My First Hurdle

My first hurdle with buying the condo -- getting non-owner occupied property insurance. You'd think it would be easy. Like one of the guys in the REIA groups says: "Nothing is easy." It's true, but persistence ALWAYS pays off.

After calling all of the big name insurance companies: AllState, AAA, Prudential, State Farm I realized that they would not insure a non-owner occupied property unless they also had my personal residence insured as well. I didn't want to do this because -- yes, I'm paranoid -- I was afraid a claim on the condo policy would jeopardize my residence policy.

But I gave in and called my insurer, Liberty Mututal, to get a quote. It was very reasonable, but I unfortunately found out that they will only allow one additional property after your primary residence. I told them I planned on buying a couple a year for many years...they said they coud not insure it unless I was willing to go to commercial rates (ouch!)

So, I put out a message on the local REIA message board to see who was using which insurance carriers. Belonging to a REIA group pays off again! I got some great contacts that I plan to use for the rest of my properties, and possibly even move the condo to at some point.

The key point I found was to work with independent insurance brokers and forget about the big boys. A well know agency that has specialty landlord policies is Foremost at http://www.foremost.com/products/basics/landlord.htm. Hope this helps!

I'm Buying a Condo!

For the past few months I have been looking not only for wholesale and lease/option deals, but to get my first buy & hold rental under my belt. I want to start this sooner than later since this is a long-term strategy. Also, I just want to see if I even have the "right stuff" to be a landlord.

I have recently -- last few weeks -- backed off on looking at houses to rent since it was so difficult to find anything that would have positive cash flow with taxes and prices so high right now. So, I have been looking at condos, which also have this problem in some respect, but there are a few good deals. The places I have been looking at that would actually be profitable have been absolute wrecks from the current tenants. It would take a lot of time/money to get them ready to rent. One lady had 12 pets (5 dogs, 7 cats!) and there were holes in the wall, and dubious "modifications" to parts of the condo. Another was literally covered in clothing piles and garbage. I realize that these typically make good deals, and I was considering putting in some low-ball offers -- even though I was unsure of how much more money and time I would have to spend to prep them (I wanted to have them ready to rent prior to Labor Day to catch the "move before school starts" rush)...when suddenly --

I finally found a unit that the owner insisted the tenant ruined, but went to see it anyway. Compared to the others, this place was move-in ready. All of the so-called damage was really just wear-and-tear.  It only needs paint and carpet, and possible a ceiling fan or two. The owners were selling for at least $10K below market price! The bad news was that it was under contract. However, the Realtor had let me know that the contract was about to fall through...so, I made an offer of a few thousand below the asking price and it got accepted. (WooHoo!)

This will be my first buy and hold property -- and my first test as a landlord. I expect to close the end of August.

Cash Flow Problem
I was getting a little nervous right after since the mortgage broker I was working with was trying hard to find me the right loan. Everything she presented to me was good, but not enough to get me positive cash flow contrary to what I had estimated -- more like break-even. So reluctantly, I had to out down 15% instead of 10% and that seemed to make the difference...she was able to find a great loan that gives me more than $100 positive cash flow per month. The bad part is that I now have NO money left to invest in other properties. It looks like I will really be forced to do the no money down deals now

I have to go pick up the Association By-laws later today and drop off the check for the appraiser.

Quick Summary & Update - Lots of Movement, No Traction

Ok - Sorry for not being more punctual in updating this - I promise to be better from now on
A lot has happened since last time so let's summarize:

* My newspaper ad drew no calls - yes, NO calls! I did not run it again in that paper...I will consider a larger daily paper next time.

* Attended meetings for both of my local REIA groups and saw Ken Williams the Wholesale Wizard, and Scott Rister. Both were very good, but I did not buy any products this time -- I have spent way too much for right now...more than I can absorb!

* I have been distributing business cards everywhere I go including shopping carts, store shelves, ATM machines, everywhere...no calls yet, but no complaints either.

* I have been getting pre-foreclosure leads via email for my hometown. I developed a 3-page colorful and sympathetic letter providing options for those in pre-fore and of course ask them to give my 800 number a call. So far, I have sent out about 12 letters.

* I bought the domain name IbuyNJhouses.com - for now just forwarded it to my other site www.ophiucus.com... not sure what I'll eventually do with it. Choices are create a lead generation site, or re-sell it.

* I also sent out a letter to a distant owner (obtained via the tax records) of a vacant house asking if he wanted to sell. (No call)

* I sent a letter to a local landlord who had a For Rent sign up. The letter offered her no tenant hassles, full tax benefits, and guaranteed rent for at least 2 years - it was a Lease Option sandwich offer essentially. (No call)

I think the key to all of this is follow-up. That is what both Scott Rister and Ken Williams said during their presentations. I created a direct mail tracking sheet in Excel, but might have to go to something more sophisticated.

I have been avoiding using bandit signs, but from everyone I talk to, this seems to be the best way to generate leads randomly - unless you have a really good direct marketing campaign.
The biggest issue so far has been juggling my "day job" duties, with family, and now my new "hobby" of RE Investing. Hopefully, once I get a deal or 2 under my belt I'll start to get some sort of system going.

Bought 3 New Books

OK - I think I do too much reading instead of doing...but I can't help it, I love reading about this stuff!

* Investing in Real Estate with Other People's Money by Jack Cummings
* Making Big Money Investing in Foreclosure by Conti/Finkel
* What Every Real Estate Investor Needs to Know about Cash Flow by Gallinelli