All Forum Posts by: Marcus Auerbach

@Michael Brunner I think you will find plenty good deals in Madison, but you will have to invest some time and energy to find them. It's the nature of a good deal not being available for a long time. If it's truly a good deal it will be gone fast. I focus on a very small farm area close to where I live and I know every street in there. I was recently able to buy a house of MLS that was listed for less than a day without pictures of the property. I just knew the adress, because I own two other properties within 100 yards on that street and made a very strong offer within hours. Frankly, most hot deals from MLS I loose to competition. They are either faster or they offer more. And you know what - thats a good thing, because when you loose deals you know that you are most likly not overpaying.

There is fundamental wisdom in the old Kiosaky quote: look at 100 houses, offer on 10, get 3 accepted and buy 1. You can take those numbers literally. If you have not looked at 100 (and analysed the numbers) you are not ready to write offers, because you will not know a good deal from a bad one. If you dont get 70% of your offers declined you are offering too much! If you dont turn down accepted offers after detailed inspection you buy too many money pits. (sidenote: being fast is not the only strategy, you can also make offers below asking price on properties that have been sitting for a long time, sometimes deals have to mature before they are ripe).

Finally, I am not sure if you should focus on a portfolio deal. Buying a group of properties requires a lot of ressources in place. Not only money. For example you need a full set of different trades on speed dial (handyman, plumber, electrician, carpenter, window guy, painter, carpet guy etc) to go through and quickly take care of things that need to be done. If you have to get three estimates for every thing you need done on 8 units plan on taking some vacation. I think a portfolio deal is a little much for getting started. You might be biting off more than you can chew. I'd suggest to buy one single family or one duplex and go through the whole cycle of buying, rehabbing (a good deal always needs some sort of work) renting out and then managing before you buy the next one. Believe me you will have your hands full with one property and you will be less stressed out and do a better and more profitable job overall.

Without going much into expenses and vacancies this does not look like much of a deal at over 110k per unit. At least not for the buyer. That's almost twice of what is usually paid arround here. Check some comps.

Hi @Dan C. the first thing to check is if there is any abandonned duct work in the walls. If you dont find any, perhaps because the second floor was added later, your best option is probably electric heat. Menards and HD have a nice selection of different systems. The upper usually takes a little less heat anyway, because heat rises from the lower.

If you would want to ad forced air heat you need an empty building, find a central wall that you can run warm air ducts and clod air returns and then drywall arround them. Normally you would use the floor joist spaces to distribute heat. Thats an option but makes for a lot of drywall work in the lower. Plan B would be the attic, but you have to insulate very well. Either way probably cost prohibitive, I'd go with electric.

@Pari Thiagasundaram you can use the same ad you normally use, but metion Rent to Own in the headline and explain further in the ad. You advertise the home as a rental in the apropritae section. I am seeing better quality aplicants lately with postlets than craigslist. If you need a template just browese ads until you find one that you like best or combine from different ads. I think people like bullet points - they are scanning lots of homes and you want to make they key facts easy to spot: number of BR, bathrooms, garage space, square footage and location.

We use two seperate contracts: a regular rental agreement and a simple option to purchase agreement. They dont reference each other. Thats the concept, but there is a lot more to it than I can put in a quick post. There are several good books on the subject of lease options, money well spent.  Wendy Patton is great, also Peter Conti.

@Account Closed DON'T FILE!

Respect for your disclaimer. But understand this: you set your self up for the wrong path in life. If you file you SCREW your creditors. It doesn't matter that they are big companies and can afford it. 

You borrowed money from them and YOU PROMISED TO PAY IT BACK. And now you break your promise, screw them and walk away?? 

This will f*** up your moral compass for the rest of your life.

Show some backbone and pay back what you owe. It will not be easy but it is something that you will be proud of for the rest of your life. If you file now, you will always find excuses in your life and scew others. 

Sorry for the harsh words my friend. Choose wisely.

