Good Morning, Boys and Girls!
It is Thursday the 14th day of January in the Year of our Lord 2,016! Time to get up, get going, and have a great day filled with action, action, action. Our hope and prayer for you is that it is the right type of action.
Here are two views of the little Craftsman house that is being built on the freshly minted and scraped Hazel lot:
This is a plan by architect David Gardner.
Have a great day, Tiger!
It's "Scraping Day!" That magical day when we get up, gather round, and rock this place (Hazel Lot One) to the ground. In short; we are clearing Hazel today and putting up silt fences for our new construction.
Our intention is to make sure that the lot is High n Dry. Then, if the rain can hold off for a little longer, we will get our foundations in and hopefully be off to the races.
Time to make a little music. Time to start the first steps in making the donuts. (Yep! We ARE going there...) Time to make a little dough! We hope it is going to be a good batch filled with sugary sweetness and satisfying taste.
We hope there are no delays, glitches, thefts, fires, etc.
And we know that in order to make all of this happen (even if it dates it considerably) we will have to get out of bed pretty early in the morning to make it happen. That's okay. We are ready to rock.
(Just out of curiosity; we wonder how many Dunkin' Donuts meets Def Leppard moments are there out there on the internet? Hmm?)
Not to be too redundant, but we are just waiting on Friday right now. Friday, Friday, Friday! We feel like Jan Brady kibitzing about Marsha at this point. We really want Friday to arrive and for it to go off without a hitch (this is the closing/sale on Moreland), but we know that being anxious for this solves absolutely nothing. And, we have had more than one closing delayed for a variety of reasons in the past.
But this is the gig. This is the amusement ride. And it is partly why we dig the gig the way we do. It is an adrenaline rush to buy something. It is an adrenaline rush to build something or renovate it, and it is a major systemic condition of adrenal glands pumping and jiving and swaying to the music... when selling something that one has built or renovated. Play that funky music, Caucasian boy. Play that funky music! (Northern Europe and Scandinavian- Descent Boy.) Play it! (Side note: We can land planes off of our legs with flashlights at night. That is how blinding they are. That is, we are of Norwegian, Swiss, Irish and German heritage. Which is simply a cocktail for being pale, possibly freckled, and subject to melanoma.)
Okay. Back to the blog and off the lack of protective pigments in our epidermis.
We are positive that our realtor friends, and our contractor friends, and our banker friends, and our lawyer friends, grow weary of us.
"Did it sell? Did it sell? Did it sell?"
"Did it permit? Did it permit? Did it permit?
"Did it deposit? Did it deposit? Did it deposit?"
"So how did the blood test come back? Anything proving guilt or innocence?"
"Marsha, Marsha, Marsha!"
But hey! On to some good news. The lot at Hazel is set to be scraped (cleared) and silt-fenced tomorrow. Mañana! Yeah! Sweet! Wunderbar! Then we wait for the city of Durham to issue our wee little permit, and we are off to the downhill-double-black-diamond-Swiss ski-races. We are off to the wonderful world of the Brady Bunch land where we have a wise inner voice saying, "Now Greg, even though she is technically your step-sister, and not a blood relation, you shouldn't be ogling her on or off screen. You've already been talked to about this, right?" Or perhaps it is saying, "Now Box Bend, even though it is getting scraped and fenced and permitted, does not mean that it will go off without a hitch. You already have had to purchase Builder's Risk insurance, right?" Either way, we are good. (And chastised.) Tomorrow we will end our day calling people and asking only one question:
"Did it scrape? Did it scrape? Did it scrape?
Just a quick update on our new construction project -Hazel.
Hazel is awaiting the permits. We have hired our "go-to" contractor, and are employing a local Construction Management company to keep things moving and to work closely with our friend -the contractor. But right now, it is just a waiting game on Hazel.
We are strongly considering the possibility of a second new build directly on the heels of the first one starting. What we are wrestling with right now is the economics of two simultaneous zero-debt builds, and the logistics of getting both finished in roughly 90 days from the moment of permit. We are also waiting to see if a rehab that we are considering actually materializes. That will determine, in part, the next steps.
Our goal for this year is to replace all of our "day-gig" income including our health benefits -which are substantial from this business alone. Our other businesses, and now, to a certain extent, this one, enjoy our investment of returns right back into the businesses. So, we are not taking any money out of the other businesses with the exception of some rental returns which go towards the long term care of a parent.
We started this business with a website and a blog called, "Earth's Pull." Back then, our twin goal was to be debt free and to have any day gig become completely optional. And nothing has really changed. Last year's timing seemed off and the delays were horrendous. We did not meet our goal. We think now that the timing may have been providential (possibly more on this later), and we are making provisions/taking measures for/towards the delays.
