Hey, thanks for being here.   Yesterday's numbers fell off to around 270 of you stopping by. But if it were just two people, and not the 350+ we have on some days, we want to let you know that we appreciate every single one of you.  Thanks again for taking the time for us.

We also want you to know that we won't be around for the next couple of weeks.  We have some things that we need to take care of for the day gig -working for the man.  We will try to post some pics and some updates, as well as finish our series of questions from a coworker, but no promises.  If not or if we cannot due to areas of little internet, we will definitely have a rash of content for your consideration and consumption once we get back from the gig work.

Stay tuned.  

Our Moreland project is finishing up.  We are expecting the listing early next week.  Our contractor has been unbelievable in pouring on the coals.  The same can be said for our Realtor.  Once again, we can not overstate how important the team is in this business.  Forget about a solo endeavor.  Unless one is a contractor, a lawyer and a realtor, as well as a marketer, it is a waste of time and money to try to do it all.  Let go and let others -competent others.  It was one of the best decisions that we ever made.  

What if you can't sell a renovated house for enough money, and need to take a loss?  This was the third question from one of our coworkers, and it is one of those things that makes the lower extremities pucker up in an involuntary cringe that is worthy of note.  The dreaded loss.  This is the part where we pause for a moment and sit back and reflect on the answer we are about to give because this isn't a simple "do this" or "do that."  This is more about rules and systems than anything else.  Let us explain.

Our rule on this is easy (most of the time), although it will mean taking an expanded view of the flip-cash-continuum.  It will alter our horizon.  We simply rent the property and reduce our cost basis over 12 months or more.  This would throw a monkey wrench into our plans to keep rolling with what we are doing at the same level, but it would not be the end of our world simply because of our cash only basis.  It would mean that our purchase-renovation pool of cash would shrink while we wait for our cost basis to reduce to an acceptable level of profit, or to a break even status.  Fortunately, we have been blessed to the point that we have not had to do this yet.  We did have a reverse of this situation, though.

What we mean by "reverse" is that we bought a property in need of work and waited for months until the existing tenant's lease expired to fix it up.  Unfortunately, in this case, the renovations took way longer than expected, needed some alterations afterwards (read the posts on State Street) and we are only now seeing daylight on this thing.  But that's okay.  We have enough diversification that it isn't a show stopper for us.  And we will sell it. (It is under contract now)  If that should fall through for some reason, we will go to our rule book and rent.  In it's fixed up state (no pun intended) we will get a decent return and generate monthly income while we wait for the market to turn in our direction.  However, again, so far we have not been in this position on a rental or sale.

We did learn a valuable lesson about 30 year old mobile homes, but that wasn't a rental situation.  Instead, we sold the property on a contract for deed.  Sounds similar, but the difference is that we are not responsible for cutting the lawn, paying any utilities, or paying the property tax.  That is a much better deal for us.  And, fortunately, that was a small amount of money VS a larger chunk of our investment pool.  

Ultimately, we would like to have more rentals than the ones we currently have in our portfolio, but that is not the business of Box Bend.  That is a business of a different corporation(s) we have set up.  Box Bend's responsibility is to buy, renovate and sell real estate of all types.  Other than the contract for deed on the mobile home, and other than the reverse "waiting for a renter to leave before renovating," we have been fortunate to have quite a few houses sell after renovations.  In one or two situations, we set the market price (new highs for the neighborhoods) due to location, and or quality of our renovations.  That's nice.

Okay, enough rambling about that.  Our best free advice to you is to set up your own rules about debt and properties that don't go quite as planned.  Those rules should be uniquely your own and not someone else's rules.  Remember, at the end of the day you are responsible for you.  

Next time we will delve into the final question, and this final question is the one we get the most:  If you were beginning today, and you didn't have any money, where would you start?  Where, indeed?

Thanks for reading, and please stay tuned.

We are still playing with format... as you can probably tell.  But hey!  Do you want to learn how to flip real estate?  Refresh this page and sign up today.  Thanks.

So, recall that we had a list of questions from a coworker.  Last time we covered the first question:  Why do this?  And we covered part of the second question:  Why not borrow money instead of working from a cash-only basis?  We believe that this is such an important topic that we decided to work it into the first two answer posts.   


We have a friend, an acquaintance that we like and like to be around.  We'll call this person, Mr. X.  Mr. X had a booming business on the coast.  He had a business that was growing by leaps and bounds,  tons of rental properties, and very nice toys.  The only problem he really had was that he had borrowed a lot of money on his rental properties.  His reasoning was that the coastal properties would always be in demand.  Good times or bad, people would want to rent a place at the beach.  He was partly right.  


