Would you buy any property.....

Question

.....as long as the price point made sense and it's in your area?

For example, if you have only bought properties that have needed light rebah and now come across a property that needs a gut rehab, would you consider it or will it be too much work for you? And what if you have only bought SFHs to date and you come across a multi-unit for which numbers make absolute sense, would you reconsider your strategy or not?

Jeffrey K. · Answer

I do residential multis.  I look at everything from SFR to 60 unit buildings.  I look at fully rented private sellers to REO in need to rehab.  The theme is all the same though.  It is all residential property management and all in zip codes 53202, 53211, and some of 53212.  This keeps fuel and time costs down because we are not running all over town.  It also helps to only stay in your geographical area because you dont have to keep up with so many markets.

I am over my loan limit so the financing is all commercial now.  I have done very extensive rehabs so I am not scared of them.  Make sure the time it takes to rehab is worth it and you understand how the financing works.

Where I do draw the line is commercial.  I might look at mixed use if it is a small part of the building.  The leases are not the same, the tenants are not the same, and it often sucks to rent them.  No matter how good of a deal my broker says an office building is I WONT LOOK AT IT.

If you are making money stay with what you know.

James Hiddle · Answer

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Harry M. · Answer

I'm very conscious of how little I know, so I'm trying to structure my learning with each property - ie. go a bit out of my comfort zone because it's necessary to learn but not so far that I make terrible and expensive decisions. So for example, my first duplex needed light all around miscelleaneous little fixes - about $1500 of handyman work. So a logical next step might be a property that needs light rehab, followed by one needing moderate rehab, and so on. I don't think it would be wise for me to jump right into a property needing extensive rehab, even if it was a great deal, because I haven't built up the experience in baby steps yet. 
The only other no-no's that come to mind would be anything in a war-zone for obvious reasons, and anything that's under an HOA, since that involves ceding partial control over your investment to a third party that doesn't care if you make or lose money.

Brian Levredge · Answer

With condos, you don't really have control over your property like you do with a detached SFD.  The CC&R's dictate that you do not have total control, although you do have a voice.  I'll list a few reasons though.

-  HOA dues.  This is an extra fee paid monthly, that literally gives you almost no value although the dues are supposed to be used to maintain the exterior of the property and common areas.

- Mismanagement.  HOA boards are often very incestuous little fiefdoms. The chief problem is that they are spending other people's money so they don't have the same vested interest as a property owner that you do.

- Under Capitalization.  The foreclosure crisis has hit condos especially hard.  This means that you have complexes with dozens, if not more, of empty units that are not paying dues.  Unfortunately, depreciation and maintenance don't wait for the reserves to be in better shape.  This leads to special assessments which can be substantial one time charges that can kill your deal overnight.

- Smaller pool of buyers.  Most people prefer a detached home vs. living in some type of HOA.  With the market being what it is in most places, why buy a condo?  Furthermore, due to underwriting guidelines with respect to financing a condo, it can be damn near impossible to get them financed due to occupancy requirements in the building.

Joe Strickley · Answer

Personally wouldn't go near a property that needs a lot of work, because I don't know enough about rehabbing. If I saw a multi that looked interesting, I'd want to be happy with the area, and tenants, but first would want to know why someone is selling a good deal in this market.

Chris Calabrese · Answer

Personally, I would buy anything if I thought I could make a profit.  I mean, if I could flip a $3 cardboard box to a homeless guy for a bottle of whiskey, that's like a 500% return!  I guess realistically, I'd like to stay away from 'war zone' properties unless I don't have to spend a lot of time there.

Ed Man · Answer

Brian & FinEx - Thank you very much. Your responses make alot of sense. I'll keep them in mind (Food for thought.)

Thanks again !

Kyle Thacker · Answer

I would tend to think that the people that have deals that are consistently successful in this business have very strict guidelines on what they invest in.

With that being said there is money in all different types of real estate, but specializing allows you to realize when it really is a deal.

So me personally I would pass on something that SEEMED to be a deal if I did not have the proper expertise myself or know someone who did.

Chris Scully · Answer

I too am interested in buy Brian won't touch condos.

The consideration of time spent that has been brought up by a few posters is something I hadn't considered. Wouldn't want a property to take up too much of my time so would have to factor that into my evaluation of a deal.