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Rental Profit – How Much Should You Make?

How much rental income should I make as an investor?  This is possibly the most asked questions that new investors ask.  The answer to that question is, there is no magic number. Every investor, every property, and every investment strategy is different.  This article contains a few guidelines to help you determine how much profit to expect from private rental properties.

There are as many reasons to become an investor as there are properties.  Some investors are looking to earn a little extra income by investing. Others are counting on it for their day-to-day living, to help fund college and retirement funds, and to live a comfortable lifestyle.  Regardless of how much you need to make, earning money on investment properties takes some time and work in the beginning before it truly feels like passive income.  It’s not a “get rich quick” scheme, by any means.

 Focus On Cash Flow – Not Appreciation

When you’re trying to determine how much profit you’ll make on a particular property, focus on cash flow, not appreciation. Relying on appreciation is risky because you can never be sure that home prices are going to increase.  In certain cases, your investment property might actually decrease in value.  Focusing on cash flow is a smarter way to determine how much money you’ll be putting into a property, and in turn how much you’ll be getting out of it.

 Find The Right Property for your personal portfolio

Research to find out the best areas in which to invest in rental property. Study the neighborhood market, don’t skip the home inspection and keep an eye out for homes that are under market value. These are the first steps in earning a profit from your investment.  Once you have narrowed your search to a few specific areas, choose the one that works best for you.  Some investors like to invest in their immediate area as it makes it easier to keep an eye on it or because they already feel comfortable with the area.  After all, they chose to live there.  Others want their investment properties to be as far away from their personal homes as possible.  Others simply want the best return on their investment and honestly don’t care if their investment properties are close to their own neighborhood or not.

 Investing in the Birmingham Area

While we can’t speak for the rest of the country, we know a thing or two about investing in the Birmingham area. In Birmingham currently, a B+ and A- property equals to about a 6.5% to 7% cap rate to hit and maybe a 12% cash on cash return. You’ll still hit somewhere in the 16% to 18% cash on cash return, maybe like 8.5% cap rate in the C+ and B- type product. (These property scores are explained near the end of this article).  Imagine the passive income you could earn if you owned multiple rental properties! Another great thing about real estate investing, and turnkey especially is that you don’t have to live locally to take advantage of the hot market. Even if you don’t live in the Birmingham area, you can still take advantage of the deals. Birmingham is a hot spot for homes that are below market value that generate a significant ROI (Return on Investment)

 Location

Real estate investing is all about location. A common misconception about investing is that you need to invest in an area close to where you live. This isn’t always the case. In fact, properties in the B- and C+ categories are in what pros consider the “sweet spot”. The sweet spot is a vibrant market that offers properties that are affordable to the majority of buyers in the area. These are the areas where you are most likely to get the most effective returns. So how do you know if the property you’re investing in falls into the sweet spot?

B Class Properties typically:

  • Are older than A class properties
  • Tend to have lower rental rates than A class properties
  • Are seen as “value-add” properties by investors
  • Can be acquired at higher Cap rates than A class properties
  • Are close to schools and amenities
  • Has a good overall feel, but just needs some updates

 C Class Properties typically

  • Are located further away from schools and amenities
  • Are older than 20 years
  • Need quite a bit of TLC to compete with other property classes

Although B and C class properties may seem like they need a little work, they’re considered the sweet spot for a reason. These homes are appealing to middle-income renters and can easily be upgraded to a higher property class usually with just a few upgrades.

 Property Management And Profit

Many investors are busy professionals who don’t have the time in their schedules to do everything required for a successful investment. Researching rental properties for sale, the acquisition of tenants, the rehab, the property repairs and maintenance, and the collection of rent checks and the overall understanding of how to manage rental property all require time and effort that most investors just don’t have. This is why many investors start interviewing rental property management companies to help them handle the day-to-day tasks related to their investment property. While some investors see the management company as an additional expense, we see it a little differently. A competent and professional management company can anticipate issues before they arise and solve them quickly. They can handle tenant issues effectively. A successful property management company is well worth the fee you pay them if they are keeping an eye on the property, making sure tenants are happy, collecting rent, and performing routine maintenance to ensure the property is performing at it’s best.

The main goal of investing is to earn money. If you’re not earning a profit, what’s the point?  Many investors have made millions investing in real estate, and you can too. But it doesn’t happen overnight, and you have to be willing to work for it. By following these guidelines, you can be on your way to successful investing that generates significant returns and changes not only your life but your legacy as well.

The Thomas and Pratt City Neighborhoods of Birmingham Alabama

The discovery of a high grade coking coal in 1879 began the industry upon which Birmingham, Alabama was born. This mineral wealth was touted far and wide by entrepreneurs such as Enoch Ensley and attracted industrial investment to Birmingham. Below he is pictured with an 11-ton lump of coal en route to the New Orleans World Exposition of 1884.

enoch ensley

By 1886, Pratt mines were the largest and most extensive mines in the state. Pratt Mines was founded in 1878 by Henry DeBardeleben, Truman Aldrich & James Sloss. Pratt Coal & Coke Company was named in honor of Daniel Pratt who was DeBardeleben’s mentor, father in law and benefactor. In 1881 it was sold to Enoch Ensley for $600,000. Enoch sold it in 1886 to the Tennessee Coal, Iron and Railroad Company. By the end of the 1950’s, the former Pratt Mines had faded into history with no surface works remaining.

Coal was either shipped via rail to market or changed in massive masonry overs to form coke, the fuel for making iron. by 1898 Tennessee Coal and Iron Co. was the nation’s second largest producer of coke. U.S. Steel acquired TCI in 1907 and developed Pratt City as a regional shipping point.

ensley tennessee coal iron and railroad company

Three railroads had extended trackage into Pratt Mines by 1887. The privately developed community that grew like topsy adjacent to the mines and company quarters became Coketon, Pratt Mines and finally Pratt City, the state’s earliest and largest mining boomtown.

1880 Pratt

 

1st street 1920

 

pratt city-7

Just to the east, Pennsylvania iron-master Samuel Thomas built two iron producing furnaces and constructed residences for furnace labor. The furnace town, noted on O’Brien’s map as Enniskydeen, an attempt to spell Thomas’ hometown in Wales, became Thomas, Alabama, headquarters of Republic Iron and Steel’s Birmingham operations.

map ensley and thomas
1st shipment of steel made in birmingham al 1897

Experienced ironmaster David Thomas, together with his sons Samuel and Edwin along with industrialist Robert Sayre, purchased the 2,000 acre Williamson Hawkins plantation in 1886. This superb industrial site had an abundant supply of limestone, water from Village Creek and seams of coal and iron which were all the necessary ingredients for the production of iron. Couple that with the fact that Pratt coal supply could not have been closer and you had a recipe for success.

By 1890, the Pioneer Mining and Manufacturing Company, as it was called, had built two “family designed”, state of the art furnaces and constructed a two street town for furnace personnel. Other laborers were hired form surrounding farms.

Thomas Streetcar

Republic Steel acquired the Thomas site in 1899 and expanded plants and the towns of Thomas and Ensley. Republic rented housing to job holders whose tasks required them to live close to the furnaces.

Laid out in the 1880’s along wide tree lined streets, the residences along 1st and 2nd streets and the commissary were closely modeled after worker communities in Pennsylvania. The main difference was that these residences showcased southern industrial types including board and batten and frame shotguns, pyramidal cottages and bungalows.

Housing in Thomas solidified a clear cut class structure. At the head was the superintendent’s house set on a large plot among stately trees and magnificent gardens. houses along 1st were surrounded by picket fences with large yards, coal and out houses in back. Foremen and young bosses lived here, along “silk stocking row”.

pratt city-4

Along 2nd street or “cotton stocking row”, lived mechanics and other skilled labor.

pratt city-6

Housing for semi-skilled and day laborers was along 3rd and 4th. Those streets were called “bare legged row”. Here many Italians put down their American roots. Joe Bruno, Alabama’s leading grocery store magnate, was born here.

pratt city-2

Black workers lived from 4th to 8th streets.

