Oh, Oh...Global Temps Dropping

Al Gore will have to return his Nobel Prize. The last 12 months have seen the largest one year drop in temperatures ever recorded, wiping out a century of supposed global warming.

Oil Myths Debunked

Here's an interesting report on why the price of oil is so high (OPEC) and when we will run out of oil (never). One interesting tidbit I didn't know was that the Saudis are using only 9 of their 80 know oil fields. So don't buy into Hillary's rants about ExxonMobile's obscene profits. She's just another Chavez statist puking up communist garbage.

Where to get rich?

The laws of Supply and Demand really determine where you will get rich. The more people there are available to be your customers the more likely you can get rich. That is why a large proportion of rich people are located or do most of their business in the largest cities. The Internet has started to level the field in that it provides world wide access to large populations no matter where you live. However, for a person starting a business in a small town or buying real estate where the population is low this is no consolation. There are fewer customers in small towns or cities for your products or houses. Demand is low and potential for profit is low.

I watch a great deal of HGTV now and see lots of stories about how people make profits of $100k+ flipping houses (and selling them in days or weeks). Others just buy a house and in a few years reap over $100k in appreciation (and are often disgustingly disappointed because it wasn't $150k). This doesn't happen in Buffalo. There are few houses that sell for over $500k here and the demand for them is low. Most houses in this price range sit on the market for months or years. There is a house across the street that was for sale for $370k. It's a beautiful home of over 4000 sq ft in great shape. It was for sale for 2 years and now is off the market. I'm guessing the owner is going to let it go to the bank. So flipping a house here is a precarious venture. Long sales times and low profit margins can sink you. Plenty of supply and low demand.

One concept that is in demand here is a rent-to-own. Whenever I put up a RTO sign I get hundreds of calls. I can get higher than normal deposits and higher than normal rents and don't have to do maintenance on the properties.

One commenter on another post asked how I got into the same situation with real estate twice. The first time I had a dozen properties that were unrented and unrentable. I was literally paying people to occupy them so they would keep the heat on in the winter. Now I have all of my properties rented out (though I wanted to flip them) with a positive cash flow. Only one property has a negative cash flow and hopefully I will be able to rectify that soon. This is no where near my previous situation, just not what I had planned.

I don't think that I will get rich investing in real estate in Buffalo but it is possible since I have found a concept that has a high demand and few suppliers. This will be a slow process though since I have little cash to invest in more properties at the moment. I cannot use hard money lenders to buy properties since I cannot flip them quickly here and must wait on having conventional financing. Maybe an Internet business is the way to go from here but I haven't a clue what that would be.

A review of What's So Great About Christianity

Dinesh D'Souza has written a book "What's So Great About Christianity" which I had the pleasure of reading during the past week. For me it was an appealing book because it comes at Christianity from a logic and reason standpoint (I'm an engineer that used logic and reason for many years to discredit Christianity). There were many points he made that I was aware of but D'Souza puts it all together in one piece that I find quite compelling. I was raised as a Catholic, became an avid atheist for many years but continued to study spirituality and was hooked into New Age beliefs for some time. I started reading M. Scott Peck's works (author of The Road Less Traveled) and by the 4th book I came to agree with Peck that Christianity was the only true religion.

Here are some highlights from D'Souza's book:

1. The conventional wisdom is that religion is declining. But the fact is that religious conversion is growing and Christianity is the fasting growing religion. Growth is mostly in the Southern hemisphere, but we see growth in mega-churches.

2. Darwinists and atheists(usually one and the same) predict the demise of religious beliefs, but as Darwin wrote “The vigorous, the healthy and the happy survive”. Atheism offers only a depressing world view (your life is meaningless, you are no different than any other animal species and death is the end – you came from nothing and are going nowhere), while Christianity offers hope and meaning to life (You are a special creation of a good and all powerful God. You are created in His image with capacity to think, feel and worship that sets you above all other life forms. You differ from animals in degree and in kind. Your Creator loves you so much and so intensely desires your companionship and affection that He has a perfect plan for your life. In addition, God gave the life of his only son that you might spend eternity with Him.) Secular people are not reproducing in adequate numbers to survive, while those with religious beliefs are.