@Pari Thiagasundaram I can't give you advise with the legal side, but here are some financial considerations. First question, who is going to buy a home and is going to volunteer to pay higher interest rate? As a first time home buyer you can get a FAH loan with 5% down. A person who can't qualify for that has either demonstrated a lot of financially iresponsible behaviour (in that case why would you take the risk) or they had a one time situation. But in my experience these people are usually smart enough to know that they can rent for a year until they haev fixed their score enough to qualify for a low interest bank loan. 

The other issue you have is trust: people will be suspicious to a home made mortgage from a private individual compared to a well known bank. Finally look at the numbers: the most you can get IMO  is a 3% spread. So in todays world 7-8% tops compared to 4-5% from the bank. On a 100k note that's $200 bucks. Looks alright for passive income at first glance, but keep in mind you loose your tax shelter, so to my best knowledge it is full taxable. On top of that you loose the tax write of from property taxes and mortgae interest rate, because that goes to the new owner now. Bottom line it's not very attractive to do; you hear it in a guru seminar once in a while, but nobody really does it, at least not in todays low interest rate environment.

You want your cake and at it? Here is something to think about: get a cash out refi and market the home as rent to own. On a typical Milaukee property you should cashflow $300-500 before property management expenses. Repairs and maintenance will be the responsibility of your tenant and in the mean time you keep all the tax write offs. Be careful to not include a rent credit (not legal anymore since the Frank Dodd Act). If you are ok with some risk take a 5 year ARM to maximize cash flow (vs a 30 year fixed), but keep in mind that you have a 50% chance that your tenant buyer is not going to execute and you need to go for another round before it may sell (keeping the deposit, so not so bad).

@Dan C. most people like dogs (as long as they don't bite them or bark all night). We allow dogs and never had an issue or a complaint. But I have a little experience with animals and dogs and we "interview" the dog as well as the owner - normally you can tell the persoablity pretty quickly. Pit bull's can be the nicest snuggle dogs if they have been raised accordingly. Unfortunatley some people get a puppy with the intention to groom an initmitating and agressive behaviour, that's the real problem, but I think also easy to spot. The city of Milwaukee has actully code on how you have to contain some breeds like rottweilers and pitt bulls that effect landlords, because they require certain infrastructure like a completley contained "cage" an agressive dog cannot jump out or dig under the fence.  If the dog is a nice and happy guy I dont think you would have an issue with tenants. I'd probably go and spend some time there after work or on the weekend and see how things roll, especiually how the dog is dealing with people walking arround in the neighbors backyard. As a resident you don't want to be barked at every time you go to get in your car... 

@Mitchell Van Overloop Congratulations. You just increased your net worth by almost 50k, get additional monthly cashflow while your tenants are paying your self eliminating debt down and you enjoy some nice tax benefits. Welcome to REI.

@Andrew Hypnarowski your business card is going to be received a s a reflection of what you do and who you are - this is how people are going to look at you. You have discovered the real issue. Getting the card printed is the easy part. Developing all the ideas and then making them reality is a bit of work, but it's part of your development process. Take the time that is necessary to develop the substance before you attempt printing cards.

A poorly developed business concept shows in your card: no real business name, no "what I do" statement, no legal entity, no fax number, no company web site and just a random gmail address. - All that shows you are a rooky.

Until you have established and developed all these things I would go with less is more and just do name, phone number and email.

Oh wow. You see crazy sh*tuff happen when homeowners decide that they need to improve an architects layout. I'd love to hear the story in this particular case..!

Dan I agree with your conclusion and thats how I would pitch it to the seller anyway. However maybe you can find an angle to chaage the floorplan without massive reconstruction. Sometimes its completley impossible and sometimes its a piece of cake. Hard to tell without looking at it, but maybe you are better off to expand the kitchen and call it a spacious 1BR? Oh, well might be a long shot.. 

The other thing to consider next to potentially lower rent is potentially higher vacancy, more work finding a tenant and in the end haveing to settle for a less attractive aplicant than usually. Maybe not a deal to pass?