Picture1
Thomas Streetcar

By 1912 more than 500 workers and their families lived at Thomas. Houses were fenced, streets and sidewalks graveled and tree lined. in the 1920’s, company gardeners maintained crepe myrtle and calla lily plantings in the medians and parks on most streets.

Early Thomas residents describe their community as closely knit. All the men worked at the plants “from can to can’t”, children rode the streetcar to schools in Pratt City. Community life revolved around the churches, the commissary and the front porch. A sense of community identity was further reinforced by geographic isolation. Thomas remains today totally hemmed in by plants and railroads.

The community of Thomas was annexed into the city of Birmingham during Birmingham’s great annexation push of 1910 along with other like communities such as Elyton, Ensley, Pratt City, West End, Wylam and Smithfield, among others.

During the 1910 annexation push, the City of Birmingham immediately grew by over 48 square miles and increased its population by nearly 73,000 people. Before Birmingham annexed these communities, the population was 60,000….afterwards Birmingham boasted a populace of 132,685.

 

Introduction to Residential Real Estate Investments for the New Investor or the Investor Wannabe

Introduction to Residential Real Estate Investments

for the New Investor or the Wannabe Investor

In order to become a residential real estate investor, there are a few terms and scenarios of which they should at least have a working knowledge.  Let’s explore some of those before we delve deeper into the how’s of becoming a successful investor.  We’ll discuss more about the “how’s” in later posts.

Why are so many people turning to residential real estate investing these days?

There are a growing number of people these days who, for a variety of reasons, no longer want to work for someone else.  I believe the number one reason is the fact that true job security is really a thing of the past.  There was a time, not too awfully long ago when a person could graduate from high school or college, go to work for a company and stay with that company until they retired.  Nowadays, not so much.  Companies are merging, selling and going out of business at an often alarming rate.  They are closing their local branches and opening new branches in faraway lands or outsourcing.  Retailers like Kmart, Sears, and Toy-R-Us are shutting (or have shut down) their stores all over the country.

Even longstanding factories that have survived economic crashes and slow periods have seen massive layoffs and even closures.  At the end of 2017, the 112-year-old Cone Denim White Oak Plant in Greensboro, NC shut its doors laying off approximately 208 people in the process.  This historical plant manufactured blue jeans and was the last major manufacturer of selvage denim in the US.  I’m sure after over a century in operation, most workers never imagined themselves out of a job.

I would be remiss if I didn’t mention the “Ma Bell” monopoly disintegration wherein more than 40,000 people lost their jobs and livelihood in 1982 when the Federal Government forced the company to split their holdings when charges were filed against them under the Sherman Antitrust Act.

As an employee at a traditional workplace, you are always trying to work your way up the corporate ladder into a better position, only oftentimes to find out that your ladder is leaning up against the wrong wall.  A raise can lead to more income, but also requires more hours, which is the one commodity we want to have more of in the future.

Most of us are allocated two weeks vacation time a year from our employers.  During this time we don’t earn anything extra.  Wouldn’t it be nice if you continued to earn income even while away on vacation, attending your child’s sporting event or even while sleeping?  This is the beauty of real estate investing and is the main goal and dreams of those who step into this line of work.

The moral to all of this, from a residential real estate investor viewpoint is twofold  (1) While the world might find a way to do without a Denim factory, or a Kmart or even a 411 operator…it will never find a way to do without people needing a place to live, and, (2) With a specific goal in mind, lots of patience, hard work and sacrifice, you can be the “master of your own universe”.  You can truly earn money without ever leaving your home.  Will it happen overnight?  No, but it will never happen if you don’t jump off the corporate ladder and follow your dream.

My favorite motivational speaker of all time, Zig Ziglar, once said “You will always get what you want by helping others get what they want.”  What does that mean to a real estate investor?  The one thing that every person wants is a nice place to live.  When I say “nice” that doesn’t necessarily translate to “mansion”.  For most of us, it translates to wanting a clean, functional  place to call home in a neighborhood that we aren’t ashamed of and at a price we can afford.  You give that to people and they will give you money.  You’ve helped them get what they want and now they are helping you.

If your goal is to become a successful residential real estate investor, then you must have specific goals.  You can’t deal in generalities.  To risk redundancy, I’ll once again quote Zig “If you go to work tomorrow because that’s what you did yesterday, you’re not going to be as good tomorrow as you were yesterday because now you’re two days older and no closer to that goal that you did not have.  You can’t make it as a wandering generality.”

So what is required to become an investor?  What are the qualifications?  The answer is short and simple.  It takes a lot of patience, hard work and research.  How much does it cost?  That varies with every community and with every investment scenario.  It also varies with the type of investor that you want to become.

Let’s look at three types of Investors:

Frugal Investor:  The frugal investor buys low usually choosing to purchase class C or D properties and spends cash on the purchase.  The frugal investor spends only what is necessary to make the unit habitable, does most of the work him/herself and holds the properties for the monthly income it produces in rent or sells quickly in order to move onto their next project.

House Hacker:  This is a process in which you get other people to pay your mortgage for you.  Arguably, the most popular version of the House Hacker is that of an investor who purchases a duplex, triplex or quadplex.  They live in one unit while collecting rent on the other unit(s).  The rent from the other unit(s) pay any expenses the investor incurs from the property.  If the House Hacker was also a Frugal Investor, the money he/she receives from rental income is actual profit once the usual expenses like maintenance, taxes and insurance have been paid.

Another version of the House Hacker is the investor who purchases a house with a guest house or garage apartment in the back.  They live in the guest house or garage apartment while renting the larger house out.  An even smaller, more common version, is the college student, fixed income person or newly divorced person who rents out spare bedrooms in their home so their renters pay the mortgage for them.

The last version I’ll mention here is what I affectionately call the “Squatter House Hacker”.  That’s the investor who buys a Class C or D property for cash and then lives in it while fixing it up.  This is not for the casual investor because the sacrifices are sundry and oftentimes extremely inconvenient.  Things we take for granted on a daily basis, like flushing toilets, showers, hot water, central heat and air, might not even exist in the beginning.  This version requires more patience and sacrifice than most investors are willing to expend.  However, if you have the stomach for it, this is a way to grow your portfolio without growing debt and with the least amount of financial exposure.  Chances are great that if you find yourself unable to complete your project or need to pull out for other reasons, you should be able to sell it for at least what you have in it at that point.

BRRRR Investor:  This is an acronym for “Buy, Renovate, Rent, Refinance, Repeat”.  We’ll go into more depth on this type of investor as this type of investing has gained a considerable amount of popularity in the past decade or so.

B – Buy.

This is the foundation upon which all things residential real estate investing hinge.  There’s an old and true saying that goes something like “a product or service is only worth whatever someone is willing to pay for it.”  Value is very often subjective. If you are purchasing the property as a flip (buy, renovate, sell), then you will know exactly how well you did when you sell the property and at that time can make any necessary adjustments to your business if necessary.  However, if you are a “buy and hold” investor (meaning you intend this property to be a rental), then it’s much more difficult, short term, to know if you made the best deal possible on your initial purchase.

The key goal in the BRRRR strategy is to pull all of the money that you have invested in the property out by refinancing it so in effect, you bought a property for nothing yet you are continuing to gain equity as long as you hold onto the property.