For now, all eyes are on Hazel, with one or two exceptions:
First, we are still slated to close on Moreland on Friday. YEAH! Happy people. (Mental Note: Need to cancel insurance and utilities.)
Second, our alma mater, North Dakota State University, just cinched their 5th consecutive win in Frisco, Texas! North Dakota State scored on its first four possessions and rolled to a 37-10 victory over No. 1 seed Jacksonville State in the NCAA Division I Football Championship Game before a record crowd of 21,836 at Toyota Stadium on Saturday, Jan. 9. Our friend pointed out that the ESPN announcer may have got it right when he said that NDSU is not a dynasty. It is an empire!
We will pay cash (and usually very fast) for problem houses and real estate. This is where we like to play. If you are stumbling upon this blog, wanting to sell your house or real estate for cash and fast, then we encourage you to look at our sister site: http://www.boxbend.com/buy-my-house.html
Below are some pictures of they types of problems we have purchased before:
We purchase problems. Tax problems, inheritance problems, houses falling down problems... you name it.
And although we won't buy all houses or real estate that is sent to us (it needs to make sense for both you and us), we have purchased some pretty serious problems in the past. (See the pictures above.) Fill out our simple form, and we will come back to you quickly -usually within 24 hours -with an offer.
Thank you for visiting our blog and our main site.
Real quick and real simple today; what kind of action are you going to take today towards:
Your Long Term Income
Your Short Term Income
Your Mental Health
Your Spiritual Life
Heck! What are we going to do today towards this list?
The universe favors action.
In the downtime of waiting on closings, permits, bank accounts to catch up to ambitions, etc., it is important for us to take stock of where we are at and where we are heading. Part of this is "rearview mirror" assessment, but most of it should be "looking through the windshield" of our business. What is meant by this is that so much of traditional business is reliant upon past facts and actions. So much of business is looking at past performance as an indicator towards future results. We think that this is a mistake. Not a complete mistake, but too much emphasis is placed here. The rearview mirror should be limited to vital facts.
While your past numbers may give you the best kind of lessons -such as where are we making the most, what neighborhoods, what kind of rehabs, or flips, or apartments, or... (pick your poison), they will not necessarily tell you what systems you should be working on. They won't give you a sense of the market or of what might be coming next, or even where you should necessarily put your resources.
So, with that in mind, here is something we use quite a bit: PSM. (This is the total opposite of PMS, by the way.) PSM is:
Prioritize those actions that you take towards your flip, rehab, rental, what-have-you. Not all of your actions make you money. Prioritize based on those that do and those that move the ball forward the furthest. Chances are you will see on your action list that you are spending the majority of your time on actions that do not result in paychecks or profits. You will probably see that you spend about 20% of your time on those things that actually bring dollars over the doorway of your financial house. You want to reverse this. You want to set things up so that 80% of your time is spent on those actions, and 20% of your time is spent on the admin, detail, tax, permit type of work. How?
Well, now is the time to pretend that you are Ray Kroc and you have just discovered the McDonald brothers cranking out consistent and congruently good products while your are roaming around selling milkshake machines. ("Nice Machine, Ray!") How are you going to set up systems that turn out consistent results while making the business about business and less about you or a hobby? One way is to focus on those priorities that make you money. Make those your focus and outsource, automate or hire your kids to do the rest of your action list.
You may make money swinging a hammer, but you will probably make more by directing others where to swing that hammer. And you will probably make even more if you can direct one to direct others on the where and when. You will probably make even more money if you don't micro-manage the contractor or GC, and spend even more time on the important tasks of filling the pipeline while carefully monitoring cash flow. (Remember: It is not a lack of profits that kill most businesses, it is a lack of cash flow.) This is what we mean by monetizing our systems. We want to put into place systems for the rote and less important garbage. And we want to put in systems for the more important, money-producing, areas of our business. The more levers that we can use to move these heavy objects, the better. So... What is your time really worth? Well, Atlas, you are not going to do it at scale by carrying this world on your back alone. Sooner or later you will end up shrugging and the whole thing will come crashing down.
Obviously, you cannot ignore the rearview mirror. To do so is to invite an accident in your blind spots. Yes, it is important to know where your money is coming from... you can use a RFM Model that we heard about on the Joe Fairless podcast. RFM is "Recency Frequency and Monetary/or Money." What that means is, in our case, which area is the most recent, which area that we work in has the greatest frequency, and which area or what kind of typology gives us the most money for our efforts. If you are doing enough deals, you will see that the hot ones may be coming from the same place. We want to treat our deals as customers. Which group of customers bring home the bacon? And then, which actions did we take towards those customers? Which actions were the most critical from that list that we just created? (Prioritize). Which actions (money-centric or not) can we outsource, hire for, or automate? (Systemize in order to focus on priorities.) And how do we increase our revenue/cash flow and profit by focusing on those priorities?
