Inspections and Appraisals

Happy Holidays to everyone! It has been nice to take a break and spend time with my family and new addition for the holidays.  We are out there turning over stones and looking at tons of new fixer upper houses to buy in San Diego, thanks to everyone who is also sending me leads. We Buy Houses in San Diego so if you know of a house please contact me.  The Painted Lady sale is closing next week after easily passing the physical inspection and VA appraisal. We even have a back-up buyer in place who is devastated she didn’t get the home.

The home inspection was pretty interesting to say the least, we sometimes miss something but generally have had no problems with our homes passing after all the work that we do.  This inspector however took a different approach and basically made some stuff up to fill his report. The big front picture windows we had custom made are of course tempered glass for safety, the inspection report I saw however said they were not. Tempered glass has a little logo in the corner, easy to see. For some reason this inspectors eyes weren’t focusing that day I guess. Foundations on old houses are another item that inspectors just feel they need to address for some reason, even if they are fine. The inspector wrote in his report that the house was not anchored to the foundation. Really?? What are all those J bolts through the bottom plate in plain view and the UFP plates along one side? I can see how some inspectors might not want to do the army crawl and check the entire perimeter under a house that sits low to the ground but there’s enough room under our house to have a party, believe me I spent all summer under there! Also the guy calls out the plumbing for being old cast iron which we removed and replaced with ABS. Probably the funniest thing I read in his report was that a light didn’t work in my hallway. I say to myself, OK a bulb must have burned out but surprisingly enough I get there and see that the dimmer switch on the 3-way wasn’t even on! If you are going to say something is wrong on a report wouldn’t you take a really good look first? When you get an inspection report that has obvious errors it’s best to just address them and provide your buyer with something in writing that shows where you feel their inspector was wrong. In our case my buyer was happy I showed him where probably 5-6 points were clearly invalid on the report.

Remember, 3rd party home inspectors are not City inspectors nor general contractors, and most of the time have minimal building knowledge. A home inspector credential can be obtained with 60 hours of online courses. Getting a bad inspection report is pretty common and sometimes is enough to spook a buyer and cancel a sale. It’s emotional enough buying a home, especially for a first time buyer. One home inspector in San Antonio named Matthew Gessner from Amerispec was famous with all the local real estate agents for blowing deals, its a wonder anyone uses him. A bad home inspection report sticks with the property, right or wrong, and has to be disclosed to future buyers if your transaction falls apart.

As I mentioned The Painted Lady had no problem appraising for the sales price. Home appraisers like to compare apples to apples but in our case Grant Hill doesn’t have any other sales comps for turn-of-the-century Victorian Houses, however within the 1 mile and 1 year guideline, the average price for a home like ours is around $600,000 although its best to use comps within the last 6 months and a half mile if you are an investor.  If you are doing a big spec project like ours I would take a look at whats comparable within the year and a 1 mile radius, if you cant justify your sales price with what you find, there is a good chance that an appraiser wont be able to either. I’ve known several real estate investors here in San Diego that after rehabbing houses and getting into escrow, they had to settle for a lower sales price after a low appraisal came in so be careful with determining your ARV.

Historic Grant Hill Park and The Painted Lady

One of San Diego’s most distinguished residents was Ulysses Simpson Grant, Jr., nicknamed “Buck” and second son of the famous eighteenth President of the United States. Mr. Grant was born in Bethel, Ohio, on July 22, 1852, at a time when his illustrious father was a lieutenant in the Fourth regiment, U.S. Army. Mr. Grant attended Emerson Institute, prepared for college at Exeter and took his A. B. from Harvard University in 1874 and his LL.B. from Columbia two years later. He was admitted to the bar in New York in 1876 and was for a time Assistant U.S. Attorney in New York, Southern District. He married Josephine Chaffee in 1880. His wife was the daughter of Senator Chaffee of Colorado. Forced by ill health to seek a milder climate, Mr. Grant and his family selected San Diego and came here in 1893.

Soon after their arrival, the Grants moved into a three-story mansion previously owned by Samuel G. Havermale at Eighth and Ash Streets on Prospect Hill. The house was sold to Grant’s wife on November 17, 1893 by Ralph Granger with Grant, Jr. listed as the attorney. According to the agreement of purchase, the deed was filed in the County Recorder’s Office three days later, consideration being $25,000 in gold. 1893 was the year of a national depression and the year that saw many bank failures. Accordingly, money was not easy to get for real estate and the purchase price of the Grant mansion was only a fourth of what Havermale had paid for the house and most of the furniture, which came with it. The house had been built in 1887-1888 by Ora Hubbell, a well-known capitalist and local banker. The architects were the Reid brothers, James W. and Merritt, who had not only built the most beautiful of the tourists’ hotels in Southern California, The Hotel Del Coronado, but had also designed the George J. Keating Mansion. The Keating’s had arrived in San Diego seven years before the Grants, also attracted by the “salubrious climate.” Keating came to be healed, and he and Fanny, his second wife of four years, settled in the new Florence Heights near the City Park.