When you get ready to refinance remember that most lenders will loan up to 75 percent of the value of the property in a refinancing scenario.  If you’re looking to draw out as much money as possible from the value of your property so you can invest in another, this is a good goal.  However, if you aren’t looking for faster volume growth, then a 70 percent loan to value ratio might be a better plan.  Why?  Because while there is only a 5 percent difference between the two numbers, the refinancing costs will be markedly higher at 75 percent.  The other major reason is how aiming for 75 percent affected the contingencies.  Most people tend to go over budget not under so when aiming for 75 percent, most usually wind up at 80.  Aiming at 70 should get you there or at worse case scenario 75.

Cash is always the easiest way to go when getting that first property.  However, not everyone has that much cash laying around so, in that case, financing is something with which you should be extremely familiar prior to buying your first property.  There are many different types of financing available.  Of course, there’s the financial institution with which you have already established a relationship in your personal financial dealings.  In addition to that route, there’s seller financing, private loans, hard money loans, etc.

R – Rehab

Unless you are purchasing a turnkey property, this part will require a large amount of thought and research…and work.  The main questions you should ask yourself at this stage are (1) What does this property NEED in order to be functional and liveable?  and (2) What improvements do I need to make in order to add more value than cost?  Notice that in both questions I said “need”?  While it’s always a great idea to make the property more attractive than it was when you found it, this is the area that puts investors over their budget quickly.  If you’re doing a luxury property, then go ahead and install soapstone or quartz counter tops with exotic hardwoods and top of the line appliances, because in that market, those are expected improvements in order to get top dollar for your property either in sales or rental income.

However, if it’s not a luxury property, skipping the current trends and sticking to the classic finishes will not only provide an attractive property but will also provide a profit down the road. That being said, it’s always a good choice to get rid of peel and stick vinyl tile in exchange for ceramic tile and refinishing existing hardwoods is almost always cheaper than installing new hardwoods especially if you’re willing (and able) to do a majority of the work rather than hiring a contractor to do it for you.

Be ready to skip the areas that aren’t going to give you immediate value. Areas such as bedrooms, dining rooms, garages, laundry rooms and basements really don’t add enough value to justify spending the bulk of your rehab dollars on them.  Make sure they’re clean, painted, have good flooring and (in the case of the basement) water proofed and move on.

The most important part of the rehab is making sure that the entire property is functional, safe and healthy.  Word spreads like wildfire in the real estate world…..and among renters…so no investor wants to be branded a slumlord.  Making a rental (or any property) pretty is a wonderful goal, but the main goal should be to make it a fully functioning, safe and healthy property so don’t skimp on waterproofing the basement, fixing roofs, updating old and potentially dangerous electrical and rusty plumbing.  Doing all of this in the short term might take a huge chunk out of the money you allocated for installing that dream kitchen but it will save you untold amounts of money in the long term from having to rip that dream kitchen out because of an electrical fire or because those old pipes leaked water in the walls and you had to pay a professional company to do mold remediation on a vacant property because the tenants had to move out due to the mold.

Oh yeah!  Don’t forget about the exterior!  I don’t care how pretty you’ve made the interior and how functional, safe and healthy you’ve made the property, if you can’t get the potential buyer or renter to want to stop and come inside….it’s not going to matter.  You should also realize that appraisers are people too.  You want their first impression of your property to be a good one too!

Below I’ve included a few before and after shots of properties that have undergone minor exterior rehabs.  It’s mostly paint, getting the landscape under control and maybe a shutter or other small exterior adornment added (or in the case of the awning – taken away).  The differences are extraordinary.

  All they did was paint and tame the landscape.

 

Again, paint and landscape but this rehabber spent a little more on a new front door,
exterior lighting, planters and gate.  I’d say worth every penny.

 

 New paint, new landscaping and they got rid of that awning!  Beautiful!

 

R – Rent

A lot of lenders, if not most, are somewhat reluctant to refinance a vacant property.  So before seeking a refinance, you need to get a tenant into your property.  It’s always better to have a good tenant who pays $100 a month (just an example) on time and takes care of your property than a bad tenant who pays $200 a month (again, just an example) every now and then and who trashes your property.  Do your due diligence!  You have just spent lots of time, hard work and money on your investment – don’t hand over the keys to just anyone.

Once you’ve gotten a signed lease, you can begin shopping for the refinance.  An appraiser will need to come to the property.  Never do a drive by appraisal as they tend to be lower than one in which the appraiser actually comes inside.  Always alert your tenants before the appraiser is due to arrive and make sure any pets are kenneled and the property is neat and clean when the appraiser arrives.

R – Refinance

When searching for lenders to refinance a single property rental, there are a couple of things you need to ask.  You will need to know if they are willing to cash out or if they will only pay off the debt and you will need to know what their seasoning period is.  A “seasoning period” is how long you will have to own the property before the bank will lend on the appraised value of the property rather than just on the amount of money you have invested in the property.  In order for the BRRRR strategy to work, you will need to borrow on the appraised value.  There are lenders that will refinance on the appraised value as soon as the property has been rehabbed.  These are the best lenders to find.

Finding the right lender for your situation can be somewhat daunting in the beginning.  There are investor clubs in most major cities who meet over lunch once a month or so.  Those are great networking opportunities for new investors.  There are also a couple of great websites that can lead you in the right direction.  For approximately $200, you can sign up with ListSource and/or DataQuick and using their search function plug in the area and price range.  It will pull up a list of properties that are not owner occupied and the lender associated with those properties.  Once you’ve found several banks that have lent money in similar situations as you, the calls can begin. The beauty of this method is the fact that you already know these banks have made loans similar to what you need.

R – Repeat

Once you’ve refinanced your first property, it’s time to take your cash and move on to the next property!

Here at Decas, we specialize in the BRRRR strategy and can guide you through the process.

We already have an extensive history in Buying, Rehabbing, Refinancing, Renting and

Repeating!  We can show you how to get the most out of your rehab budget and what makes

properties more attractive to both potential buyers and potential renters in the Birmingham,

Alabama metro area.

The BRRRR method is a fantastic way to grow your residential real estate investment portfolio

and we would love to help you grow your portfolio!  Give us a call or reach out to us via our

website.

East Lake Atheneum/St. Thomas on the Hill in Birmingham, Alabama

East Lake Antheneum and Orphans Homes circa 1890

East Lake Atheneum/St. Thomas on the Hill located at 4th Avenue South and 82nd Street in East Lake, Alabama

 

The 79,000 square foot East Lake Atheneum, later named St. Thomas on the Hill, sat on 11 acres covering a full city block in the heart of South East Lake at 4th Avenue South and 82nd Street.  It rose abruptly from a modest residential area on a steep hill at the foot of Red Mountain.  This building was rich with history as one of East Birmingham’s oldest buildings.  It was initially built to house a private seminary of learning for young ladies and later to house an existing orphanage that eventually became the East Lake Atheneum Orphan’s Home.  A substantial expansion in 1957, which included a chapel, presents an unusual two, three and four-story look as the old and new buildings were connected.  The building, in which classrooms had been converted to offices and conference rooms and included dormitories, served as a civil defense shelter during World War II. A separate seven-story retirement community called Villa Maria I was erected around the same year on the back section of the property.  It remains an active retirement community as well as the newer addition of a 5 story retirement community called the Villa Maria II which sits next to the original Villa Maria I.  Both of these retirement communities are still owned by the Catholic Diocese.

 

East-Lake-Atheneum-girls-school

 

The orphanage, later called St. Thomas Home on the Hill, ceased operating in 1971 and the Diocese moved their administrative and family services office there from the Five Points South area of Birmingham in 1973.

