Winter Break and a tale of two escrows

Well,  Its winter break for the kids and this is when we typically head up to the cabin for a few weeks and put some mileage on our Big Bear season passes.

Unfortunately---the weather has not been that cold and the resort only has a base of 6-12” and it is raining up there this whole week----in fact, the resort is completely shut down today and is operating on a minute by minute basis----UNREAL!!  Last year at this time---we were looking at a 6 foot base and beautiful conditions-------OH—why now?

To top off this crappy situation I am in escrow on two of my properties—should be great but, I am having some issues with one of my places.  I am selling a 5 bedroom—3 bath home that is beautiful with new everything.  This was a whole house renovation----everything from the floors to furnace was replaced.  I am also selling it cheap---287K when the last house sold for 264K and had 1000 square feet less living space.  I am only selling it this cheap because the buyers promised me that they would close prior to December 31 2010 and I could book this revenue and post it against some earlier negative entries.

During the discussions about price-----I committed the Cardinal Sin—I negotiated against MYSELF!!  (Whats up Rookie?)  I knew what I was doing at the time---the agent was telling me how much they could afford, comps etc. and in one conversation I was in a good mood and said—“Yeah OK—as long as I net 280K and then 10 minutes later “OK we I will take 272” and then the next morning in a caffeine induced snow covered morning (I was at the cabin) I texted her and said if we can get this done easily and quickly I would take 265K (net). 

They agreed and we should have been off and running but, they came back a few days later with some kind of reasoning and said “Gee—would you take a net of 263K?”  I almost killed the deal right there but, I said sure—I will take it as long as nothing else comes up.  Wrong move—in fact most of the things I did in this deal were wrong and I knew it when I was doing it---why did I do it?  At some level I underestimated the agent---older lady (3 grandkids) and I was essentially just chatting with her. 

OK—I made some really basic negotiating errors and they are getting a good deal.  They should be happy and I should be taking my lumps.  The question is why are they now coming back to the table and wanting more???  The really crazy thing is that what they are asking for is essentially just pennies.  They came back with a junk’d up inspection report from a guy who after looking at a 2x4 would say---“observed rough wood, that is not square---consider having an engineer provide additional report”.  This guys report is a joke----and to top if off they agent then went and got an estimate from a heating guy who gave them an estimate that was about 5x actual costs.  Geez! 

So---no these guys are coming back and asking me to reduce the price to a 10K premium over what the last house sold for---remember—that my house is twice the size!!  2100SF compared to 1280SF or so—and then seriously want me to sell it to them for 10K over?  Either that or put an additional heating unit in----(I just put one in?!?).  So-instead of blowing up---I guided the agent to an online site and showed her that her clients could buy a wall unit for 400 bucks and that all the piping and venting is already inside the wall----------I had a 80 minute conversation with her about a 400 dollar line item?  Nutty—she kept going over and over saying “I want you to say that you will put a wall unit in”.  Boy—did I ever underestimate this lady----pit bull---1. see target, 2. Bite 3. Dont let go till you taste blood.  That is OK---she is doing a great job for her client although, maybe a little too good.

For me—I easily knocked off 15 thousand dollars from this transaction just to make it easy and now they are quibbling over 400 bucks?  OH yeah—this is a VA loan and MY fees are 24,0000 dollars because I have to pay for their whole escrow and promised to give them 9,000 dollars at the end of escrow-----and they are complaining about a 400 dollar wall heater?  Talk about not being able to see the forest for the trees—in their defense---they are newbies---never bought a house and are probably scared to death -----I am sure they are thinking that renting is so much easier----no decisions to make.

So---what is the moral of this story---the lesson?  I think it is this 1. never underestimate your other (opponent) 2.  Dont step into the ring unless you are ready to fight to the death and 3.  For every item you ever give up make sure that the other party gives up something in return.

 

 

About a week ago two of my properties went into escrow.  One is a

The other property is a 3 bedroom---2 bath condo.  In this unit i pretty much only put in new wood flooring and carpet----new paint and granite in the kitchen and bathrooms.

The prices for these two properties are as follows  287K for the 5/3 and 178K (I think—ned to look) for the condo.  Here is the funny thing----if you look at the values based on Zillow which are always low---the 5/3 has a Zestimate (Zillow Estimate) of 295K.  The condo on the other hand has a Zestimate of 143K.

