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Sunday, April 4, 2010

Working On Vs Working In the Business

So I spent ALL weekend doing my books. 12+ hours on Saturday and more than 10 on Sunday. I had a lot to catch up, let's just leave it at that. I am now ready for the CPA and the tax man though so that is a good thing if you're into that kind of stuff. I had set a goal to have my corp books done by Sunday night and I finished at about 11PM. At least up through the date the tax man is concerned with. I am positive I will be more proactive in entering my transactions. Even a few weeks leaves me puzzled why I withdrew or deposited thousands of dollars??..

In the beginning I had hired a bookkeeper off of Craigs List and that was mistake #1. I should have asked around at one of the many RE investor meetings I used to attend. Which, by the way, is what I eventually did and I couldn't be happier. My books were so screwed up. Of course it is my own fault for not understanding what was being entered and how it was being assigned. I was implementing the "work on my business, not in my business" philosophy and it cost me many thousands of dollars and just as much wasted time. I understaning very well how to do my books now. I even made my own reference book with screen shots for tricky transactions. I will have better luck turning it over to someone else next time because I will be able to read the reports and actually know what I am looking at/for. Each mortage payment has potentially three parts; principal paydown, interest, and impounds and they each get assigned to their own special account and class. I learned this after taking a few Quickbooks classes and spending hours with my new wondeful bookkeeper.

I do have some interesting updates! We put 4 houses and a parcel of land into escrow last week for $300,000. We wholesaled the package for $315,000, but kept the parcel of land free & clear. If only we could do that with a remainder house! However, this opens up a great 1031 exchange strategy which I will talk about at another time.

On Friday we received a call from a former customer (repeat business!!). He sold me a condo in Rancho Cucamonga recently which I paid $210,000 for and wholesaled for $230,000. We hit a few small speed bumps in that escrow, but I did what I said I was going to do and closed when I said I would. This particular condo he wanted to sell me now had a much better view, he claimed. "You can see the whole city of Ontario" he told me. Well, I'm not much interested in a view. I told him I bet the view from an airplane is much better. If he kept pushing it as if it were worth something to me, I might have told him I am afraid of heights and that view has a negative value to me. What I realize is that it is my job to liquidate real estate fast and at a fair price for not just the seller, but the buyer as well. I do this by writing simple, contingency free contracts, not peforming any inspections, using cash to close, and funding quickly.

A view might be wondeful to a home owner, but it really means nothing to me. I have always thought that if you can see everybody, can't everybody see you too? I'm buying a house, not a view. I can't wholesale a view. He said the least he would take would be $240,000 for this special view condo. The other one of his I wholesaled is on the market for $299,000. He told me he has a tenant in the one he wants to sell me and the lease runs through the end of June. I told him I would get $210,000 cash in his hands in 2 weeks, I'd put down $10,000 earnest money and take it with his tenant in place. I told him I needed to buy this property fast because the guy selling the other one has no sentimental connection to the property he has on the market. It is inventory to him and we both know he has a lower number he can sell it for. If we wait until the end of June when the tenant moves out, my profit margin could get squeezed by the investor if he lowers his price. Before leaving the office on Friday, I asked my partner to email him a written offer under the terms 'we' discussed. I firmly believe in getting an offer into the seller's hands. Even if they tell me over the phone they will never sell the property to me for the price I mention I still want to shoot them over something hard in writing to look at and ponder. This was a hot lead and we needed to act fast.

He countered via email at $220,000. Just like that he knocked $20,000 cash off his bottom line sales price. He also mentioned in the email that he had room to 'wiggle'. I asked my parter to send him back an email clarifying that our offer was $210,000 cash in his hands in two weeks. He got back to us the next day and said he'd take it. We already have a buyer lined up and I think we can get him at $230,000. That is a nice wholesale. And why not? The property has this amazing view!

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