Wednesday, March 30, 2011

Transactions #12-14 of 52 in 2011

Transactions #12-14 are actually directly related to the first transaction of the year. How? Let me explain...

For the first transaction of the year, we lent $25,000 to a real estate investor that we had done business with before. He used the funds to put a down payment onto three properties and the owner carried the balance. One needed light rehab, the other two significant rehab. He told us that he had a contractor lined up and that the contractor would bring in fix-up funds.

Two weeks later he called back. His contractor disappeared. No one to do the work and no fix-up money. What did we want to do? Could we bring in the additional funds? He didn't have the resources. Oh yea, by the way, the city has a demolition order on all three properties and we need to convince Mayor Godfrey to stop the destruction order!

Clear Day Capital was not in a bad position, we had only $25,000 into the project. Worst case, we would have 3 vacant lots. The problem? Demolition is not free and the lots would have liens from the city for the cost of demolition and garbage removal. Lots cost money each year- taxes and insurance. New construction is not something we want to do- rehabs are much easier and less expensive and less time consuming.

We needed to make this a safer, more secure transaction and protect our investment. We wanted to make lemon-aid out of lemons. If we funded our current borrower the LTV would not be good and we would not have control. On the other hand, we didn't want to take the properties back- they did not fit our typical property profile and we didn't want to manage them.

Our original borrower went to our good friends and business associates (Shawn, Angel, and Sarah) at The Equity Growth Group (TEGG.) The borrower knew that they specialize in this type of house. What did they do? They called us since they know that we have capital!

We decided that we would work on this together. To make it safer, Clear Day Holdings purchased the three houses after we got approval from the mayor to delay destruction by 120 days. He required that we put rehab funds into escrow and have a firm bid from a licensed contractor, which we did.

Clear Day Capital provided the additional rehab funds, TEGG provides rehab supervision and property management when the houses are ready to be occupied.

We will be into the three houses about $150,000 total. This is low enough that we will be able to have good cash flow. The key for long-term benefit will be finding private money investors who want to lend us long-term (5-10 years) money and terms that we both win.

Want more details? Send me an e-mail, leave a comment, or give me a call!

Friday, March 25, 2011

Transaction #11 of 52 in 2011- Another House

When we purchased our first sub-$40,000 property we were really happy and surprised that we could purchase a house so inexpensively and with so little repairs needed. (This was in November 2010 when we purchased a house for $23,900 put $4,000 in repairs into it and rented it immediately for $695/month.)

Now buying houses for under 50% LTV is common and we are purchasing duplexes for under $50,000! So #11 was the purchase of a single family home for $49,500. It needs about $7,000 in repairs. When we are done it will be worth about $99,000 and we will rent it for about $950 per month.

We are now talking to several investors interested in loaning us money for 5-10 years as a first position mortgage holder. They'll earn 8-10% on their money, maybe more!

Tuesday, March 22, 2011

Transaction #10 of 52 in 2011

We closed transaction #10 of 52 on the 16th of March. It was a simple cash purchase of a duplex which was already rented and completely rehabilitated about 4 years ago.

We are selling it this week to an investor who likes the terms we can offer. We take our equity over time, he gets cash flow, tax benefits, growth, and amortization.

This was a quick transaction. The keys were our cash and our purchasers ability to use his credit for partial take-out financing. He will give us our cash back in about 2-3 months and then we'll use it to buy another and do this all over again! Let me know if you want to learn more about how we do this.

Thursday, March 10, 2011

Transaction #9 of 52 in 2011

We just completed our 9th transaction of the year. Fairly strait-forward: a single family home in Ogden. Why did we buy it? Cash flow.

The house is a solid, no-frills property in a good neighborhood. It will cash flow:

$900 Rent
- 90 Management
- 45 Vacancy Reserve
- 45 Repair Reserve
- 38 Insurance
- 33 Taxes
$649 Cash Before Mortgage

We will find a private mortgage and pay 7-8% to someone for 10 years or more. They will get a first position lien against the property and a payment of $500 - $550 per month.

Everyone wins! Obviously we win. So does:
  • The City of Ogden: A rehabbed property
  • The Tenant: They have a great place to live
  • The Private Mortgage Holder: Secured, reliable income for a long, long time
  • The Local Economy: $7,500 in repair costs for materials and labor and $1,000 in closing fees
Would you like to be a part of one of our transactions this year? Let me know at 801.510.3566. We are always looking for people to participate in our projects. There are lots of ways to win and we enjoy working with new people.

Look for transaction #10 by next week!