So---I am selling the condo at 35K over the estimate and selling the 5/3 at a little less than 10K under the zestimate.  From just looking at the zestimate—it looks like the buyer of the 5/3 is getting a great deal---which is true.  The question is why am I having problems with these buyers?

Wow!! Last post was in January? 12 months ago--unbelievable

Well it is now December and have neglected this blog for a very long time----much of this neglect stems from being a little gunshy about posting my life online--very recently after my last post almost a year ago I had a meeting with a guy and out of the blue he asked me a question. I was kinda like "HUH?" and then realized that this guy had read my blog prior to this meeting---it felt a little awkward so........havent posted in the last year.

This blog is/was mainly meant to sort of be kind of a journal for myself---too many times I cant remember when some event happened I just sort of recall what else was going on at the time of the event----so I figured I would blog it and be able to document these events in a blog sort of timeline.

Anyhow---here is what is going on right now----still sitting on a bunch of real estate--7 houses---that is a pile of cash that is just waiting to be converted. For much of this year with everything in the economy looking kooky----I felt pretty good about having my cash in a hard tangible asset like real estate----I figured even if the economy completely took a dump I was in a better position with real estate than cash or stocks. Well---although the real estate market has stabilized (somewhat) there is still a ton of fear out there from buyers as well as lenders---so the time has come to sell of my inventory of houses.

I had two properties listed in the last 3-6 months and as of yesterday have two of the properties in escrow--now lets close them. Next on my list is a commercial property that I bought about 5 months ago----It has a pretty interesting "Light Industrial" zoning with super freeway access and you can see it from the freeway itself so--this should make a pretty good rental. I have zero interest in being a landlord but, in this case I am going to give it a try---after that sell the ranch. Funny thing is that I spent about 5K in September cleaning the 5 acres of landscaping and gutting the house only to leave the property vacanct for the last two months---I havent even been over there---nutty.

Kids are getting out of school for winter break next week and we are going to the cabin and begin putting our season passes to work--my goal this year is for me to get 30 days of snowboarding---that would make me feel good. I recently bought a bunch of cameras to tape the action of the kids --got a Vhold HD for my helmet and a super small Kodac for my pocket.

OK---I know this was a boring post but, had to get started with something. Next post will be some vids of the kids. I also am working on some tech ideas---one is for a pretty interesting Iphone App and another is a product post syndication concept. Neither one seems to be out there right now so..I need to get out of these real estate positions and start working on some different stuff.

Rambling views on the outdoors and addiction

This post is not going to be about any deals I have done or I am working on--although, I have done a few since the last post. This post is about recapturing passion. I recently turned 40 and somehow I have been thinking less and less about what I have done than what I have not yet done.

Sometimes when people ask "How are you doing?" My reply is "Just living the dream". While I am living a dream sometimes I wonder who's dream I am actually living. Dont get me wrong I would not trade my life or circumstance with anyone that I know but, still the thought of something missing gnaws at me. I have everything that anyone could want--beautiful wife and gorgeous kids. I have an amazing house and everyday I get to choose which of my 3 Porsches, Jeep or BMW motorcycle I will drive that day. BUT,,,,,what is lacking, missing or not yet full?

The funny thing is that I know what I am lacking but, even though everyday I take risks with my money I cant seem to take the risk involved to fill the hole. You want to know what I am talking about? I promise that it is simple but, its those simple things that will drive you mad. This thing I am talking about is adventure. Sailing the seven seas and climbing Everest. I know you were thinking it was something a little more mystical---a little more unobtainable but, a little adventure for me could be a dangerous thing.

I tend to be a little obessive. That may be too harsh a word -------maybe its self determined, ambitious, or single minded. I tend to see the goal and do whatever it takes to get to the goal line-----whatever it is called I have it. I get addicted to the pursuit and just like any addiction I will tune out, ignore or delete the things that get in the way of getting to the goal line. Therein lay my problem. What I need right now at 40 years old is to recapture the adventures that have always been on my to-do list. There has always been mountains that I would like to climb and routes that I have dreamed about completing. I have done plenty of routes and climbed the north face of Shasta and climbed Mt. Rainier. I have not done Denali and I have not done Aconcagua in Argentina. I would love to climb these-----so whats holding me back?

