Coming into Light

I can finally see a direction of where I am going, of where I am headed. This weekend, to celebrate our engagement and my birthday, we came up to New Haven to check out the RE scene. We both lined up several properties that made sense, in different areas so we would get a better feel of the area.

There was one which really struck my fancy, it was an ad on Craig's List (and I love Craig's List...that website has been one of the greatest tools in my life to date) that just said, "Wholesale -- New Haven" and a phone number. So I called the guy, who I liked from the first moment. I'm not sure how to describe it but there are people I like right away, or people who I want to stay away from. This guy was one of those people that I could talk to and enjoy a great conversation.

Anyway, this was the first property that we had lined up to see on Saturday morning. I had been warned that the property had some damage done to it because of a burst water pipe. I was also told that the furnaces and electrical systems would need some work. I was also told that this property was on the edge of a good part of town and a bad part of town, but that the former owner had rented it out to college students at Yale and another college in the area. It was a house that was purchased by a company in pre-foreclosure. There is still a lot of stuff inside the house and we were told that the house was rented as furnished to students.

I fell in love, as soon as we walked in.

This is not the kind of place that needs to be gutted, this place needs some work, some sheetrock, some locating of the burst pipe and repair, some electrical, some furnace work. It would be a project and something that I would love to do and oversee.

Reasons I love this:

Improve a neighborhood. Right now, a vacant house is a target for vandals. Not to mention, who wants to live next to the scary, empty house?

I have always wanted to rehab. I love the idea of bringing a home back to life, to restoring it to a welcoming place to live.

Cashflow. The money works on this place, and works really well. I still need to dig up a few numbers, but it is looking good right now.

Challenges:

The area of town. It is on a dangerous street. The street is also a main drag, so I feel more comfortable than the other pretty, quiet streets in NH where people are mugged at gun point because there is no one to see them...or hear them scream. Solution: assuming that the numbers come out like roses, we would not live there. Or, we would live there as some work was going on, but rent closer to school. There is an area right by Yale that is way over priced, but beautiful and lovely and pretty cheap to rent. That is where we want to live, but the homes there are similar to downtown Manhattan - a bargain may happen, but it is unlikely. I'll keep watching, though ;)

The scope of the project. This is something that we both feel like we can handle, but we have never done it before. Solution: DIY websites. Kidding. I want to ask the person who is selling it if he will adopt me as his mentee (word?). I then want to do the deal with his supervision and guidance. I would have all the risk, I would get to ask him all the questions. He has a bunch of great contractors in the area, and that saves us several steps, in terms of finding them.

Financing. I am still worried about this -- both because of my job situation, Paul's student loan lifestyle for the next 3 years and the bank situation. Owner financing is not possible for this one, but there are hard money loans -- I would like to find a way around this, that does not kill my credit score (i.e. putting everything on credit cards). I want to have strong credit so when the next deal pops up, I can jump. Right now, both of our credit scores are excellent. My ideal situation would be to get a mortgage through a bank, for as much as they will give me, but let's say it is for the asking price. Then, get a hard money loan, or get some credit cards through the LLC that I would have for the property and pay for the renovations that way. Reassess, refinance and relax for a bit while the cashflow rolls in.

My one question on this is; what happens if the property is valued today at X. I do the steps described above, and then have it reassessed, but due to the crazy RE market, the property is not reassessed at a higher amount. I do not think this is likely, but I was wondering if anyone had any ideas about this -- and how to handle it.

This has been such a great weekend. We have more properties lined up for Sunday, which I am looking forward to. If only I could sleep.... :-D

I can taste the future.