3. The basis of Western Civilization is Christian ideals. The separation of Church and State is a religious idea that was first spoken by Christ (“Render unto Caesar that which is Caesars and to God that which is God's”) and further developed by Augustine in the “The City of God”. The basis of limited government, equal rights, religious tolerance found in the US Constitution were all Christian ideas.

4. The Christian concept of human fallibility led to the elevation of the nuclear family, limited government, the rule of law and our cultural emphasis on the relief of suffering. The priority of romantic love in marriage developed out of Christianity. Capitalism and the basic rules of economics rose out of Christianity. No where is compassion for those suffering so emphasized as in the Christian religion.

5. “All men are created equal” was a Christian idea. Though “democratic”, Greek and Roman cultures did not value the sanctity of life as Christianity does. Christianity elevated the place of women, was the first group to eliminate slavery, developed “just war” principles (you should not kill innocent civilians) and our concepts of individual freedom (derived from “free will”)

6. Science was able to arise in civilization only because of Christianity's focus on reason as a basis of understanding God's creation. The highest discipline in Judaism and Islam is jurisprudence, while in Christianity it is theology. Theology is employed to understand the ways of God. Augustine first posited that God created time along with the universe (something only recently confirmed by scientists). Augustine argued that every series (e.g. the universe) must have a cause and that cause must stand outside of the series. Thus the universe had a creator, God, that stands outside of time and space. Psalm 13:1”The fool has said in his heart that there is no God”. Anselm's argument that God is “that than which no greater can be thought” offers an inductive proof of the existence of God. Neither Augustine nor Anselm appeal to supernatural revelation to prove God's existence.

7. The greatest idea of modern science is faith that the universe is rational. All scientific discoveries have been developed from this faith. This is an idea Christians developed by envisioning the universe as following laws that embody the rationality of God the creator. The laws that govern the universe are written in the language of mathematics – a miraculous mystery. Institutions of higher learning developed out of Christianity (Oxford, Yale, Harvard & Dartmouth were all Christian universities). The first professional scientists can be traced to the Middle Ages and were Christians.

8. Modern science points to a Creator rather than a purely naturalistic explanation. The “Big Bang” theory is a stunning confirmation of the Genesis story of creation. “In the beginning was the word...”. Neither time nor space existed before the singularity of the universes' beginning. The universe was created in a burst of light. God separated night from day later, i.e. the sun and planets were created at a later point. The creation of the universe was truly a miracle. The universe had a beginning and that beginning had a cause which we call God. The Creator used no laws to create the universe since the laws of physics were created with the universe, so the creator must be supernatural. There was no matter before the universe, so the creator must be non-physical(i.e. Spiritual). Since space and time are inside the universe the creator must be outside of space and time (i.e. Eternal). Since the universe was created out of nothing the creator must be omnipotent.

9. Scientists claim that we are insignificant creatures in a vast universe and are nothing special. The Anthropic Principal proves that universe and all its laws are a conspiracy to produce human beings. Had any given law of physics differed by minutia amounts we would not exist (e.g. The gravitational constant or mass of the proton). It is not luck that we are here (the probability of all the laws of nature all lining up is astronomically small). The “multiple universe” theory explanation for the anthropic principal has no evidence. Using Occam's Razor you can deduce that we live in a Designer universe, that is a universe designed specifically for us.

10. Paley's argued that by looking at a watch you would conclude that there was a watchmaker and thus we can look at the Universe and conclude that there is a Creator. Darwin's theory of natural selection does not disprove the need for a watchmaker. Evolution by natural selection explains a significant portion of how creatures are they way they are, but does not explain the beginning of life. How did the simple living cell come into being? There is no explanation for the complex formation of DNA and RNA in such cells. In addition, evolution cannot explain consciousness, rationality nor morality. Evolution offers no explanation for the creation of the universe nor its laws.

