True Bread Properties: Debt-Free Real Estate Investments // About

Risk #1 –

“Owing more than it’s worth” (being “upside-down”)

This has occurred frequently in recent years in the spec home market. We have removed this risk completely by never borrowing money for anything.

Risk #2 –

“It’s worth less than we have in to it.” This can happen for several reasons…

• Paid too much for the house – expected re-sell price is more than declining neighborhood values could support. We only buy severely depreciated houses whose price is frequently less than half of its next-door neighbors’.

•Spent too much fixing it up – used higher quality finishes that will not return value in the neighborhood. We use nice looking inexpensive finishes and work relentlessly to find even cheaper ways to do it.

•Market declined during the time house was owned – owned the house much longer than should have. When we purchase a house, we spend 1-2 weeks planning, 3-5 weeks working. In less than 2 months, values don’t have very long to decline.

•Unforeseen major work needed – needs new foundation, needs new septic system, etc. We are contractors and do extensive inspections before the offer to purchase is made. If something is missed. Part of what is budgeted for is a MINIMUM $20k profit. If the budget for construction is blown, the budgeted profit is able to absorb unforeseen costs.

Risk #3 –

Material loss – house burns down or is flooded. We carry insurance on all of our houses with enough coverage to easily rebuild or restore the house in the case damage does occur.

The Adventure Begins…

In 2002, the Davises bought and moved into a completely run-down 1912, double-lot estate home in the South Tabor neighborhood of SE Portland. They bought it for a hand-shake at a garage sale and spent the next two years completely renovating it. In May 2005, their house hit the market, and to their surprise gathered seven above-asking offers in the first two days. The sale of the house netted the Davises a substantial tax-free equity return, and during the same week, Will lost his job as a school teacher.

The Honeymoon Period…

Out of work and laden with cash, the Davises quickly pounced when their Realtor called the next week saying, “I just went to a garage sale, and this house is perfect for you to flip.” The weary home owners needed to sell quickly, and Will was eager to negotiate the sale. With his own hands over the next 3½ months, Will re-did every surface of the house inside and out. Within a month of listing, the house sold netting the Davises almost two years teacher’s salary. A new career was born.

Reality Sets In…

If there is money to be made in the $260k house, there must be HUGE money to be made in the $460k house, no? To that point T.V. shows and bad advice had taught the Davises most of what they knew about house flipping. It seemed that using borrowed money, mortgages, and rehab loans with steep interest payments was the way all investors were doing it. So they mortgaged a high-end fixer and borrowed all of the money to rehab it. The foundation caved in; the city stopped work; and much of the work that had been completed had to be re-done and inspected. The budget more than tripled, the timeline was completely shot with no end in sight, and the holding costs threatened to end it all. By the time the house was finally finished, the dreaded “market decline” had indeed begun in winter of 06/07, and just over a year after we bought the house, it finally sold for $60k less than they had originally projected netting a $58k loss.

Managing to make matters worse, the Davises invested in luxury spec homes out of state. After all the loss, they were right back where they had started, and it was time to take a different approach to real estate investing.

Overhauled for the Long Haul…

The Davises experience has taught them: regardless of what the housing market does, entry-level homes are always accessible to the greatest amount of buyers; buyers will buy the nicest thing for the cheapest price; borrowed money adds enormous risk and costs more than it’s worth; people who have no financial interest in your investment will not treat it with the care needed to protect your investment. There is never a time when these things are untrue. So True Bread Properties focuses on entry-level homes which are usually found in distressed neighborhoods. They perform quality remodels that make their houses stand out in the entry-level market. Will and Angela Davis will never borrow money for any reason in their business or personal lives (no mortgages, lines of credit, or credit cards). And they are major financial investors in each of True Bread Properties’ rehabs.

Contact Will anytime to set up a personal, informational meeting: 503-922-0985

"Given the uncertainty of investing in the current economic climate, it is refreshing to find a business I can trust with my investment. I'm ecstatic to be a partner of True Bread Properties and, without reservation, have put my reputation on the line by recommending partnership to all of my friends."

- J. Wilson, Portland, Or.