When I bought my third house it was a townhouse.  I was very scared and thought long and hard about it.  And it was only 35k.  Eventually you just have to realize that you only have so much downside potential.  It is certainly worth more than zero.  So then what is it worth?  Well who knows what the rock bottom price was but it definitely wasn’t less than 20k or so.  So ultimately I was taking a 15k risk which I can live with.  If I lose 15k I will be pissed but I am not going to go bankrupt or anything.  I can bounce back.  I have since made probably 75k off of this neighborhood alone.  I have owned 4 properties in this exact neighborhood and will buy more if they come available.

So I have ventured near downtown Dallas.  When I don’t have any investments going on I often broaden my horizons.  I step out of my normal boundaries in search of deals.  I have no choice I either put my money to work or I make nothing.  I would rather make something than nothing if the investment looks sound and requires no more extra work on my end.

So the one thing I don’t like is comps are a little harder to come by in this area.  No two properties are alike.  One townhouse community is nothing like the other community down the street.  You are basically comparing apples to oranges and if you do this you often get lemonade.  A recipe for disaster in the making.  Just like with my 35k purchase years ago I am having a hard time with this one.  I have thought long and hard over this one and I have decided my downside risk is very low.  Extremely low even which made me pull the trigger.  I fired in at 60k and have a feeling I will be getting this one.

My exit strategy is about 7-8k in work and list it way below market for a quick sale.  I could probably sell it without doing any work but why would someone buy from me for more than the bank is asking?  I plan on giving the townhouse a nice face lift and updating it to todays standards.  Even though it was built in 1984 it is defintely looking dated. I am going to put in new light fixtures, granite, paint, and probably redo the bathtub and tile surround.  I don’t plan on doing any of the work and think I will get out for around 7-8k or so.  I could probably do this remodel in about a week to 10 days.  It is definitely very minor.  I will then list the property at 99k and hope for a quick sale.  If it sells quick and for 99k it will yield about a 22k profit after all fees and expenses.  I would be insanely happy with that result.  This property is on the tax roles at 135k and should probably be listed at about 115-120k but I want a fast sell.

One mistake I believe I have made in my investing career is pricing all of my houses at the absolute top of the market.  While I have had some that have sold for nice prices I have also had some sit for a long time.  I will never go back and run numbers but in my head I can tell this was a mistake.  If I would have priced my properties slightly below market they would have sold faster I am sure.  This would have resulted in a NET gain over the method I used.  Holding expenses add up quick and end up costing you tons of money. For example I sold a house about a month ago.  It took me about 9 months to sell it and I dropped the price 20k over that period of time.  If I would have dropped that price originally I would have ended up making about 8k more in profit.  That is how much the holding expenses were and that was on a sub 100k property.  Another example that even proves my point and hurts very badly.  I sold a house this year for 375k.  I held it for just under a year.  If I would have just listed it at 375k to begin with I would have made about 30k more in profit.  That is some serious money.

Before this year I had an average turn around time of only 5 months.  So from the day I bought the place, all rehab, on the market, and closing was only 5 months.  This year however that number has bumped all the way up to 8 maybe even 9 months.  So on even a low end house that is an extra 3-5k in holding expenses.  Even worse than the cost of owning it is the stress it causes.  You are constantly wondering will this thing ever sell?  Will I have to lower the price?  Am I going to lose money?  This has also made me very scared of the market.

For the better part of the year most of my money has been tied up.  The money I did have I was just too scared to put it into play.  I had to keep my risks low and thus I have not purchased a property this year.  In the business I am in if you are not buying houses you are not making money. Simple as that.  In the area of investing I am in there is a saying.  You make money when you buy, you get paid when you sell.  That is absolutely 100% true.  So in essense you can argue I have not made a dime this year.

I finally put my first offer in on a house last week in probably 5 months.  It was a good feeling and while I thought it was a long shot I was excited and hopeful I would get the house.  I will give you guys some stats on it.  It is a bank owned property.  They were listed at 70k and it had only been on the market for 15 days.  The house is a wreck.  Someone went in and decided they didn’t like the floor plan and just demolished about half of the inside.  I have no idea what they were thinking I just have to go on they were on crack.  Not only did they do stupid stuff they did it in a shoddy manner.  Even if I wanted to use their remodeling I couldn’t as it is just idiotic.

Normally I can walk a property in 5-10 minutes and know exactly what my remodeling plan is and about how much it is going to take.  This property took me 40 minutes because I just couldn’t figure out what this jackass did to the place.  My plan is to bring it back to the original floor plan and it was very difficult figuring out how it was layed out.

I get home and come up with right about 20-23k to put this place back into the condition it should be.  That figure is with me not lifting a finger and subbing everything out.  At first I want to make a 40k offer but you have to fire in at a number that the bank will even consider countering.  If the property had been on the market for 6 months I would consider 40k a reasonable starting offer.  Since it is a fresh listing though I decided to go in at 47k with a goal of getting at 50kish.  I fire in at 47k with a 10k Earnest Money Deposit.  I also make my offers with no option period and no inspection period.  I want the bank to know I am serious, I have already inspected the property, and I won’t be backing out without losing 10k.  Does this help?  I don’t know but I would assume it does.