In addition, the site of the Grant home with its commanding view of the harbor, was one of the most valuable in the city. Built in Queen Anne style, the mansion was far more elaborate than might have been expected in the late 1880s, containing some twenty-five rooms. A spiral staircase, stained glass windows, and fireplaces of Tennessee marble and Mexican onyx adorned the living rooms. On the exterior, the first floor was pressed brick with brown stone trimmings and the upper floors were shingled. Elegant tile floors decorated the verandas and porches. Currently the El Cortez Hotel sits where this home was once located.

Grant continued to speculate in real estate. He also became a leading citizen, who pushed for the creation of a city park, that would become Balboa Park. Grant was a delegate-at-large for California at the Republican National Conventions in 1896 and 1900. He was also an elector for California in the 1904 and 1908 presidential elections

About San Diego – Grant Hill Park

The development of Grant Hill Park Historic District has been a long, slow process. Originally called Mount Gilead, the area was subdivided in 1887 by Mrs. W.E. Daugherty. The sparse development in the area indicates that this was a predominantly rural area of small houses and orchards. There was little construction in the area until 1906 when Ulysses S. Grant Jr. purchased a major portion of the subdivision, including the top of the hill, and resubdivided it, renaming it U.S. Grant’s Hill.

Ulysses S. Grant, Jr. (1852-1928) had long held the dream of erecting the finest hotel in San Diego and naming it the U.S. Grant Hotel as a memorial to his father, the former General and U.S. President (1869-1876). Just as his dream was about to come true, it appeared to be dashed when the San Francisco earthquake and fire of 1906 brought construction of the U.S. Grant Hotel in downtown to an abrupt halt. Because there was no lumber available, all construction in San Diego had stopped. While the hotel would finally be completed 4 years later, it may have looked to Ulysses Grant Jr. that his dream would never become a reality. This may explain why Grant Jr. purchased Mount Gilead, a prominent hill commanding a spectacular view, and changed the name to U.S. Grant’s Hill. He may have wanted San Diego to at least have a natural prominent site as a memorial to his father.

In order to take advantage of the view of the bay, the ocean and the hills of Mexico, Grant Jr. had “J” Street, which in earlier Mount Gilead subdivision would have cut over the top of the hill, graded in a curvilinear fashion to the South around the summit. The summit itself was never built upon and for many years served as a natural “reserve” where members of the community could retreat and enjoy the view. In 1940, the neighborhood conducted a campaign, under the leadership of Violet Black and the Golden Hill Improvement Association, to develop the summit area as a city park. With strong support of the community, including a contribution from George W. Marston, the City purchased the land for under $3,000 and developed Grant Hill Park.

In 1912, Michael F. Hall, a close friend of Ulysses S. Grant, Jr., and a member of the board of directors of the U.S. Grant Corporation, purchased the entire North side of “K” Street between 26th and 27th Streets. He built 15 bungalows along this block in this same year to sell as spec houses. Mr. Hall was a prominent realtor and businessman in San Diego who developed Mission Hills, Bird Rock and other San Diego subdivisions. When he built these houses, Mr. Hall was quoted in the paper as saying he had many more plans for the Grant Hill area.

The development of the area around Grant Hill Park was a very slow and sporadic process. Individual lots were purchased and built upon over a span of eight decades and, thus, cover a diverse range of architectural styles. To this day, this community presents a low density, low-key rural development character.

Also, in the early 1900’s, a number of homes were built by a family named Berger. This family worked as Stone Masons and owned their own firm called Berger Brothers. Their profession may be responsible for the many cobblestone retaining walls in the area, a unique and consistent design feature of the Grant Hill neighborhood. The Bergers were also a part of a larger German colony that lived in the greater Golden Hill and Sherman Heights areas.

Because of the nonrestrictive nature of the neighborhood, many ethnic groups have settled in the Grant Hill area over the years. Kikuye Kawamoto, a prominent Japanese restaurateur built a fine Spanish Colonial Revival home there in 1936. Mr. Kawamoto was the owner of the Frisco Café on Fifth Avenue in The Gaslamp area. The Kawamoto family and all the Japanese –Americans living in this neighborhood were forced to leave in 1942 when they were sent to military detention centers for the duration of World War II. The Kawamotos, unlike most others, were able to return to their home after the war and were still living in this house in 1967 when the architectural survey was made.

In 1990 the City established The Grant Hill Historic District and as recently as 2007 set forth detailed developmental guidelines. No alterations or modifications may be made to historic structures without obtaining a permit from the Planning Director and undergoing an intensive review by the City’s Historical Site Review Board.

