We’ve been working through three refinances for what seems like forever. And we were almost across the finish line, ready to wrap them up… almost.
Then we realized that I didn’t have marketable title for both The McCarty House and The Grow Room Home.
Oops.
Yes, I (kind of) knew I had to do this since we purchased both homes in last year’s Wayne County Tax auction. I say “kind of” because thinking back on it, I definitely recall my loan officer telling me I’d need to do a quiet title. But now that it’s been nearly a year, it slipped my mind.
So instead of putting some cash in the bank and relieving some of our cash crunch, I’m having to spend $600 per house to get marketable title and get this refinances closed.
The money is what it is. But the title company says it can take “up to a month”, and my loan officer said he’s seen them take six months (I think I’d die).
We started the process last week on the 19th, and I did see some movement from them today. I’ll be calling Monday to check on the status and hope that it moves faster than not.
I wish I could exclaim, “DEMO DAY!!!!” with the connotation that we’re rocking and will be done quickly. But that’s not the case.
I got started knocking down plaster and tearing out lath yesterday on our latest buy, Courtship Revival. It was just me working solo, and it’s going to take a long time just to get it down to the studs. That’s ok, the whole idea with this one is to learn more, not just about different skills and trades, but about the time it takes to do things, costs, etc.
Here are some photos of the room I got started in:
The first room I’m starting on.
Getting started on the opposite wall. Notice the dark lath on the left. It’s severely water damaged from the hole in the roof.
Progress getting plaster off.
Tested out pulling lath. Ultimately I want to get all the plaster off and then start on the lath.
More progress on the second wall.
I got this ventilator on Amazon for $30. The dust from the plaster is no joke!
I watched several YouTube videos on best practices when it comes to removing plaster and lath. They were helpful, but I’m honing my own process as I work. I’ve found that using the side of a hammer to whack the lath loose is pretty effective (I’ll do a video at some point). Much of it will simply start falling off the wall.
Today I’ll be taking a hand sledgehammer to see if that improves efficiency. I’m also thinking about how to tackle the ceilings. Duct taping a sledge hammer to a broom handle and hitting it with that may work well.
Regardless, there’s a lot to do here. Between the two units there’s something like 2,300+ square feet.
On Saturday afternoon I attended a workshop for installing exterior doors and windows at the Detroit Training Center. Given Courtship Revival has no windows, I figured I could save a ton of money by learning how to install them myself.
The facility itself is impressive. They have a number of stations setup for masonry, hardwood floors, tiling, and a bunch of rough carpentry for doing things like doors, windows, siding, etc.
Our instructor talking through the basics of measuring for doors and windows.
With our rough carpentry done, it was time to shim in the door.
Different stations at DTC.
Tile backsplash station. It’s not meant to be perfect, I’m sure… just learning the basics.
Overall, the course was decent. It was nice to see someone, in person, install a door from measurement, framing, and final adjustments. It gave me new appreciation for how time consuming installing a door actually is. Doing it took most of the 3-hour long class, granted the instructor was interrupted with questions quite a bit.
That said, I wasn’t super blown away. I wish we’d spent more time on windows, even though they share many similarities. While our instructor seemed pretty knowledgeable it was clear he wasn’t an expert in doors and windows. There was a question about security doors and he admitted he had zero experience with them and was unable to answer it. So I’m sure the quality of the course is heavily dependent on the instructor.
The course was $70, and you get slight discounts for buying multiple course credits at once. I’m still on the fence in terms of whether or not it was worth it, but I’m willing to take another before making a final decision.
I do firmly believe Detroit’s future is real estate and all things related (trades), so I love seeing things like DCI. I hope they realize the opportunity they have and continue investing in the trades.
On my way out, there was a film crew with a huge camera attached to a boom on the front of a car. The crew was loitering about. They must have been filming No Sudden Move.
It was November 18th, 2019… the day I won the auction for a ratty Detroit duplex. It was ugly, I knew that from the pictures. But it wasn’t until December 19th that I was able to walk through it (a few days before I was supposed to close on it) and see how bad it really was.
To be honest, I thought it’d be worse.
Yes, I knew the roof had a hole in it. Yes, the water damage and general exposure to the elements for what has probably been years was bad. But it wasn’t TERRIBLE terrible.
There was a lot of work to be done. That was clear. But how much… well, I’m not good enough yet to be able to quantify it. Regardless, I knew it’d be expensive so my plan was to punt on closing as long as possible so that we wouldn’t have to get to work on it until we had some free capital.
A couple days after walking the property, I received an email to schedule the closing. I haggled with the woman over the phone, hemming and hawing about why I couldn’t close soon, and in fact, why I couldn’t close until late March.
