Which is annoying in and of itself, but more so because the buyers are using the downtime to create list after list of “repairs” they want done. I just finished List #5. Each list has had about 5-6 items on it, with nearly all the items to be “repaired” along the lines of “Caulk top of shoe molding trim on left side of closet in second bedroom.”

When the minor nature of such repairs on the lists is pointed out to them via their agent the response has been “But we’re paying full price.”

Well, yes, yes you are. And that’s the only reason I’m largely biting my tongue and continuing to address the nine million tiny things you find going over the house with a fine-tooth comb. Well, that and the fact that you’re paying in cash. But my tongue is getting a bit sore and, well, you realize that at some point you will (hopefully) own said house, right? And that I’m not going to be there to continue to do things such as “raise height of water spigot in backyard 12 inches so as not to have to bend over so far”? Right?

But yeah, it could be much worse, all things considered, so I can’t complain. Just want to get the thing closed and done and completely and utterly out of mind and finished.

I’m waiting to get House #2 sold and House #1 refinanced before tackling any major renovations at the house we live in now, but I have been slowly tackling the fairly ginormous task the last few weeks of cleaning up, de-cluttering, boxing stuff up for a yard sale/Goodwill donation, and generally trying to get our house in order. I’ve been so busy working on other houses for the last year or so that things have gotten pretty out of control at home as far as crap perpetually being stored and/or strewn everywhere, so its kind of nice to dig into stuff with some order slowly being restored.

As far as assorted real estate stuffs, we actually managed to get House #1 rented about a week ago, while I was still in Vegas. It’s only a six month lease but it was pretty spur of the moment, as the guy renting it is re-locating from Dallas and his other plans fell through at the last minute, so he needed something quick and easy for six months while he can sell his house in Dallas and find something to buy here. Not optimal but his application and credit was pretty spotless, he just got hired as a manager at a local plant, makes good money, etc. I’d have preferred a longer lease but it’s a decent band-aid to get it rented and get a tiny bit of cash flow moving, and a good bit more once I get it refinanced.

The sale of House #2 is still chugging along. The buyer’s had their inspection done and it didn’t turn up anything too major. They requested some repairs and nearly all of it has been knocked out, except for some electrical stuff their inspector was just flat out wrong about. He noted several things that he considered not up to code but it only applies to new construction, and the city has already passed us on everything he noted, and we called them out again just to be positive that the stuff he noted was in fact kosher and fine. So now we’re going back and forth a bit with the buyers trying to get the electrical stuff excluded that should have never been in his report to begin with (but which they’ve obviously seen and are concerned about).

All in all, though, the inspection report was pretty clean and all systems are still go for hopefully closing in the next week or two. Which will be a pretty huge relief, financially and psychologically, as I’m really, really ready to be done with that place.

Before Photos

After Photos

Not the best way to view it, I know, but I just don’t have the time to do the extra Wow! thing and place them side by side, so this’ll have to suffice for now for those curious about real proof of the beast of a project that’s kept me busy for months.

Kind of a funny scene yesterday as I was driving to Austin to buy a new laptop and drop off my extension ladder with a friend doing some painting on his house, and I just threw the aluminum extension ladder in the back of my truck and took off, like I’ve done a thousand times. My wife always nags me about not strapping down anything in the back of my truck, but, bless her heart, it’s more from a lack of grasping the physics involved, as she’s convinced that anything in the bed of the truck that weighs less than 300 lbs is subject to constant gale-force winds and in imminent danger of blowing out.

So I’m driving along merrily at about 70 mph yesterday and remark to myself, “Self, gee, it’s damn windy today”, as we were getting 20-30 mph gusts of wind, enough to blow my wee little truck around on the highway, when suddenly a huge gust of wind just blew the ladder right out of my truck. I mean, just cleanly whisked it out and sent it spinning (thankfully) about twenty feet over onto the side of the road, well away from traffic when it finally touched down.

The funny part is that by the time I slowed down, turned around, and got back to it (which took about 90 seconds), some dude had already stopped and was loading it into his truck.  I got out of my truck came running up and he’s looking at me like we’re about to have a Mortal Kombat style deathmatch there on the side of the road over a $50 ladder, but he caved in fairly quickly and laughed when I explained what happened, as I was like “Dude, look at all the paint cans and drop cloths and other sundry crap in the back of my truck. Seriously, that’s my ladder.” (Well, okay, I didn’t actually use the word “sundry”.)

