Tuesday, August 26, 2008

Papers signed!

This was the fastest closing yet.  Jen and I got there at 9:30 and signed the last papers at 9:50.  Incredible. 

Apparently they file the deed and release the money tomorrow morning, and we get the keys tomorrow night.  That's pretty quick for seattle as well.  It seems like we often wait three days for the keys. 

The painter is scheduled for Friday, so hopefully we can have it on the market Monday, and tenants in it quick and in a hurry.

Monday, August 25, 2008

Tomorrow's the day!

Jen went to the bank today and got a cashier's check for $62,328.56 to close the deal. She doesn't like walking around with that much money. This was from the HELOC on our primary residence, which we're using to finance the down payment. Although long term rates are up lately, Ben Bernanke has been nice enough to keep short term rates down. I have auto-payment via my bank so our rate on the HELOC is prime - 0.50%. So this month it's 4.49%. Not so bad. I wish I could get long term money at this rate. And, it's tax deductible since it's financed from our primary residence.

Next steps, sign the paper tomorrow (tuesday), get the keys thursday, and get the painter in there (Friday)? The head roof guy is out of town this week. he offered to send over his guys, but David suggested we wait a week and a half til he gets back, so we get it done right. Probably a good idea. So we''ll get the painting done first, get the house on the market, and then get a new roof.

It'll soon be Kevin the property manager's turn to do his stuff. We've also got the kids moving out of our first rental this month, so we need to get folks back in there ASAP, or we're gonna be waaayyyy Cash Flow negative.

Sunday, August 24, 2008

I learned something new today about Google

I installed the Google Analytics tracking code, which allows me to see how many page hits I'm getting each day. I was doing pretty good last week...I had about 10 hits a day. All of the sudden, it went to 0 hits for the last three days. I knew that at least I was hitting my site, so there should be something! It turned out when I updated the template, it overwrote the tracking code that I had hand-added to the original template.

This isn't about the house, but is equally as frustrating as buying a house!

I just also added my blog to this Directory of Real Estate Blogs.

Saturday, August 23, 2008

Ready for Closing

Yesterday afternoon the woman from the escrow company, Michelle, called and said "When can you come sign?" She offered to do it Monday, but I have a big meeting at work, so we've scheduled it for Tuesday morning. That was fast! I first gave the mortgage broker my application over the phone last Friday, and all the paperwork is done this Friday, and ready to sign on Monday. I guess the mortgage folks aren't quite as busy as they were two years ago.

She even sent me a pdf of the HUD settlement statement, and the mortgage broker sent me a pdf of the appraisal ($390k, $10k more than our price).

Thursday, August 21, 2008


Don't forget insurance if you're buying a house...either your own or a rental! You can not get the bank's approval without it. All you have to do is call your insurance company and say "I need a binder for ....give address."

If not, you will get a nastygram from your loan officer saying that you are holding up the papers.


Wednesday, August 20, 2008

Mortgage done -- not really!

Today I got a note from John the mortgage broker. The subject was "FW: GLICK, DAVID". This didn't bode well...

It followed:

I lied they found one little corner of your life they haven’t poked into yet. Would you please fill out and fax back. There is something on title that they need to prove isn’t you®s .

Apparently there's a guy named David Richard Glick who has a $25k settlement against him for being a deadbeat dad. This is the same guy who the title insurance folks confused me with the last two times. The first time, it was caught at closing where they were going to take the money out of my down payment before applying it to the house. The second time, the title insurance company found it and asked me to fill out a form which included my full name and SSN. It seems like a waste of time not to do that in the first place...

So we printed the attachment, filled out my name, Jen scanned it and we emailed it back to John.

Tuesday, August 19, 2008

Mortgage done! For now

I sent over my 1040s and Schedule E's which I found in my file cabinet (unfortunately, I didn't do them online, I did them in Turbotax desktop version) to the broker today. We'll see if that completes my part of the mortgage transaction. We'll see how the underwriters do. Next step, get the closing date, get it painted, and get a tenant in there!

