’s a story for another post.  Is there a such thing as ethics in politics and government?  Maybe in the end they will fix this mess and I can move on. 

The Housing Choice Voucher Program (once called section eight) was put in place by HUD for low income families to rent property.  Many landlords choose this program for one reason…guaranteed rent every month on time.  Unfortunately, it’s not always that simple.  In some areas the tenant uses 30 percent of their income towards housing when enrolled in the program.  For example, if the tenant makes $25,000 per year they are required to pay $625 of the monthly rent.  If your rent is $900/month then the program only subsidizes $225/month.  The $225 is the only portion that is guaranteed by the government.   The rest must be collected from the tenant and there are no guarantees.   This is a common misconception of the section 8 program.  However, there are no guarantees at all when renting to anyone else.   If you have been a landlord for a while, you have experienced this first hand.

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As we all should know by now real estate is local.  Even in the midst of this bubble/crash or whatever they are calling it these days, there are still hot markets around the country.   Thanks to the military, some area markets are drawing tens of thousands of new residents and in turn real estate investments.  Why thanks the military you ask?  Well if you haven’t heard about the defense base realignments and BRAC, I suggest that you look it up.

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Real estate tax sales are another avenue to acquire investment property.  They can require some research and comfort with having your hard earned dollars unavailable to you for a period of up to two years in some cases.  The good news is that the rules usually require the original owner to pay the lien holder interest if they are able to redeem the property.  In some areas the interest can be up to 24%!!  That’s what I call a great savings account.  In fact many investors use them for just that. 

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The best way to save a few bucks on your house flips is to do some of the work yourself.  Of course most of us are not qualified which is why we pay people in the first place.  One area that does not require special skills is demolition.  You might think to yourself “This is a no brainer”, but be careful.   There can be a few hidden problems with demolition.  Besides the obvious back breaking work of slinging a sledge hammer and rolling out the trash to the dumpster, there are also potential hazards.

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Good question.  The answer nine times out of ten is yes.  Small jobs such as painting, minor changes of bathroom and kitchen fixtures will not require a permit.  However if you plan on doing anything electrical, plumbing, HVAC, structural, landscaping, etc a permit is normally required.  It also can save you money in the long run by avoiding costly fines, and stop work orders.  When you go to sell your property, you will be able to disclose to the potential buyer whether not you pulled proper permits.   There can also be insurance problems when collecting on fire damage when a permit was not used to do the renovations.  Better safe than sorry I say. 

Did you know your utility company gives discounts and rebates for your flip?  Depending on your project and whether or not you are holding or flipping, this can mean considerable savings for you or your tenant.  The discounts are normally available when you buy energy saving appliances, install additional insulation, replace old air conditioners, space heaters, install double pane windows, and many others upgrades. 

The return comes in the form of cash vs. a loan, and can cover anywhere from 50 to even 100 percent of the cost of the qualifying upgrade.  You will need to check with your local utility company to find out more information.  In some cases you need to apply before the work is performed.  The utility company may want to inspect the work before final approval. 

The HVAC rough in inspection went well.  The inspector seemed to like everything he saw; from what my contractor told me anyway.  Plumbing should get started today which will require more of my involvement.  I will need to pick up the fixtures for the tubs and shower.  Lets hope things continue along smoothly.  The electrician will be starting next week as well.  I will post some pictures once all three trades are roughed in and inspected. 

I’m still waiting for the city to ratify my East Baltimore project so I can get started in that one.  It seems like its taking forever and I’m really anxious to get going.  This hurry up and wait business is never fun.   You rush to get all your stuff ready to go just to wait for the powers that be to do their part.  That’s the government for you.  

Don’t quit your day job.  We all know this infamous phrase to mean something negative.  But does it have to be?  I am often asked about real estate investing and whether or not it can replace income from a job.  My answer is that it can, but usually not right away.  The good news is it doesn’t have to.  You can do it on the side.  Author Richard Paul Evans calls it “winning in the margins” in his book The 5 Lessons A Millionaire Taught Me About Life and Wealth.  He refers to winning in the margins as investing or creating wealth through extra income.

In his book he talks about is wife’s grandfather who scraped gold from the hood of a GOLD smelting furnace.  He also talks about Lance Shiffman who’s made millions from Xango Juice, which he originally started selling on the side.  Real Estate investing is another great way to win in the margins.  It can be used to create passive income while providing tax benefits and appreciation all at the same time.   Another great thing about real estate is that you as the owner control it.  So before you go thinking that you need to quit your job to get rich, think again.  You can start off  in the margins.

I’ve waited as long as possible and the Hopkins Biotech area project is back in rehab mode.  The HVAC work has begun and should be ready for rough in soon.  I still have not received anything from the city.  As far as I’m concerned there is no reason to assume I ever will.   I realized a long time ago that I cannot trust anything that I am told or even given in writing from the development corporation that is responsible for the area project. 

I feel a lot better moving forward again anyway.   Each day that my property sits, I loose money and it’s sat for most of the last 10 months.  I can no longer afford to keep paying out and not getting anything back so I am forced to move forward.  If they decide that they are going to acquire it, they should pay fair market value based on the renovations and COMPS for rehabbed properties in the area.  I am prepared to fight tooth and nail for anything less.

I will be showing fewer pictures but I promise to show some shots after major phases of the project are completed.  I should be starting the Old East Baltimore Project soon.  Once that happens, I plan to focus my blog on that project from start to finish.