11. Scientists believe that reason and evidence are the only way to understand the universe but Kant points out that our knowledge is limited by our 5 senses. Kant asks “how do we know that the reality that we see is reality itself?” Science provides only an illusion of reality – this is congruent with all the worlds religions. We don't know what we don't know.

12. Scientific laws are not verifiable. No finite number of observations can be used to determine that the laws are true everywhere in the universe. Science properly understood cannot verify theories, it can merely falsify them. This leaves open the possibility of miracles.

13. Life is full of gambles (who you marry, what field to study and job to take, where to invest...). So how should you gamble in regards to whether God exists or not? Pascal's Wager says that it is better to bet that there is a God than to wager that there is none. Reasonable people have faith because it is the smart bet. Doubt is the proper habit of mind for the religious believer. If we have faith in a God that does not exist what have we lost? If we reject God and are faced with an eternity without him (hell) than we have lost everything. If God were to reveal himself, He would force us to accept Him, defeating the free will He has given us to believe or not.

14. Atheists condemn religion claiming that religion is responsible for most of the deaths the world has seen. But the facts are otherwise. Atheism has been responsible for over 100 million deaths in one century (Hitler, Mao, Stalin, Pol Pot), Christianity was responsible for 200,000 deaths over 20 centuries. Why? Atheists have no moral constraints, an ideology that sees man not god as the creator of values. “If God is not, everything is permitted”.

15. Moral laws are both universal and objective. There are no known cultures that do not have some system of morality. Jews, Christian, Muslims, Hindus and Buddhists agree on a wide range of moral values. Morality is not relative since even relativists have a code of values that they espouse. Moral laws presume a moral lawgiver. Conscience is the voice of God within our souls.

16. Are we just made of matter or is part of us spiritual? If we do not have a soul then we live in a deterministic universe and free will is an illusion. A materialistic view of the world makes us slaves to our genes controlling all of our actions and decisions, yet we can demonstrate that this is not so. Our inclination to live within a moral code is one such evidence. The “I” that we experience is outside of our material bodies and transcends time. We are free to chose not to follow our genetic programming.

17. Marx said that “religion is the opium of the masses” but the opposite is true. Religion requires sacrifice, and promises damnation for failure to follow a moral code. How can this be an opiate? Atheism allows us to practice a hedonistic life without consequences and avoid accountability for our actions. Atheists use sensual pleasures to numb themselves to the nothingness of their purpose and existence and ultimate end. Atheism is the opiate of the morally corrupt.

18. If God is good why do people suffer? No one can explain the existence of suffering or evil. However, religion offers hope to the despairing. Atheism offers nothing.

19. All religions are not the same. Christianity holds that man, no matter how hard he tries cannot reach God, so God became man. Christians view that mans nature is the propensity to sin. We cannot redeem ourselves (Hinduism and Buddhism believe that we can through meditation, Islam and Judaism through following God's Law). Christians believe salvation is a gift from God that can be claimed by asking for it.

20. Christ is the most influential figure in history. His words are unmatched in eloquence and are easily identified. We know he existed. There is historical evidence of his resurrection. His claims were remarkable. He did not claim to be a prophet but God Himself (“I and the Father are One”). Using Gods words for himself, “I Am”, he claimed to exist before Abraham. He forgave sins and the divine authority to interpret Scriptures.

21. Christianity makes sense of who we are in the world. It integrates reason and faith. Christianity infuses us with a sense of purpose. Christianity offers a solution to the cosmic loneliness that we all suffer. It helps us cope with suffering and death. For Christians there is the life to come. Finally, Christianity helps us to become better persons that we want to be.

