Who is selling that house?

If you are actively looking at houses today, it is likely you are seeing properties in these states:

1. Foreclosure – essentially the previous owner could not pay the loan and the bank has taken possession of the house. If the loan was backed by a federal agency (e.g. FNMA) then that government agency has possession of the house.

2. Short sale – the house is still owned by an individual, but they owe more on the loan than the house is worth on the open market. Thus, they are trying to sell the house for less than what they owe on the mortgage. This is subject to the banks approval.

3. Private sale – someone owns the place and wants to move. Maybe it is time for them to move to a diffent house (bigger, smaller) or maybe they need to move due to a job relocation or….

OK, so I have not bought a thousand houses, so my notes here are from my direct experience on houses I have actually bid on.

1. Foreclosures
I bid on a number (8?) of foreclosures and lost when looking for my first rental. Many of these needed significant repair and were under market value for the area they were in. As such, most of them attracted multiple offers and (in my opinion) drove the cost of the house plus the cost of repairs above market value. If you are investing to make money, this isn’t the way to do it. In my experience to date, multiple offers means someone is going to get emotionally caught up in it and pay too much.

I’ve driven past a couple of the foreclosures we bid on to see what is happening. One of them appears to have been purchased by an individual owner. They have cleaned the place up, repaired the damage (visible from the exterior), and painted. It looks very nice and I think they built some equity.

Another place has been under renovation for months. It is starting to look decent, but given the timeline, I can’t belive they are building any equity.

The third reference property sits un-renovated and unoccupied. I lost that bid by $2,000. It seems a shame to let it decay – there was a lot of potential there.

2. Short sale – I have not gotten involved with these because I have been told by some people that it is a long process. However, when I look at comps through the various neighborhoods, in multiple instances the short sales looked to have the best price per square foot, and based on pictures in the MLS seemed to be in decent shape Not a scientific study by any measure, but I think it deserves more scrutiny than I have given it.

3. Private Owners -My first rental was purchased from a private owner. It was in great shape. It was one of the first houses I really liked, but it was priced too high. I watched it sit on the market for months and months and slowly come down to my target area. I bid low, countered a few times, and still ended up with a deal I am very happy with.

I am under contract with a FNMA owned house now. I think it is decent deal, but compared to my first private owner deal, it is much less personal. There is no individual on the other side to deal with – just an agent tasked with getting as much out of the deal as possible. I think this model has pros and cons and will talk about the deal in more detail once I actually close it (otherwise it is all theory!).

Identifying potential properties

If you can’t rent it or sell it when you are done being a landlord, then the property is not a good deal no matter the price.

It is pretty easy to get caught up as price being the prime factor in a property. It is important, but it is not the only important thing. You want to know the neighborhood. Understand who lives there. Is this an area where your target tenant wants to be?

If the house is in a sub-division, it may be under the control of a home owner’s association (HOA). Before considering placing an offer, you need to obtain a copy of their governing documents and read them thoroughly, as they will detail what is and is not allowed, including the ability to lease the home.

I recommend walking or driving through target neighborhoods at different times of the day and on both week days and weekends. It will help you get a better feel for what living there is like. Does traffic make it difficult to get out of the neighborhood? Do you see lots of children and families out and active? Or does everyone keep to themselves? If there is an HOA, contact a board member and see if they are willing to talk to you about the area. It will give you an idea of how friendly the board is toward investors. Some are not that excited about the prospect of having rental property in their neighborhood. It is not a deal breaker, but you should know what you are getting into.

Once you have a few target areas for homes, you can use a tool to set up searches and email you results. I have been using ziprealty.com because I like the interactive map feature. I will also look at trulia.com for info. If you are working with a realtor, they may be able to enter your search criteria into a tool that will email you results or give you access to houses listed on the multiple listing service. Try some out and see what you like. You are also going to want to find out if the local tax records are on-line as they can give you a lot of historical information on a house.

Who is your tenant?