The East Lake Atheneum school was founded by Dr. Solomon Palmer, a leading educator of the South, and a one-time state superintendent of education. The land was donated by the East Lake Land Company.  The word Atheneum is often used in the names of libraries or institutions for literary or scientific study.

number 62 trolley with advertisement for east lake atheneum

 Number 62 trolley advertising the East Lake Atheneum school opening

The school was locally promoted by the East Lake Land Company, a number of public-spirited men of Birmingham and the community of East Lake as a whole. It was chartered by the legislature on December 5, 1890.  The East Lake suburb would be annexed into Birmingham 20 years later during the great annexation push of 1910.

Many of the school’s trustees served were also trustees of Howard College.  Howard College would later become Sanford University and would abandon their East Lake campus in favor of their newly built campus in Homewood, AL in 1957.

The first board of trustees for the East Lake Atheneum included Robert Jemison, Solomon Palmer, A. D. Smith, Dr. J. H. Phillips, W. H. Wood, S. L. Robertson, R. G. Hewitt, M. V. Henry, C. C. Jones, J. H. Finch, James Van Hoose, Henry H. Brown and James Wilson.

The charter declared its objects to be the “establishment, organization and maintenance of an institution of learning of high grade for the education of young women, in the arts, sciences, and practical industries.”

The first session opened October 7, 1890, with an enrollment of 180 students. The main building, a large brick, and stone Romanesque-style classroom and dormitory building was completed in 1892 and 212 girls entered the school the next Fall. The stone was taken from a local quarry less than a mile away at Ruffner Mountain. The building was heated throughout by steam and had a chapel, recitation, dining and enough bedrooms to accommodate 150 to 200 pupils.

Ten to twelve experienced teachers taught preparatory, classical, scientific, normal, musical, art, elocution, stenography and industrial courses were offered.  The school had to close briefly due to the 1893 financial panic.

Dr. Palmer continued as its head until his death May 15, 1896. He was succeeded by Rev. J. B. Cumming, who served for two years, followed by Dr. W. S. Weissinger.

 

1900 pic when it was an orphanage

In 1900 the school closed permanently, and the property passed into the hands of the Sisters of Charity of the Roman Catholic Church.  The Sisters changed the use and name of the facility, turning it into an orphanage which continued to operate until 1971.

The orphanage was called the St. Thomas Home on the Hill. When the orphanage closed in 1971, the building was used for the offices of the Catholic Diocese of Birmingham (officially called the Catholic Life Center and later Catholic Family Services) until they moved to their new headquarters.  For a number of years, the facility sat empty until 2001 when the property was purchased by the Birmingham City Schools for $1.6M.  The historic buildings, which had fallen into disrepair were razed and a new school was built which opened as Ossie Ware Mitchell Middle School in 2006.

All that remains of the East Lake Antheneum/St. Thomas on the Hill are old photo’s and the memories of the people who have passed through its halls.

Due Diligence

Some real estate investors are more comfortable investing in their geographical area while others don’t mind investing on the other side of the country.  No matter where you decide to invest, your due diligence process should be the same.

How do you decide if you should invest in your own backyard or expand your search to other areas/states?  Forbes magazine says it’s all about knowing the factors that contribute to any area’s local real estate economy.  “Location, location, location proves a timeless axiom.  This is why your market, team, and property manager are altogether more important that your investment property itself.”

According to Forbes, “an economically viable market supports price gains, rent growth, occupancy and population expansion; a depressed market does not.”  What does this mean for an investor?  It means that before you decide on the property, decide on the area.  It means that researching an area before you research available properties is key to your success.  Before you jump into a long distance investment, you need to fully understand the market in that area.  A property can be turn key ready, fully and tastefully updated with a gorgeous yard and curb appeal BUT (there’s always a “but”) if the market in that area won’t support the price or the rent that you need in order to make this property work for you, then you need to walk away.

Researching the area before looking at available properties can limit the emotional connections that investors sometimes make when looking at available properties.  I think every investor, especially in the beginning, has found a property that just “spoke” to them.  You know the property.  It’s the one that is low in price but big on looks.  Easy money, right?  Maybe not. The old adage “If it looks too good to be true, then it probably is too good to be true” is spot on 99% of the time.

nice-house-bad-neighborhood-rhodes-porter-realty-group

So what are some of the contributing factors that lead to a depressed area?  The top few reasons are:

  • High crime rates (both violent and property) in that area
  • High unemployment or high numbers of underemployed in that area
  • High vacancy rates both in commercial and residential properties in that area

It should be noted that different areas within the same city or county can exhibit different market conditions.  Just because one area is depressed doesn’t mean the entire city or county is in the same condition.  The real estate market can not only vary within areas of a city or county but even as specific as within city blocks.  A great investment property can oftentimes be found within blocks of a bad investment area.  If your heart is set upon investing in a certain city or county, move your search around a bit.  Chances are, you’ll be able to find an area that meets all the right criteria.

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It’s all about due diligence.

 

Value Adds for your Investment Property

Value Adds are improvements that you make to a property that increases the value more than the cost of the improvements.  Many investors like a turn key property that is completely done with all possible improvements already made.  There’s absolutely nothing wrong with this approach if you are willing to pay more and wait longer for your return on investment.  However, if you are willing to do a little creative thinking, roll up your shirtsleeves and get to work, value-add properties will give you a much higher return on investment and a lot faster.

But how do you do this?  Let’s say you’ve found a cute little house that really just needs a good application of lipstick and mascara, meaning the house is structurally and mechanically in good shape but isn’t as pretty as it could be.  Chances are you aren’t going to add a lot of value to your property by cleaning, painting, refinishing the hardwoods and planting a few flowers in the yard.  So how do you add value to it? Let’s look at a few options.

Add a Bedroom

Oftentimes the easiest and most cost-efficient way to immediately add value to most properties is by adding another bedroom. If your property is already a 4 or 5 bedroom house, adding another bedroom probably isn’t going to add a lot of value. It might actually make the property harder to rent as potential renters will look at it and think there’s just too much space to fill.  However, if your property is a one, two or even a three bedroom, adding another bedroom can instantly add value and will appeal to a wider range of potential renters.  This is especially true if your potential renter wants a TV room, playroom for the kids or home office and the property doesn’t offer more than one living space in its original condition.

To add a bedroom to an existing property, you really only have 3 options.

1. Do an exterior add-on.  This option can become really expensive and since it requires permits and inspections (in most municipalities), the timeline can be 60 days or more which means you are missing out on at least two months rent or more if the inspector finds issues or doesn’t get out to your property quickly when needed. Also, there may not be enough lot space to legally add-on to the property.  Many municipalities limit the amount of square footage that can be built on lots depending on lot size and surrounding houses in the area.  Most municipalities require a certain amount of footage between houses.  This is called a setback and it refers to the distance a house or other structure must be from a property line.  It can also relate to the distance a house or structure must be from a road, wetland, or other areas that are considered to need protection from nearby development.  This means that even if your property is in the country or isn’t in an actual subdivision, setbacks may be an issue depending on the size and location of your lot. This route involves money, time, research and expert knowledge.  Unless you paid well below market value for your property, this might not be the best option.

2. Turn one large room into two smaller rooms.  The average secondary bedroom size is approximately 10 feet by 10 feet. Many municipalities, insurance companies, and lenders require that a bedroom not be less than 9 feet by 9 feet in order to be considered a bedroom. That means you would need to have a room in the house that is at least 25 feet by 25 feet (or some variation of that footage).  Remember some of your footage will be used up by the new wall (studs, drywall, baseboards, etc), closet and door openings for the new room.  Also note that legally a room must contain a window, closet, and door in order to be considered a bedroom.  In most municipalities, the size of the window must be at least 24 inches high, 20 inches wide and no higher than 44 inches from the floor to allow for emergency egress. It bears repeating that some municipalities, insurance companies, and lenders mandate the minimum square footage of bedrooms.  This means that if you build an 8 foot by 8-foot room it may not be legally considered a bedroom even if it contains the necessary ingredients listed above.  Research is key in any remodel.  Better to know up front what you are allowed to do than to incur the expense of building your new room only to be forced to rip it all out down the road.