Hunkering Down

The past few months have not been too active for me in the real estate business. I spent November and December fighting pneumonia and this past week had surgery related to complications I am suffering from ulcerative colitis that I've had for the past year. Unable to sell any of my "flips", I now have everything rented. I was hoping to have a positive cash flow but due to the mortgage crisis have not been able to refinance the big rehab I did. I still am paying over $2200 per month on it and taking in only $1750 (which is a damn good rent in this area). Interest rates are low but banks are wary about doing investment property loans at the moment and looking for full documented loans. Unfortunately, I can't show a profit on my rentals. I have been working on my 2007 taxes the past few weeks and am in shock as to the extent of my loses last year. Despite my high salary I won't be paying any income taxes. In fact, I expect to get back all of the withheld taxes plus $3000 in child tax credits when I file. Certainly this was the worse year of my financial life.

So I am hunkered down trying to ride out this financial disaster. Not spending anything on real estate that is absolutely necessary. I've taken down my web site and stopped doing direct mail. Everything is at a standstill. Hopefully, the tenants will pay their rents on time and my cash flow will allow me to sustain my lifestyle until one of the lease-purchases excercises their option.

The Best Mix of Investments from two top performers

I wrote a post talking about having a balance of investments in both stocks and real estate. It turns out that the "big boys" use this exact strategy and get some of the best returns. Look at how Harvard and Yale invest their endowments. It turns out that they invest approximately 30% of this money in real assets like real estate. And what is their return? Over 10 years it is 15% and 17% annualized returns for the two schools.

Even though I was upset that I could not sell my real estate last year, property values here have not declined at all and in fact have risen over the past year. So while my 401k has taken a beating this year, my real estate equity has been stable.

A Landlord Once Again

At the start of last year I had set some goals to buy and flip some houses. I ended up buying 3 houses last year Vs a goal of 4. I had set a goal to sell 3 houses but was unable to even get any offers on the houses I own. I tried FSBO, professional Realtors, and auctions but got no where. So to save myself from bankruptcy, I have rented all of my properties. Right now I have 4 rental properties in my real estate portfolio.

I wrote about my previous experience as a landlord in WV here. It was a miserable experience. Tenants didn't pay their rent, the apartments were usually vacant and difficult to rent, I was awakened in the middle of the night to fight bats or crawl under houses to thaw out frozen water lines and I lost lots of money.

I bought a house 2 years ago and used a lease-purchase method to rent it out. It worked out pretty well. The tenants spent money to upgrade the property, never called me and I didn't have to spend a penny on repairs. They decided not to buy the property after the year and so I got to keep their option money and have re-lease-optioned the property quickly. I should have learned from that lesson, but I had the flipping thing in my head and so spent the greater part of last year losing money trying to sell 2 properties.

In the end I ended up renting out all of my properties using the rent-to-own signs I put on the front lawns. The signs got the tenants, not any other advertising. I got lots of calls and rented each property quickly and higher than market rates with a non-refundable option payment. So far it is working out well. One trash property that I bought is being rehabbed by the tenant. He's put $3K into it so far - re-plumbed the whole house, re-wired it and put in a new bath. I couldn't give this house away when I was trying to sell it and now it's in much better shape and worth a lot more, so if the tenant defaults I'll have house worth much more.

The cash flow on all but one of the properties is positive. I had tried to refinance that property but so far have not had much luck. However, it has an adjustable ARM and maybe with the interest rate cut the ARM will drop from it's current 9.7% interest rate. The only real negative to my current situation is that I have no cash on hand for emergencies or to buy more properties. If the economy tanks and one of my tenants loses a job, it could put a hurt on my finances. Hopefully, someone will exercise their option in the coming year. But for now I remain a landlord not by choice.