And I did have a partial excuse. After all, we were in California visiting family early this year from mid-February through mid-March. She bought it, and the closing was scheduled for March 20th, 2020.
Well, by the time March 20th came along, the world was looking pretty different. We honestly weren’t sure if we wanted to take on the financial commitment of this rehab. I’d walked it with my general contractor and he guessed it’d be anywhere from $100k – $120k to rehab it.
Oof.
So when we returned, just before we were supposed to close, I asked to push the closing. And it was rescheduled for May 26, 2020.
So we thought about it some more. I walked it AGAIN, and we decided that it wasn’t worth it. The duplex, fully done, would likely only appraise for about $80,000. Yes, it’d be a cash cow, but leaving so much money in the deal would hurt.
But I still wasn’t SURE sure, so I let the clock run out on the closing and when it was time to pull the trigger I told them that we wouldn’t be closing on it. I received confirmation that it was cancelled and I was in “default” with the Detroit Land Bank (gosh that sounded harsh!).
But it wasn’t long before I was regretting my decision. You see, Dougie Fresh is on the SAME block, on the other side of the street a few houses down. There’s something about the area I find intoxicating. Yes, it’s a bit rough. But it feels peaceful and (mostly) safe. I get good vibes. And every time I’m in the area, I think about how I’d regret not buying the land bank one.
So on June 8th, I emailed again but saying we’d love to still close on it if possible. And it was. So on June 15th we had a new closing date of September 30th, 2020.
Well, as that date approached we’d finally decided that yes, this is something we want to do. I was going to treat it like an experiment and learning experience, trying to sub-contract out some tasks, maybe do some myself to keep costs down.
But I didn’t receive an email two days before our closing date like I was supposed to. I knew this was a sign something was wrong, and I knew I’d be able to reschedule again. At this point we were super tight on funds (still are!) and any delay was welcomed. So I waited until September 30th and emailed my Land Bank agent saying I just received a notification from my calendar that we were closing today… “is it still happening”?
Sure enough, it wasn’t properly scheduled, so we rescheduled again for October 14th. I had every intention of closing this time, and we did.
Amrock closes all Detroit Land Bank Authority purchases.
Both kitchens look like this. This is the upper unit. The roof hole is directly above in the attic.
Upstairs living room. Not in terrible shape, but needs windows!
Upstairs hallway to bathroom and bedrooms.
It’s been a long time coming, almost a year. And Kaitlin and I had gone back and forth on it at least a dozen times. Ultimately, I just couldn’t let it go. It was a heck of a courtship. Hence the nickname, Courtship Revival.
At first, I planned to demo just the kitchens and do my best to repair the plaster in the other rooms. But I’m thinking it might be best to just take it down to the studs, have access to everything, and replace all of the mechanicals.
The demo on this alone could be $6k-$10k, so if I can do a lot of it myself and/or with neighborhood hired help, that could save a lot right there.
It’s definitely going to be an interesting learning experience. Stay tuned!
My tenant at Rutherford texted me the other day. It was a picture of a floor drain in the basement. She said, “Water kept coming up” through it. I texted it to my GC, who’s also been fantastic about helping me with small service calls like this, to get his opinion.
He said it probably just needs to be snaked, so he sent his plumber over there.
But he didn’t come. And he didn’t show the next day either. Everyone is slammed.
So his plumber recommended another that DID show up the next day. He spent three hours trying to snake it, cam it, etc. to find the issue only to conclude that the pipe is collapsed.
He said he’d be able to dig it out with his excavator but we’d need to rip out the back deck(!) to get to the main plumbing line in the back of the house.
WHAT?!?
I was a bit overwhelmed having to make a decision like that in 45 seconds, so we (my GC and I) told him to hold off while we talked to the original plumber, that we know and trust, to get a second opinion.
Well, we spoke to him and he said it sounded legit. So I gave the greenlight go have at it, stressing that I REALLY didn’t want to have to rip the deck out if we didn’t need to.
Friday I get a call from my GC saying he had “some good news and… well, some good news”. Apparently, the crushed part of the pipe was behind the garage, so it was unlikely we’d have to rip out the deck (awesome!). The other good news was that the initial quote ($2,500 — not bad actually) sounded like it’d be for the entire job, including the initial 3 hours the guy had spent trying to diagnose and solve the issue.
They were supposed to come back today and do it, but decided to wait until tomorrow because it was supposed to rain. For what it’s worth, it just started raining about 8 second ago (it’s 9pm at night). Whatever…
How did the pipe collapse? It’s not entirely clear (to me at least), but it seems that the neighbor’s tree that fell over in a storm in August not only damaged our garage roof, but was the culprit in the main plumbing line collapse.
