The young couple with the baby.

"My buyers were a young couple with a baby so it is probably going to be too much work for them." After I received that feedback from an agent on my flipper listing I had to ask myself. What part of the whole "House is in very poor condition." did you not understand? I was very, almost brutally, honest with agents and buyers that showed an interest in 5033 Clayton Rd. Many prospects passed on it after I shared its needs and condition. Those that followed though saw a lot of work but a lot of potential. Finding the right home can be difficult, and often frustrating. Ask questions and drill deeper before you go visit a listing. You can save yourself time and frustration by staying on target and seeing only realistic prospects.

The Flipper

So I listed a flipper on Clayton Rd. The 3 bedroom, 1.75 bath home is on a big lot with mature trees, almost 3/4 acre. The basement is exposed with a walk out, the roof and siding is only 5 years old. Why a flipper? This home was, and parts of it still are, stuffed to the gills with junk. In a different context it would not be junk, it would be flea market fodder or swap meet inventory, but after being piled into corners and forgotten, it is mostly junk, junk in the way of getting around, cleaning, repairing and even living. The interior finishes are all original to a 40 year old home and have suffered at the hand of all the stuff.
So where do you start? Set a good price, try to be the flipper and see what numbers you need to make it work. Make a plan. Showings were delayed 1. so we could clean it out a little more and 2. so we could attempt to build or at least take advantage of any penned up demand. Priced at $109,900 it would seem a bargain but only time will tell if people are able to see past the flea market fodder to good bones and a bright shiny new home for a family of four.
It would seem so far that the delay of the first showings is paying off. There are 9 showings scheduled for the first day open. My hope is for at least 2 offers. Only time will tell if I am on the ball or off the mark. Stay tuned...

How do "They" know?

"The Realtors Association expects a rebound in 2008 but they (researchers) say it will be 2009." This was the wrap up of a story on housing value. Existing home sales (nationally) were down 13.1% the largest drop in 25 years. Home values (nationally) dropped 1.8%, the first time since the great depression. I'm sorry to tell you that home values in Madison did not drop. Sure, they have not exactly skyrocketed, but they are up. Sales in Madison are down, but only relative to the last 5 years, not the last 25.

When you hear the news about real estate, keep in mind it may not be that real, or at least not local. In my opinion the news in a box so many of our local affiliates choose to repackage for us only perpetuates the myth and slows recovery.

Do It Yourself

There are going to be times that you are tempted to do it yourself. Plumbing, electrical, and emergency repairs will all come with a hefty bill if you are unwilling to tackle them on your own. Though there are certainly successful landlords that hire everything out, one of the cost saving measures I employ is doing everything I can on my own. Does it always save me money? That my friend is the beauty, you never really know. How much of an hourly wage do you deserve and did you earn it on that job?

There is always the risk that you will dig a hole a professional has to fill and the job will cost you double but that is a risk you should probably be willing to take. Is not failure after all how we learn? I have been fortunate enough to impress even myself in the last few weeks with a few do it yourself victories. Pushing the envelope will further your skills, ability, and ego. If you are thinking about being a landlord, or in some respects even a homeowner, you can't be afraid to get your hands dirty or challenge yourself to learn new things.

I told you things were picking up.

I used the recent surge in showings on one of my residential income properties as proof positive that the market was picking up. Would an offer on that same property make you believe me even more? The property had been listed since mid August 2007, just under 6 months. Our timing was not ideal, in Aug. the 2007 buying season had subsided. The winter months gave us several low ball offers but nothing worth countering. We had to keep in mind though, that if a property does not sell in the first 90 - 120 days or so, chances of it selling for 90+% of the original asking price drop significantly. Keep in mind the 3 P's of selling a home (Prep, Price, Plan) to make sure you are doing all you can to get the job done a few months or less.