CountryWide mess hits home

I had decided in November to take my flip off the market and try a lease-purchase. Part of the strategy was to re-finance the loan on the property. (I had been paying the previous owners loan payments on an ARM loan and the interest rate had jumped up to 9.7%). When I applied for the mortgage in November the broker thought it was a slam dunk. But CountryWide dragged their feet on the loan for 2 months, constantly asking for this and that document. It was a death of a thousand cuts as they decided Friday that they didn't want to lend the money.

So now I am in a funk. This is a $500 a month penalty over what I thought I would be paying on the re-fi. I had the cash flow on all my properties worked out to squeak by and now it doesn't look promising. There's no place else to look for income at the moment and the only light I see in this tunnel is a train coming at me.

I'm a Millionaire!

Hah! Not really. If you click on my NetworthIQ you'll see that I have assets of over $1.2M now. On the downside, I have liabilities of nearly a million dollars. My net worth has moved slightly downward over the last 2 quarters as my stock portfolio has taken a hit over the second half of the year. My real estate ventures did not pan out as I had hoped either. On the plus side, real estate values in this area are not taking the big hit that they are in other parts of the country, so this is counterbalancing my stock market losses.

I've been trying to re-finance the property that I rehabbed last year (it has an ARM that's at 9.7% right now). However, the bank (CountryWide has been really dragging their feet on this loan. I'm hoping to get that done soon so I can pay off some of the increased debts I've accumulated in the last 6 months.

I'd say my big mistake this year was not trying to lease-purchase out my rehab. I thought that I could flip it and make a profit, but flipping is for people in markets that are growing. Buffalo is not such a market and that exit strategy doesn't work here.

I still haven't come up with a plan for 2008. I'm recovering from pneumonia which I have had for the past 2 months and have not had the energy to do much. Moving in December took the last ounce of energy I had and put me over the edge.

We're all Capitalists when we are making a profit

During the 90's when the stock market was booming and people were making a killing on tech stocks no one was calling for government regulations to tame the market or for higher taxes on their profits. Same thing happened in the early part of this decade. Where was the outcry for investigations when people were buying houses and flipping them overnight for huge profits?

Now we want to put all the bankers in jail and regulate the heck out of the mortgage industry and Hillary wants to nationalize the oil industry.

When we make a profit it's our great skill that at play, but when we lose money it's someone else's fault and when a company makes a profit its through stealing. Someones not thinking right here - wonder who?

The great mortgage bailout

Our politicians seem hellbent on making the country one great nanny state. The Presidents proposal to bail people out is just the latest example. Here in NY they want to keep us from smoking, eating trans-fats and taking any responsibility for our lives. Fools and speculators have driven up the prices of homes in major markets and now someone has to pay the piper. It's always the politicians solution to make all of the prudent people pay for the crooks, fools and speculators irrational behaviour. People have been speculating since the great tulip bubble in Holland hundreds of years ago and someone gets burnt. Hell, I bought into the stock market in late 1999 and lost a lot of money. I didn't sue anyone or call my Congressman to get my money back. Instead, I kicked myself for my stupidity and learned a lesson. If people lose their houses because they took out liar loans, why should I pay (and I will, as will you)?

I wish politicians would let the free market take care of itself.

Moving week

Well, this week we will be moving to a new house and am putting up our existing house as a "Rent to own" purchase. I'm not sure if the Christmas season will slow shoppers, but I've had three calls since I put out the sign Saturday. With this rent to own concept it seems that all I need is a sign. The $1000+ that I have spent advertising in papers has not yielded a single buyer and amounts to about 1% of the inquiries about the properties I have used this concept on (4 in total now).

The tenant at my trash property has been tearing the place up and seems to be pretty competent at fixing up properties. But he has uncovered some defects that neither of us saw. It seems that the roof has had a leak on one side for some time. When he tore the bath room wall off the interior of the outside wall was soaking wet. He tracked it down to a roof leak, found huge ant nests in the walls and lots of rotten wood. The property is probably worth even less now in its current state and now that we know the condition of the roof (it was very hard to access since the adjoining house is only 5 feet away).