This house, Rutherford, has been an absolutely nightmare, and I haven’t even written about the $25,000 insurance claim we had to make on it the other month.
I learned a lot with this one, and I’m definitely still paying that tuition off. If I thought I could sell it and get my money out at this point, I’m pretty sure I would.
Kibin received a check from the US Treasury today. Our mail goes to a company that scans it and gives us the option to have them open it, scan all pages, forward it, shred, etc. We do this because we’re a remote team, and I love it.
I wasn’t expecting anything from the US Treasury, and I only knew it was a check because of the clear envelope window on the front and the distinct, visible coloring of the check’s face. We used to receive quarterly checks for the R&D Tax Credit but we’ve since exhausted that program. Usually I’d just have those forwarded without having them opened and scanned.
But this one was unexpected, so I thought I’d kill the suspense of waiting for it to arrive and have it opened.
This wasn’t at all explained with the check. It was literally just the check and an attached blurb stating what to do if you thought you received the incorrect amount.
The “Notice 134” was ultimately what tipped off my teammate and generated our response through the Google machine.
So what, you ask?
So, I’m baffled we just received what, to us, is a sizeable amount of money. I didn’t expect it and obviously wasn’t planning on it. We were happy to get the PPP… now this?
My wife and I were surprised when we got stimulus checks in the amount of $3,400 during the earlier pandemic months. It seems there will be more, it’s just a matter of time. I also wouldn’t be surprised if there’s more PPP as well.
And the endless money isn’t just coming in the form of handouts. It’s in the stock market, too. I believe major stock indices are about to break higher because… well the government won’t let them fall.
It’s all mindboggling, and I’m taking what I can from wherever it comes from because this party has to end sometime.
We’re currently working our way through three much needed cash out refinances. As I outlined the other week, we’re pretty stretched in terms of finances right now. And a big part of taking some of that pressure off is pulling out capital from our latest rehabs, The McCarty House, The Grow Room Home (haven’t written about this one yet), and Somerset.
We have about $160,000 tied up, combined, in The McCarty House and The Grow Room Home since we’ve been dumping money into them and haven’t put a mortgage on them yet. Unfortunately, the appraisals for those didn’t come in much higher than that total sum.
Oh well, we can at least get 75% of the value out yet.
But a big surprise was Somerset where the appraisal came in at just $54,000.
Now, we purchased the home last year for just $40,000 and put about $15,000 of improvements into it. So the appraised value at least isn’t (much) lower than that. But I expected it to be around $100,000 due to two houses on the block, similar square footage and updates, that sold for $112,500 each. Things have really gone crazy in that neighborhood since April, with prices rising rapidly.
We contested the appraisal but heard back today that they aren’t budging.
Sweet.
I was really banking on pulling out some decent cash to invest in our next projects.
Why did the appraisal come in so low? Am I wildly out of touch with the home’s value?
For what it’s worth, I had two realtor friends pull comps for me. Both said they expected the home to appraise for $100,000 – $120,000 and they presented the comps to back it up.
Why it didn’t appraise very high likely boils down to two reasons. First, Detroit is notoriously tough for appraisals because the market is so erratic. You can have a home sell on the block for $100,000 and another sell for $20,000.
And lenders will lean conservative. So if they can point to enough comps that skew to the lower end of the market, that’s what they’re going to use. It makes it tough to pull off a true BRRRR in Detroit, especially when you usually have to dump a bunch of money into mechanicals.
So, will we still go through with the refinance on Somerset given our current mortgage was last done at an appraised value of $44,000?
Probably, even though it doesn’t seem worth it on paper. I’ll talk more about it later, but we’ve likely already spent most of the fixed costs to get to this point, our rate will drop, and so our monthly payment only goes up $2 while we’ll pull out something like $4,000 (woohoo…).
We’ll see how The Crown Jewel fares. I have higher hopes for that home simply because it’s located in a better part of the neighborhood and it will be a top-to-bottom (very nice) rehab.
But if that one doesn’t come out strong, we’ll definitely be doing some flips. I know if we listed Somerset on the open market we’d get at least $90,000 for it. And that’s what really drives me nuts.
And yes, we could change lenders, have it re-appraised, and hope for a better outcome. But on this end of the market it’s really not worth doing. I’d rather not spend the time and move forward.
I was chatting with a guy that lives in a Detroit neighborhood I invest in. He’s been in the community for 30+ years and teaches urban planning and development. He’s highly involved in the community and city in general. Very cool guy, but we’ve yet to meet in person.