They fire back at 68k and then the next thing I know they have multiple offers.  I hate multiple offers.  People start bidding crazy amounts during multiple offers.  In fact I have even just backed out before during multiple offers as I rarely win them.  I have won a few though so I decide I will go ahead and fire in again.  Before the multiple offer subject came up I had it in my head I would pay a max of 55k if I had to.  I believe this place is worth 120k but I am running all my exit numbers on 100k to be super safe.  I don’t feel like wasting my time and not making any money as I have done on a couple of my last deals.  So with all these numbers in place I will walk with 15k in profit if it sells for 100k and I have an upside potential of about 20k.  So in theory I could walk with 35k which would be a home run deal in my opinion.

I will probably know tomorrow about this deal.  The deadline was today.

I hope I get it.

So what gave me the bright idea that this would be a good investment.  A few months ago my brother decided to sell his doublewide.  He had owned it for probably 4 years and for the last couple years it just sat there rotting away.  Finally he decided to just let the thing go before it rotted to the ground and at least get some of his money back.  This thing finally sold after a few months on the market.  All we did was put a sign out front and a random person would call every once in a while and it eventually sold.  Some guy with cash bought it and moved it onto his property.

So here I am without a rehab to work on and I am scouring through MLS trying to find my next deal.  I am scanning through property after property when all the sudden I come across a doublewide on about 2 acres.  The price looks very attractive and what I like best about it is I can easily pay cash for it and not be too concerned about tieing my money up.  I believe it was around 20k.  I start thinking all about this trailer and what my exit strategy would be if I purchased it.  I quickly come to the conclusion that I am going to buy a trailer, make the repairs and be into one for around 25k or so.  I am then going to sell this via owner financing for 50-60k.  I will hope for around a 5k down payment and finance the rest for 10 years at 10%.  I won’t break down the math for you but I will say it looks amazing on paper.

The next day I get up and I am ready to head out to this trailer to take a look at it.  The one down side to trailer investing is they all seem to be around 1 hour away from my house.  I don’t mind driving to get a good deal but I can tell this is going to be rather annoying if I am hunting these things down frequently.  I pull up the trailer on MLS and bam it is under contract.  WTF.  This sucks.  So there goes that idea right back to the back burner.

I really believe in this method and I like that I don’t have to tie up too much of my money.  I want to do a trailer deal.  I want to do one even at the expense of not making an amazing deal.  See with something like this no matter how much you research online you really get your education when you make a deal happen.  Everything you have learned up to this point pales in comparison to actually doing a deal.  So I head back to the MLS and start scanning away again at properties.  Ahh here we go here is 2 properties way the heck outta town.  Looks like I have another round trip ahead of me chasing some pie in the sky.  I get out to the first property.  This thing is in the middle of nowhere timbuktoo.  Most cars would have a hard time even making it down the road.  Pot holes all over the place I am wondering if my truck is even gonna make it.  Nothing like rolling down the street in an escalade on 22’s wondering if the next pothole is gonna blow a tire.  YeeeeHAW!.  So I pull up to this place.  I don’t even need to go inside as I know what to expect by the looks of the outside.  This place just needs to be torn down.  I have seen it all when it comes to single family houses.  I have done rehabs that your average person would freak out at.  I have made haunted houses into the best on the block.  This trailer takes the cake though.  I think you would be throwing good money after bad if you did anything other than just tear this P.O.S down.

I head out from this one and realize I am just out in the boondocks.  I am driving down country roads wondering if I am gonna be taken hostage by some country folk never to be seen again.  What if my car breaks down?  This is scary out here with these shanties for houses.  This next trailer is only 12 miles from this one but on these roads you might as well realize it is gonna take 45 minutes to make that trek.  UGH this was a mistake.  Stupid trailer business what am I thinking how do I want to buy one of these.  I finally get out to this trailer and it looks good.  I mean for a trailer it looks great.  Only needs a few minor repairs and this thing is ready to go.  I balk at the price though and figure it is just too far outside of town.  I don’t make an offer.

A couple weeks later I am looking through MLS and I come across another trailer.  Once again this thing is an hour away but it is near a lake that I have had my eye on for a while.  I desperately want a lake property and this is an excuss to go check out this lake.  I have never been to this lake and even though it is under developed currently I think it could be nice.  I head out there and just as I am getting there it is getting dark.  I have to decide do I go look at the lake or find the property.  I know the property doesn’t have utilities on so I must make a decision.  It turns out looking at the property wins.  I don’t get to see the lake.  This trailer I am looking for nowhere to be seen.  Out in the country google maps is not that precise.  It thinks this road is the next road over.  As it turns out the trailer is hidden behind another trailer and I miss it a couple times.  Finally after spending another hour driving in circles I finally find the place.  It is pitch black outside now.  Luckily I have brought a flashlight and take a jaunt around the property.  It is newer and appears to be in good condition.  Other than the annoying dog next door I want this trailer.  I think it would be an excellent initial investment into the world of doublewides.  It blows my brothers trailer away and I am gonna bid just under 13k for it.  Seems like an amazing deal to me.  I put my offer in and it turns out they won’t accept it.  They want 15k or no deal. I am just too scared of making a mistake so I back out.

Looking back I wish I would have went ahead and gone up to 15k.  The property only needed another 5k in work so I would have only had an outlay of 20k.  I feel like I could have sold it for 50k.  It doesn’t take a genious to look at that math and realize it was a great deal.  Just the learning experience…I want that learning experience.

I am pretty confident I will purchase a trailer within the next 3 months.  I just want to see how that business plays out and see what it is all about.  I don’t mind tieing up 20-25k to learn about it.