All Forum Posts by: Marcus Auerbach

@Hank Valdez what's wrong with Vista? I just did a quick search on Zillow and found 12 properties below 200k, half of them arround 100k. I agree with @Account Closed you need to learn as much as you can and I will ad that you do that best in your backyard (or at least close by), maybe within 30 min to an hour. Tons of deals in San Jacinto and Chedral City (according to Zillow). I bought my first property in West Milwaukee which is a 30 minute drive for me, but can easily be 60 minutes during rush hour (guess when I have time to go). I got smarter and focus now on an area about 15 minutes away in any traffic, because investing close by makes your life a lot easier. In any case, I dont need a plane...  

If you go out of State, be careful who you partner with. Generally speaking MOST of the people you will attract are either newbies or people who, well, have not been so succesful in the past, probably for a reason. Most people you would want to partner with get money from their bank for 5.5% and I am sure you'd expect more in return. Please note that I said "most", because there are GREAT investors out there who rely on PM for resons beyond their control or simply prefer it.

So if you find a local deal and get it under contract you will find the the comunity here on BP is always happy to help you out with any questions or issues you run into (and you dont even have to pay anything!!). Post your numbers and people will tell you if you should sign or run. So if you go on your own be confident that you are not really alone. Good luck!

@Account Closed most of the time I find water or moisture in a basement it is caused by impropper irrigated surface water. Either from gutters or from grading thats pitched towards the house. These things can be esaily corrected, just make sure that all surface water gets directed 10ft away from the foundation.

It get's a little bit more tricky if you are dealing with a faulty drain tile system. Most foundations I have seen have a pipe system arround the foundation that collects water underneath the house. The pipes drain into your sump from where it gets pumped out.

While on surface related issues you aften see the mositure high in the wall, if its drain tile related you will see water come trough the floor and up between the wall and the floor. Drain tile issues get expensive quickly, because you have to dig them up, either inside the basement or outside the foundation. A sewer specialist will inspect the system for you for about $200 and stick a camera in the pipes (drain tile).

Drain tile can get damaged for example by roots (Willow trees are really bad and will go a loog way to reach the pipes), but sometimes its just age.

The way you deal with the issue depends much on your strategy. Many investors will choose a "good enough" solution for a flip (morally questionable) or a professional repair if its  a long term hold or a well done flip.

@Wendell De Guzman a little, the 1 million without further explaination smells a bit to everyone who makes 5k on a deal or $300 a door. However, I like it. Good luck man!

@Max T. 6k? expensive furnace that is...

Agree with Dawn as long as the foundation is in good shape and the roof has some life left. Maybe I'd be more on the lower end as it's just a single car garage and the concrete driveway looks bad. I'd expect some repairs and deferred maintenance typical for foreclosures..

Welcome Jutiki! Join the milwaukee REIA, open meeting every month and great to meet people from the comunity. You should give it some thought what's in it for the mentor....

@Valerie Harris

... no need to. focus on finding a deal first, you will see there are plenty of buyers arround, just nobody will talk to you or take you serious until you have a deal.

Lisa nailed it !! 

And this is exactly the point that is so often misunderstood or overlooked. It blows my mind that people make statements about the great ROI and typically refer to cash flow after PITI ignoring repairs and reserves. Damn right it is about cash flow, but when you do the math for a 30k property then don't be naive about the repairs and look at TCO total cost of ownership over the lifetime of the asset. And don't forget that there is a overhead cost to every maintenance call, not just how much the contractor charges.

Replacing all mechanical systems in a house that can be expected to fail in the next 5 years makes perfect financial sense. Eventually you will have to replace it anyway, because it simply is beyond repairs and patches. So you really pay double, first for all the repairs and then for the full replacement cost on top of it.

I find that in my market $30k neighborhoods don't warrant the necessary expense to replace the essential systems, because comps no longer support it and your asset ends up being under water. The cost of a new roof is exactly the same for a $30k house and a $100k house. And eventually it will need one...

@Donald Morrison

Let me ad a little, maybe I did not do the best job explaining this - I don't think the 100/10/3/1 rule is to be taken literally. It is more a guideline like so many other rules of thumb that are commonly discussed on BP. It does certainly not mean that you can't buy a house before you have turned 2 other AOs away or have completed your 100 list. It just says that you can turn an AO away if you find something during the inspection that renders your asumptions/numbers invalid - like a bad foundation. By all means if you got a good AO and the property is ok, why would you not close?

Last year I talked a friend of mine, who has been renting for almost 15 years into what Brandon calls house-hacking. She never owned a house before and I was horrified when I found out that she offered almost asking price for a massive fixer upper duplex after looking at a grand total of 4 properties on one Saturday afternoon. It blew my mind, as she would go back and forth over buying a pair of shoes for weeks, but buys a house in an afternoon.

Well, what can I say, to my relief everything worked out well, its a great property in prime location and the rehab stayed almost on budget; she got really lucky.

@David S.

 I remember the feeling, we all have been there and it takes time to get comfortable (in hindsight you will wonder what you were so worried about). It does not sound like you are stuck in analysis paralysis, rather you feel the pressure to make something happen. You are doing the right thing by running the numbers. The more deals you analyse the better you will get spoting a gem. The old rule is: look at 100 properties, offer on 10 and get 3 accepted. Buy one. Follow this rule!

Sounds like you are already looking at deals, if you have not looked at at least 20 I dont think you are ready to make an offer. And you dont have to go inside every house. What I usually do is I make a list of 10 potential deals and then do drive bys by myself. Typically I can tell from the outside if I am even interested in the deal. This way you dont waste your realtors time. (by the way, if you are not happy with her, find someone else - seriousley, its your money on the line, not hers and you want someone who either works a lot with investors or owns rentals. You can always pay her for her time if you want to.) I schedule showings only for properties I like from the outside.

Your next goal is to get 7 out of 10 offers rejected. This is going to be hard, because you will feel the urge to make a "good" offer and get it accepted. If you get your first offer accepted you are offering too much. You want to be rejected and that is certainly counter intuitive. I am not suggesting to make redicolous low ball offers, but you should ignore the list price and come up with your own math for you purchase price. Getting your first offers rejected will also make you a lot more comfortable with your position; you will feel a lot more confident with your first accepted offer.

Once you have an accepted offer it is time for a thourgh inspection. Have a good home inspector ready and go with him and have him explain the issues to you on site. He will tell you what real problems are vs. things that are easy to take care of. If something serious or unexpected costly comes up don't hesitate to walk away from the deal or adjust the price.

You dont need your first deal a spectacular one as far as cash flow or cap rate. If you make $150-200 per door after PITI, PM fees and reserves you are doing well. The most important thing is that your first deal is a safe deal. Buy a solid property in a desireable neighborhood. You will have to pay a little bit more and there is more competition, but once you own the place you are on the other side of that equation. Easier to rent, more rent, less vacancies and if you want to sell you will be able to sell it faster and for a better price.

Remember location is the only thing that you can't fix. If you are in a good neighborhood where people want to live and you have a nice place you will never have an issue keeping it rented. There is something to be said about investing close by and five minutes sounds much better than 30, but a direable neighborhood is more important. If your cash flow is a little bit less I would not worry about it, as long as it is positive and you know your deal is solid.

Expect your first property to be a learning project. I think the main goal for your first deal is not to make it the best investment ever, that will come later, just make sure you stick to your numbers and you wont have a problem sleeping at night. Good luck!