Welcome to Chez Cliff!

Last week, the Real Estate Agent and I had a great meeting.

Reviewing properties for sale, this trend has started appearing.  Halfway through a renovation, people are stopping and being forced to sell.  Why?

Banks have closed off HELOCs.

It’s common practice for someone to purchase a property, take some equity out, then finish the property.  The only way to take the equity out is in the form of a HELOC, which banks are closing down due to the state of affairs.

Moral of the story:  the property can’t be finished.  Surprisingly enough those mortgage payments don’t go away.  One day, Mr Bankruptcy will come knocking at the door.  The only solution: sell.  But banks won’t finance a property if someone can’t live in it.  My bank wouldn’t finish my appraisal because no carpet was down in the bedroom.  Forget that everything else worked perfectly.  No carpet equals no appraisal.

One property we looked at.  A triplex.  One three bedroom, three bath.  Two one bedroom units, both rented out with total $2000/month rents.   The three bedroom was completely gutted with brand new, up-to-code electrical and plumbing.  No drywall on ceilings or walls.  Floor was plywood.  

Asking price:  $575,000.

Our thought was to offer $520,000 with 10 day escrow.  Who can say “no” to that when facing bankruptcy?

As far as cashflow is concerned: this particular property had three units.  Total incoming rent would be $4800/month.  Taking a look at the mortgage, insurance, taxes, water – roughly around $4500/month.  The numbers look good.

Stated previously, no bank will finance this property.  Many investors would be hardpressed to just “pay cash” and come up with $520,000 for one property.  Afterall using 80/10/10 financing, an investor could buy $5 million in real estate.

Really this can be done only one way: hard money lender.

REA and I were looking over contracts, essentially getting a hard money loan between 8 and 10% with no payments for 90 days.  At the end of 90 days, the property is finished and the bank will now finance it.  Between 6 and 7%.  Pay off the hard money loan with a bit of interest.  If the property for some reason can’t be finished and refinanced the hard money lender takes possession of the property*.

“Buy when there’s blood in the streets” – Baron Philippe de Rothschild

The fire has returned.

Wait wait wait a minute.  No, I’m not buying the aforementioned property.  A hundred things must be done before this and I’m on thing 14.  This is talked about now because (1) the media is completely inept and this story won’t see the light of day (2)  it happens to be a strong possibility for finding cash-flowing properties.

*Of course, many details about the contract have been left out due to keeping this article brief.  It’s just an option we’re exploring.

The carpet in the back house looks like someone has been practicing aircraft carrier landings on it.  Deep, deep paths are worn into it, nearly showing the bare threads underneath.

Never, ever have I seen carpet worn this bad.

The skid marks scare me.

This is not upsetting. It is expected. It is naive to think carpet, especially the cheapest rental carpet, will last forever. Carpet is made of fibers and fibers wear out.  Three years has passed since it was installed.  Since this tenant shows no signs of moving out it will probably be another year at least before the carpet will be replaced.

Back in the exciting days of yesterday Project #1 Back House had the cheapest, blandest, most neutral color installed.  Even being the cheapest, the carpet bill came to $800.  Thanks to the Home Depot super-fast carpet installation, the replacement carpet will probably be 2/3 of that price at least.

With the Project #2 “back house”, the floor was not carpeted but tiled. It was more of an experiment, than some kind of business decision. My curiosity wanted to know how tile would fair against carpet. It’s probably not a fair experiment, for I recognize this is still my residence and I’m a fairly neat individual.

Tenants may be able to destroy carpet but somehow destroying tile doesn’t seem feasible.  Granted, some tenant may attack the floor with a hammer and chisel in some meth-induced frenzy.  But this is Southern California.  People don’t do meth here.

For Project #1, installing the carpet twice will cost roughly $1400.

For Project #2, installing the tile was $1200.

For my numbers, it seems that 5 years is the break even point if tile is used instead of carpet.

Every day this week, between 30 and 50 flies have greeted me when returning home.  Before no flies existed in my house.  As of this last Monday that all changed.

This isn’t the first time I‘ve dealt with uninvited guests.  

The flies gather at either the bathroom window or the right front window.  No place else.  Committing the shameless murder of dozens of flies, or flyocide, is at least efficient.  But it is not all fun and games.  Someone has to pick up their bodies.  

To solve the problem, determine the cause.

One of three explanations as to how this many flies entered the house.

1. My mom is convinced the flies are entering a tiny hole under the bathroom sink, connecting the outside world to my bathroom cabinet.  For some reason, I can’t imagine over 100 flies entering my house, in a conga line through this hole.
2. The homeless dude in the alley is actually Moses, sending a plague on my house.  I tend to resist this because (a) I’m not a Pharaoh (b) if some dude threw a stick on the ground and it turned into a snake, I would do whatever the mofo said.
3. Something icky crawled under the house and died.

Number 3 wins!

There’s a couple of options.

1. Hire a midget to explore the very cramped space under the house, looking for icky dead thing.
2. Superglue suction cups to an Iguana and attach him to the window.  Bon appetit!
3. Drink wine out of a box, watch Star Trek.

I envision the Real Estate Agent, showing the house to some perspective buyers.  He opens the door, suddenly 50 flies descend upon him like a bunch of drunken frat boys on a stripper.

The Gaslamp district of San Diego is laid out like a PacMan maze. Block after block, turn after turn no matter where you look there’s a restaurant.

Not just any restaurant. No, these restaurants are the fine and refined best that San Diego has to offer. In order to even be considered for dining, these places need to have as a standard “Zagat Rated” hanging in front of their establishment. But it doesn’t stop there: every positive article, written in “Fine Dining” or the San Diego Tribue must be posted as well. One place was found without either: McDonalds. But hanging dutifully in the window was the article, proclaiming McDonald’s coffee better than Starbucks.

Not bad for a clown.

This maze of restaurants is conveniently located at the end of the Amtrak line, the Santa Fe train station. A 30 minute drive from my house puts me inside the train. After all, with gas breaching $4/gallon the train ticket to San Diego is now cost effective. With decent public transportation, a traveler can easily get around without having to worry about parking.

With that being said: San Diego is now designated as one of my haunts, some place where I can escape for a day. Or two. Captain Kirk already helped me once, why not again?

Unfortunately on this last trip, my parents don’t share my culinary sense of adventure in trying new places. We ate at the “comfort food” places, which was fine.

It’s only two hours away from Chez Cliff.

Taking the day off.

After a brief stint in San Diego with the parents, I’m exhausted.  Of course, spending two and a half weeks on the couch didn’t help matters much.  Six foot dude + 5 foot couch = sleeping fetal syndrome

Dementia must residing in my head.  All my thoughts end with vision of peas.

Until tomorrow.