Smoke, baby! We have been smoked on two of our candidates. First the lot fell through, and now our rehab candidate (which we will call, "Harvard") fell through. No worries. We have faith. And we believe that we should count the blessings we don't see, as well as the ones we do. These two eggs broke before their time. These dos tacos crumbled and fell to the floor. Or, if you are French, these deux baguettes are now in the mouth of the stray dog that roams the city. We wish him well and hope that he has a nice meal. We don't begrudge him his success or his meal. (Belle chiot!)
We still have our new-build-spec-home going. And we may consider building on the next lot we own instead of doing a rehab, renovation, transformation, configuration thingy. But, before we get too new construction-like...
We still have five (5) (cinco) (cinq) (groupe de cinq objets) candidates that we will be looking at very closely in the next day or two. And, of those we will probably bid on one or two. So stay tuned and don't lose heart. It is not luck. It is statistics. Sometimes eggs are going to get broken. Tacos will crumble. A baguette or two will be drug off by the stray dog or dogs. But if you really feel like you need good luck, well then, here you go: Mi amigo, bon oportunidad! Or, Bon chance, mon ami!
We'll stick with statistics and faith. And, until next time, we'll keep the sunny side up.
A snow day was followed by a day at the day-gig, which in turn was followed by a sick day.
Sick days are okay, except for the fact that one may feel bored and also feel like not moving and not working... Thus the word, "sick" day. Other terms for being sick can include, but not be limited to, such fun things as "mental health day," "hospitalization," "severe hemorrhaging," "loss of limb," "Diarrhea," and our favorite, "projectile vomiting."
At any rate, we have all of our limbs and we will just leave it at that. The thing is, around 7:30 or 8:00 PM, as the malaise lifted, and while watching Barrett Jackson auction off tons and tons of automotive eye-candy on the Velocity channel, we finally reached that point where we just had "to do something." The day couldn't be a total waste of recuperation and hopefully restoration to a healthy state. So, we updated ourCandidate List. This is the Stop in the equation, Ice. It is important to stop activity once in a while to make sure that one is on the right course.
This is a simple spread sheet that we do in our Google Drive account. Side note: We highly recommend Google Drive over any other doc storage idea, service, etc. Our spread sheet is pretty simple. We have the following headers across multiple cells at the top of the page:
ADDRESS -Because, let's face it, if you can't find it, you can still own it, but making a profit is going to be tough.
SF -Square Feet (if known). Some sources will not know. If new build, the total SF of the finished product.
SOURCE -This is the "How Did We Find This" column on the sheet. Possible entries below it could be: MLS, Friend, Bird Dog, Realtor, Contractor, Owner, Auction... and so forth.
OPEN. BID - This is either how much the property is being listed for (if MLS), how much the source is asking for the property, or the actual opening bid amount at auction. If a new build, this is the cost of the lot and the clearing of the lot.
MAX BID -This is it. This is the max we are willing to pay. Sometimes this is the last column we fill out. We want to know everything else, first.
EST. REPAIR -This one is a little tougher in the sense that you will either have to rely on a great contractor who knows his or her stuff, great bids or quotes from contractors, or have a deep, deep knowledge of what it will take to get this thing off the ground. After a while, you may end up where we end up, which is knowing the average $$$ per Square Foot of renovation. If new construction, this is the cost of the build. Is it $100 per SF, $200 per SF, $578.32 per SF of build? Bids, quotes and experience will start to work in your favor. We always add around 10% to this number.
ARV -After Repair Value. How much is the rough diamond worth once we polish it up and place it in a golden setting. This can be a little rough if you have a realtor who thinks that he or she knows the market, but does not. "Comps" alone may or may not get it. Knowing what is going on within a neighborhood or town is critical. We always diminish this number by 10%.