Before you jump into being a landlord, you should identify who you want for tenants. Families? Students? This will help you identify areas and properties that are appropriate for your target market.

I decided I wanted to rent to families who wanted a detached single family home in a good school district. Highly rated schools are a big draw. Families need space, so I looked at homes with four bedrooms. A nice yard is also desirable, as is proximity to workplaces, transportation, restaurants, shopping, and medical care.

I evaluated each house as someplace my family would live. If I would live there, it passed the test. If not, I thought really hard about why this would make sense to purchase.

Getting started I worried that being a landlord is something I might not like doing, so I also evaluated the potential exit strategy for each house.

Rental Property Startup

My focus the last year has shifted to identifying and purchasing rental property. I’ve always wanted to try my hand at being a landlord, but different fears kept me back:
- what if I can’t rent it?
- it will be too much work
- what if tenants wreck the place?

A combination of decreasing housing prices, low interest rates and a desire to try to build a business on the side made me make the leap.

I have acquired and rented one house and am under contract on my second property. So far, so good. I’ve learned a lot in the process and hope that you find this information useful.

Attic Fan Repair

I have a roof mounted exhaust fan in my attic that died sometime in the last month or so. I tried to ignore it, but with highs in the 90s and lows in the 70s the upstairs was not cooling down at night. Then I got my $400 electric bill. Ouch.

I’ll do all sorts of home repairs but I hate heights and I don’t get on the roof. I called a roofing company that advertised attic ventilation. They wouldn’t repair the fan and the replacement estimate was $580. Ouch again.

I found a vendor through ServiceMagic that said he would replace the motor for $250, which still seemed expensive.

I finally broke down, went to home depot, and bought a replacement motor and thermostat and did the job myself.  Parts ran $80 plus about 90 minutes in a very hot attic.

To figure out what is broken:

1.  Check the circuit breaker and make sure it is powered on.
2.  Turn the thermostat to its lowest setting to see if the fan will come on.  If it does, everything is working OK, the setting was just off.
3.  Beyond this, if you are not knowledgeable and comfortable working with electrical wiring, call a pro.
4.  To troubleshoot the thermostat, carefully remove the cover.  Using a voltage tester, make sure the black supply line is hot.  Assuming it is, with the thermostat turned to its lowest setting from step 2,  power should be supplied to the fan.  If power is not going to the fan, the thermostat needs replacement (assuming the attic is warm of course).  If power is going to the fan, then the fan motor needs replacing.

Here’s how you do it:

1. Shut electric off at breaker.
2. Take cover off existing thermostat. Pay attention to which black wire is connected to the hot wire and which one is connect to the fan.
3. Remove the existing thermostat.
4. The fan motor was held in place by metal strapping. Three screws held the strapping together. Support the motor and remove the screws. I had to bend the metal out of the way a little to get the fan blades past it.
5. The fan was connected to the motor with a set screw. Take note of the orientation of the fan to the motor so you can put it back the same way. Loosen the set screw with an allen wrench and remove. I thought this would be rusted in place but it came of easily.
6. Attach the fan to the new motor and tighten the set screw.
7. Place the fan back in the metal strapping and replace the screws. Double check everything to make sure the fan and motor are firmly supported.
8. Wire the fan to the new thermostat. The white wire from the fan will go the the white (neutral) on the supply wire. The bare copper from the supply will attach to a screw on the thermostat. The black (hot) wire will attach to one of the black wires on the thermostat. The other black thermostat wire will connect to the fan.
9. Make sure all electrical connections are properly made and place cover back on the thermostat.
10. Set the thermostat to a low setting.
11. Turn on breaker and test.
12. Once everything is working, adjust thermostat to desired setting.

I replaced the thermostat because I had the purchased the parts and already had everything apart. I used a voltage tester to ensure my thermostat was working ok before replace the (dead) motor.

Desk in progress

Here’s a picture of the in-process desk project.