I've fallen off blogging over the last few months for a couple of reasons. My work load at my job has been incredible the last few months due to being assigned to 2 high value Six Sigma projects. I've also been in a funk due to the inability to sell my rehab. But fortunately, thanks to the prodding of one of my readers, I have that house rented out now and feel considerably better. After moving and putting my current home in shape to lease-purchase I expect to get back on track.

Goals - review and look forward

I've been thinking about how well I did Vs my goals for 2007 in my real estate venture. I've been told that if you write down your goals and review them daily you have a high chance of making them. But that doesn't seem to be the case in our situation.

I did buy 3 houses this year, but since I didn't sell any properties this year, I look at my entire plan as flawed. Flipping houses in this area takes much more expertise than I have at the moment. Watching all the flip shows on TV where clueless people do everything wrong and still make $100K just discouraged me most of the second half of the year.

But I did meet some of my sub-goals:

I did find over $720K of funding although I did not seal the deal on the major source ($500K), so I ended up having about $220K of funding available but did not use any of it. The major source was going to cost me $6500 to finalize the deal (I did get approved) and I borrowed that money from Prosper but by the time it came around to paying out the money and signing the papers, I started to realize I was not going to sell my rehab and was stuck with a $2300k per month payment to make, so I bailed.

We did do direct mail all year to pre-foreclosures but again, do to the failure to sell any properties we scaled back our advertising to just those properties in growing towns. This amounted to less then 20 letters per week which isn't enough to really do any good.

The third goal we just didn't do after our first 2 purchases in February. When we couldn't sell the wholesale property quickly and realized I would need much more cash for the rehab I only worked with pre-foreclosures and only made a limited number of offers to banks for short sales.

I did get an operations manual in place which has been a really good way for my wife and I to communicate about what to do.

I see that most of the sub-goals were geared towards buying property and not towards selling. There were several strategies we tried for selling properties: FSBO, flat-fee listing, full service Realtors, E-bay auctions, The "Sell Your House in 5 Days" strategy and Rent-to-own. The last was the the only success that I had, which doesn't get me any of the equity out of my houses.

So now I am in the position of many real estate investors - lots of equity but little cash.

I had hoped to double the number of houses bought and sold next year when I first devised my 2007 goals, but now think that I will scale back. My experiences buying in areas where population is declining echoes my 1980's real estate experiences in WV.

In the next month I hope to come up with a plan for 2008, but for the next couple of weeks will focus on moving and fixing my current residence so I can market it as a Rent to own house.

A Solution to Real Estate Situation

One of my readers left comments suggesting that I rent out my properties to stop my financial bleeding, so for the past 3 weeks I have been feverishly trying to do that. I have received large deposits on both vacant properties that I have been trying to sell most of the year. In addition, I am refinancing my rehab from 9.7% to a 6.5% interest rate loan.

The "rent to own" strategy that I have used before is what got me a solution that works. Typically rents for homes in this area average about $1000 per month and many of the callers to my sign could or would only pay that. But I found 3 people who competed for the property and am getting $1750 per month. The couple that is renting the property with an option to buy are paying one months security deposit as well as a $1500 option payment to purchase the property in the next 12 months for a price of $199,000. At that price I will break even on this property (mostly due to the extensive carrying costs that I have incurred). So, I feel fortunate that for the next 12 months I should be cash flow neutral on this property and I shouldn't get burned when I sell. If they don't buy I will probably do the same thing again and should have a positive cash flow.

The "fixer-upper" that I have been trying to sell since February and couldn't give away at an auction has also been "sold". I've given the buyer a 3 year lease for $450 per month with a $375 per month rent credit (He paid a $1500 option price). So after 3 years he will have accumulated credits of $15,000 at which time I will Deed the house over to him. Although I'd rather have the cash this is equivalent to loaning out the $13,500 loan balance at 11% interest rate, so it is a pretty good investment.