No "Short" Cuts

In doing some research for a few electrical projects I will tackle over at our new home. I've come across an awful lot but thought this link to be a pretty helpful guide. Take a click here for 9 common mistakes made by homeowner/electricians. Click Here
In a home as old as the one we are buying we will also have to keep an eye for knob and tube wiring. If a home has been updated (to 100 amps or greater) you may often still find knob and tube running from the wall switches to ceiling fixtures as this is very hard to replace without pulling plaster down. More often than not though, outlets have had BX Cable run to them You can test outlets, if they show as being grounded, they are not knob and tube.

"Special" Assessments

So you are a proud homeowner, and as such should be punished. Punished with high property taxes and maintenance costs. So what do your property taxes pay for anyhow? Well, some of it goes to pay for public schooling, which my wife the school teacher accredits for the lack of support for increased funding, and evidently it pays for the roads. In reality it pays for all the roads but the one in front of our house. That one is extra.

How much does the road in front of your house cost? It seems you pay only over to the centerline so the way I figure, road costs about $125 a foot, or in our case over on E. Main St. about $5000. Next time you are looking at a house, be sure to pay attention to the road and sidewalks in front, its condition and the potential for a special assessment for its repair.

Just an observation

In my business I come across the occasional individual that finds themselves nearing a foreclosure situation. In my limited experience in this arena there have been a few commonalities. 100% financing that was made possible by an 80/20 loan. Where you take a out a loan for the 20% down payment and another for the remaining principal, in some circumstances paying interest only on one of the loans. The other commonality was that these loans were made by brokers, not banks, again just an observation. Is this a good idea? (The interest only part, no.) For the rest of it, it all depends on where you are going and how certain you feel you are going to get there. These few situations I learned of recently were all tied to some kind of life change. So if you are going to get a divorce, lose a job, have a job move you away, highly leveraged home ownership might not be right for you now.

Rent is due on the first day, not the first chance

When you buy a rental property, you inherit the tenants, lease terms, dogs, cigarettes and their bad habits. Be aware of the fact that there may be some limit testing when you first buy a home. How late can I be on rent before they get angry? How many dogs can I keep in the unit before they comment? In owner occupied situations, there may be an "I was here first" attitude complete with chip on shoulder. They were there first, but you pay the mortgage. Be firm so that new precedents can be set but keep in mind you need these people to cooperate with you at least a little bit to make for a pleasant tenant landlord relationship.

The easiest way to Bad Credit...Good Credit

Even with todays tightened lending practices anybody with a few dollars in the bank, a steady job and decent credit can be approved for a home loan. Loans of 100% are still commonplace, but are they for you?
Before you take a home loan for 100% of the properties value ask yourself a few important questions.
Am I upwardly mobile, will I be making more money in a year, two?
Is my relationship status, whatever it may be, stable?
Am I going to stay in Madison for several years?
Is it safe to say I will not experience any major life changes for a few years? (kids, divorce, etc.)
If you answered yes to all of those questions, then go ahead and buy a house, maybe even one mortgaged to 100%. If you answered No to any of those questions, ask yourself what kind of risk you are willing to take. Assume the market will be flat for a few years and that the very small amount of principal you pay down on a young mortgage (maybe 3-5% of your monthly payment) is all the equity you have when it comes time to sell. Will you have enough equity to walk away clean if some worst case scenario knocks at your door.
Once you have made the mistake there are two ways out. 1. You get lucky and sell your house for more than it is worth in a slow, saturated market. 2. You sell your house at a loss, the bank approves a short sale and your credit score gets a big black eye. Both 1 and 2 allow you to avoid the F word, foreclosures.

It's going to be a great 2008

"It's going to be a great 2008," and not just because it has to be. First though, live through the pain of 4 toddlers yelling that at the top of their lungs, over and over again so that, lets call him Steve, will shower them with spring propelled confetti from a news years party "kit."
Things are picking up already and it is only the first. One of my listings, a duplex on Waubesa St. (here) has not has an MLS showing (a showing request from another Realtor) since October, and now, two in two days. The first elicited a verbal low ball but the buyers, whichever type they are, will reemerge as the snow recedes and the holidays are behind us.