Saturday, August 31, 2013

Mapping Out Real Estate Sales

I talked about this map on a recent podcast and wanted to share it here as well. If you click on it, you should get to see the large version of it. It's meant to be printed on a 17"x11" sheet of paper.

This map shows sales in Corvallis, Albany, Lebanon and Philomath in the last 12 months. People often talk about price differences in Corvallis and Albany, and this map shows it perfectly. Of course, this map takes it a another step and shows the differences in neighborhoods too. Often North Albany is said to be more expensive, and South Corvallis is thought to be less expensive. With the map, you can clearly see that.

What's also fun is finding the place you recently bought or sold on the map. We bought two in the last 12 months and I was able to pick them out (one yellow and one green dot).

I don't know if this will become a regular thing, but it sure was fun to make once I figured out all the tools I needed to combine to make it happen.

Want to make a map yourself? Here's how to do it:

  • I created a grey map using MapBox. They have all sorts of cool styles to choose from. It requires a free account.
  • I installed an app of their's called TileMill. It took a while to figure out how to use this. It's not as intuitive as I would like.
  • I imported a reference layer from map I made in MapBox to TileMill (under setting, link to your map's MapBox ID).
  • Then, I went to the MLS database and exported all the sales in the last 12 months, including their price. This could, in theory, be anything geographic.
  • I went to GPS Visualizer and geocoded all the address (1,700 of them!) to latitude and longitude using their javascript tool.
  • Once I had that, I made a .CSV file of the data and imported that into TileMill as another map layer.
  • TileMill is cool because then I could style the markers any way I wanted using code similar to CSS. I chose plain dots that differed in color based on the price. I could also change the size of the dots if I wanted based on some other criteria.
  • Then I created a 17"x11" image at 300 ppi in Pixelmator. This is like Photoshop for Mac, but much more affordable and just as powerful in my opinion.
  • Then it was a laborious task of taking screen shots of TileMill, cropping them down to only the map using Mac's build in Preview app and lining up the layers in Pixelmator. Since a screen's resolution is 72 ppi, I essentially had to blow everything up 3 times the size so it printed normally. I had more than 30 layers to cover the entire canvas.
  • I couldn't fit Lebanon inline with the other cities, so I broke it out into it's own box. It happens.
  • I could also, if I wanted, upload my dots layer back to MapBox and then have something to embed on a website. Like so:

So there you go. A cool map that shows sales and a really quick guide on how to make it. Or at least, the tools to make it happen.

Wednesday, August 28, 2013

How To Finance Commercial Real Estate

I was recently doing some research for a real estate investor's club meeting on how to fund commercial real estate and had trouble finding this information online. So... Here it is as of August 2013.

Let's say you want to buy an apartment complex larger than 4 units (that was one of the properties we practiced analyzing as a group). Those, whether it's 5 or 500 are considered commercial real estate. That means you need to get a commercial loan. When you go to a business-based bank, like Citizens Bank, here's what they'll tell you. Again... this is all subject to change, but these should work as general lending rules.

  • First, the downpayment minimum is 30%! That could come from the seller (or anyone really) as long as they're willing to take 2nd position to the main loan.
  • Second you can only get a loan for 20-25 years.
  • That loan will probably have an variable rate, which can adjust every 3-5 years.
  • Your personal credit score, though looked at, doesn't matter as much. If you're buying with a bunch of investors as an LLC then the majority owners would have to guarantee the loan payment.
  • Instead, they'll look critically at the income and expenses of the property. The income must be at least 1.24 (call it one and a quarter) of all expenses, including all debt repayment.
  • Closing costs will be the fairly standard loan fee: 1% of mortgage. Plus the fairly standard 4% of the purchase price for title insurance. Plus recording fees of course, but those are minimal.
  • Often times, since these are larger properties with considerably more risk, the lender will want to do an environment impact report to make sure nothing comes up.
  • That's it. Gather your funds and paperwork and you can buy a commercial property.

This means you need a TON of capital to buy a property though. The specific one I was analyzing met all the criteria if I had enough money for a downpayment and closing costs. Well... except that I don't have $200,000 to invest... So I guess I don't meet all the criteria! I did officially find out that not having enough money is the #1 reason why people don't qualify. No kidding!

Now, if the seller was willing to take back a 2nd for the down payment, and even though it would still have positive cash-flow, the rent-to-expense ratio would become less than 1.24 in this case and I wouldn't be able to finance the rest of the purchase. Bummer. But... if the right property came along that still met the criteria, it would be totally cool. Good luck finding that deal on the MLS.

It could also work, in theory, with a group of investors adding up to the $200,000 minimum down. Of course, I don't exactly know how to find people with lots of cash waiting to be invested... Plus, I'd have to have a very clear exist strategy, somehow prove my credibility, and put in a ton of work... but it could be worth it. I know some people do this full-time with larger properties where the scale makes it worth the effort. They find deals, find investors, property managers and get part of the equity for pulling it all together. I actually would like to learn more about this style of investing.

Anyways, that's what it takes to finance a commercial property. It's way out of my league today, but still fun to think about.

Monday, August 05, 2013

Sweat Equity: Columbus Final Pictures

As promised, here are some pictures of the remodel we did. It turned out to be a massive project, but looks great (especially now that we're done). Let's start with a couple before-ish photos.

The kitchen. The refrigerator used to sit in the empty spot.

The living room. There used to be wall-to-wall carpet where the hardwood is. Unfortunately, that wood was in horrible shape.

The hole in the wall. The trick is to seal it up while allowing for future access to the pipes.

These sections were rotted away and the whole subfloor needed to be replaced.

OK. Now for the final after pictures.

We didn't do anything on the outside except fix a couple spots where the water didn't drain the way I wanted.

The living room. Boom.

We moved the fridge and my dad built this cabinet & counter.

 New sink. new counters. New dishwasher. All refinished cabinets. Just stop for half a second and admire what took us MONTHS to do.

Custom chop block.

Custom countertop too.

MEGA thanks to my dad for coming up TWO weekends to help make these.

Without the fridge here, we added a mini counter for a microwave.

NEW garbage disposal.

What hole? It now also has an access panel just in case...

We changed the sink facet in the bathroom.

We repaired the subfloor. With carpet, you would never know.

We didn't do anything in the backyard, but I like this panorama.

Don't worry, we didn't work 100% of the time. I did my best attempt at Pottering using a paint roller.

We're ready to relax for a bit before taking on any new projects. It'll be nice to get back to a semi-normal routine too.

Friday, August 02, 2013

I Think It's Time For a New Pair of Shoes

There are certain things in life I destroy. What can I say? It's usually a combination of buying the wrong (read: cheap) tool for the job, and then using it to it's fullest.

Almost 1 year ago I bought these shoes. It was a last minute purchase because I forgot my normal pair at home. When I finally got back, these shoes became my "work shoes". I did construction, mowed lawns, painted, and climbed around on roofs with them.

Clearly these $30 shoes from Walmart were not made for that level of abuse.

So, I think I'm ready to replace them. Normally I would demote my current "everyday shoes" to work shoes and get new "everyday shoes"... Which double as  running shoes - their intended purpose.

But now that I'm mowing lawns a lot, and it tends to be wet where I live, I'm second guessing that decision. Does anyone have advice when it comes to buying work shoes?