Gonna give my property manager a ring now and see if he's gotten my first house rented, as the tenants there gave notice at the beginning of the month that they are moving out 9/1. I'd like to get some folks in there in September, rather than October when the market slows down.

PS. If you know of anyone who is looking for a three bedroom (plus a study) 2 bathroom house for rent, send them my way. Here are some pictures.

Monday, August 18, 2008

Mortgage Drama!

As I noted below, I have a mortgage broker, Ed, who I've been working with for several years. When I came looking for a loan this time around, he told me there were no 5/1 ARMs, and no Interest Only loans. And that he could get me a 30yr fixed for 7%. I then went to Zillow to see if there was anything better out there. I found just what I wanted, a 5/1 IO ARM, for half a point less than Ed's 30 yr fixed.
As I reported below, I asked Ed if he could do that, and he said "there is NO magic money" and "good luck."

I also talked to my realtor David's guy John. John hooked me up with a 5/1 IO ARM at 6.625%. Maybe not magic, but better than 7%.

I got this note Friday from Ed:
"I’m sure sorry about what’s been going on. I assumed that you were going with the zillow lady, even though I didn’t think she could deliver, so I did not keep searching for loans for you. I was a bit surprised last night when I got your message saying you were going with someone else before I had heard from you that you were dropping the zillow deal.

I know that you bought down the rate on your loan for 12026 in February. You should know that the buydowns for a 5/1 IO ARM today look quite appealing to me. I thought you’d want to see them, so they are attached.

The par price doesn’t even show up on this sheet, but it’s over 7%. However, you can buy down the rate to 6.375% for less than one point ($3110).

Let me know if I can assist. "

I feel a little bit bad that I switched, but when I asked him to give me the same loan as I found online, he said "Good luck." And now all of the sudden he can find the loan I wanted. Oh well, that's the way the cookie crumbles sometimes.

Even moooooorrrreee financing

Buying a house is easy. Paying for it is hard. Or asking someone to give you money to pay for it...

On Friday morning, I talked to the mortgage broker and gave him my info...salary, current assets and debts, name of my first born, and on and on. Friday night he emailed me 15 pages of documents to sign and send back to him. Actually, I just recounted...it's 24 pages. He misspelled my wife's name and our street on every page, so we had to fix that and initial each one where we had changed it. This morning I faxed it back to him. This was the application (5 pages) and the ancillary documents (19 pages).
Now for the actual documents needed. Thank god for the internet...

Last two pay stubs (thank you ADP for storing that stuff online)
Last two W-2s (ditto, thanks ADP)
Loan statements for all four properties (to prove the payment includes tax and insurance)
  • chase, flagstar bank = easy to find statements online
  • Wamu hard to find statement online
  • Morequity I found an old statement that had been sitting on my desk with only a small grease stain on it, and scanned that
Last two tax returns -- maybe just 1040 and schedule E. Maybe all 50 pages (still not sure)
Leases for all three rentals (not sure why if they have the schedule E and the loan statement)
Paystub for Aug 15 (I tried to explain that I'm paid monthly. maybe I will photoshop it)
Oh, and last two months of asset accounts at our broker Morgan Stanley (online as well)

I must say that the internet is a wonderful place that I was able to get about 80% of the documents in pdf format and email them straight over to the loan officer.

Saturday, August 16, 2008

Financing Continued

I am relating this saga to my realtor David, and guess what -- he "knows a guy" who can help.

I send him this note Wednesday 8/13 at 10:33pm:

My guy is at 6.875% for a 30 yr fixed, and 7% for a 10/1 IO on rental property. I found someone on Zillow who says she can do a 7/1 IO ARM for 6.5%. My guy doesn't believe it. Do you know what John is at for a 5/1 or (preferably) 5/1 IO?