3. Finding space for an extra bedroom is much easier when you find a property that has more than one living areas, a large sunroom, an open loft area, unfinished basement, a garage or carport that can be enclosed or (my personal favorite) an attic with good head space and permanent stairs.  I’m not a fan of stealing garage and/or carport space for interior footage.  I’ve rarely seen one of these conversions that don’t scream conversion.  In areas of the country where winters are harsh, taking away a covered parking area is the exact opposite of a value-add.  However, if your plan for your property is to rent to tenants who are on government rental assistance, converting that carport or garage might be an attractive option as government programs such as Section 8 pay rent based on the number of legal bedrooms.  It’s also a value add if you intend to rent the property out to students, again, the more bedrooms, the more rent you can charge.

Basement Conversions

If your property has sufficient bedroom space and you think your money might be better spent on adding additional living space, basement and attics are still the way to go. A lot of houses have tiny living areas so adding a second living area can be a huge plus to potential tenants, especially those with children.  But before you decide to pump money into the basement, let’s look at the reality of the situation.

I’ve seen a lot of sad basement renovations.  By sad, I mean basements that have been haphazardly finished with poor workmanship and even poorer materials and/or designs.  A basement conversion should be given the same thought and meticulous workmanship that you’d give the main area of the house.  In my opinion, perhaps even more as a basement is traditionally a dark area mostly underground so it has a negative reputation right off the bat.  In order to make it attractive to potential tenants, it will need to be light, bright, dry, free of odors such as that dank musty smell a lot of basements have and have ample headroom.

 

finished basement

Another reason basement conversions can be a horrible idea is moisture.  If you bought the property and/or had the property inspected in the dry season, you may not know that once or twice a year that basement floods until…..it floods.  Even if it doesn’t actually flood there is always the possibility of moisture on a regular basis. This greatly ups the mold exposure and gives the area a continuous musty smell that will permeate everything that is placed down there.  It can and oftentimes will negatively affect a person with allergies or asthma.  Money spent on dehumidifiers and exhaust fans that automatically turn on when moisture is present and vents the moisture outside the home is money very well spent in these conversions.

If equity or resale value is a concern, another downside to spending your money on a basement conversion is the appraisal.  Many appraisers won’t even count bedrooms, bathrooms, or square footage in finished basements.  Even walkout basements. Instead they check a little box “finished basement” and give you a small adjustment. The only time I’d consider spending my reno budget on a basement is (1) if the neighborhood is strong and (2) it’s a true walkout basement with easy egress.

If the two points above are true, then, by all means, finish that basement!  While the appraiser might not appreciate the extra finished space, a potential renter (or buyer) certainly will and they will be willing to pay more money for it!

Final thought on basements.  Even if you don’t finish the basement into extra living footage, cleaning it up, painting the walls and floors will make it attractive to potential renters or buyers.  They will be able to visualize themselves setting up a workout space, a man cave or a hobby area down there.  At a minimum, they will see loads of extra storage space.

 

partially finished basement

 

Attic Conversions

“This Old House” has some great advice before you attempt to convert your attic space to living space.

Follow the “rule of 7s”: Enforcement varies, but codes typically say that at least half of a finished attic must be at least 7 feet high, and that this area must be a minimum of 7 feet wide and 70 square feet. A contractor or a local building official can help you assess how the rule will apply to your attic and how modifications like dormers can resolve height shortcomings.

Have a pro check the structure: A finished attic weighs a lot more than boxes of off-season duds. Hire an engineer to inspect your house’s foundation and framing to ensure they can carry the extra load. At a minimum, you may need to strengthen the attic’s floor joists, which are often too shallow or spaced too far apart for the job.

Assess your access: If you’re building a staircase from scratch, consider a switchback layout. It needs more room than a straight run (roughly 45 to 50 square feet per floor versus 33), but its footprint is more squarish than linear, so it will often fit in spaces where a straight run can’t go. Just make sure the landing is large enough to maneuver furniture upstairs.

A benefit to an attic conversion is that it will increase the value of your property.  The 2015 national average for the return on investment of an attic conversion was 61%. This is a great way to add value and space to your property without the time, expense and complexity that comes with an exterior extension.

 

Before attic

 

before attic-2

 

Turning a half bath into a whole bath and/or adding bathrooms

You know the old saying “Kitchens and bathrooms sell a house”.  It’s true! Sometimes, especially in houses built during the 50’s and 60’s, bathrooms are small and few.  If the master has an on-suite bath, it is probably a really really small bath and oftentimes it is only a half bath or a 3/4 bath with a shower seemingly built for a very small child.

If there is any space that you can steal, adding footage to the existing bathrooms is an excellent way to add value to your property.  Perhaps there is a linen closet either inside the bathroom or right next to it.  Taking out the linen closet might sound like a horrible idea as it is deleting storage but in reality, it’s a great idea.  You can always add shelving to the bathroom or laundry room to compensate for the loss of the linen closet but adding footage to that bathroom will bring in more rent and will make the property appeal to a larger group of potential renters.  Chances are great that just by stealing the footage occupied by the linen closet, you can enlarge that shower stall and possibly even make room for a larger vanity.  If there’s no linen closet conveniently located near the bath, taking a few feet from an adjoining bedroom would work as well.

For those properties without a master bath, adding one is definitely a value-add. Sacrificing a few feet of a large master bedroom or stealing it from a secondary bedroom next door, is more than worth it when you are able to charge more rent. Tenants are willing to pay more money for more bathrooms.  According to pocketsense.com, adding a half bath adds about 9% to the value of your property while adding a full bath will increase the value by 20%.

Larger Kitchen

Remember, bathrooms and kitchens sell houses?  We’ve covered the bathrooms, now let’s take a look at the kitchen.

You don’t have to gut the kitchen to add value.  Simple updates to a good layout will usually do the job.  However, if you’ve purchased a home with a tiny and/or dark kitchen, simple updates may not do the trick.  The easiest and least expensive thing to do in this situation is to open it up.  Below are a couple of pictures that will show you the difference just opening a wall or widening a doorway can make.  Many kitchens built in the years between 1950-1980 are filled with dark wood.  Top that off with the fact that galley kitchens were all the rage during this time period and you have a small dark kitchen.  If your budget won’t support taking out a wall or drastically widening the doorway, sometimes just painting out all that dark wood makes a remarkable difference which will result in more rent.

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Dark Kitchen Before

 

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Dark Kitchen After

 

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Galley Kitchen with Wall Removed

 

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Galley Kitchen with widened opening

Adding Storage

While it’s not living space, an important feature that potential renters look for is storage.  They want plenty of space to put their dishes, pantry goods, linens, Christmas decorations, out of season clothing, etc.  Adding storage will take that hurdle out of your way.  Simple adds like putting flooring in the attic can sometimes solve the issue.

 

unfinished attic

Basements and garages are excellent storage opportunities.  Adding a kitchen pantry or bathroom linen closet in between the existing studs in the wall and then installing cabinet doors will solve the kitchen and bathroom storage issues.  However, if your property doesn’t have good attic access, basement or garage, buying a portable storage building from one of the big box home improvement centers and putting it in the backyard will go a long way to addressing your renter’s storage problems.

 

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Of course, there are many other ways to add value to any property regardless of size, style or location. These are just a few ideas to carry with you to your next investment.

 

 

 

 

Clear Titles

Clear title is the phrase used to state that the owner of real property owns it free and clear of encumbrances. In a more limited sense, it is used to state that, although the owner does not own clear title, it is nevertheless within the power of the owner to convey clear title. For example, a property may be encumbered by a mortgage. This encumbrance means that no one has clear title to the property. However, standard terms in a mortgage require the mortgage holder to release the mortgage if a certain amount of money is paid. Therefore, a buyer with enough money to satisfy both the mortgage and the current owner can get clear title.