It’s birch plywood trimmed with maple.  The cabinets on each side with either get a set of feet or sit on a base.  Each cabinet will get doors or drawers.  The top will remain open shelving.

Child’s Desk

The cabinet for the master bath is done and installed.  Next on the to-do list is a child’s desk.

This desk is for my daughter.  She has been wanting a desk so she a place to do her homework.  She also needs some storage for the books, awards, and general stuff that has taken over her room.

The desk will be simple but functional.  Two 15 inch base cabinets will support the top.  The top of the desk will have a shelving unit split in to three areas, a wide shelf in the middle and two narrower on each side.

The base cabinets will have some combination of drawers and doors, but I’m not sure of the configuration yet. 

I finished the carcasses for the base cabinets this weekend and rough cut the plywood for the top and the shelving unit.  I’ll trim everything to size on the table saw next.

Most of the project is 3/4 inch birch plywood.   It has a eucalyptus core, which is supposed to stay nice and flat.  I’ll trim the plywood with maple.  Drawers and doors will also be made with plywood and maple.

Master Bath Cabinet: Progress

I hesitated to title this post Progress, because at times this weekend it felt like anything but progress. Since 2010 is going to be the year where I learn from my mistakes, I won’t lead off with that. I’ll post the list at the end for those that may be interested or those looking for affirmation that they are not the only ones who make mistakes.

I milled the door frames last weekend. To safely cut the grooves for the door panel I needed a zero clearance throat plate for the table saw.  The one that came with my bench top table saw was way too open.   I’ve needed one for some time, but the shape of the throat opening in my table saw is odd and I couldn’t find anything available ready made. I bought a piece of phenolic plastic and milled it up this weekend.

I cut the first one using the router table and a plunge router. Way too much work. Once I had one made for the dado cutter I used the table saw to quickly clear the material for another one.

I figured this would be a good opportunity to try my new thin kerf Forrest WoodWorker II blade. I bought it awhile ago when it was on sale for a really good price, but have been having really decent results with 60 tooth blade I picked up at Home Depot for about $25, so I have been reluctant to switch. I only made a few cuts on ply for the door panels, but so far I like it.

So back to the cabinet doors. I assembled the first one, no problem. I assembled the second one and one of the rails is ever so slightly short.   How it got that way is a mystery.  I cut all four pieces with a stop block at the miter saw and checked them all when I laid out the frames.  Anyway, after messing around for an inordinate amount of time with the hinges, I got it pretty close.

So, truth be told, I was a little disappointed with the doors, but it will be OK. The perfectionist in me just saw it coming out a bit different.

So, here’s some things I learned this weekend that I hope to remember  next time

1. If you build it from the cut-off pile, you have to expect some issues.
2. If you put off building jigs you need (to work safely), you are going to have your project put on hold when you are most anxious to move forward.    Worse yet, you could get hurt doing something you know you shouldn’t do.
3. Adjustable hinges were invented to keep you from going insane when trying to align doors.  Friends don’t let friends  use cheap hinges.
4. Alignment and orientation marks on the wood are a good thing, but only if you pay attention to them when you join everything.
5. Revisiting your reference materials from time to time is useful.  I reread my router table manual and my plunge router manual this weekend and picked up a few adjustments beyond the basics.  I also reread the drawer chapter in Rae’s Cabinet Construction book to help me figure out design for my next project.

Master Bath Cabinet: Carcass Complete

The main carcass for the master bath cabinet is complete.  The outside dimensions are 25 1/2 inches high by 20 1/4 inches wide by 6 3/4 inches deep.  For this project I’m using leftover wood from other projects – 3/4 inch birch plywood for the sides, 1/4 inch birch plywood for the back and door panels, 3/4 inch clear pine for door frames and to face the plywood.