We do this on Excel in our day-gigs, and we do this in Google Drive in our business. We set up almost an outline in the spreadsheet of our actions from deal generation to closing. (In the case of renovations.) We then highlight those areas that are the true money makers -the critical actions. And we highlight the rote tasks with another color. We also highlight those tasks that just seem unnecessary or stupid to us. We use an ugly color for the unnecessary or stupid. We then start a column of priorities. We place a number "1" next to the most important task, a "2" next to the next one, and so on. What this gives us is the ability to sort these actions by priority.
We then set up a column for Systemization. How can we automate, outsource or hire for a specific task? Our notes on this go into the Systemization column.
We then set up a Monetization column or two. This includes things like what we think the task is worth in terms of actual dollars per deal -first column. And how can we magnify our efforts for the money making critical tasks? Our notes on this go into the second Monetization column.
Combined with a similar spreadsheet on the RFM Model, and even another on individual deal analysis, and we start to kick out patterns and actions that have a positive effect on our business. That's it... It is a 1-2-3... or 1-2-3-4... or 1-2-3-4-5 loop. Do. Repeat. Do. Modify. Do. Repeat. Do. Change. Do. Repeat.
Everything else is just waiting.
Just for clarification; yesterday's post was a quote that we received from our contractor. We have been around the horn enough times with him to know that what he is showing is a a complete picture -even though it may not seem like such to some experienced builders.
We also know that "stuff happens," so the real trick is to keep budget creep from taking place and driving up expenses while driving down profits. Thus the fee we are paying to a local Construction Management company. We shall see, because it is our first rodeo with the CM company, but it may be that their fee is the best 3K we ever spent.
Again, we urge you to think of your business like McDonalds in the pre-franchise days. Your goal should be to create systems that can be replicated and implemented without your presence. You may want to consider building an asset with your business in and of itself. This and rote systemization could end up being one of the harder design problems you might face with this industry (or any business), but it will be worth it.
Full disclosure: We aren't there, just yet.
But we are working on it.
Have a great week!
Against our better judgement, we want to give you a peek into a quote that we are getting on our new construction on one of the three lots we own. The question is often: "So, how much?" Here is part of the answer:
ESTIMATE FOR 1,583 SQUARE FOOT HOME
Permits – 2000.00 2000.00
Temp. electric – 150.00 150.00
Temp. water – 150.00 150.00
Portable toilet – 400.00 400.00
Water meter – 990.00 990.00
Water tap fees – 4400.00 4400.00
Sewer tap fees –2400.00 2400.00
Clearing/grading – 4500.00 4500.00
Trash removal – 1600.00 1600.00
Termite treatment – 1000.00 1000.00
Footing materials – 2200.00 2200.00
Footing labor – 2600.00 2600.00
Foundation materials – 3200.00 3200.00
Foundation labor – 3700.00 3700.00
Waterproofing – 850.00 850.00
Framing materials – 17400.00 17400.00
Framing labor – 7650.00 7650.00
Windows/doors – 4500.00 4500.00
Porches – 3000.00 3000.00
Decks – 2000.00 2000.00
Plumbing materials – 4700.00 4700.00
Plumbing labor – 5500.00 5500.00
Electrical fixtures – 1500.00 1500.00
Electrician – 5800.00 5800.00
HVAC – 6400.00 6400.00
Siding materials – 3800.00 3800.00
Siding labor – 5200.00 5200.00
Roofing materials – 2800.00 2800.00
Roofing labor – 1500.00 1500.00
Gutters – 550.00 550.00
Garage door w/ opener – 1700.00 1700.00
Insulation – 4700.00 4700.00
Drywall materials – 2130.00 2130.00
Drywall labor – 3125.00 3125.00
Trim materials – 4000.00 4000.00
Trim labor – 5000.00 5000.00
Cabinets – 4000.00 4000.00
Granite countertops – 3500.00 3500.00
Bath accessories – 350.00 350.00
Hardware – 500.00 500.00
Shower door – 1250.00 1250.00
Painting – 6000.00 6000.00
Flooring – 7000.00 7000.00
Appliances – 3300.00 3300.00
Driveway – 3000.00 3000.00
Landscaping – 2000.00 2000.00
Cleaning – 500.00 500.00
Total - $154,595.00
You may be able to do this for less or more in your area. It is like our brother in Indiana talking about the cost of a home in Brownsburg, Indiana, and one in Annapolis, Maryland. Same home. Same fit and finish and square feet. Massively different pricing.