Is a title the same as a deed?  A Title refers to the legal ownership and the right to use a piece of property.  Deeds are the legal documents that provide evidence of title.

What does that mean for an investor and why is it important?  When you’re ready to purchase a property, you always want to know that the property you’re buying has a clear title.  Said title should be free of liens, conflicting claims of ownership, or other issues that could result in a big financial hit on your pocketbook.  While anyone can research a property to determine if it has a clear title, it can be extremely time consuming and an individual would have to know exactly where to look for each possible issue.  In addition to that, an individual would also have to know the legal processes involved in curing any deficiencies that they might find.  Hiring a reputable company to do a title search is the best and most efficient way to achieve this goal.

Why would you need a title search?  A title search is a process that allows you to determine if the seller owns and can legally sell the property.  It allows you, or your title professional, to flush out any liens that might be against the property or the seller.  Liens are more common than you’d think in the real estate world and if a lien exists on your property, it will have to be paid off at closing….or there will be no closing.  Let’s look at the 5 most common types of liens.

1. Property Taxes. Property tax liens are unfortunately common, mainly because they are prioritized over every other claimant to the property, from the mortgage lender to unpaid contractors. When property taxes go unpaid, the government has the ability to step in and sell the home to pay off the remaining balance — a losing situation for everyone involved. That’s why, in some cases, a mortgage lender will assume property tax payments in order to preserve its first lien position — guaranteeing they get repaid in the case of a sale, voluntary or forced.

2. IRS Tax Liens. It’s not only unpaid property taxes that can place a lien on a property — so can unpaid Federal taxes. The IRS has a process for recouping unpaid taxes, and will typically first garnish wages in the case that there is money owed. However, if the debtor has unstable or insufficient income to satisfy the IRS with wage garnishing, they can also place a lien on a property, including on a home. The problem with these liens is that the IRS is far more aggressive than most other claimants. If significant back taxes are owed with no solution in sight, they will pursue a forced sale.

3. Contractor Liens. Another common source of liens is mechanic’s or contractor’s liens. These are placed on a property when a contractor has done work on the property but has not been paid. Contractor liens are common in the case of foreclosures and distressed properties, as often homeowners who are underwater stop paying for these kinds of services. first. Subcontractors who have been hired by contractors but not paid can also place these kinds of liens, although typically the initial burden of payment of a subcontractor rests with the general contractor and an attempt to collect the debt from the property only occurs if that general contractor is insolvent.

4. Judgment Liens, Child Support, and Alimony. If a homeowner has been successfully sued, the winning party can place a judgment lien on the homeowner’s property should the homeowner fail or refuse to pay the entire judgment amount. This guarantees that the winning party will get the money they are owed. Other legal situations that result in liens placed on a property are unpaid child support and alimony. As with judgment liens, it requires a court action to place these claims on a property’s title.

5. Mortgage Liens. When a mortgage is taken out on a property, the lender has a claim to ownership to offset the risk of lending money. The difference with mortgage liens as compared to the above types is that it is voluntary — the homeowner agrees that the lender has a claim or lien to the property until the underlying debt is paid. (This list is courtesy of Linda Aparo, a leading title insurance and real estate professional with over 25 years of experience).

When it comes to liens, consumers typically have two options: pay it or dispute it. The latter can drag out the process, costing time and money, but in the case of an incorrect claim, the time and effort will be worth it.

In addition to finding outstanding liens against your property, a title search can also uncover other issues that could complicate your purchase such as:

  • Errors or omissions in deeds
  • Forgery
  • Mistakes in examining records
  • Undisclosed heirs (This issue arises when someone from the past (possibly a long-lost relative) appears and claims a right, or partial right, to property ownership.
  • Covenants of Records (This involves promises that the original owner made to someone else.)

Title companies report that in more than one-third of all real estate transactions they must undertake “extraordinary work” to address title issues. The title company will examine public records — often going back 50 years or more — to look for past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments and tax records that may be defective or outstanding.

No matter how small a problem it may be, any title issue will need to be resolved in order to offer a clear title to the buyer. The results of the search will be compiled into a preliminary title report that will be given to the buyer, seller, real estate agent, lender, and attorney involved in the sale.

A title insurance policy will be your best protection against the above-listed issue and many other title problems that may become known after you close on your transaction. The cost for the policy is a one-time fee, and the policy will remain in effect for as long as you own the property.

But in order to purchase title insurance, you’ll need a complete title search conducted by a title company.

Buying real estate is arguably the most expensive purchase you will ever make in your lifetime.  Bearing that in mind, it just makes sense to do whatever it takes to ensure that problems are fixed before you close on your property.  No one wants to be unpleasantly surprised down the road.

 

Lakeview Park, Birmingham, Alabama

Birmingham, Alabama has so many grand old houses and buildings it’s sometimes easy to forget that she’s one of the youngest old girl on the block.  Birmingham was officially founded in 1871.  Atlanta, GA was founded in 1847, Montgomery and Tuscaloosa in 1819, Huntsville in 1805, and the “elder sister” of them all, Mobile which was founded in 1702.

January 26, 1871, a group of businessmen gathered at the office of Josiah Morris and Company in Montgomery, Alabama to officially organize the Elyton Land Company.  The Elyton Land Company Board of Directors adopted bylaws which included “The city to be built by the Elyton Land Company, near Elyton, in the County of Jefferson, State of Alabama, shall be called Birmingham.”

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highland ave 1907

Elyton Land Company then set about fashioning a city.  Some of the improvements were Highland Avenue and Lakeview Park. Lakeview Park was situated in the Lakeview suburb of Birmingham at the intersection of Highland and Clairmont Avenues.

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A well-worn historic marker on 6th Ave S offers clues as to one of the early major landowners in Birmingham and his ties to Lakeview.  Benjamin P. “Pink” Worthington, Jr., one of the Elyton Land Co. founding directors, owned a 1,000-acre farmstead in what is now Lakeview and Avondale. He sold all but two acres of the land that surrounded his house for 133 shares in the Elyton Land Co., in 1870.  Portions of the property were referred to as “Pink Worthington’s Frog Pond.” He also was a founding director of the National Bank of Birmingham. He was married to Caroline Mitchell of South Carolina and had 11 children. He died in 1884. The Birmingham Historical Society marker on 6th Ave S at 30th St S erected in 1956 marks the spot where the Worthington home stood from 1858-1953. The stately, eight-room home had one of the first water systems in the area supplied by springs later submerged under Rushton Park.

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Benjamin P. “Pink” Worthington, Jr.

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Home of Benjamin Worthington, Jr. on 30th St. S.

Lakeview Park was formed around a man-made lake that was created by damming up springs in the area and was accessible by the streetcar system running along Highland Avenue.  These streetcars brought tremendous changes to the everyday lives of the citizens in the late 1800s.  They encouraged the growth of suburbs by allowing people to live miles from where they worked and they opened new avenues for amusement that led to the development of Birmingham’s turn-of-the-century lake resorts.

lakeview postcard

 

1907_Lakeview_postcard

To add to the appeal of the Lakeview Park development, the Elyton Land Company built the Lakeview Hotel, which was opened to the public on July 12, 1887, and was visited by Presidents Grover Cleveland and Benjamin Harrison.  it became a rendezvous, especially during the summer months, for the elite of the city and all parts of the South.  The two-story hotel was lit by electric lights, and each room had running water and an electric bell.  It was heated by steam throughout.  Lakeview Hotel was known for its excellent cuisine with French cooks serving only meats that were purchased in New York.