He was only stretched thin in a few places during the housing boom that preceded the recession.  After all, wasn't it true that you had to spend money to make money, and wouldn't it be better if it was someone else's money?  But as the clouds and thunderstorms grew just out of sight off his personal empire's shores, Mr. X started to see his main business wain.  The thin cash flow that he had on his rentals allowed him to keep the doors of the business open, but little more.  Then the storm grew into a tropical depression and a couple of his rentals started to suffer from lower occupancy rates.  When people get scared, they tend to batten down the financial hatches.  


Suddenly Mr. X was saying goodbye to some of his toys.  He had to save his empire, after all, so he could always pick up those same toys later on -after the clouds passed.  Goodbye, Cadillac Escalade, Goodbye, beautiful boat.  He sold them at a price that was decent, but he ended up with a new problem; what should he do with the cash?  Should he put it into his business?  Keep the doors open and hope for the best?  Should he pay down some of his debt?  Should he sock it away under the mattress and hope for the best?  Here's the deal:  Hope is not a strategy.  Mr. X was suddenly watching the sky very closely.  


The tropical depression turned into a tropical storm and was on the cusp of becoming a full-blown hurricane.  The water was rising and the waves were shooting over the breakers.  He jettisoned one rental that had always been borderline.  On paper, Mr. X was still profitable.  But then the hurricane actually developed and assumed an identity.  The public called it the "Housing Bubble," and suddenly many, many people, including Mr. X were sitting on property that was not only worth less than they had paid, but truly out of the bounds of affordability.  This was a class five hurricane, and she was shaping up to be a real bitch.  


Believe it or not, even with the upside down property values, Mr. X was still profitable on paper.  However, the weak cash flow on his properties was now anorexic and soaking wet.  The 220 pound bruisers had turned into a 90-pound weaklings under the pummeling they received from this hurricane.  His business was in even worse shape.  Located directly on the waterline, it suffered from an eroded foundation of confidence in the market.  People were walking away from upside down properties.  Unfortunately, in addition to rentals, Mr. X's main business was in real estate.  Teetering on the edge of insolvency, he once again hoped that he would be able to weather the crisis at hand, and emerge solvent on the other side.  He may have been partly on the right track.  The worst of it seemed to be behind him.  


Mr. X was right, there was a little, tiny, minuscule amount of sunshine peeking around the clouds on the far horizon.  But where he was very wrong was in the assumption that profitability, no matter how meager, equates into solvency.  In the end, the cumulative effect was a loss of his business, of his rentals, and his toys, and all of this because of cash flow issues.  He was profitable until the end, but he could no longer make payments and keep up with payroll.  On paper he was scraping by.  But in reality he was losing ground quickly.  And all it took was not a hurricane, but a few small inconsequential gusts of wind in the form of late rent on the heels of the housing bubble hurricane.  More than a handful of units not paying on time, and he started to sink.   


No debt for us, please.  It is hard enough to hold it altogether without the burden of debt and the certainty of economic cycles coming to bear on our small holdings.  We would rather stay on the high ground.  Mr. X is a real person.  And if you ask him what happened he will tell you first and foremost that a housing bubble sunk him.  But in quieter moments of honesty, he will tell you that his over-leveraged position did him in.  And once that debt-cash-payment-repeat-cycle begins, it is a mother to stop.  Why, it's almost like trying to stop a hurricane. 

Greetings, denizens of the real estate flipping and renovation world.  Good news over the weekend:  Although it is never over until the check has been cashed and is in the bank, State Street went under contract this weekend.

Two quick object lessons here for your consideration:

First, we screwed around too much in doing what we should have done all along... fixing the floors.  And, if collective wisdom says that sloping floors are charming and that people expect them in older homes, and your little voice or voices say, "Um... well...  how could...,"  that is the voice of reason trying to break through collective reasoning and your willingness to go along with such tripe because it is easier and cheaper to do so.  Trust your gut.  Or guts.  Big or small, they probably know what is right even if everyone else is saying something different.  Our messing around with this stuff ended up costings us thousands of dollars in carrying costs including, but not limited to, insurance, taxes, theft and maintenance.  

Second, the end game objective here is to put out a great product in the shortest amount of time.  If your contractor, realtor, lawn-care person, you name it, is not up to snuff, deep-six them and move on.  Your endeavors are not for charity or for social speculation and folly.  You are jumping into this because you want to make money.  Never forget that Money and Time are married.  One without the other is like visiting divorced parents.  It is not an ideal situation.  Your company is not here to pay for the education of others.  Your company is here to pay your way through the world.  It sucks being merciless, and we are not advocating 100% no-mercy.  The n0-mercy stance will result in you or your company overpaying for everything because no one will want to work with you.  However, we are advocating that you outline goals and objectives, nail down the time frame with all involved, and explain the consequences of not meeting those time and objective goals to all involved.  That's fair.