Manage to safely deliver the ladder (after, umm, strapping it down securely) and bought a new laptop in preparation for another poker reporting gig for PokerRoom.com in Las Vegas from April 15th-27th. I’m not 100% thrilled to be gone that long, especially when trying to close on House #2, but it’s good money and hard to turn down staying at the Bellagio with meals and other perks provided. And yeah, I likes the Vegas, so I can’t really complain, I just wish my wife was there and that the trip was about 5 days shorter, as a week is usually enough time for me to get pretty sick of being away from home.

As far as a little more about Bellevue Block, here’s what their website has to say:

The Bellevue Block is a real estate team led by experienced Realtor, Cherie Lang, with Windermere. Our focus is to provide detailed information on homes and condomimiums within walking distance to the downtown Bellevue corridor. 

The Birth of The Bellevue Block by Cherie Lang

When I decided to purchase in One Lincoln Tower in Bellevue, I did so primarily as an investment.  However as the time of completion drew near, I found myself filled with excitement to live there!

Clients, friends and family were eager to know more once they had seen my unit. As I began my search for condominium information, I realized there was no central site to compare and retrieve facts on all of the many projects  popping up in the Bellevue Condominium market.  Thus, the Bellevue Block was born.  I trust you’ll find all you need at TheBellevueBlock.com, and when you’re ready to buy or sell your unit, you’ll call on me and my staff to  help  you navigate through the process.

My only beef with passive income is that it seems to increasingly be tossed about in contexts that I’ve personally found to be far from passive, if you want to have any success at all. It seems that suddenly it’s hip and cool to talk about passive income as a goal (which I’m all for, don’t get me wrong, as I think we’d all love to be in a position where our bank accounts grow of their own accord), but it’s hard for me to scan the horizon or pull from my own experience and find many situations that actually produce the much-talked-about passive income.

Case in point: I’ve been involved in affiliate marketing/SEO optimization for nearly 10 years now. I’ve got a dedicated server with approximately 250 websites parked on it, all angling to make money in one form or another, whether it be from direct e-commerce sales, Adsense ads, affiliate products, direct ad sales, text link sales, reviews, you name it, I’ve got a site that’s likely trying to capitalize on it.

House #2 pretty much dominated my life the last month, with all my free time going into the renovation work there, so I had essentially zero time for my Web ventures. I didn’t launch any new sites, didn’t overhaul any sites, didn’t do a single damn thing to any of the sites other than the bare minimum to keep the trains rolling. For the month of March I ended up with a net profit of +$2,072 from all of those websites combined.

Pretty sweet, no? 2 grand in passive income isn’t something to sneeze at, not for me at least. But is that really passive income?

By definition, sure. I did nothing, yet all of my little sites hummed right along, producing a handsome profit. In this example, though, there’s a piper to be paid later down the road. You can’t really sit still in the world of affiliate marketing via websites, as things are always in flux and your targets are moving. Google is constantly tweaking its search algorithms, competitors are angling for top keywords on your sites, sites that get a short-term boost due to current events or links from huge sites drop back to reality, etc. For the particular game I play in the affiliate marketing world, I have to rely on volume, as far as producing lots of sites that typically return a decent but small profit, so I’ve got a pretty consistent churn of sites that I launch and build up, they make decent money, then slowly spiral down to producing nothing.

While taking a month off didn’t show any demonstrable effects, as far as income I’m going to pay for it 2-3 months down the line (unless I bust my butt in the next month or two working double-time), as I won’t have sites in the pipeline that start making cash to replace the ones dropping down in search engine results.

Which, really, is the point of this babbling about passive income. In my case — and I think in many cases when people discuss passive income — it’s not really passive income at all, as it requires a good amount of attention moving forward. While the sites I’ve built in the past are on auto-pilot and passively generating income, they’ll almost assuredly die a slow death if I never touch them again, and my net income will drop unless I constantly pay attention to them or add additional sites.

I think the same is true of many other cases where people talk about passive income, especially in real estate. Rental properties are usually what’s discussed, in combination with property managers that handle all of the day-to-day work, allowing you to simply cash fat checks  as the owner. Which could definitely be the case in some situations, but far too often investors are stuck managing their property managers, rotating in major repairs to rentals stuff as new roofs and/or renovations between tenants, scoping out new properties to buy, determining when the best time to sell other rentals is, etc.