We’ve chatted on the phone several times though, trade texts and sometimes emails.
We were chatting the other day and I was explaining to him how my investing philosophy has evolved. I used to buy occupied homes until I realized the inherited tenants are usually headaches.
When we bought Wrecked on Rutherford I learned that rehabs really aren’t all that scary, so we started doing more of those because you can go in, knock out what needs to be done, and know things are fixed and updated correctly, and then place a tenant you vet yourself.
Now that we have a handful of producing properties, I still want to buy them empty, but for other reasons as well. I want to be able to make an impact, even if it’s small for now.
I want to take that vacant, rundown house and make it nice, put a tenant in there, and hopefully inspire others to do the same. House by house, the neighborhood gets better… Detroit gets better.
That’s rewarding.
But it’s risky to do out of the gate when you have limited funds. The McCarty House went drastically over budget. I’ve avoided looking at the numbers until our appraisal comes back, but I’m pretty sure we spent ~$65,000 on the renovation.
We initially thought it’d be about $40,000.
Yeah…
That can wreck people, mentally and financially.
So buying the “turnkey” tenant occupied house is the safe way to start.
And safe can be smart, but it’s also boring. Boring is why people end up hating their careers and feeling void of purpose.
We’ve got some decent projects coming up, but we also have some refinances that will be coming through soon. That means more cash to spend. And I’m looking for a bigger project I can sink my teeth into and have even more of an impact with.
The latest mainstream meme cloaked as intelligent thought is, “CITIES ARE DEAD!!!”. It was the obvious, easy conclusion to make post-COVID. But like any good meme it needs to go viral to really become mainstream. We can (partly) thank James Altucher and his article, “NYC IS DEAD FOREVER. HERE’S WHY“.
James didn’t spare the caps lock key for his title… intentionally.
If you’ve ever read anything by James Altucher with at least one open eye (metaphorically here), you’ll know he’s more interested in producing content that’s jarring and controversial than actually accurate and substantive.
Why?
Because it gets attention. It’s the same reason our president lies and embellishes at every opportunity. It’s brand building in the most simplistic, ugly form of the word.
I’ve been meaning to write a quick thought about this for awhile. Back in early July someone posted to our FB real estate group saying,
The road to financial freedom seems so far away…
My quick, off-the-cuff reply was, “The road to nowhere is far longer”. It landed, because it’s true.
But there were plenty of other comments, one I found particularly disgusting. It said,
Wait for a good deal they’ll always pop up. And slow and steady wins the race. My motto is “calculated risk.”
“Slow and steady wins the race.” I’m not sure there’s another saying I despise more.
If you’re somehow unaware, the saying is derived from a fable in which a tortoise challenges a hare to a race when the hare mocks him for being so slow. The hare is so far ahead he decides to stop and nap, and the tortoise ends up passing him and winning.
The motto, “Slow and steady wins the race” is henceforth ingrained in children at a young age.
Let’s be clear, slow and steady does not win the race. It gets you to a pre-determined destination through sheer grit and determination much like grinding out 50 years in a 9-5 job will get you to retirement when you’re about too old to enjoy it.
Is this really what we want to be striving for? Is it what we proudly want to exclaim our strategy is in building wealth and aiming for financial freedom? Is it what we want to be teaching our children?!
Absolutely not.
The tortoise beat the hare, but he did not win. Let’s be clear on that.
The tortoise beat the hare, because of two things. First, the hare was distracted, lazy, and cocky. Second, the tortoise was a grinder.
What we should be aspiring to is a combination of the best attributes of each the tortoise and hare. Give me the speed and the recklessness of the hare combined with the determination and focus of the tortoise.
And yes, I said the recklessness. I want to formulate my goal and work relentlessly toward it as quickly as possible. That doesn’t mean just moving as quickly as I can, but figuring out ways to accelerate that with added risk taking.
THAT is how you get to financial freedom and still have time to enjoy it.
Yes, at times you will stumble. You may suffer a set back, like our hybrid tortoise/hare missing his turn. But you can quickly re-calibrate and continue moving at a breakneck speed. And who’s to say a wrong turn doesn’t turn into a shortcut? You don’t know if they’re there unless you’re looking for them.
So stop idolizing the tortoise. He’s a loser. His strategy is exactly what you’re trying to get away from. And just because you’re trying to get away from that grueling 9-5 by slowly working on your side hustle, real estate business, whatever, does not mean you aren’t being a tortoise.
If you’re moving too slow and playing it too safe you’re always going to be a tortoise.