P. P. -No, not urine. Potential Profit. Cheddar. The making of the rain. This is a spitball, but we generally take the ARV and subtract our EST REPAIR and MAX BID. Sometimes we just subtract the EST REPAIR from the ARV and let that inform us on the MAX BID. Either way, we always take 0.8% of the ARV off the top. This eight percent (one friend called it "The Hateful Eight." Which we called, "Wait for Netflix or Showtime and Save Your Money.") is the amount you will pay in closing costs and commissions. Or at least what we normally see. This is not a hateful number. This is a well deserved amount of brisket that you have to give to those that deserve a seat at the table. A good closing attorney (in North Carolina) will save you money. A good realtor is worth his or her weight in gold. So this number is a number that one should be ready to pay. This is the Collaborate of this little ditty.
DATE -Either the auction date, the offer date, or the date that we put it in our books.
DOM - Days on Market. If known, how long is it taking for the average home in this neighborhood to sell?
LOT - Length of Time. How long is this party going to take? Our how long do we, our realtor, our contractor, our Magic Eight Ball, think this puppy is going to take to make the full Iditarod Circuit. From the moment we buy this until the day we close on selling it -how long? Time really is money. We value time over money. No kidding. So, if this gig is going to be a quick lipstick and cleaning, but the number is smaller in the P.P. column than, say, a seven month remodel with an average DOM of 120 days that produces a bigger potential profit, we will break out our calculators to see which one will give us a higher ROCE on an annualized basis. (ROCE = Return on Cap Employed)
NOTES -We will note things like "Addition Candidate" -meaning we can create value by adding on. Or, "Seller is partial to pecan pies." (We are not above greasing the skids.) Or, "Smells like a urine party took place over the past 5,324 days." Urine, Mold, Structural Issues, Dead Mice, Snakes, Falcons, and Low Slope Roofs all smell like profit to us. (Among other things.) We currently have notes on two separate properties that say, "Check Flood Plains," because the town in question is known for flooding in certain areas. A popular note is "DRIVE." This means that while we practice our weekly ritual of driving around and looking at property, we may want to swing by this particular profit and get a feel for elevation, neighborhood, proximity to schools, etc. Side Note: Superior Schools Sell. Find a great candidate in a great school district, and you will probably have a very short DOM.
Once we strike a candidate from the list, we no longer erase it. Instead, we turn the cells to red. We do this because it is very interesting to us to note if a former candidate is coming back under the same or different guises over and over again. If an auction item, this could be an indication of deeper problems, or an unrealistic seller. If a number of bird dogs are shopping the same property, then it may indicate some title problems. All of that may mean more money to someone with the skills to pay the bills and/or the patience to wait out the suckers.
The Listen in the tune comes from the fact that the numbers will tell you which properties should be a priority. In a world of infinite resources, we find that our wallet is finite on the "going in" side of the equation. So, prioritizing is key.
Should a candidate make it into the One Percent Club (We probably buy one percent of the deals we look at), we will start a new Spreadsheet just for that property and turn the cells to green ink. Or, more on the mark, we start a new tab/sheet on or in our "TRUE EXPENSE" sheet -not a stand alone sheet. The TRUE EXPENSE sheet is the place where we monitor costs, profits, etc for each project under separate tabs. This is where the real music takes place.
We hope that this was helpful and all of those visiting are cooler than cool this week. Until next time...
Real quick update on the post from yesterday... There is an affirmed "no go" on the lot we were after. That's alright now, mama. That alright with us.
On to the next gig.
Have a great day (or night)!
Okay. Here is the short list of things we have to do this week:
Make sure that Hazel has either been scraped and cleared, or is dry enough to do so.
Get the "word" on our renovation/transformation candidate. Get the "other word" on our new lot candidate.
Look into the possibility and reality of a new strategy for candidate generation.
Look into the math and a possible new strategy for doing more with the same resources and without additional debt.
Hate to say it, but work on the two other businesses we are looking to start up. (Soooooo many podcasters will disagree with this take. Here is our take: once things are moving in the direction one wants, and the systems are in place so that the gig is a business and NOT a job, it is time to look at diversification. It is time to look at creating other systems in other businesses.) This is not to say that one should not focus. FOCUS! But when the systems are in place, work on the other projects and FOCUS there.