A little side note here for one and all.  We recently watched the first season and first episode of Flip or Flop on TV.  One observation is that the young couple in the show was four houses into their flipping careers before they landed their show.  Good for them and being able to pitch and land the show.  But four houses?  We bet that they know a whole lot more about house flipping now then they did then.  Agreed?  Same here.  After renovating and flipping quite a few homes, we can say with out reservation that the schedule should rule the day, and that quality should be a close second.  

Here's a couple of examples for your consideration:

If the contractor is way behind on the project, you need to stop and ask yourself three questions:  
     First, are there extenuating circumstances?  Did the roof cave in?  Was asbestos discovered?   Something like that will set any schedule back.  
     Second, if no life changing events took place with the project, why is the contractor behind schedule?  Did they lose  a love one?  Have to go to court?  Are they incompetent?  Do they know what they are doing?  Did they lose a limb?  Are they temporarily blind from some mysterious event involving a carpet cleaner and malfunctioning steam cleaner?  Did their dog die?  Unless they have a great reason for being behind, you may want to consider your acceptance of their excuses. 
     Third, if they can't hold the schedule now, will they be any better later on?  If not, it may be time to fire them and get someone else.

If the house isn't selling, you need to stop and ask yourself two questions:
     One, is there something wrong with the house, and if so what will you do about it?  Are you going to fix it?  Are you going to drop the price?  Are you going to rent it?
     Two, is there something wrong with the marketing or the way the realtor set it up?  If so, how long is your contract?
     
In both cases, we suggest that you set up a schedule with the contractor, and limit the contract with the realtor.  Don't sign long contracts.  This way, you can reassess with them about what you want to do and how you are doing it.  Make sure that there is a clause that gives you the right to fire anyone you work with if they aren't performing the way you think they should be, or if you are not hitting your end goals in a reasonable amount of time.  Emphasis here on the word, reasonable.  Extreme Home Makeover re-runs notwithstanding, it is pretty ridiculous to do a total renovation in a week or two.  

Also, have a clear picture of average DOM (days on market) for your city and even the neighborhood that you are in.  Your realtor is a professional and should be able to give you that information.  If it is your first rodeo with that realtor, verify the information with another source.  Either way, keep an eye on what is going on here until you build up a track record with anyone including the contractor, realtor, lawn person, graphic designer, service provider, etc.  As you move from your first to your fourth, and from your fourth to your ___________ project, you will know who, how, when and where.   But for now, limit your exposure to anyone by defining and communicating realistic expectations, and by giving yourself the escape clause you need to move out of those arenas that prove to be caustic to your wallet.

If your realtor, contractor, lawn person, service provider is professional at all, and you communicate clearly, they will respect your approach.  However, and we cannot stress this point enough, you have to be able to communicate clearly.  At the end of the day you will be accountable and responsible for turning a profit.  No one else.  Everyone else on the job will be taking care of themselves.  You need to take care of you.  

Finally, keep your worst case scenario in mind at the beginning.  You should be able to answer that question that we will answer in another post:  
What if you can't sell a house for enough money and need to take a loss?

Until then...
Happy hunting.  

In an earlier post, we talked about answering some questions that a coworker had asked us about our business.  In this four part series, we will do our level best to answer these questions.  Our hope with all of this is that our answers will move past mere information and into the realm of helping you accomplish whatever it is that you are after.

So, the first question the coworker asked was:
Why do this?  (He was really asking,  "Why do this day job thing if you renovate and sell houses?  Or, why not renovate and sell houses exclusively?")

So, this is partially a Mick Jagger question.  

In one of the Stones books out there (either Blown Away by A.E. Hotchner, or Life by bandmate Keith Richards), it was reported that Mick kept attending classes at the prestigious London School of Economics while Keith and some of their other early bandmates pounded out music rehearsals and craftwork at their miserable little flat in Edith Grove.  Mick was, in essence, keeping the back door open just in case the front door of music failed to open fully.  Eventually he left LSE and focused on the Stones, but he waited until things were well under way, and the Stones success was all but guaranteed, before pulling that trigger.  

This is something that Martin Fridson points out that is common to the elite.  In his (almost tongue-in-cheek) book, How to Be a Billionaire (which is more a compendium of biographical sketches than a real "How To" book), Martin talks that almost all of his subjects exhibit this trait of having a back door, a way out, just in case things don't work out as planned.  We see and hear many, many stories of men and women that put all of their resources on black 33 or red 19 at the roulette wheel of life, and succeed or fail in spectacular fashion, however, according to Fridson, this is the exception not the rule.  More big wheels make sure that they have a spare or two in the trunk just in case.