The Painted Lady Bio

Although the tax records show 1909, our Victorian 2 story house located at 405 27th Street was built on lots 15 and 16, Block 50 of the Olmstead and Lowe’s subdivision possibly as early as 1894.  It currently sits right across the street from Grant Hill Park and is the oldest and only 2 story Victorian on the hill. Geo Bell purchased the lots in 1891 and made an improvement by 1894 valued at $1475. This improvement indicates the building of a home, though no building records could be located. Although not certain, it appears that SEG Dougherty (Sallie Elizabeth Geller) may have lived at this property between 1893-1900 so our home might be technically “The Bell-Dougherty House 1894.”  Sallie Dougherty was involved in the subdividing of the Olmstead and Lowe’s subdivision in 1887. On August 20, 1900, Geo Bell sold the property to Homer G. Taber, who only a month later sold it to Mrs. Tina Pope.

Mrs. Tina (also spelled Christina or Tena) Pope owned and lived at 405 27th Street for about a decade.  In 1910, Tina Pope filed a sewer permit with City of San Diego, indicating that until this time the property was on septic and likely had an outhouse.  Mrs. Pope was a widow when she purchased this house and lived there with her son, Walter Lester Pope.  During her tenure at 405 27th Street, Mrs. Pope worked as a fruit packer.  According to US Census documents and San Diego City Directories, Mrs. Pope opened up her home to lodgers.  In 1913, Mrs. Tina Pope and her son, Lester (Walter), were listed as proprietors of the Hotel Webster at 912 8th Street.  By 1917, Tena and Walter were both living in Oceanside where Mrs. Pope was the proprietor of a hotel there.

By 1913, 405 27th Street had new owners: Sidney and Jennie Stead.  In 1913, Sidney was working as a salesman for De Varona & McDonald, a real estate company.  In 1914, his occupation was Bailiff at the Superior Court.  By 1917, he was working as a gas purifier at San Diego Gas and Electric Company.  The Stead’s lived at 405 27th Street until 1956.

We purchased The Painted Lady in Spring 2011 and during the course of the Summer completed the total ground up restoration. To see the complete renovation story, see before and after pics, and videos visit http://tomtarrant.com/tag/painted-lady/.

Sources:

Christianne Knoop

Tom Tarrant

Save our Heritage Organisation

San Diego History Center

Wikipedia

Special Thanks to:

Steve “Barney” Barnett

Jim The Realtor

Ken Kramer’s About San Diego

Jodie Brown, Senior Planner Historical Resources Board San Diego

Painted Lady Open House

It’s finally done! Green Button Homes presents: “The Painted Lady” for $499k, she’s a 5 bedroom, 2.5 bath, 2044 s.f. 1909 Victorian Gingerbread that we totally restored over the summer. There’s nothing like this property in San Diego right now on the market for the price. I’m having an Open House this Sunday October 23rd from 1-3 pm. If you are in the market or just want to see the project please feel free to stop by after the Charger game. The address is 405 27th Street 92102 in Historic Grant Hill Park. Here’s a walk through video from Jim The Realtor, he’ll also be onsite Sunday to assist any potential buyers. I’ll post more pics, back stories on the property and a before and after video soon.

*Realtors, we are showing this fine property by appointment only. There is no lock box onsite. If you have a buyer and want to schedule a showing please call Jim Klinge (760) 434-5000 or myself at (619) 565-7475. See ya Sunday!

Paint on the Lady

The painters I hired for The Lady turned out to be a little in over their heads. Throughout the week I found myself initially letting some poor prep slide, then finally by the end of the week I was actually showing them how I wanted things done and had my hourly helper doing their work. Since we had agreed on a contract price and not hourly, I told them it just wasn’t working out and I wanted to break up. The straw that broke the camels back is when I had my guy re-sand a whole wall because they didn’t prep it good enough and then before we could even put some primer on it, they sprayed color right over the raw wood. I feel much better now after letting them go, me and my guy will probably just finish it off ourselves. The paint job is real important on this house and as you know its all in the prep, but even though I had not planned nor budgeted for the caliber of work we’ve done in the past, it still needed to be better than what I was getting.  This is the first sub contractor who hasn’t worked out so I’ve been really lucky getting back here to San Diego and having to build a new team and at least the error is on something I can fix. I am super excited with my colors, the first one we put up after primer is the dark green on the big eaves. Victorian color schemes are known for dark eaves and trim and lighter body colors. The pictures are large format again so make sure and click on them if you want to zoom in: )

The second color we sprayed was on the gable shingles. This accent color will also be carried down to a few other spots later. Notice the ornamental rosette discs I found online to replace what must have been there originally. When we pulled the siding off last month I noticed these circle marks and figured out what had been there years ago. These little details are going to pop after all the colors are up. I’ve got one more period detail big surprise with the front porch handrail, the house is looking really good now but only half way to the impact I’ve got planned!

The drywall crew is doing a great job and should be finished in a few more days. The hand troweled smooth texture is coming out perfect so that’s my good news for the week. Here are a few pics before the texturing went on, the huge tray ceilings are really dramatic. I also went with the new style “mini-bullnose” for the corners, its smaller than your typical rounded corner but very sharp and clean and usually reserved for high end custom homes. My plan is to keep pushing on the exterior so we can get all the colors up before coming back inside to do window trim, interior paint and flooring. We had a good home sale a few blocks over, its another historic 2 story rehab, 500 square feet smaller and only a 2 bedroom went pending after only 5 days on the market for $425k. We’ll have to see what it closes for but I’m sure they didn’t take too much less with that short market time.

