Buying in low income areas Help.

[Eamon Sullivan]

Guys. I have 3 homes under contract in low income income areas. I am starting to get cold feet. Prices ranging from $20-31k. Rents in the area are $600-$1000. I really want to max out BRRRR or Flip the property to generate some liquidity/ cash. I am worried about purchasing these properties with Cash and having my money locked into one or 2 properties. In this area investors are snatching these houses up for the same price(20-30k). I am worried with the BRRRR method that the appraiser is going to say " well the last 10 houses were sold for 20(example) so that's what yours is worth." Even though I have rehabbed to a nice standard. Meanwhile the houses that are being sold are in poor condition. There are a few homes of nice standard being sold to the working class people and they are averaging between $65-90k, which is what I derive my ARV from. I know all you seasoned vets out there say to steer clear of these properties bc they become a huge hassle. Right? I am looking to really start to get some momentum in the cash flow department and these are the best I can find in my area. Any comments or thoughts would be appreciated for a newb. Deals Below 1.) $27k Arv $75k Rehab $20k Rents $750 (easy) 2.)$31k Arv $75k Rehab $18k Rents $1000( College students) 3.) $33k Arv $65k Rehab $20-25k Rents $100

[George Skidis]

For low income rentals check out my blog for today called "Bullet Proof Properties".

Bullet Proof Properties

1. Exterior Siding: Vinyl siding does not stand up well to weed eaters and children bounding a ball off of it. It gets brittle and cracks after a few years. Aluminum and steel siding gets stolen almost as fast as central air units. Consider installing 4 x 8 sheets of T-111 plywood siding. Never paint it. Paint needs scraped off. If available in your area use an oil based stain on both sides and all edges before installation and seal with a water seal. The exterior will need retreated every three to five years, but should last 25 to 30 years with no major maintenance.

2. Exterior Windows: Every Bedroom needs at least one window large enough to serve as an egress opening. Close the extra windows when you install the siding. Extra windows bleed heat in both directions. Save on your resident’s Heating and cooling and turn that into paid rent.

3. Exterior Doors: Steel clad exterior doors with no windows. Install a peep hole. Make sure it has a dead bolt. Use security storm doors with a dead bolt as well.

4. Interior Floors: Never install carpet. On a concrete slab consider either commercial grade floor tile or garage floor paint if local code permits. When ready to rent lay some inexpensive, and when the resident moves out disposable, area rugs in the bedrooms. For wood floors consider “Carpet in a Can”. Not sure who coined that phrase but it works. Paint the floors with enamel deck paint and seal with polyurethane.

5 Kitchen: Install fewer cabinets and use more built in pantries. Cabinets are expensive. Replacing them every few years is a pain. Large spacious pantries are the answer. Cabinets with drawers are high maintenance since they don’t receive much TLC from your residents. Install a high backsplash behind the sink to avoid painting and a stainless steel backsplash behind the stove to contain and reflect cooking fires.

6. Bathrooms: Never install fiberglass tubs and showers. We had a plus size tenant step through the floor of one that came with the house. Consider installing steel enamel tubs that cost about $125.00 or so. Tub refinishing kits are a great racket. They last about a year even if you follow the directions perfectly. If the unit is occupied your resident will not follow the directions. A better choice might be to make the unit ready for special needs clients and have a drain in the floor. Don’t even install a tub.

Tub Surrounds are great. Consider installing Fiberglass Reinforced Panels (FRP) without any soap dishes. Give the resident a shower caddie.

Don’t install toilet paper dispensers. Avoid drywall repairs and maintenance by “Gifting” your resident a free standing one. If they leave it behind when they move out, even better.

Exhaust Fans: Except when required by code they should not be installed. Instead consider installing a horizontal sliding window 35” x 12” as high up on the wall as possible. That is the vent and it makes it a harder window to damage or break in through.

Sinks: Install Pedestal sinks. Residents will not call you when the drain leaks and your wood vanity will be rotted out and need replaced before the next tenant moves in.

Medicine Cabinets: Install a wall mounted mirror and flank on either side with built in shelving.

Floors: No carpet, if you must use seamless vinyl and make sure to seal, glue and caulk the perimeter before renting.

7. Interior Doors: When the interior doors break consider installing steel clad exterior doors. It improves the fire rating of the bedroom and makes the resident more secure. It may even keep grandma’s grandchild from forcing the door and taking her rent money.

8. Attached Garages: Whenever possible turn them into one or two new bedrooms. A garage is where tenants pile the things they do not want. Get extra rent instead of extra headaches.

9. Detached Garages and Storage Buildings: Convert them into a carriage house, rent them separately, use them yourself or tear them down. If you cannot make a profit on them they need to go. Remember to notify the tax assessor if they are removed.

10. Insulation: If doing a total rehab consider paying the difference to have 4 to 6 inches of spray foam insulation installed in the exterior walls and rafters. Help the tenants save on utilities and take away the excuse for not paying you rent.

Landlord Quiz: It is 11:00 AM and there is a moving truck in front of a house. Is the tenant moving in or moving out?

Answer: Moving in. If they were moving out it would have been 11:00 PM

Good Luck and GREAT Investing!