At the end of the day it’s pretty difficult to find any magic passive income pill that really works as promised.  Or at least that’s been the case in my own personal experience, as anything that will make you money, whether it be REI, affiliate marketing, or even investing in dividend-producing stocks, also includes more than a small amount of associated work, if you really want to do it well and be successful.

Granted, it’s not as sexy to say “Project A should generate $1,000 in income from a massive amount of hard work, planning, and determination” when you can say “My latest venture will easily provide me with $1,000 in passive income”, but in my experience the former is far, far more common than later, unsexy as it may be.

The buyers are scheduled to do another walkthrough on Thursday and hopefully everything will be to their liking and we can get serious about setting a closing date. Since they’re paying in cash we can blessedly skip underwriting hell, so I’m keeping my fingers crossed for a pretty quick close.

It’s been kind of nice to gear down slightly over the last week or two, with stress levels dropping dramatically and a chance to recover physically a bit after a fairly intense 3-4 weeks there tiling, grouting, and refininshing hardwood floors. My hands are actually clean and grout/paint/stain-free for the first time in, oh, probably a month or two.

As far as future REI scheming, I’ve been mulling that over in my head a lot of late. The short term plan is definitely NOT to run out and buy another house, as I have to get House #1 rented and re-financed, and there are a ton of upgrades I’ve been promising my very patient, very awesome wife to do on our own house.

What I’m unsure about, though, is just how far to go with upgrading our house. I’m considering tackling some pretty substantial projects, such as a complete kitchen upgrade, adding a workshop/guest house in the back, adding a deck, etc., and am currently rolling around the idea of doing all of that and then refinancing our house as well to extract some equity to build up more capital in the war chest to go after REI pursuits.

I can’t get as excited in the past about the prospects of flipping more properties, but some of the foreclosure listings out there are pretty dang attractive right now. There’s too much economic uncertainty floating around for me to feel comfortable tackling another flip like House #2, but I think with the right game plan I could make a go of picking up beat-to-hell foreclosures for cash, rehab them to the point that they’re rentable, rent ‘em, do a cash-out refinance to get my cash out, and rinse, lather, and repeat.

 I looked at a couple of foreclosures the other day and one was listed at $30,000 cash for a 3-2 1400 sq. ft. house on a .3 acre lot. It’s definitely beat to hell but it’s far from a scrape and I could probably get it for $25,000, put $15,000-$20,000 into it, rent it for $700/month, and get a loan to get my cash out, as similar houses in the neighborhood appraise for $80,000-$90,000.

I’m pretty bullish about the long-term prospects of property values in our area 5-10 years from now, and picking up a bunch of rentals at (hopefully) artificially depressed prices could be a very good thing. I’d be giving up any short-term dreams of flipping houses for a living as a full-time job, but that’s increasingly a bit of a pipe dream in the current market that we’re in.

I ran all of that by Contractor #2 and he’s pretty much on board and willing to scope out potential properties with me, so we shall see. The biggest issue is speed, as far as cranking out projects like that, and while I’ve been happy enough with Contractor #2’s work, I’m not completely convinced that he can scale up and hire the folks to knock out a complete remodel job in 3-4 weeks, but he claims he’s run crews of up to 18 guys in the past, cranking out 25+ houses/year, doing exactly the sort of work I’m considering, so we shall see.

That’s obviously getting way ahead of myself, though, as all of the above (selling House #2, renting and refing House #1, and upgrading our own house) has to happen before I’m allowed to even contemplate buying another investment property.

I’m still pretty much in a state of happy shock, as I really couldn’t have scripted a happier ending to the adventures of House #2. Assuming everything goes through with a minimum of hitches, this’ll also be a pretty profitable deal, with a final profit after commissions and taxes and fees of just shy of $20,000.  Which I’d gladly take in pretty much any situation, but especially given that I bought House #2 back in October 2007 when the financial landscape was much rosier, not to mention all of the bumps in the road during the renovation process.

Before I pat myself on the back too much, though, I definitely am aware of the luck factor/even-a-blind-squirrel phenomenon in play here, as it’s looking like I definitely benefited from having the right house in the right place at the right time with this deal. It’s hard to take much credit for a family being dislocated by state highway construction with a load of money in their pockets looking for pretty much exactly the house (an older 4-2 in town with over 2,000 sq. ft.) that they’re looking for. They apparently even were specifically looking for older houses built in the 40s, 50s, and turning their noses up at nicer (but blander) new construction that looks better on paper, preferring instead an older home with some character. Can’t really take a lot of credit for all those happy collisions of wants and needs.