Painted Lady Week 6

Here’s a walk through to show the progress of The Painted Lady at week 6. After waiting 4 weeks for historical board approval we finally got the green light so we started calling for inspections. It was quite interesting to say the least, initially we failed both the foundation and framing because of a few small issues. The trench for the foundation was 2″ too shallow,  the plans I drew noted a 24″ deep trench which is overkill because a 2 story house only requires 18″ deep footings but I wanted to beef it up a little. I also upgraded the rebar size from the nominal 1/2″ as code requires to 5/8″ just do make it stronger. None of this mattered when the inspector showed up, he failed me anyway for lack of the 2″ to make it match what the plans called for. On the framing I was missing a few nails as the plans called for. I knew it wasn’t a big deal to make these few changes so it really didn’t bother me to fail. We fixed them quick and called the inspector back out 2 days later.

This is when I learned that nothing is going to just get signed off on that quick. When he arrived it took him all of about 10 minutes to measure the trench depth and check for the framing nails. He then proceeds to tell me that he can only pass me on the foundation but I’ll have to wait to pass on the framing. Really, didn’t you just look and see I made the corrections?  I’ve heard that they commonly show up and will only sign off on one or two things due to time restraints. The framing inspection includes about 4 categories; roof, floor, wall construction and sheer panels and could take up to 40 minutes in theory. Although he already verified everything was o.k. he only passed me on the roof portion “so I could stay busy and put my roof on.”  As you can imagine there’s not much new construction going on, so last year half of the inspectors got laid off so I don’t think morale is at its highest level.  With half of the staff now the inspectors are covering twice the territories so there’s not much time when they show up. When dealing with inspectors always tread lightly, give respect and remember not to rock the boat. The best rule is to close your mouth and just listen. This is exactly why most rehabbers look for the cosmetic flips or sneak by without permits.  Next week will be big, plumbing is now completely done, hvac done and electrical 75% done. Monday we are finally pouring the foundation after waiting forever for the City. Even with the slow downs I’m still pushing,  small set backs are just part of the business.

Several other cool things in TomTarrant.com land for this week;

1. There is a new contest at REIClub.com that I am nominated for. It’s another Best Real Estate Investing Blog shoot out. I’m up against some really popular sites so please go and cast your vote for me. Voting doesn’t begin until Monday, June 13 and goes through midnight on Friday June 17. This one is big, I could win a $250 Apple gift card which my wife would love. I need your help on this one guys, if you like the info I share here for you, please take a second and go vote for me!

http://www.reiclub.com/realestateblog/best-real-estate-investing-blogs-2011/

2. Joshua Dorkin over at Biggerpockets.com asked me to do an off the cuff Skype video interview for him where we’ll cover general real estate investing stuff and info about my house flipping business.  Make sure and go by his site next week and look for the interview. I’ll probably spill all the secrets you’ve been wanting to know.

http://www.biggerpockets.com/renewsblog/real-estate-interviews/

It’s Heatin’ Up

Even with the short week we still managed to get a lot done. The plumber is almost done now and I had the hvac guy come through and he roughed in the whole house in 2 days. I installed a Goodman 70,000 btu central heat system only with all new ducts. It was a breath of fresh “air” not to have to do the full central air system because in most areas in San Diego you don’t even need air conditioning. These guys don’t mess around in this town, he rolled in with 6 helpers and they knocked it out. What a change from “Land of Manana” as we called San Antonio, where most workers only did the bare minimum, never showed up and just squeaked by since the cost of living is so low there. Thanks to my buddy Curtis Gabhart from Gabhart Investments for the referral! Check out his site if you want to see how the big boys are rehabbing here in San Diego.

I always bring the hvac sub contractor through second, then finally my electrician will come Monday and start with my 200 amp rewire and new service. The best news all week was that I finally appear to have approval from the Historical Review Board. The City Planner emailed me late Friday and said I could come pick up my plans. My project has been under review for over 4 weeks now, luckily they stamped my structural and mechanical plans right away so I could get started. If everything was approved then I officially have the permit and I’m free to start calling for inspections and can move forward faster. I’ll call for the foundation inspection first so he can check our forms and rebar, then we can pour Wednesday. Next I’ll call in for framing inspection so I can then put the roof on. Finally I’ll call for rough-in inspections on all 3 trades so I can then hang insulation and drywall the house up. It seems like a lot but I’m really not that far away from getting it sealed up.

I was a little surprised about code differences between here and in Texas, seems with all the regulations here in California they would be a little more strict on the duct work but evidently you don’t even have to put “pookie” on the registers or plenum. In Texas with the summer heat they were really strict on the system install but then again this is heat only and no a/c. Right now it’s 68 degrees and sunny. Sorry, to my friends in San Antonio already sweating in 100 degree, 80% humidity.. its going to be a long summer!