I get a call from David at about 2:35 on Thursday -- his guy John can get me a 5/1 Interest Only ARM for 6.625%, with an additional half point (about $1500) in closing costs. So, I get out my spreadsheet and calculate that I save $768/year (or $63/month) on interest. I also save about $250/month in cash out of pocket by not paying down the principal. So the cash flow calculation improves significantly with this.

So I call John Thursday afternoon, and tell him I'm interested. Friday morning I get an email from him saying he needs 15 minutes of my time and he'd take care of the rest. I give him a call Friday morning, tell him my income, assets (my house and three others), debt, and rental income.
Friday afternoon at 3:27 I got an email from him -- rate is locked, and he says he can close in 10 days. We'll see if that's really true.

As an aside, I talked to my property manager, and he said it is much easier to rent a house in September than October, so bringing in the closing a few weeks may make everything easier.

So my rate is locked. Next post will be on all the documentation I need to provide...W-2's, Pay stubs, assets, etc etc.

Friday, August 15, 2008


So, I had been doing my homework. I had been watching zillow.com daily, and knew that the rate for a 5/1 ARM was 5.88%. And about half a point higher for 30 year fixed. I thought I was in good shape, because I might flip this house when/if the market picks up, so no need for a 30 year loan.

So I get my pre-qual letter from Ed Sunday at 2:12 and a credit authorization form arrives at 3:38 not even 90 minutes later. That's a good sign. I sign it that night, and send it back.

Monday evening, I get an email from Ed. It starts out:

We are starting to realize some of the fallout of the mortgage meltdown in your pricing.

That does not bode well for me getting a low rate!

It continues:

At 20% down, 30 yr fixed is at 7%, and a 5/1 ARM is NOT available, believe it or not. Probably, of course, because it’s non-owner occupied.

Doh! That's more than a point more than I had expected...or $3000/year or $250/month. Not a good start to the project. Since it is not interest only (IO), there's also another $250 or so in principal pay down. This is starting to get more expensive!

My spidey sense is tingling on this, so I go to zillow.com. Zillow has a service which allows you to enter your loan parameters and get like 10 offers back, and you remain anonymous. I love this, because it gives you a good benchmark for the market, even if you have your own guy. I stuck my parameters in, and found a woman who offered:

Loan Details

August 12, 2008 11:15AM PDT

Loan amount:$312,000

Down payment:$78,000

Loan product:7/1 ARM (Interest-Only)

Interest rate:6.5 %

Assumed rate lock:30-day

Note due in

30 years

APR:6.22 %

Pre-payment penalty:No

Interest only loan:Yes

So I wrote to Ed: Can I get that from you? Expecting that if the loan's out there, he can find it the same as she did.

He replied:

David, I see the quote but it’s hard to believe they can deliver. We’ve checked with 15 lenders this morning and can’t find anything close to that price.

Today, the 30 year fixed is available at 6.875% and I can deliver a 10/1 interest only ARM at 7%. And, over the years, one thing I have learned is that there is “NO magic money”. And the 5/1 IO ARM (with 10 years interest only) is not even getting to par on their quote, but my guess is that the par price is about 6.875% - 7%.

So, let me know if you plan to go elsewhere so I can call off the appraiser. Just make sure you get a lock and good luck on getting it closed at the quoted rate, fee and program.

I took this to mean that he couldn't get this loan. If you disagree with my reading on this, please leave a comment. I expect that if I were a lender, I would try a little harder to match a competitor's rate.

I do take his point though that finding cheap money off the internet might not be the best way to go, so I continue to investigate.

The inspection

We scheduled the inspection for Tuesday afternoon. David has an inspector named Fred. I met David and Fred out at the house around 4:00. They'd been there for about an hour already and had walked through most of the house. My property manager, Kevin, who I'd never met, was there too. he was trying to figure out what we could charge for the place and what work needed to be done. We figured we'd paint the whole inside, put up some quarter-round molding, and do a few other odds and ends. We'd try to get $2000/month for it, although once he realized that it only had one bathroom he backed off that estimate a bit.
We're still trying to decide whether we should put some sort of finish coat on the hardwood (oak?) floors, or just let them be. And he's supposed to get back with me on how much rent a bathroom would add. And I have to figure out how much it would cost to add a second bathroom.