My big education this year has been that "flipping" is for the people in growing metro areas - not any places where I have lived. But in areas with poor economic climates rent to own is a high demand product for houses.

WOW! House rented already!

Just hours after posting my house on Craigslist I got a tenant - from England no less! She's coming to the US to study for her Masters and will be sending me a check for more than the first months rent and deposit. I just need to send her some personal information and once I deposit the check wire her back the balance.

Too bad the education system is so bad in England. Poor Kelly can't write proper grammatical sentences or spell very well for someone with a college education. Maybe she's majoring in Scam 101. I'm sure she'll make a great tenant though!

How to Sell Your Home in 5 Days?? No Sale Again!

I've decided that the author of "How to Sell Your Home in 5 Days" is either a fraud or just sold his properties during the booming real estate market days. I've now tried to sell 2 homes using his methods and had either no bidders or bidders trying to steal the house. I've spent $1000 in advertising in papers and direct marketing to prospects who are most suited to purchase the property, so I don't think that I have missed anything the author suggested.

A commenter (LRK) has offered the suggestion that I try to rent out the properties and that is what I am going to try to do at this point. With winter approaching (very slow sales season) and heating bills threatening to take more of my money, that seems the only reasonable recourse. My big concern is how low a rent will I be forced to take on my Cheektowaga property. My monthly net is -$2300 and no properties here rent for that amount. I've got the properties listed on Craigslist and with various relocation/ temporary housing websites. Advertising in the Buffalo News is like throwing cash down the toilet, so signs are the only other means I can think of doing at the moment.

Location and Price in Real Estate

I have been watching real estate flip shows over the last few months while sitting in limbo waiting for my properties to sell. "Flip this House", "Flip That House" and "Property Ladder" have been standard fare on Saturday night. "Property Ladder" is the most amusing as it usually highlights clueless people who, given the advice of a professional, learn some hard lessons. Despite their mistakes and ignoring the expert advice many make lots of money. Which highlights the most important lesson in real estate - location can overcome ineptness, ignorance and stupidity much of the time. None of the shows I watch feature homes in Buffalo. The houses are always located in a thriving metropolises of CA, TX, SC or CT.

Which brings me face to face with why my rehab is not selling. This is a beautiful home that has everyone who enters it exclaiming how wonderful it is. It's located in a great neighborhood of well kept homes. I've not heard a negative comment yet about the house itself. But there are two comments people make - "too expensive!" or "taxes are too high!" We started out at at a price of $219k and are now down to $199k but one comment we still get is "taxes are too high" (taxes are $7800). Now this is a house that has 2800 sq ft of living space and at $199k is selling at only $71 per sq ft. It's assessed value is only $165k , so I guess people are thinking it will be reassessed once it is sold and taxes will go higher. Houses of similar size located in the neighborhood are all assessed the same so the possibility of getting the assessment lowered is slim to none.

Five hundred yards to the north houses are selling for over $100 per sq ft. The difference is that you cross from Cheektowaga to Amherst. Both cities border Buffalo but Amherst is known for its good schools, while Cheektowaga has schools which are not so good and rife with racial problems. Cheektowaga is where inner city blacks are moving and Amherst remains largely white.

When I had researched the house for comparables, the only house that had sold in the last 2 years of similar size and style in Cheektowaga was the one I bought (for $182k). There had been multiple sales in Amherst within 0.5 miles in the $250k-$350k range of similar homes. To the eye, the neighborhoods looked identical, but crossing the townline makes all the difference in the world.

I recently found a top notch Realtor and he told me that only 5 homes have sold for a price of over $200K in Cheektowaga last year. He blamed the taxes, but Amherst has similar taxes. So is it schools, racial composition or some other factor making Cheektowaga a bad location? One thing I have noticed is that 98% of the people viewing this home are black. It's a desirable location for blacks who want to leave Buffalo. Whites who wander into my open houses will just turn around and walk out when I tell them the house is in Cheektowaga.