The San Diego Real Estate market saw some price slippage, in May there was a 4% decrease from year-over-year prices. Nationally, the 20-City Case Shiller Metro home prices are already in double-dip territory but we aren’t there yet even with the large decrease. I attribute most of this to the artificial market and tax credit last Spring, if the government would just stay out of everything and let the markets correct naturally I think we’d be in a better place. Here’s a good article by Rich Toscano over at Voice of San Diego.org.

Hammer Time

Feels great to be back doing what I love, creating new spaces, and most of all home in San Diego. We spent all week doing demo on The Painted Lady, with 3 laborers I gutted just about the entire house, maybe only a half day left and we’ll be done. I filled nearly (3) 40-yard roll off dumpsters at $427.00 each. I was really worried that we weren’t going to be able to get the dumpsters into the back yard, having to put them on a public street is a pain in the butt as you have to have a permit. My only other choice was paying someone with a dump truck to drive the loads to the dump one by one. This would have been very time consuming and costly. The house is huge inside, I am really excited and can see the final product already. Next up on deck after the demo is done is the foundation work, then I’ll be ready to re-frame the back of the house and put the new roof on. So far it seems sub contractor prices are not that much higher than I was paying in Texas, although I still haven’t nailed down a good electrical or plumbing contractor. Here’s a walk through video so you can see this great floor plan.

New Project – The Painted Lady

74 days after arriving home in sunny San Diego we’ve finally bought our first rehab project, The Painted Lady. I’m real excited about it, she’s a 1909 Folk Victorian Gingerbread. The house is located in an Urban Redevelopment neighborhood just 1 mile from Petco Park and Downtown, with incredible views of the Coronado Bridge and all the way to Tijuana.

There are original hardwood floors under the carpet, 10 foot ceilings, and a lot of original details still intact. This is a huge project and needs just about everything a rehab could require. I’ll be leveling the foundation by adding a new perimeter stem wall and 40 new footings, new roof, re-framing a 360 square foot master suite on the back, replacing all the mechanicals, new kitchen, 2.5 new baths including adding a half bath under the staircase, some new windows and complete landscaping and fencing with an automatic gate on the alley. The house has aluminum siding that’s probably been on there since the 70’s. I peeked underneath it and there’s fiber shingles probably from the 50-60’s . Under the shingles I found the original wood board and bat siding which I’ll expose and also add some of the missing period details like the gingerbread ornamentation and porch decoration the Victorians are famous for.

The Victorian era began in the 1830’s and ran until roughly 1940. Our house is a Folk Victorian, more simple in design than the ornate Gothic or Italianate Victorians, and was usually built more modestly for the middle class. I’m excited to see the scalloped shingles under the gables which I’ll paint multi-color and the decorative gable bracket. This architecture can really hold color well so I’m planning on using a minimum of 6 bold colors to bring her back to life. I’ve done a lot of Craftsman style houses but this will be my first Victorian and only the second 2-story house we’ve rehabbed. With the huge scope of this project it will be a perfect welcome home project and enable me to become reacquainted with the City permitting, historical and inspection departments this summer as well as dial in my sub contractor team. If you can’t see the potential in what we have here, Google “Painted Ladies San Francisco” and you can get an idea of where I’m going with this project. Stay tuned for demo and a walk through design video!

San Diego… Short Sale City

                                                                                                                                                                                                                                Yes folks, it’s definitely all about the short sales. With 1 in 6 San Diego houses underwater many homeowners are opting for strategic defaults and walking away from their properties. The hungry agents out there are simply working the NOD (notice of default) list and finding plenty of anxious sellers who want out as their home is now only worth roughly half of their loan amount. This presents a huge opportunity for investors and homebuyers willing to wait out what’s frequently a slow process. After scouring MLS for weeks for REO’s and swimming with all the sharks out there I decided to switch gears and actually get on the phone and start networking with the short sale agents who are on the front line with all the distressed deals. I’ve quickly come to realize that you have to make your own deals, not just look for one. Not every agent however who has a short sale listing is capable of influencing the deal, much less even closing it. There are third party professional negotiators who seem to have the process wired though. A good short sale negotiator can hammer the lender and dispute their BPO’s, even sometimes providing their own appraisals and documentation as to the value and condition of the property and build in the margin rehabbers need to make a profit. The downside is it can take 2-6 months to close a short sale so we are filling our pipeline up with as many as possible. Knowing who these agents are and networking with them is key, once again its not what you know in this market but who you know. If you are a homeowner looking to do a short sale in San Diego, make sure both lien holders give you a “non-deficiency”, it holds you harmless for the portion of the loan amount thats been forgiven. Our short sale agent has 100% success ratio getting this and has done over 150 transactions. If you are interested in a short sale please contact me.

Calling All Contractors! Contact me if you want to be a part of our team! 

