My dilemma as a new investor

[Muks M.]

Really finding it hard to find 1% rule properties especially when you factor in vacancy, repairs, capex, HOA, PM fee in the total expense along with PITI. Recently found a short sales which may meet this criteria but would need much more than cosmetic repairs (~35K rehab). The numbers does make sense for the deal if offer accepted at the my max price and if rehab cost is in line with estimates from agent. But kind of worried with the idea of handling rehab (not well versed with rehab cost and the hassle it brings along) and short sale (this perhaps would be OK as time is the only risk here ?).

Any suggestions would be appreciated from seasoned investors or someone who has started out like this (major rehab for their first buy and hold strategy unit) along with a full time job ??

[April Crossley]

Just my two cents- but new investors really need to throw all these fancy rules out the window : 1% rule, 2% rule, closing costs are X percentage of the purchase price, etc.  These rules do NOT fit all markets (especially not pricier markets like Collegeville) and SOOooo many people want easy rules to find the easy way that they are guesstimating... and guesstimating very wrong and even to the point they can't get deals that they could have gotten but because they are so stuck on these "rules" that aren't really rules at all.. they aren't getting deals.  My advice -- learn to analyze a deal. Learn ALLlll the closing costs in your area to buy and refinance.  So you can run a thorough analysis on the deal to see if it cash flows. No rules, no guesstimating, just actual numbers.  I have seen newbies with full time jobs take on major rehabs as their first project. The key is getting a contractor in there to get estimates. We make all of our contracts contingent upon a contractor bid coming in line with what we estimate repairs to be. The only way to get good at estimating repairs is practice (as all markets are different for this too, so no guru can tell you that your rehab will cost X per sqft as it will not necessarily apply to your market and is just another "rule" that doesn't fit all areas). In the case of a short sale... these things tend to sit on the market FOREVER. So you have time to go through with your realtor and someone that is well versed in repair costs (doesn't necessarily have to be a contractor- it can be a family member or friend or someone that knows repairs). Or.. it can be a contractor. But I am very honest with them if I do not have it under contract and will pay them for their time to walk through. ALSO-- I highly recommend asking around to see if you can shadow a home inspector. Its a great way to learn what to look for :)  I could go on forever... but those are my initial thoughts on it.