Anyway, I met David and Fred out at the house. Fred is always full of bad news. This is the fourth house he's inspected for me, and he always seems to take a perverse glee in delivering the bad news...he started with a waste pipe in the basement that had leaked and then resealed with tar. I asked if we could get the seller to fix that. David said..."umm, you better tell him about the roof Fred." That seemed foreboding. They had already decided that the roof needed to be replaced. Fortunately, David "knows a guy" who can do it cheap. We'll ask them to pay for it and use David's guy. After they tell me about the roof, Fred proceeds to drag me to the garage, and explains that the garage door with old springs is a deathtrap, because if a spring breaks, it's very dangerous. Fortunately, Fred knows a guy who can replace it cheap.
Fred then shows me the area outside from where water can flow into the house, and recommends that I do some landscaping. Build a block retaining wall, and put a french drain behind it to divert the water.
Sounds expensive to me.
Neither Fred nor David knows a guy. They suggest picking some day laborers up outside the Home Depot for cheap.
No thanks.
Then the end of inspection ritual...Fred always says "How should I write it, David?" and so far, David has always replied "Right it hard, Fred." The upshot is that we asked the sellers to put on a new $5700 roof.
On the way out the door, David notices that my truck is dented. Fortunately, David knows a guy. He can fix it for cash. It's good to have colleagues who "know a guy."

The small, small world of Facebook

I found out that one of my friends new the down the street neighbor, and another one of my friends' dog sitter lives kitty corner to this house...funny.
Amy Bates at 10:47am August 11
Dude, my friend Christine lives almost across the street from this house. Will it be a rental?
David Glick at 11:10am August 11
yep, it will be a rental...but a nice rental.
David Sligar at 10:15pm August 11
Your best rental investment to date. Are you going to name this one like the monopoly like the names on the board? Signed your Agent
David Glick at 10:27pm August 11
first step, get an affordable loan...I'm having trouble finding a 5/1. And the days of the I/O and Option ARMs are behind us.

The Hunt!

As I said, I've always enjoyed walking through open houses on Sunday afternoon. In the past couple years, I've taken Toby along, and it's become a father-son bonding experience. One of the first words he could ever read was "OPEN" on the open house signs. "Windermere" came soon after. In the last few months, the market has slowed in Seattle -- not as much as elsewhere but it has slowed. I've been feeling the itch to buy another house. I found a house a few blocks away that was for sale by the estate of the previous owner, rather than a realtor, for 589k. A representative of the estate was there every Sunday afternoon for open houses, but there was not other advertising...I would link to it but it's not in the MLS. I really liked it...turn of the century craftsman with high ceilings, and a finished second floor, and a big semi-finished basement. I wanted to give them a low ball offer, so I called David and we went to look at it. We looked at it on Saturday morning, August 2nd. He convinced me that I couldn't make it cash flow (rental income - mortgage and expenses > 0), and that it would cost > $100k to fix it up and flip it. In this market, even if they would have excepted a low ball offer, I couldn't make it work.

Again, I started to get the bug. I added to my iGoogle customized google homepage a widget from Redfin.com. This shows you the top 5 houses that result from any search you choose and you can link from your google home page directly to information about the house. Pretty neat. So when I got up each morning and checked my email and stock prices, I saw what the latest houses for sale were. On Friday, 8/8, at 7:41am , I found a 3 bed, 2 bath house in Greenwood for $293k. I emailed to David and we talked about going by there Sunday morning.

That night, Jen, Toby and I went over to Toby's friend Katherine's house. (her mom Chris is another middle manager/junior executive with me; her dad Mike is the best chef I know). Uncharacteristically, I left my blackberry in the car, making for an enjoyable but slightly nerve wracking evening. Mike made hummus, greek salad, chicken and lamb kabobs. And of course wine...lots of Syrah during the evening.