I think what is holding me back is fear-------not fear of the mountain but, fear that climbing or adventure gets a hold of me. I am scared that I will become addicted to peak or the next .........I think that is why I have stayed away from the things I loved when I was younger. I am afraid of falling in love again and ignoring everything else in my life. So--it becomes a question of blending---can a person truly cleave his passion in two equal pieces? Can a person be devoted to two causes simultaneously or does one side of the equation live on life support while the other thrives? In my case--those two pieces are my passion for adventure and my passion & love for my family. Maybe this is all mountain and molehill stuff-----maybe I wont get hooked----maybe....

Well I am going to give it a try-----this summer I am going to redo Rainier and see how it goes. I did it last about 8 years ago--I put together a team and I led the route-----this time I will probably do it the old man way and just hire a guide. I think it will be fun and a great way to rekindle the fire that use to keep me up at nights dreaming.

Right about now--

Over the summer I started looking for properties to purchase. foreclosures were up and I smelled some opportunity. I started looking in July and made a few offers in August--got one accepted and closed on my first flipper on Sept. 30. I got a pretty good deal only because I am paying all cash and offering to close in 10 days.

This particluar house is a 5 bedroom 3 bath home in a low income but, clean part of San Diego. My plan is to flip it so I want to do a complete surface renovation as cheap as I am able. I paid 160K for the house and so far I have about 11K into it. I think I can get it done for another 5-7K. The comps in the area range from 240 to 305K. I plan to list it between 260 and 280 and see what happens. I would be happy with 275K-----with net profit of 80K after all expenses (i.e. closing costs, commissions. etc)

Just after this house (La Paz) I purchased an equestrian center. I am very excited about this property. It is a 4BR/2Bath on 5 acres. WOW! It also has a detached 1100 square foot building that is plumbed for a granny flat. I got this place for 260 and so far I am not sure exactly what I am going to do with it. Its in pretty good shape right now and a house just down the road is very similar to mine and is listed for 585K. This one should be a really good deal.

Where I am torn is the sell or rent proposition. If I sell I can make some good quick cash---200 to 250K is pretty good for a few months work but, if I keep the properties and rent them I would be adding wealth to my net worth. The only problem is that I am having a hard time deciding which is better--take the 200K and roll it into another deal or rent it out and be cash flow positive of 1500 a month or so.

Anyhow---the most important line item for me right now is to finish the cabin so that I dont lose any powder days in Big Bear.

will try to keep this updated with pics---that would be great.

What next?

As usual--too long in between posts. I was busy this summer working on the cabin and trying to have fun with the family. I spent most of July in Big Bear working on the cabin. Its funny how things develop. Here is a quick synopsis.

In June I had a broker guy start putting out blind offers for me on some of these bank owned homes as it looks like the market is heating back up in San Diego--multiple offers over asking price. We got one in late June that I backed out of due to a lengthy repair process. Early July I got into another one from a different agent. This one is pretty good with about 50K in profit and 25 days of work. Just before I pulled the trigger I ran across the proverbial goose that laid golden eggs.

I met this guy who has many deep relationships with asset managers. He says that he can deliver very clean properties with 60-120K profit with almost no work in them. If this guy is legit---this could be huge. We will see. I am meeting him in 45 minutes to put 4 houses in escrow. I will be using my own money on these first ones--they have to be paid in all cash. If we can turn out 10 or so of these I will go back to my bridge fund friends and raise 5-8MM depending on how many properties this guy can provide. I really hope this guy can deliver what he says he can---we will find out this morning.

Dr. Horsepower: Those guys came back with some changes to the company and again want me to head it up. They have a lot of distribution in mexico and the net profit numbers look amazing. They also have an apparel deal in the works that could outshine the beverage piece. OK--looks good--whats the hold up? The snag is that they are undercapitalized and that puts them in a overhead/product squeeze. If I came on----my immediate attention would be fund raising while doing the buildout. Thats fine although, the growth could be so elastic that we could create too much demand out of the gate and not be able to perform on the delivery and service side. I still need to get my head around it.

Other than that----kids started school--sydney doesnt like her teacher but, Hudson loves it. Its sad to see them go off knowing that they will be in school for the rest of their lives. Cabin still has about 15 days of work left. Really looking forward to getting this done and doing some skiing.