In addition to all of that, we recommend that everyone and their dog takes a long look at the Pomodoro Method or Pomodoro Technique. Or, if one likes, one can look at productivity strategies and studies that show that it is not how long one's butt is in a seat that counts. It is what one does with extreme focus for a short period of time... repeated over and over and over again. Kind of like rock and roll.
It is a new week -at least to our calendar. The metro area of Raleigh is clothed in a blanket of ice and a small amount of snow. This has been going on for two days. People have wrecked their vehicles, stocked up on staples, and marshaled for the equivalent of Iwo Jima. We were told that the collective memory holds this moment of pain ten or so years back where the entire city shut down for nine days due to ice. So, people freak out in a big way and clear the shelves of milk and bread and other staples.
The wild thing is that we walked to a nearby movie theater yesterday and watched The Big Short. It was open, and we saw quite a few cars on our little jaunt to the theater. Walking there (about a mile from our house) was a little cold and we were glad for Navy Pea Coats and stocking caps -not to mention the good old BOX BEND hoodie. But the walk back was warm enough that coats were unbuttoned, and stocking caps pocketed. The city had started to warm up, or the wind had died down. Or both.
Now comes the slush and the salt residue.
Which is better? To put down sand and gain traction? Or to put down salt and clear the roads? At first blush the salt or salt brine solution looks like it is the better solution. The roads become clear. The sand approach looks like an inferior solution because it only gives traction. However, things are not always what they appear.
On one hand, the salt solution ends up pitting and breaking up the concrete if not rinsed off in adequate time. As children growing up in the Midwest, we could always tell the line of demarcation between Minnesota and North Dakota by the front quarter panels of the cars. No matter the season, the Minnesota cars seemed to suffer continuously from rusting quarter panels. This was the salt or brine that the state used on the road in winter playing a game of hide and seek, or slap and tickle, in the deeper recesses of the wheel wells. The North Dakota cars were rust free for the most part. But, one did see a good quantity of cars in the ditches in North Dakota winters because the sand was at a surface level only. The sand could and would be tracked off or removed from the surface by cars, trucks, wind, rain or snow.
The Minnesota peeps seemed to be saying, "Our roads are clear -unlike the cave men and women living across the state line in North Dakota." The North Dakota contingency seemed to be saying, "Our cars look good because we don't use a caustic chemical to clear our roads like those Minnesota cretins." Followed by a superior, "We use snow plows and then sand, there ya know." Each state holding fast to that hometown or home-state bias that everyone seems to have. Side note: We once had a friend in LA say to us, "There is no better place. Sun, sand, chicks... why would you want to live anywhere else?" Our unspoken response, having lived in Oxnard, CA for a season, was, "Crime, smog, taxes, traffic... why would anyone live there?" Different strokes for different folks. (Cue the ghost of Gary Coleman.)
The point of all this weak metaphorical business being that we are vying currently for a couple of different properties ranging from lots to renovation candidates. On one hand the turn-around may be quick, but the profits are low. On the other, the turn-around may be long, but the profits are high. Then there are the ones that are spit-balling, they're a guess, or the finger in the wind to gauge direction. Those types suck because the whole process is reduced to a best guess scenario. How do Midwestern boys or girls, or any boys and girls make the right decision?
Well, it is like so much slush or salt. Underneath all that crap is the road one wants to be on. The decision on how to get to that road is first one of analysis of a few items that we can quantify:
Resources -Do we have the funds to see the project through? Can we handle any contingencies? Are we prepared for two days of crap instead of one?
Risk -Can we stomach or handle the worst case scenario? Moreover, have we laid out the worst cast scenario? What if that renovation is a a teardown because of all the garbage we are not seeing or detecting? What if the whole project is a failure and doesn't sell? What if we run out of cash? (Remember, profitability doesn't make or kill businesses. Cash flow does.)
Time -What kind of daylight are we burning on this thing? When we are done, will we be ahead of the alternative move?