What you are not seeing in this quote is the cost of the lot. You are also not seeing the cost to clear the lot and find the right plan (altogether this was another 5K for clearing & plans.) You are not seeing the utility bills, or even the cost of Builder's Risk insurance. You are not seeing the property taxes or the monthly fees that might go into owning this bad boy. And you are not seeing the fee that we are going to pay a local company to act as construction manager. You are not seeing the "overage" money... the money we might have to pay if our CM or our contractor cannot keep the budget in line. But the biggest thing that you are not seeing... the number one item... is time.
If you are going to play this game, you have to know now that time truly is money. If a project takes too long, then you will lose money. We have an expectation of 90 days on this build once the permit is granted. (By the way, where we live, frost lines are not as big of a concern as they are in, say, Belfield, North Dakota.) There is a definitive value to time. And you need to add in the time involved in purchasing the lot, holding the lot (in our case we have held these three lots in reserve for quite some time. We treated them as an insurance policy. And it was -is- expensive.), and in carrying the new construction, and the eventual sale of the house. You have to calculate not only the commissions and closing costs of the eventual sale, but how many days you will have to carry the house until it is sold once it is completed. What is that time worth to you? What else, or where else, can you put your money into for that much time and for how much of a return? If you are holding lots for a year, then building, then selling, how much time do you have invested in the deal? Keep track. This is important. Why?
(Return/X amount of months) x 12 = Annualized Return
Can you get a better return elsewhere? If so, you may want to consider taking it. But hold on. We aren't done just yet.
The second biggest thing -some say the first big thing, is RISK. There are no warranties or guarantees that say you will make a single dime off of your efforts. So, reach down, between your legs, and ease the seat back (thank you David Lee Roth for that line), and give this some serious thought. Like the stock market, if you can't afford to lose, you probably cannot afford to be there in the first place. Do the Daymond John bit and start with smaller affordable steps. But know what that risk is worth to you. Give this some very serious thought. Can you invest in something else with less risk and equal or greater returns? Is there more risk here? If the risk is higher, the reward needs to be higher. Otherwise you may as well go look for some guaranteed investment with very low risk and a low rate of return on your investment. What is that exponential variable for risk? Only you can decide that. You need to nail down and figure out how much risk you are willing to take (first) and then what you expect to get compensated for that risk. This could be as easy as comparing investments and returns and quantifying the risk, or qualifying it, to the extent of your ability.
And finally, look at this as a worst case scenario deal. What if it all goes wrong? What if the market goes belly up and we cannot sell? What happens to your math when the sky begins to fall. Our fallback position is to rent. And we won't waste too much time renting it at a reasonable number that puts a good candidate (or renter) into reach. Each and every month involves carrying costs. We might also consider a contract for deed, but that is truly a last resort move. Why? We would rather have the possibility of all the cash invested coming back out in one shot. CFD is all the money coming back out in drips and drabs. It is a good solution for longer term wealth creation, but it is not the game that we are playing with Box Bend on a permanent or strategic level... at least not yet.
Happy New Year to you and yours!
We celebrated around the Box Bend Ranch by hitting the bunkhouse early last night. I think we woke up around midnight to the sounds of fireworks for a brief second, but quickly fell back asleep. Yep, we are hardcore party people.
At any rate, just a quick note today. Remember yesterday when we talked about being patient and waiting for that glint of sunshine reflecting off a diamond in the rough? Remember how we were moaning about all the "dumb money" out there? Remember that terrific recipe for sausage dip? Wait...
At any rate, our realtor IM'd us yesterday with the stats on a possible renovation candidate. This falls right into line with what we want to do. And this is usually how it works out. (If you are patient.) The right deal will find you.
Now, that being said, we don't know if this is "the right deal." Neither does our realtor friend. Not yet. But he is going to do a little more investigating. A little more "sleuthing," and let us know. Right now, we only know that the numbers look right. The numbers look like the numbers we want to see, and our realtor friend has been to the rodeo so many times that we respect his judgement when he says, "Here is a possible candidate." And also when he says, "I need to investigate a little more before we pull the trigger." We are still moving forward with the new home build. That has not changed. But we are stoked by this IM from our realtor brother. And final note for today -this is the power of a good team. Surround yourself with good people who understand where you are, what you are after, and what you can & cannot do. Tie yourself to the people who move and not those who talk about moving. There is nothing more fortifying in business than a good team.
It's a New Year, baby. Go knock 'em dead!
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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.