Mick Jagger was not poor by any means.  His family was middle class, but he was still engaged in this pursuit to break out of an average existence prison.  He wanted something beyond the walls and razor wire of convention and used his heartfelt fascination with music as a vehicle to carry himself and his mates outside of those middle-class walls.  Be that as it may, he still kept a little powder dry and made sure that he went to the London School of Economics until the Stones had moved past maybe.

We aren't saying that we are Mick Jagger, like Mick Jagger, or even close to rockstar or billionaire fodder.  (We own a minivan, for pete's sake.)  But we are saying that having an escape hatch is a great position to be in.  Also, if we did not have a minivan full of kids, we just might do this full-time.  However, with a minivan full of kids, we find it prudent to meet our goals before even considering deep-sixing the day jobs.  In addition, why would we give up a great salary, fantastic benefits, amazing perks, and challenges we love in order to solely focus on one business that we also love, but is sporadic in returns -at least for the time being?  It doesn't make sense.  Then there is the time thing.

Let's be honest, here.  The proceeds from renovating a home can make a day job, even with a great salary, look like peanuts.  We talk about this sometimes -but usually only amongst ourselves.  Name another part time gig that can put thousands of dollars in your pockets while staying out of jail.  Most houses can take ten to twenty hours of our time because our methodology is to normally hire others to do all the work.  This blog takes up more time than some of the houses we have done.  Our profits are less than they could conceivably be in the end if we did the work, but the greater value to us is time.  

So, with that being said, let's say that we turn a profit of $6,000 on a house full of problems.    That $6,000 can represent $300 to $600 per hour of our time.  That's if the house sucks and we aren't doing well.  Remember, we have day jobs, so this is after-hours or on the weekend.  And, if it is during the week,  we are not exaggerating in the least when we say that we have signed documents at 30,000+ feet in the air on our way to an outing for our day gig.  Five minutes and domestic wifi on a domestic flight, and boom!  The house is closed and our proceeds are transferred by our lawyer to our account.  Or, we have used our lunch hours, or a Saturday morning breakfast, to get together and meet with our realtor.  We have met our contractor in the parking lot of our day job and handed over checks.  We have called our lawyer on normal breaks in the day.  And so on.  

The other thing here is another rock and roll analogy (although admittedly weak).  The drummer from Def Leppard had a Porsche or a C4 Corvette (we've heard both versions).  A few days after Christmas in the mid-eighties (December 31st, 1984) he was out with his girlfriend at the time, supposedly passing another car at high speeds late at night, missed a curve, and lost an arm in the ensuing crash.  (He's still with Def Leppard, by the way.)  He was left High and Dry (excuse the earlier, less pop-inspired reference).  The car and the inexperience, or over-confident driving, take your pick, is like the use of debt in doing renovation deals.  Debt is fine and everyone always tells you, "Don't worry.  I know what I am doing."  But then the economy throws a cyclical curve at the drivers.  This is a curve we should know is coming if we understand economics at all, and many people will tell you, their neighbor, and one another, "You know, we are due for a correction.  There's a bubble out there," and yet keep on with their high speed, over-confident ways.  Debt for us is like a formula one car in the hands of our seventeen year old son.  Or in our hands for that matter; a bad idea.  

We know so many people personally that have retained their appendages, but have lost their homes, bank accounts and cars, just because they were sure that they were on the fast-track and had complete control of their financial automobile, when that economic hard left turn popped up in the middle of the night.  Their success in other areas of their lives gave them a cockiness that they thought extended to all areas of their lives.  Even the areas that they mistakenly thought that they controlled.  These are the guys and gals who are the smartest people in the room.  We would rather say that we don't know what we don't know.  

So, our rule is no debt.  If we want to grow beyond our resources, we may consider taking on limited partners, but there again, that is like putting on slicks in a rain-soaked environment.  Your hind end is going to be all over the road, and you may be at risk of losing it -albeit at a potentially slower rate than debt.  

So to answer this question succinctly;  we don't take on debt and thereby limited our growth, we want to leave a back door open just in case the front door doesn't work, and this is truly a part time, evening and weekend gig for us at this point.  

Now ask us about our intentions...

We recently had a discussion with a coworker that asked the following questions:

Why do this?  (He was really asking,  "Why do this day job thing if you renovate and sell houses?  Or, why not renovate and sell houses exclusively?")

Why not borrow money instead of working from a cash-only basis?

What if you can't sell a house for enough money and need to take a loss?


If you were starting today, and you didn't have any money, where would you start?


Over the next few posts, or next few weeks (depending upon our travel schedule and other duties) we are going to attempt to answer these questions.  However, here's the gig, Sparky:  We are not saying that we have all the answers.  We are one small time and little business.  However, we are saying that our answers will be honest, straight-forward, and in line with the "what" and the "why" behind what we do.

We hope you enjoy reading our answers, and moreover, we hope you can use what you read.

Stay tuned.