So our best free advice is that anyone interested in this business takes a snow day or two to break through all the slush and salt and crap on the road. Do some analysis of which solutions are viable and, of those, which ones make the most sense for the resources, risk tolerance and time at hand. Do a matrix of possibilities. Ask Neo to plug you in and work through the realities of this world before trying to jump to the next one. This matrix should go so far as to list out contingencies in terms of time and resources. It should include the calculations on ROI and the hard line approach of erring on the side of conservatism, instead of going all liberal and la-la-land on the returns. "Worst case scenario,"should be a part of the lexicon.
Then it is time to pick the poison of success or failure. The results may not be improved by doing all this work, but the chances are pretty good that the road will at least provide traction, and at most be clear (even if it is just for a little while). The thing is, a choice needs to be made. Paralysis by analysis is like repeated applications of salt brine directly to the car. Forget the road, pal, the car will be gone in short order. You'll be hoofing it... waiting for that wind to die down and things to warm up.
We have had two days of snow days in Raleigh.
We are kicked back and relaxing.
So a snow warning has made way into the public conscience, and the guilt and fear of being unprepared has once again has gripped the frail hearts of mankind, in the Triangle region of Carolina.
But we shall not fear. We can't control the snow. We can't control power outages. We can't control the utter inability of the majority of the population not having clue-one on how to drive in this stuff. And we certainly cannot control the strange phenomena of people clearing out the milk and bread aisles at the mere mention of a snow WARNING.
What we can do is stay active with the one or two things that carry the cause forward. This is the beauty of the age. We no longer need a solid physical line to carry data to and fro, dosey doe, back and forth, up and down, sideways, front ways and backwards. No, no, no, sir! This isn't a square dance, pard'.
We only need a WiFi connection and we are G to the Olden. (Golden!) And, should the fine folks at Comcast, Time Warner, AT & T, or <insert name of vapid service provider here> fail and falter, and the mysteries of the world wide web no longer be within our frail and fearful grip, then there are other things that we can surely do to move forward.
So, for your viewing pleasure (or displeasure if you are a grumpy grinch type), here are a list of snow globe activities that you can shake up when the world shuts down:
You can do an analysis or an autopsy on your deals. Which ones were good? Which ones were bad? Why?
You can prepare marketing letters or postcards for the masses.
You can floss your cat. (You don't need cat plaque and gingivitis harshing your mellow, or your productive mode, or even quenching your thirst for work and progress with that foul stench.)
You can read up on investment analysis.
You can read up on real estate development.
You can take a nap and dream about your next deal.
You can call your realtor five times and purposely "Forget" why you are calling the first three times, remember why you are calling on the fourth call, and conveniently "forget" on the fifth -just to keep him or her wondering about your sanity.
You can try to teach others about this crazy world of wholesalers and renovators (or, as we prefer to call ourselves, "transformers") out there. (No, not the Shia LaBeouf/Bumble Bee types.)
If power comes back on, you can watch the Transformer series. (Yes, the one with Shia LaBeouf and Bumble Bee.)
You can feel utterly ridiculous for watching (and possibly enjoying) Transformers with Shia LaBeouf and Bumble Bee.
You can take a long, hard look at cash flow for your business.
You can call your contractor.
You can cold-call prospects in a hot neighborhood.
You can cold-call politicians and ask for their support in the upcoming elections.
You can work on your website. Even if the web is down.
You can work on your advertisements.
You can order Swag for your worthless branding that produces zero results and does absolutely nothing other than stroke your ego.
You can think about your branding and marketing and devise some systems to produce and measure results.
You can write a comment to every Box Bend Crew Blog Post going back to July of 2014.
You can post those comments if the power comes back on.
You can comment about the state of the world today to no one in particular. Or to your cat, if you would like.
You can follow up those comments with comments about the young people today.
You can walk your goldfish.
You can protect your goldfish from the cat -that little fur ball -with the gleaming teeth and rakish smile.
You can realize that you are to blame for the cat's gleaming teeth and rakish smile. You flossed him or her.
You can pay all your carrying cost bills.
You can balance your house flipping or house renovation or real estate business check book.
You can weep over the balance in your check book and seek out libations, and possibly a VHS throwback copy of the first Transformers, and a generator for power.