But the kicker is that I have learned that there are only 785 black households in all of metropolitan Buffalo who would qualify for the loan and pay the taxes on this property. That is a very small pool of buyers. In a sense, the Realtor is right that taxes are limiting the prices of houses in Cheektowaga. But the ultimate reality is that this is a town where whites are moving out and blacks seeking to flee Buffalo are moving in. Buffalo is a poor city and the good paying union jobs are disappearing.

So what were my mistakes in buying and selling this property?

• I did not recognize how much influence a town line made in price. Even though no one would recognize the difference between Amherst and Cheetowaga driving the neighborhood, there is a substantial difference in a buyers mind.
• I did not realize that there was a strong racial component to this neighborhood. Over 98% of the 200 people that have visited the open houses have been black. It is possible that a white family will buy this but not likely at all. This also reduces the possibility that a relocating black family will buy this house.
• I did not realize how limited the pool of successful blacks are in the entire Buffalo metro area. If my assessment is correct that only a black family will buy this house, that means less than 0.079% of the people in this area can afford it. To sell I will have to reduce price drastically to increase the pool of buyers or wait longer.
• I did miss on improvements that were needed and spent ~$15k more than I had estimated. Had I used a contractor like the people in all those flip shows used I would have spent about $20k more than I did spend and would really be in the hole, so I feel only partially bad about this.

In the end though, I think it is all about location. Location influences the pool of buyers. There aren't many buyers in Buffalo able to spent the outrageous prices for home as seen on the flip shows near big cities. In my case, the demographics are working against me.

How to Sell Your Home in 5 Days?? No Sale!

I mentioned that I was going to try the technique advocated by the book "How to Sell Your Home in 5 Days" last weekend. I spent several hundred dollars advertising the property, bargain priced it below my acquisition costs at $9,900 and handed out flyers at the local REI club meeting.

The results? Four people showed up, no one was willing to put in any type of bid. So much for a "sure fire" way of selling a house.

I've advertised my expensive rehab for next weekend using the same technique. I've direct mailed postcards to every person in Buffalo that could qualify for loan for this house as well. I hope I get some offers on that house since I'm bleeding $2300 per month on it. My biggest fear now is that no real estate is going to sell until the spring.

Will there be bidders?

I've scheduled 2 open auctions this weekend and next to sell our 2 properties based on the book "How to Sell Your House in 5 Days". Per the book, I should have received 40 phone calls about the property for auction this weekend. So far I have one call. I've not yet gotten any response from news paper advertising in this city. I have the properties advertised in both the major paper and weekly community paper and the price for the fixer is set at only $9,900.

I attended the local real estate club meeting on Wednesday and passed out about 30 flyers. Typically there are over 100 members at these meetings but this week the topics did not have any draw, so attendance was lower than my expectations.

So, I'm not sure if I am going to get any bidders this weekend. On the other hand, signs seem to be the best draw, so I will put out lots of signs tomorrow.

New House

It's looks like I will be buying a new house in the next 60 days. I had a seller accept an offer of $269,000 on a 3200 sq ft contemporary home in my town. The seller had paid $290k for the house and had upgraded the kitchen and put on a new roof. The house is assessed for $339k.

After 9 months on the market and moving to Arizona they became one of the desperate sellers that you read about. The seller had dropped the price from $350k to $290k and had 3 interested parties. We all put in offers, surprisingly, the offers were all around $265k. We had included $5k in seller concessions and our offer was rejected initially. But we upped our offer to $270k without concessions and no one else was willing to raise their offer, so we got the house.

The plan is to rent out our existing house. Maybe a "rent-to-own" offer might work. There are few properties for rent in our town as it is quite desirable to live in. I think that we can still extract more value from our existing home by doing some upgrades. The new house also has potential for upgrades to add value.

At any rate, my wife (who has been unhappy with our current home since we married) is overjoyed with the new house.