1. I started by ripping the birch plywood 6.5 inches wide on the table saw and cutting to length on the miter saw.  This is 1/4 inch narrow than the final dimension because I am going to trim the plywood with 1/4 inch pine.
2. Each piece was rabbeted on the table saw to recess the back.
3. Pocket screw holes were made the bottom and top pieces to join the carcass and a hanging rail.  The screw holes will be on the outside bottom and top.  I’ll fill the bottom with plugs and the top will be trimmed out.
4. I used a jig to drill holes for adjustable shelving on each side.  I think this is much easier to do before everything is joined together.
5. Back to the table saw to rip 1/4 inch strips to face the plywood and the back.
6. I screwed the carcass together with pocket screws first.  Then I trimmed the fronts with the pine so I could get nice tight fitting joints.  I just glued the trim to the front and used blue masking tape to clamp it in place until it dried.
7. The hanging rail was attached to the back using pocket screws.  The holes will be covered by the back.
8. Using a router with a straight trimming bit I cleaned up the edges of the trim on both the inside and the outside of the box.  I squared up the inside corners with a chisel.
9. Then the back was secured with some 5/8 inch brads.

Here are a few things I would do differently next time:

Rabbet for the back:  A first for me.  I used a Freud dado set which cut a very smooth rabbet.  I was so focused on getting the width for the back correct that I didn’t cut enough width.  What I mean is that I cut a rabbet about 1/4 inch deep by 1/4 inch wide.  It works fine, but it made securing the back much more tricky than if I had made it 1/4 deep by say 1/2 inch wide.

Adjustable Shelf Jig:  I was anxious to try this out and wasn’t paying as much attention to placement as I should have.  The first row of holes is too close to the front of the cabinet.  The jig includes a self centering 1/4 inch drill bit, which works much easier than using peg board.  If you try to go too quickly though, the shavings clog up the bit.

Trimming the plywood fronts:   I trimmed the pine strips on the front of the cabinet with a router.  It worked pretty good, but you really need to keep the router level on the piece to get a nice cut.  I had a few places where I tipped slightly and got a little gouge.  Next time I may try another method.  Maybe something on the router base to help steady it or maybe I’ll trim the plywood before joining and clean up the edge on the table saw or router table.

Start building!

A recent post from Adam King got me back in building mode. I have enjoyed building stuff since I was a little kid. I have decent skills with a wide variety of tools and have a pretty good depth of renovation experience in my personal residence.   Almost 25 years ago I built my first piece of furniture for my future wife from a plan I found in some woodworking magazine.  The finish is a bit worse for the years, but it is solid as ever.

Over the last six months or so I have become interested in learning more about building furniture.  I’ve taken some classes, read a bunch of magazines and books, and have been reading / watching tons of online content.

My goal is to learn how to do things properly.  I read somewhere that it takes 10,000 hours of practice to master a skill.  And with woodworking it seems there are tons of subjects to master – hand tools, power tools, safety, joinery, technique, design, finishing.

So in my journey I was learning a lot.   But the more I learned, the more I realized how much I didn’t know.  Mentally I was making lists of things I needed to learn and tools I needed to build things properly.  At some point, the investment in time to learn and money to acquire tools seemed to be overwhelming.  How would I ever learn enough or have all the proper tools to create furniture?

Adam’s post put things in proper perspective.  If I wait for the perfect level of knowledge and the perfect shop, I’ll never build anything.

So, I’m going to build.  With the tools I have and the skills I have.    On each project I’ll try a new technique or improve an existing one to make sure I keep learning.   And I won’t focus on buying any new tools or jigs until I utilize the ones I have.

OK, well, that last one might be hard.  There are a lot of cool toys out there .

So the next project is a small cabinet for our master bathroom.  Things I am going to try with this project:

1. Create rabbets for the back with a table saw.    My table saw is pretty rudimentary.  It is a bench top model I bought at Sears 10 years ago when I needed to rip down some hardwood flooring.
2. Rip some thin stock to trim out plywood for a frameless cabinet.
3. Focus on finishing.  This piece will be painted, but I want a smooth and durable finish.