Moving here I had the long term plan of stepping away from the labor part of the rehabs and just doing design work and overseeing the contractors.  Afterall, these arent huge projects, mostly cosmetic stuff. I had given myself a 3 year window to get to that point but after arriving here its evident that this needs to be my new business model right out of the gate. I’ll be hiring all the construction out so I can do multiple projects simultaneously so if you are a GC or know of a reliable one let me know please.  Maybe once the market picks up for move up buyers I’ll do some larger structural projects again but the money to be made now is on the entry level stuff, that only needs light rehabs. The profits wont be as large as we were used to but with increased volume we should be able to make it up and then some. I’m super excited, our California LLC is set up now, we have over 30 offers out there and some are very close to reaching acceptance so I’m looking forward to finding solid team members on the construction side. Also, many people are reaching out to me, new blog followers and old alike. I’m stoked to meet all of you, after the machine gets running we’ll be open to joint venturing on some deals, offering some of our overflow deals to you or even using private investment funds so contact me if you are in San Diego and want to chat about all the opportunities we are seeing with the local real estate market.  

                                                                                                                                                                                                                                 I’m not totally over the bungalow craze so fast though, I’ve got an offer on this amazing California Craftsman REO, I hope it pans out. I’m competing with conventional retail buyer offers that are higher but hopefully the lender will opt for my all cash offer instead. I utilized my “write the offer with the listing agent” strategy on this one: ). No matter what we start buying we’ll do some fun stuff and try to set our rehabs apart from the crowd by hopefully offering a little more attention to detail and some cool design sense. I’m really making headway, once we have more deals than we know what to do with I’ll share a little more about how I figured it out. Stay tuned and thanks for following.

Mid Century Modern Making a Splash

One things for sure, in every city across America you’ll find an abundance of 50’s ranch houses in great established neighborhoods and San Diego is no different. The post war Ranch style house is know for its sprawling lay out and horizontal orientation with the street, usually being single story and having an attached 2 car garage as this was the first decade where families actually had 2 cars. Low profile roof lines and fairly open floorplans are also indicative of this time period as are huge overhanging eaves and exposed beams. Sliding glass doors leading to outdoor patios were first introduced in this era as well. Looking at these homes makes you realize how perfect these traits align themselves with todays homebuyer, even 50 years later.  

Recently its become very popular to put the modern twist on these homes. Being in San Diego now I’m not sure if I’ll continue with the Craftsman Bungalow affair we had in Texas but with what I’m seeing done to these 1945-1968 Ranchers its looking pretty fun. You’ve got the large rooms, open beams and open floorplan. To get the modern element into the exterior all you need are aluminum windows, smooth stucco and some natural elements such as stained redwood or teak. These style homes already typically have minimal exterior ornamentation. Metal windows, dark wood and frosted glass, Bam. You got it. I really like this house a friend showed me this week during our property hunt, I’m so excited about this design style I think I’ll try my hand if I land a rancher. The interiors are semi-minimalist but Modern with clean lines, high end finishes and trendy material choices, no travertine here. Formica countertops were also introduced during this period but there’s a variety of other new materials of course that mimic the clean, smooth look for counters.    

Hopefully I’ll find the right house to transform into a Mid Century Modern project, were making tons of offers. REO’s, short sales, traditional equity sales and to private party non-mls stuff. Somethings bound to stick soon, stay tuned.

Payin’ Dues

I’m giving 110%, eating and breathing real estate but still haven’t bought anything. It’s been just over 4 weeks now since rolling into town, sometimes you just have to pay your dues so I’ve come to grips with it now. San Diego is so large and to find deals you have to be willing to cover some ground. This week I looked at about 30 properties and made 4 offers. I know the city pretty well after living here for 27 years but I had to buy a GPS to get swiftly around town to some of these unfamiliar locales. Most of the deals I looked at were on MLS and bank owned REO properties. They are commonly vacant and beat up. Some more than others, its common to see signs of past renovations like travertine tile or faux paint jobs from times when easy money and using your home equity as an ATM machine were so popular here. Many homeowners simply ripped everything out when they left and took it with them. A lot of lenders are opting to paint and carpet and then list for near retail price.

One deal I found early this week in the middle class neighborhood of Linda Vista was listed at $168k. It was a great little 50’s rancher 3/3 with a room addition. I pinned the ARV at $299k. It needed complete kitchen, 3 baths, paint in and out, windows, stucco, flooring, and landscaping. I estimated my rehab budget around $60k, it looked real good so I wrote an offer of $172k hoping to grab it quick. This bank only lists their properties on a website, you are not allowed to submit offers via fax or email. Its like the EBay of REO’s. Whats neat about this system is its suppose to take out all the double dipping as the listing agent doesn’t even control what gets presented, the bank has direct access to the site and picks the best offer. You have to upload your proof of funds and everything to the site. On the last day someone overbid me by 500 bucks and got the house for $172,500. I should have sat at the computer all day.