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Lakeview Hotel

SCANDAL AND MURDER AT LAKEVIEW

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Richard “Dick” Hawes

 

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Emma Hawes

 

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May Hawes

December 4, 1888, would find the Lakeview Park associated with a notorious murder mystery that became known as “Hawes Horror”.  This was perhaps the first sensational crime of this magnitude to hit the young city of Birmingham and certainly to affect the Lakeview area.  The trial produced a deadly riot and gained national attention for the young city of Birmingham.

Richard “Dick” Hawes was an engineer for the Georgia-Pacific railroad and he lived on 32nd Street South with his wife Emma, daughters May and Irene and his youngest child, son Willie.  By all accounts, Emma Hawes was a troubled alcoholic.  Since Richard’s job often required that he be away from home, sometimes for extended periods of time, the caring of the 3 children and their mother fell to the oldest daughter, May, with some help from Fannie Bryant who did laundry and cooked for the family.

According to a coroner’s inquest, Richard and Emma had a very troubled marriage.  December 4, 1888, the body of a young white female was found in East Lake by local teenagers out for a boat ride.  Alfred Babbitt, Jefferson County Coroner, determined the cause of death to be murder.  However, no one East Lake recognized the young girl.  The body was laid out for viewing for the general public at Lockwood & Miller’s Funeral Parlor in the hopes that someone could identify her.  Thousands viewed the body, but it wasn’t until the next day that a local butcher recognized the deceased as that of May Hawes, daughter of Richard and Emma Hawes.

During the following inquest, conflicting reports arose. While many witnesses believed that Emma was Richard’s wife, several witnesses swore that Richard Hawes was divorced and had left for Columbus, Mississippi to marry again. Fannie Bryant, the woman that worked in the Hawes household, stated that on the weekend before May’s body was found, she saw Richard and May help Emma pack for a trip to Atlanta to retrieve youngest son Willie, who was staying with Richard’s family at the time.

After the inquest adjourned, a telegram was delivered to the Weekly Age-Herald office announcing Hawes’ marriage to the former Mayes Story in Mississippi that very afternoon. It also listed their train itinerary from Columbus, Mississippi to Atlanta, Georgia. When the train made a stop at the Birmingham station, police officers boarded and arrested Hawes for murder. According to the Age-Herald reporter on the scene, Hawes “asked no questions as to which of his children he was accused of having murdered, nor did he express any desire to see the remains. About all that he said on the way to the jail was that he was innocent.”

In custody, Hawes pleaded his innocence and wrote beseeching letters to his new bride asking forgiveness for claiming to be a widower and not mentioning having a daughter. To police, he claimed to have completed his divorce to Emma, citing her frequent infidelity, and arranged for the care of his daughters, though no record was ever found. Hawes told an Age-Herald reporter that he had last seen May three days before her body was discovered.

On Friday, December 7, during a long day of questioning, Mayes Story Hawes admitted that Richard told her he was divorced and had only one male child.  In a letter he wrote to her from jail, Richard told her that he never mentioned May because she would be in a convent, and he did not want to trouble his new bride.  Irene was never mentioned.

Hawe’s youngest child, Willie, continued to remain safely in Atlanta with Richard’s brother, Jim.  Birmingham police began searching for Emma and Irene.  After the discovery of a bloody hatchet and a torn ribbon, investigators focused their search on Lakeview Park, where, on December 8, after dragging the lake, they discovered Emma Hawes’s bruised and battered body, weighted down with iron.

As the news spread through the city on December 8, a mob of 1,000 to 3,000 people, many of whom had been spending their off day in Birmingham’s taverns, headed toward the Jefferson County Jail. Sheriff Joseph S. Smith issued shotguns and rifles to his Deputies and placed them in positions where they could protect the jail. He told them to fire into the mob if they came across the alley towards the jail door.

When the huge mob appeared near the alley, Sheriff Smith ordered them to stop and counted to five. The mob ignored the warnings and continued across the alley. Smith then gave the order to fire. Ten died in the violence, including postmaster Maurice Throckmorton, a deputy U. S. Marshal, a civil engineer and a painter. Smith and Police chief O. A. Pickard were both placed under arrest the next day as the state militia restored order. Governor Thomas Seay came to Birmingham to discuss resurrecting the city’s soiled reputation in the wake of these horrific events.  Smith and Pickard were released the next year following a deadlocked jury.

After the riotous group marched on the city jail, outraged by the horror of these murders, a renewed effort was made to find Irene Hawes.  After repeated draggings of the lake turned up nobody, the lake was drained.  On the third day of draining, Irene’s body was found about thirty feet from where her mothers was, also weighted down.  Irene’s body was taken from the pavilion directly to the city cemetery, where she was immediately interred.  The Baist Property Atlas, which was published in 1902, shows a lake at that location, so apparently, the lake was refilled.  It is unclear when the lake was drained permanently.  Highland Park Golf Course opened in 1903 on the location of the lake.

After a trial in which the defense relied solely upon the testimony of Richard Hawes, the jury, composed entirely of middle to upper-class white males aged 28 to 47 deliberated for fifty-five minutes and decided upon the death penalty on May 3, 1889. The defense submitted several appeals to the Alabama Supreme Court, but all were denied. During this time, a request from a St. Louis circus owner to display the caged murderer in his sideshow was rejected.

During Hawes’ last month in jail, he apparently admitted to his brother Jim and a guard that he had paid an associate, John Wylie, to commit the murders. He told the guard that he initially wanted Wylie to kill only Emma and Irene, but when it appeared that May might know some information about the murder, Hawes decided to intoxicate May and drown her at East Lake Park. When the guard made this confession public, Hawes denied it. No other evidence emerged.

Hawes was executed by Sheriff Smith on February 28, 1890. The gallows platform was constructed for the occasion by J. A. Griffith, who had also served on Hawes’ jury. Tickets to the spectacle were trading on the street for as much as $200. After a prayer, Smith counted to three and pulled the lever, dropping the platform. Hawes was buried by his brother, Jim, in an unmarked grave in the family’s plot at Oakland Cemetery in Atlanta. No words were spoken over the grave.

Fannie Bryant and her companion, Albert Patterson were also sentenced to death for their role in aiding Hawes. Bryant died in a prison riot before the sentence was carried out, and Patterson won a reduced sentence for testifying for the state. John Wylie was later brought to trial for the murders of Irene and Emma, but due to lack of evidence, the case was dismissed.

Emma, Irene, and May Hawes are buried next to each other in unmarked graves at Oak Hill Cemetery. It is unknown as to what became of Willie Hawes, though it is generally thought that Richard’s brother Jim continued to care for him in Atlanta.

LAKEVIEW ENTERTAINMENT

During its heyday, Lakeview made headlines for more than murder and intrigue.  The Lakeview Theatre, a covered stage for open-air concert and performances, opened in Lakeview Park in November 1890 with a performance by Mrs. General Thom Thumb and Her Japanese Troupe.  The following summer, a performance of Gilbert and Sullivan’s J.M.S. Pinafore was staged on a replica ship floating in the lake, which was surrounded by electric lights.

The resort’s centerpiece was the Lakeview Pavilion, featuring a swimming pool in the basement beneath a dance floor, a skating rink and a bowling alley.

 

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Lakeview_boat_house

The Lakeview Baseball Park also called Lakeview Park home.  Perhaps the most important event that occurred at Lakeview Park, however, was not a baseball game but rather the first football game between the University of Alabama and the Agricultural and Mechanical College (Auburn University), which occurred on February 22, 1893.

 

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Many arrived in Lakeview via the Highland Avenue and Belt Railroad, which put several extra cars into service for the event.  Others came by foot, horseback or in buggies.  One estimate of the attendance was five thousand people and the gate receipts were said to total between $1,200 and $1,500.  Auburn won the fame, 32-22.  Sadly this would be the only game to be played at Lakeview, and the series did not return to Birmingham until 1902.