When we got home at 9 with a tired Toby, there was a message from David -- "we can go see that house that you wanted to see in the morning, but there's one that just came back on the market that we've gotta see too. They're looking at offers tomorrow afternoon at 4." So I called David back and told him we'd take a look at 10am the next morning. This house was 4 bed, 1 bath, for $380k.

Timeline for Sunday, 8/10:
10:30am (5 1/2 hours til deadline) -- take a look at the house with David. Looks promising, 7k sf lot, 4 bedrooms (although one is very, very small), and a huge semi-finished basement.
11:30am (4 1/2 hours til deadline) -- called Jen to see if she and Toby wanted to come see the house, as I wanted to make an offer. She says no. But she does want to see the numbers. :)
12pm (4 hours to deadline) -- Opened up Staroffice Calc (like Excel, but better) and run the numbers:

Purchase Price 381000
Loaded Purchase Price 392430
Cash Down 32000 0
HELOC cash 44200 -202.58
Mortgage 304800 -1493.52
Taxes 3178 -264.83
Insurance 720 -60
Prop mgmt
Total Expenses


Cash Flow

12:20 -- Jen's not so happy about the -310 at the bottom but she acquiesces. Call David and tell him to start writing an offer.
12:21 -- Call my mortgage guy, Ed, and ask him for a pre-approval letter. He says he'll get on it (on Sunday afternoon) and send it in a few hours.
1:38 -- send a follow up to Ed:
"Hi ed, thanks for putting together the pre-approval letter. You can send it to me at this address and the other address on the to: line.
When do you expect to send it? We're gonna write the offer at 2pm.

2:03 -- David gets here and we sign the offer for $381k (one grand over the asking price, even in this market). We stand around waiting for the pre-approval letter.
2:12 -- Ed sends pre-qualification letters (not too shabby service for sunday afternoon).
3:43 -- David drops the offer with the seller's realtor. He likes to deliver them personally. He tells them that we're a nice young couple looking for a nice house...doesn't mention that it's a rental property.
5:55 -- Update Facebook --
David is trying to buy another house...waiting to hear back from the sellers. 5:55pm
7:57 -- David calls and says we got it!
8:03 -- Update Facebook
David just bought a house in Greenwood. Not bad for a day's work. 8:03pm
8:37 -- Update Facebook

This was the easy part. Now the saga begins!

The epic quest to buy an investment property (or 4)

Hi, let me introduce myself. My name is Dave. By day, I'm a middle manager (some might say junior executive, lol) at a large dot com company. I work with about 30 software developers write software for our website.

My wife Jen and I had our first son, Toby, back in 2004. He was born prematurely and spent his first four months in the hospital. I took a leave of absence for the first six weeks. I'd spend a couple of hours over at the hospital each day, and then come home and while away the hours playing Everquest (or Evercrack as they call it). One day my friend Jon said that his girlfriend Beth was reading Rich Dad, Poor Dad. (You should take a look at Beth's site. She bought a couple investment properties, maintains an impressive blog, wrote and published a book and leads tours to Bhutan.) Jon suggested I read it, so I downloaded it from Amazon to my computer (in the pre-Kindle days) and read it while I was playing Everquest.
I had always been interested in houses (dare I say real estate) -- another friend of mine, Suzanne, and I used to go to open houses on Sunday afternoon. I told Suzanne that I loved the book, and she said "my realtor David Sligar is a big fan...you should get together with him." So one afternoon I dragged myself away from the computer and had coffee with David. He got me pumped up to buy a rental house. To make a long story short, I bought a rental house in April 2004, when Toby was 2 months old, and getting healthy. I bought another one in January 2005, and a third in March 2008 as the market slowed.
The subsequent posts will be a day by day blow by blow account of the buying of my fourth house. Hopefully this will be interesting to and/or educational for someone!