My direct marketing is working as well, I’ve got offers out on several really exciting projects so hopefully those will come to fruition this summer. I’ve been networking with some other San Diego real estate investors as well, 2 of these guys have alot of offers out and have even offered me some of their deals so I’m real grateful. When you are chasing Short Sales here in San Diego its common to write offers on 15-20 houses and then wait for 6 months. This is the case with these guys and now some of the deals are getting accepted and they don’t want them all. I feel happy with the progress I’ve made during the short time we’ve been back but still anxious to break ground on the first rehab. Stay tuned to see what I’m going to end up with for the first project…

PS. I’m Still Looking To Network With More San Diego Investors, Wholesalers, REO Agents, Short Sale Agents, Contractors and most of all Anyone Who Knows of a Cool House For Sale, Friend me on Facebook or Contact Me here.

PSS. A Special Thanks to Peter for the lead you sent to me on the Real Cool house!

Exploring San Diego Bungalows

Here’s a great 1920’s bungalow project. It’s a bank owned REO in a highly sought after neighborhood. I missed this deal yesterday literally by hours. By the time we went to submit an offer they had just accepted another one. There’s another great investing tip back story with this house, I’ll share it after I know it’s gone for sure.

San Diego Real Estate Market 2011

“Welcome to San Diego, Now Go Home!” This was a popular bumper sticker back in the day and I kinda feel like the real estate market is telling me this. After spending the first few weeks settling in I’m now excited to started looking at property and assessing the local market conditions. Here’s my take as an outsider just arriving. There are tons of deals here but tons of competition to boot. Several agents have showed me stuff and of course I am searching MLS daily for hours and getting to know the “new” old system. I’ve found the San Diego market to be quite energized with a flurry of seasoned investors, newbies and first time home buyers all competing for what really appears to be a limited amount of inventory. When getting in a bidding war against a potential homeowner for a MLS property you’ll likely get outbid unless its an all cash sale. All the newbie investors that seemed to come out of the woodwork, are also bidding the MLS REO properties up to a point where its difficult to make a decent margin. Some of these guys are settling for skinny profits just to try and keep their volume up. Investors are commonly using POF from hard money lenders, tying up properties with a winning bid and then going back to negotiate round two after inspections. This isn’t anything new but seems to really have listing agents’ guard up here. Local wholesalers are running around town touting their overpriced deals as well. Foreclosures at the auctions have picked up this year substantially but you have several big players to compete with who are paying up to 90% ARV minus repairs. One of these investment groups is backed by Chinese investors and bought over 350 properties in 2010, that’s more than 30 a month. Another group is doing almost the same volume and a third player has about 20 million floating in entry level houses as this has been where the easy sales lie. It was interesting to see that the San Diego Courthouse foreclosure auction is daily, not just the first Tuesday of every month as in San Antonio. That shows you the volume difference here. There are many partnerships of guys doing 5-10 rehabs a year as well and they are all competing for the same stuff.

Being in a new market certainly has its challenges, even if it is my home town. Looking back at our move to San Antonio makes me realize how lucky we were to pick a killer rehab off, right out of MLS on day 3 after arriving. Reality is setting in now, its going to be way more difficult to find juicy deals here. I’m sure I can pull it off, after all we have no choice. There are several avenues I have to chose from, one being to chase down the 3/2 bank owned properties in MLS that basically just need cosmetics like kitchen, bath, flooring, windows, landscaping and paint. With this model I would be bouncing all over San Diego County for sure. The other avenue would be continue with our specialty which is finding the inner city bungalows which are generally 1/1’s or 2/1’s and very small at around 600 s.f. and do the larger structural rehabs adding master suites to them. I viewed quite of a few of these this week to get an idea what my competition looks like.

Here’s a sweet one in the neighborhood that I like. Checking out the rehabbed homes I was interested to see some of the material choices as well as paint schemes. This one is really cool and new construction but some of the other rehabs really lacked the design sense that I know help sell our houses. One rehab selling for top dollar still had some 1970 aluminum windows left in the kitchen, another had some new concrete steps blocking access to the garage and the craziest of all; the top dollar, king of the area rehab that’s now Pending for $650k probably had the worst prep job for paint than I’ve ever seen. This was new construction addition where none of the blocking between the rafters or siding was even caulked before they painted it. The eaves were raw OSB with roofing nails poking through. I was alarmed to see this quality or lack thereof on the highest comp in the area. A new friend told me I should be happy to see this, and I was: ).

The 4-5 adjoining neighborhoods that I have targeted as my new farm still have a plethora of distressed homes in them. These of course are not for sale nor in MLS. We’ve started to ramp up out direct marketing campaign or what I call “the system” that worked so well for us in San Antonio and have been pleasantly surprisedwith a 10% response rate from our efforts. Doing the big remodels will thin out the competition for me as there are no homeowners to compete with, the newbies just aren’t capable and even the big players don’t want to get tied up in a 6 month rehab because they have to keep their money moving, as its borrowed. For me this works great, we enjoy the larger projects because we don’thave to find that many deals a year and we can squeeze every bit of equity out of them by doing the construction ourselves. The big budget rehabs with big profits are where it’s at so I hope I can end up back in this model. You’re not just getting paid for adding the latest “pergraniteel finishes” but you’re adding real value and forcing the house to appreciate by the additional square footage. Hopefully this is where I’ll land but I cant wait forever to start finding them, so we might have to knock a few lipsticks down in the meantime.