You can build a fantasy Lego version of your dream place, replete with grotto and outsized swimming pool.
You can build the same place in Mine Craft.
You can dig up your parent's Lincoln Logs (or your own) and build a rustic, pioneer version of your fantasy place.
You can call the Lincoln Log version, "Igor," just because you can. Really. Who is going to stop you?
You can start that book you always wanted to write about this business.
You can start that podcast you always wanted to start about this business.
You can listen to those podcasts you downloaded but couldn't listen to at work without some serious looks of consternation emanating from the boss-man's or boss-lady's office.
You can listen to the sound of the cat thrashing around in the goldfish bowl.
You can listen real hard for cries of help from the goldfish.
Or you can just sit. And think.
You can just sit because the sun does not shine. It is too wet to play. So you can just sit in the house all this cold, cold, wet day.
We look forward to hearing what you did when the world shut down and the Deep South lost it's ever-loving mind. (Bless our hearts.) In the meantime, where is that cat?
Hey Race Fans! Happy day to you!
Tonight, barring the unforeseen, we will get together with the Realtor, the Contractor, the Cook, The Thief, His Wife, and.... Wait. Um...
No. Tonight we will get together with the Contractor that we prefer to use for our projects, as well as our preferred Realtor. We will sit around the Realtor's table with a beer or two and discuss the poetics of transforming houses, as well as the poetic justice of profits.
Mind you, this is no Algonquin Round Table -that venerable meeting spot of actors, writers and wit back in the day. Dorthy Parker will not be gracing us with her presence. Nor will we be meeting in New York City or anywhere near West 44th Street. The jokes might be present, but they will lack the panache, punch and the lingering acerbic taste and affront that one can find in, well, The Portable Dorthy Parker.
But meet we will. Sitting around drinking libations and possibly dining on bovine will possibly provide the requisite recipe for frank talk and casual shoulders. We have a lot to talk about... Hazel Street -and was the lot cleared yesterday(?), a new renovation/transformation candidate that we made an offer on, the CM company we employed for Hazel, and above all else, time.
Time is our number one concern. The more turns at the track the better. Less turns equates into less experience. And less experience refers mainly to profits. Less profits and we spend more time caught in earth's pull as we try to escape gravity. And the loop repeats and repeats and repeats and repeats and repeats...
It may not be the brain trust at The Algonquin Hotel back in the day, but it will certainly be a good meeting with good people about good and important topics. The question is will it result in good actions?
Hey! Happy Sunday.
A few days ago, we talked about Jan Brady and the fact that we are a little OCD when it comes to certain events. Well, today we are going to go back to that post and catch up on a few events (or lack thereof).
First, the Hazel lot was not "scraped," or cleared. The excuse was a chance of rain and a lack of silt fencing. Not so sure we buy that one, but the good news is that the lot is supposed to be scraped tomorrow. We are cool with this and not blowing a head gasket, while we look at each other with tears in our eyes and say, "Hazel, Hazel, Hazel!" Why? Simply because the permit has yet to be issued.
So, hey kids! Want to get into the renovation game? Just remember what Uncle and Auntie Box Bend say, "The renovation game is a waiting game." (Why thank you, Capt. & Mrs. Obvious, that was really helpful!) Seriously, if you are new to the game, what this means is that you have a cashflow issue. Time truly is money. And the longer things take the more money it takes to support the effort. That is why we recommend buying War Bonds and supporting the War Effort.
(Sorry. 1941 moment somehow crept into this very early morning Brady blog post. We are blaming a lack of sleep and John Belushi/Capt. Wild Bill Kelso.)
At any rate, the city is going to do what the city is going to do. We don't see an issue in getting the permit. We see an issue in waiting for the permit. In the meantime, it is a good time to reach out to our Construction Manager and say, "Hey, friend... did you know that the lot wasn't scraped on time? Sir? Did you? Did you know that?" (Hint, hint, nudge, nudge.) Which we already did. It is also a good time to count your pennies.