By 1891, it had become obvious that while the park was extremely popular, the Lakeview Hotel could no longer compete with other resort hotels in the state.  There were no mineral waters to interest the sick such as those found in places like Blount Springs.  Also, the Lakeview Hotel and Park was only intended to serve as a resort during the summer months.  The hotel’s doors closed for good on August 21, 1891.

Later that year, Dr. H.M. Caldwell, President of the Elyton Land Company, invited Hawthorne College of Florence to move to Birmingham and occupy the Lakeview Hotel building.  The school became a ladies seminary under the name of the Southern Female University.  Sadly, on December 6, 1893, the building burned down.

The Lakeview pavilion was torn down to build the Highland Park Golf Course in 1900.  The Lakeview entertainment district retains the name of the park to this day.  A section of the former baseball field was preserved as a grassy corner outside the BBVA Compass Bank administrative headquarters, with a historical marker describing the first Alabama-Auburn game.

How to get into Real Estate on a $40,000 a Year Salary

According to real estate mogul Sidney Torres, you don’t need a lot of money to flip your first property. And he knows from personal experience. When Torres first got into real estate in 1997, he was making only about $25,000 a year working at a construction company. With overtime pay, he brought home anywhere from $30,000 to $40,000 a year, he tells CNBC Make It. Thanks to help from a mentor, his old soccer coach who was a real estate agent, Torres bought his first property and successfully flipped it despite his small salary. Here’s how to do the same, in three steps:

Sidney Torres of
Walling McGarity photography | CNBC
Sidney Torres of “The Deed”

1. Find the “sweet spot”

Location is everything, says Torres, who now helps struggling property investors on CNBC’s “The Deed.” Especially when you’re first getting started in real estate, you want to make sure you find a property in the right neighborhood, and that may take time.

Before Torres bought his first property, a $40,000 home near Tulane and Loyola University, he and his mentor would “spend hours upon hours, days upon days, weekends, holidays, driving neighborhoods,” he says.

You should be looking to buy properties in up-and-coming neighborhoods — or, what Torres calls the “sweet spot” between the fancy areas and the fringe. To find that sweet spot, you have to do your homework, he says: “Take your time. Search the area you want to be in. Talk to your mentors. You can never ask enough people before you pull the trigger and close.”

This self-made millionaire made his first house flip while making only $40,000 a year

2. Negotiate the right price 

Ultimately, “you make your money on the buy, not the sale,” says Torres. “You collect your money on the sale.” That means, he says, “you’ve got to go in there and really show your negotiating skills.”

Torres negotiated the cost of his first flip down to $40,000, but “the actual property, as it sat there, appraised for $60,000,” he says. “So I had $20,000 in equity before I even had to go look for a hard money lender. That’s a good way to start because when you go to your hard money lender and you say, ‘I’m buying this property for $40,000. I’ve got $20,000 in equity, right off the bat,’ who’s not going to want to take that deal? Because if you default, he gets a $20,000 nice little chunk of cash because you brought him this property.”

As a new flipper, strong negotiation on the front end can make all the difference, says Torres: “Because when you come to a hard money lender like myself and you don’t have the financial statements to support borrowing the money, you don’t have the income to support borrowing the money, but you’ve done enough negotiating to build equity into the deal, I know that you’re the type of person I want to work with.”

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3. Have several exit strategies

“You’ve got to have a strategy if your property doesn’t sell right away,” says Torres, yet very few people investing in real estate think about the end from the beginning.
“No matter what real estate deal I get into, I always want to have four exit doors,” he says. Real estate exit strategies include, among other things, wholesaling the property, buying and holding for the long-term or renting the property until it sells.

Torres got out of his first flip with a nice profit. “As soon as I finished that house, I ended up getting it appraised for $100,000 more than I actually had in it,” he tells CNBC Make It. “I refinanced that house and I took that money and I bought another house next-door.”

Since then, the real estate mogul has developed more than $250 million in commercial and residential real estate, and he says that others can do the same: “You don’t have to have a bunch of money to get started in the real estate world. It really depends on surrounding yourself with a good mentor or mentors, and you know, learning how to do your homework.”

This article was republished with permission from the author (Kathleen Elkins). Original article with additional video can be found at the following link: https://www.cnbc.com/2018/05/30/self-made-millionaire-how-to-get-into-real-estate-on-a-40000-salary.html?recirc=taboolainternal

 

Conventional Loans vs Hard Money Loans

Real estate investors need money to fund their projects.  The real estate market may fluctuate but this fact remains the same. As the lending landscape has changed over the years, it has become increasingly more difficult for developers to get the money they need through traditional lenders.

That’s where private lending hard money loans come in. Hard money loans are an important alternative for developers who need the funds to get their new project started but may not be a good fit for a loan from a traditional lender.

 

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Let’s talk about the difference between hard money vs. traditional loans and how to decide which is right for you.

Hard Money vs. Traditional Lender Loans

While conventional loans are issued by traditional lending institutions like banks, hard money loans are provided by investors or investment groups. Hard money loans are secured by the real estate being purchased and often charge higher interest rates than loans from a bank, but can close in a matter of days vs. traditional lenders that take more time. However, even developers with a strong financial background and access to traditional loans sometimes opt for hard money loans to fund their new projects.

When looking at hard money vs. traditional loans, it’s important to consider the following questions:

 

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When do you need your money?

In the real estate industry, time is often an important factor when it comes to project success. Funding a loan quickly can often be the difference between taking advantage of a great deal or losing out on it completely. Though timelines vary when it comes to approving and funding a loan, hard money loans tend to be quicker.

 

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While most hard money loans can be funded within a week, traditional lenders often take 30 days or more to get you the money you need. This doesn’t even include the application process, which can be quite lengthy with traditional lending institutions but is often completed in 1-2 days for most hard money loans.

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How do you want your loan to be structured?

 

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Loan structuring is another concern when it comes to choosing a loan type. Most traditional lenders take a one-size-fits-all approach to loans. Their terms are straightforward, but there is very little wiggle room when it comes to your specific loan requests. On the other hand, hard money lenders often provide more flexible loan repayment and collateral release terms.

 

one size does not fit all

 

Hard money lenders are not bound by a one-size-fits-all lending model. This means that they can structure the loan terms in ways that benefit both the lender and the borrower. In addition, they can also provide repayment schedules that are structured to meet the borrower’s unique needs.

What type of loan do you qualify for?

When it comes down to it, approval is one of the most important factors when it comes to loans. There are many reasons why a builder might not get approved for a traditional loan. Even if your financial history is strong, the bank may still see something in your application that indicates you aren’t a good fit for a conventional loan, such as incomplete records or self-employed work.

Hard money lenders are able to take more than just the borrower or company’s financial history into account when evaluating loan applications. A hard money lender will look at your ability to repay the loan as well as how much equity you have invested in the property. This means that they can often fund projects that were not approved for a traditional bank loan.

Which Loan Type is Right for You?

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When it comes to hard money vs. traditional lender loans, the right option for you will depend on a number of factors. If you have been turned down for a conventional loan, then hard money may be just the solution to helping you get your project funded. Similarly, if the less flexible loan structures offered by traditional lenders don’t work for you, then you may want to explore your hard money options.

For many builders, choosing the right type of loan comes down to their timeline. In this business, being able to quickly take advantage of deals and secure land or properties is important. While conventional loans are slower when it comes to approval and funding,  Hard money loans can be completed and funded quickly, allowing builders to jump on excellent opportunities.

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In the end, the right type of loan for you will depend on what your circumstances and priorities are. After weighing the pros and cons of each type of loan, consider which loan will give you the flexibility and terms you need to get your project off the ground.

 

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