Here’s an example of the diamonds in the rough I am finding.  There are some great old houses here, its just going to take time to start getting them. If you are a wholesaler or agent and got one of these, or know of one for sale, please contact me, we pay top referral fees. With all the heavy competition here it apparently has corrupted a lot of the local agents. One Top Producing “bus bench ad” agent would not even accept a full price offer when it was Active in the computer, holding out so she could double-dip and represent the buyer as well. Other agents getting REO’s from the banks seem to magically have a buyer lined up at the same time they get around to putting them in the computer, very discouraging to see such unethical behavior. Short Sales in San Diego are all the rage, its easy to get a list of everyone who is upside down in the mortgage and then contact them and offer to help. You don’t have to be an agent to negotiate with a lender on behalf of an upside-down homeowner. Once you get a low offer accepted you sweep in and scoop the deal yourself for rehab. Being new to town I’m being very picky on what we write offers on, it’ll be interesting to see what direction we end up going. You have to stay flexible as an investor and change your strategy for the current market conditions but we aren’t giving up so quick and bowing down to a cosmetic skinny deal yet!

We’ve Moved Back to San Diego!

We are in San Diego now! Over a 10 day period I drove from San Antonio to San Diego twice, bringing 2 work trucks, a 26′ UHaul and the family SUV. The trip takes about 18 hours, it was way more difficult to get out of Texas than it was to go there but well worth the effort now that we’re back. Pulling into San Diego was the best feeling ever after our 4 year hiatus but unfortunatley we were blindsided with disgusting conditions at our house which had been rented in our absence. The place was so bad we had to clean, paint and repair things for 3 days before we could even unload the truck. Not what I was hoping for after the huge move. It was all worth it now and we’re busy settling in, hopefully soon we’ll be writing offers and landing some deals.

 There are tons of bargains on San Diego Real Estate right now and a lot of investor activity and house flipping. All of the deals I’m seeing here are cosmetic rehabs, mostly bank owned stuff. Not to say that we wont get back into some room additions and huge projects but I’ll probably warm up with some light renovations while I build my team of sub contractors. I’ve sent in the application to take my real estate test so hopefully I’ll be licensed by the time we sell our first project. It’s been a crazy move, stay tuned for some updates from the front line as I start to look at potential projects soon.

30-Day Notices Are Flying

 After 60 days on the market, we sold The Target House last week. We had a flurry of activity right after Christmas and then someone popped up who had actually seen it weeks earlier. Their inspector told me this week he loved the house more even after the inspection and that my quality of work was 2 levels above most renovations he sees even in the nearby pricier Alamo Heights neighborhood. I’m really going to miss this project, its one of our favorite houses. The sale wont close until the end of the month but we’ve got alot of packing to do and loose ends to tie up before we leave town. The 30-day notices were flying last week, one to our tenants in SD and another to our landlord here in SA.

It’s been a great final year for us here in San Antonio but I truly feel we are leaving at the right time. When we first got to S.A. there were tons of other California investors here rehabbing but they fled when the market here slowed and simultaneously CA started to rebound. The San Diego real estate market reached a bottom in Q2 09 and throughout 2010 saw steady home price appreciation up until July where things started to back off a tad. Depending on who’s numbers you are looking at they gained back about 3-8% of the 35% they were down from 2005 peak. I’m sure interest rates will continue to creep up in 2011 and the big lenders will continue to dribble out the REO’s for everyone to fight over but even with the Fall sales decrease I am optimistic that San Diego will hold ground throughout 2011 and then really take off in 2012 if the unemployment situation improves. Of course there is the double dip crowd that sees the opposite and anything is possible. San Diego is on sale right now, and 2011 is going to be a great year there for experienced investors. It’s a perfect storm of higher affordability, low interest rates, tons of bank owned properties that need to be fixed up, decreasing inventory levels, price increases and first time buyers chomping at the bit after waiting nearly a decade to be able to get into the market.

We had tons of fun this year sharing our adventures on the blog and attracted alot of attention doing it. This Spring my blog was voted Top 10 Real Estate Investing Blogs by Biggerpockets.com. This summer I was approached by 2 different production companies to do Real Estate Reality Shows and we completed and sold 2 big rehab high-end projects;  The Neighbors House and The Target House.  My killer rehab called The Hat Trick House was also featured on the front page of the local newspaper this summer which drew the attention of a local City Councilwoman who called us in to consult on urban redevelopment for the City. Our blog traffic doubled from last years numbers to over 80,000 visitors and my YouTube channel is blowing up. Happy New Year to everyone who’s followed along with us, thanks for all your comments and in less than 4 short weeks you’ll get to see a Great change of House Flipping Scenery from us, San Diego here we come!