One of those days

You ever have those days where it seems like either everyone you come into contact with is crazy? Either they are nuts or you are---the last few days has been like that for me. Those Dr. Horsepower guys Steve Scholl and Jim McCormick have flipped a switch.

On 2/27/09 I posted that I had been meeting with them again--(against my better judgement)---and they again wanted me to run the company and get the company off the ground. I met with them maybe 4 or 5 times and after looking closely at the company it became apparent that they needed some help and my background could be hugely valuable to this enterprise.

We discussed my salary and I told them that if I was going to dedicate more of my time to this project they needed to pay me. That became a problem for them----I am not really sure why but, Jim and Steve kept saying to join the company and just go out and raise your salary. I have no problems raising money but, I would rather join a company that is able to sustain typical overhead and spend my time raising money for growth and operational needs. I have invested in many private placements and it is my opinion that a private raise should not be for executive salaries but, that is just my thinking. It is possible that people are happy to pay someone to try and get a company started. More on this later.

Jumping forward to May 10 or so---out of the blue I get an email from them saying that they read my blog and that I didnt fit the company image because of my height. I was completely stunned. Where were these guys coming from and what prompted them to send that to me I have no idea. It was so crazy it was humorous. I sent the email to some people who were familiar with my meeting with them and asked for some opinions.

After me sending this out-----somebody thought it was funny to begin a blog. I wont give out the address at this time. I wont give it out because now these guys are threatening to sue me. What they are going to sue me for I really dont know. I have closely read the blogs and the items mentioned in it are common knowledge to anyone remotely familiar with the companies operations. All through this process I have never been asked to sign an NDA, non-compete or anything that would bind me to secrecy.

the only thing I can think of is that these guys are scared that during the fund raising process people will begin to ask certain questions that would be difficult to answer. In my opinion these issues are easily deflected because I am sure a paper trail is non-existant. That is if--they ever happened at all. I think they are also concerned about their other venture Dr. Prison.

The moral of the story is to carefully watch whom you try to do business with as you never know who is absolutely nuts and will threaten to sue you later. I hopefully have learned my lesson---and you know what my wife told me all along these guys were a waste of time---I just wasnt smart enough to heed your "womans intuition".

New Trends

As an investor I am a swing trader. What that means is that instead of looking at fundamentals of a company (stock) I tend to look for swings in the markets. The idea being that if you can jump on a rising tide you can quickly get some upside by following upward ticks and large volume. This is nothing new and really a fairly easy way to capture a few points (percentage points) on your investable money.

In addition to thinking this way about stocks I also think like this about new ventures. My last company www.swppsystems.com was just that. I started this company when two things were rapidly emerging. The first being a huge rise in new housing starts and the second being new laws that were established around storm water. It has been a huge success. With the rapid decline of the housing markets we have also seen a decline in the willingness of municipalities to enforce the laws around storm water. So----

I am always looking for new opportunities and lately I have an interesting convergence between a few things that could prove to be fertile ground for a startup. We all have seen how hugely successful and viral social networking is---facebook with its 50M users and myspace with about half of that. This "social movement" is really a blend of utilizing the internet with its global reach and making it relevant and local to a users wants and needs. We have seen a lot of companies try to do this with content---read citysearch.

The other things that is emerging is P2P (peer2peer) platforms. Five years ago all those bit torrent sites (i.e. napster) were doing p2p stuff with content that is nothing new; but, now P2P is different. We have blended this social movement into a P2P platform that is facilitating all sorts of things---we have social lending and microphilanthropy.

Social lending sites like prosper.com and microphilanthropy sites like donorschoose.com are facilitating inter-personal connections into financial transactions. My question is how far can this go? In 2007 P2P lending was a 700M market. It is projected to be 5B in 2010. While I think 5B is very optimistic there is no doubt that it is a movement that will get larger and larger in the future-------especially as the face of typical banking is rapidly changing and banks are going out of business.

The "swing trade" question is how does one capitalize on this? The easiest thing would be to take one of the more successful business models and introduce it into a different country with a vibrant economy--maybe India or the pacific rim. The other thing would be to take a slice of P2P lending and build it out--maybe focus on real estate or microbusiness loans.

I am not sure at this point but, as with anything timing is critical and its always working against you. Will keep you updated.