On the other hand, I’d be selling myself short not to give myself some credit. Aside from all the personal labor and blood, sweat, and tears necessary to drag this thing to the finish line, I did manage to see the potential in a big 1900 sq. ft. 3-1 (but with a terrible layout) that hadn’t been updated or painted since the 1960s and managed to turn it (kicking and screaming) into a pretty damn nice 2100 sq. ft. 4-2, with a master suite, laundry room, and other nice touches, without completely breaking the bank. I definitely dropped the ball on the execution at different points, and left more than a little money lying on the table due to my own inexperience and learning curve, but I did get more than a few things right.

But it ain’t sold yet, so no counting of chickens.

So, umm, yeah. Good news. Amazingly good news, even, on a couple of different fronts. We haven’t even listed the house yet, so the “list price” was just a number we stuck on it for a city-wide tour of open houses that happened last weekend for our wee little town’s “Rites of Spring” celebration. I was planning on actually listing it at something like $146,500-$147,500, so an offer for $149,500 is a nice little unexpected bonus.

It’s also an all cash offer, which I won’t bother commenting on the benefits of, as that should be pretty obvious.

The potential offer is coming from a family that I’d mentioned here before, who were looking to find a 4-2 in town to move into with their mother, who was uprooted by a big honking toll road that the state is building in our neck of the woods. They’re apparently getting cut quite a big check by the state, thus the cash offer. I’ve actually heard some crazy stories about the payouts some people are getting, stuff like people who are renting getting paid $5,000-$20,000 for being dislocated, and home/property owners are getting paid out generously as far as not just getting fair current value but also projected appreciation for the next ten years.

The only hitch (and why the offer is still on their agent’s desk, which I know because he works in the same little office as our realtor) is that the state wants to cut a check to the mother and the children, as the husband/father died recently without a will, and the property was in his name. The family wants the money to go to the mother, and for her to be listed in the offer as the sole purchaser, so they’re seeing if they can basically assign their rights in the peoperty to the mother, etc.

Normally legal talk like that would scare me but in this case it’s pretty straightforward, as the kids and mother are going to be living in the house together, so it’s not a case of one kid wanting cash, another wanting to buy the house, a third on the fence, etc. All their interests are aligned so it should be pretty straightforward to work out.

Another nice perk is that our realtor and the other agent agreed to give us a break on commissions, so we’re only paying 4%, as the house was never listed or marketed, and it was a bit debateable as to whether or not I brought the buyer to them myself (they’d technically been in the office before they talked to me, so it was a bit of a gray area as to whether they had an agent or not).

But yeah, technically no offer yet and we definitely haven’t closed yet, so I’m trying not to get ahead of myself. But pretty damn good news nonetheless, and definitely very encouraging. Fingers crossed.

As far as the house itself, still a few odds and ends remaining to be done, but it’s mostly there. Finally. One solid day this weekend should wrap it up, then it just needs a good cleaning and I can snap some photos and pretty much call it done, done, done.

The site is clean and easy to navigate and the company isn’t some recent sketchy Web-based start-up, as they’ve been in the mortgage refinance business for 16 years:

“Refinance.com was previously known as Homebridge Mortgage Bankers which was founded in 1989. We have helped thousands of clients reach their home financing goals through its diverse range of mortgage and refinancing options. A privately held company, our officers and primary shareholders bring years of collective experience in a wide range of areas that help make them the best source for home financing needs. With backgrounds in mortgage banking, real estate, financing, capital markets and regulatory compliance and administration issues, the leaders at Refinance.com bring invaluable knowledge and expertise together to formulate the best financing options for our clients.”

The sites offers much of the standard fare you’d expect, including mortgage calculators, amortization calculators, and more tools, as well as listings for current mortgage rates for a variety of loan products such as 15 and 30 year fixed mortgages, 1, 3, and 5 year ARMS, etc.

Free online refinancing quotes are available directly through the site, as well as via phone if you’d prefer to speak to an actual live person to get a quote or apply for a loan via phone. Getting an online quote is pretty painless, although you do have to cough up some personal contact details such as a phone number and email address.