And that is where we have some good news. The Moreland project closed Friday morn, and the proceeds have been banked and, most critical of all, most of the profits have been removed from the table.
Now don't get us wrong, or even bring us down, Bruce. (Obscure ELO reference alert!) We do believe in investing back into the business. But we believe even more in taking a portion off of the table. For us that means tithing, savings and taxes. Uncle Sam is not going to care that things went bad later on. At least under an LLC structure, they won't. Instead, they will view the Moreland profit as something akin to a short term capital gain and ask for their pound(s) of flesh. So, we bank that and wait for the tax man to cometh -on a pale horse... carrying a sword...
Concerning tithing, charity, church, etc., well now, Nancy, (obscure Ronald Reagan reference alert!) if you can't give any money away, you will truly never be wealthy because you will never have enough. (Just our way of looking at it.)
Additionally, you will never, ever, ever infinity be able to diversify into other things unless you have a little cash saved and stashed. As our father/father-in-law once said, "You've gotta save some of that stuff." It is either that, or you have a cousin, who knows a guy, who has this thing -and his name is Guido. (Good luck, pal.)
We also wrote an offer on a house (yesterday) and got out of a bid on a house by the skin of our teeth. (Whatever that means. Skin? On teeth?) No. Really. We made an offer on a tiny, little, wee bit of a bungalow masquerading as "Run-Down-Small-House," (a 2/1), but hiding a pot of opportunity at the end of that peeling paint rainbow. Or so we think. Now we wait for the acceptance, counter, or denial of that offer.
We were also, fortunately, out bid on a different house that we were bidding on. And, in the process we were taught a very, very, very important lesson about remembering our origins. That is, when we started out we would always drive by a property before bidding on it. Since that humble start to our house transformation biz, we have grown complacent. Our mentality has been that if we buy the place right, then we will be A-Okay no matter what -even if it is a tear down. Well, not so, friend. Our preferred realtor (a personal friend) did a drive-by on this auction property for us. He then did a drive-by-and-stop-and-put-it-in-park-so-that-one-can-fire-off-a-few-shots-with-the-camera. And what did he spy with his little eye?
No kidding. A River Runs Through It. The backyard had a culvert filled to capacity with a rushing torrent of water, and our Realtor quickly explained things to us in a long-winded text message:
He then followed it up and ended with this cryptic message:
The house sits alone on a cul-de-sac of fill dirt piled over the top of an active creek. One good hurricane away from no Mas Casa.
We took that to mean that it was bad. And then, like soooooooooooooooooo very often happens, no one bid on the thing. We sat there as high bidder thinking, "Woah, woah, Scooby!" Finally, hours later, someone out bid us. Maybe they have a new stilt home planned. We hope so.
The good thing is that you usually have 2 days to back out of a bad auction deal. You might lose your deposit ($2,500 in this case), but you can back off -and in a hurry. But even losing the deposit makes the next transformation that much harder. "Oh yeah. I screwed the pooch on that auction. Deduct $2,500 from my pocket." That's the equivalent of a used Orange amplifier and a Gibson Les Paul Studio guitar -plus money left over for din-din. Ouch!
There is a service out there that you can employ if you are completely introverted, don't know anyone, or take to wearing full camo and face paint during the day. We will see if they are still in business, and/or can find the link and re-post it ---if we can find it. But basically, these kids drive by any property for you and take a few shots. For a nominal fee, that is. And, least we forget, a simple Google Earth moment can put you into power-chord land with your sweet Orange amp head and cab, and the guitar of the day.
No need to get all bunged up like Greg Brady, or Jan Brady, or Capt. Wild Bill, or ELO, or...
Have a great week!
It is only Friday, and a great day to go out and work. And even if it is winter where you are, the sun is up (someplace) and it is time to rock and roll. We want to pretend that his is our last day on this earth and make it count. But least we forget, we want everyone out there in the land to have a Great Weekend!
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This site is for informational purposes only. We do not guarantee anyone's performance in the house flipping, or transformation, or investment arena of real estate. Invest in your own ideas and projects at your own risk.