All Forum Posts by: Adam Ramsey

@Drew Markert I currently have a duplex that I house hack. To make things easier I set up a separate checking account to put rent in and pay the mortgage out of. I also did get a separate credit card to use just for house expenses.

This makes it a whole lot easier, especially if you misplace a receipt when doing taxes. I know everything on my credit card is house related. One thing to factor in is how much you can write off for certain expenses. Keep track of what items are purely for the rental unit and what items are for both units.

If it's an item that is technically for improvement of the whole house (landscaping, common area improvements, exterior siding/painting) you can only write off a portion. You'll have to figure out the percentage of the livable space is rented. In my case the rental unit is approx 33% of the homes square footage so I can only write off 33% of those items. If it's just for the rental unit you can write off 100%.

If it's an improvement to your unit keep it separate and not on the rental credit card or at least keep track of it. 

As a plus, I use my rewards as a check to myself every now and then and put that towards the mortgage/investment account. I don't know how it would work using "$100" in rewards to buy something for the rental unit and if I could write that off. 

Hi All,

I'm looking at a house that has a block foundation. It's an older home, 1930's, and the block looks in rough shape (probably just from being old). However, there are noticeable cracks and there has been water leaking in for many years. It's a house being sold by a trust so they don't know how serious it is. One of the trustees use to live there 15 years ago and remembered water coming in.

This property is in Wisconsin and old foundations with cracks are not uncommon but I have no experience with block foundations.

If I write on the offer I plan to have a contingency to get the foundation checked out to make sure there are no issues. 

Hopefully it is just a matter of making sure the gutters are clean and landscaping is good to reduce the water coming in. I'm hoping it's a matter of cleaning it up and sealing cracks were needed. I did not notice any bowing in the walls or major settling in the home. There might be some water that comes in and it just is what it is. Does anyone have past experience with fixing leaky block foundations? Also, anything to look out for on them that I may have missed?

Thanks @John Leavelle,

I looked at the property and cosmetic repairs should help it a lot. However, the kitchen is going to need remodeling and will hurt my appraisal if I don't do so.

Also, got excited when doing numbers and looked past some of the costs you mentioned. 

The property is under market value but does have some basement leaking which may be what they're trying to account for. I'll have to run numbers again but I'm thinking that $50K is a better starting point and then figuring $80K ARV w/out kitchen and $85-90K w/ kitchen remodel. I did look at comparable properties similar age and finish condition and it put me right about $90K. However, these all had better kitchens.

I might buy a SFH for $60,000. I plan on making a cash offer and then doing the Brrrr strategy.

Purchase: $60,000

Rehab: $5,000-10,000

ARV: $90-100,000

Rent Price: $1,000

Being conservative I'm planning on ARV of $90,000 and repairs of $10k.

Refinance at 70% ARV: $63,000

Payment: $319 @ 4.5%

Taxes: $158/Month

Insurance: $75/Month

Vacancy 10%: $100

Maintenance/Cap X 10%: $100

Management 10%: $100

Cashflow: $148/month

I would borrow about half of the money initially from family and paying back after refinance (rate tbd) and pay the rest out of pocket. I have the my side of the cash handy or could borrow from a heloc at 1.9%. After everything I should have approximately $10,000 left in after cash out refi (factoring a little extra for closing costs and unknowns). Cash on cash return would be 17.7% (cashflow x 12 divided by $10,000) - think I did this right. I'm uncertain on the 2% and other rules.

The cash flow is not huge but a good return plus the equity. By looking at numbers I think it will be closer to $100,000 ARV. If it's that, my payment would be $355 @ $70k financed and approximately $100 cashflow but with little to no money out of pocket after refi. I'm trying to be conservative with all numbers. I'm expecting more of a 5% vacancy rate, plan on managing myself which would add $150 a month to cashflow. Repairs should be mostly cosmetic (flooring and painting) and hopefully closer to the $5K number.

Would love to hear your thoughts and whether my numbers look correct just on an analyzation standpoint. 

Hi @Chris Heeren,

I've mostly looked at Multi Family - 2-4 units but am open to single family homes and small apartment buildings depending on the price range. Mostly just looking generate better cash flow than I can here in Madison. Do you have property management recommendations for that area? Also, should I message you my email for property leads?

Thanks!

@Casandra M. - Thanks for the detailed info!

I'd have to look into the difference between Dane County vs. Rock County laws. I know the Madison area used to sway towards the tenants more than landlords. To my understanding that has evened out over the years. 

I know McFarland pretty well and have plenty of family from the Stoughton area. McFarland rental rates will be very similar to Madison - probably $100 less on rent for a similar home (unless you're talking about downtown Madison or certain trendy neighborhoods). Stoughton is a nice area too. The company I work has rented out nicer homes both in Stoughton. Those prices are probably $100-200/mo less. Of course it would vary depending on the property.

I'd love to continue to invest in the Madison area as I've worked in the industry here for over 5 years. I know the area so well and have seen the ebbs and flows over the years. The returns aren't the best up front but the chance for appreciation both in rents and prop value are nice. The right place also rents very quickly. Unfortunately some of the prices things go for, especially duplexes, do not even make sense. MLS is hard and I need to look harder into finding properties off the market. Madison also has had tons of development lately in higher end apartments too so stay away from anything that would compete against them.

Hi @Jack Medford,

Thanks I'll definitely do that and maybe see you on Wednesday.

Hi @Casandra M.

Thanks for the input! I'll look into the South Side, I forgot about UW-Rock. Is 4th ward pretty much the inside of the bend of the river and does it extend out much? I've seen properties just outside of there going towards Mercy and also on the east side of the river and going up Milton Ave. Do you have any input on that area?

Madison is great. It's a very competitive market here and you don't see the cash flow of Janesville. However, your appreciation potential (especially in the last 2 years) is great. I bought my duplex about 2 years ago and owner occupied it. I'm in a trendier up and coming area so the upper unit fills quickly and I've seen my property value jump quite a bit in the last 2 years.

Hi Everyone,

I am looking for advice on the Janesville and Beloit markets in Wisconsin. I currently live in Madison and am a Real Estate Agent with a Property Management firm here in Madison. I am very familiar with the Madison market. I have a duplex that I owner occupy here that works great, however finding a new deal that makes sense is difficult in Madison.

I grew up in the Janesville area but really am not familiar with it anymore in regards to the neighborhoods. I tend to migrate towards small multi family but am open to single family. Are there certain areas of either Janesville or Beloit to definitely stay away from? I always hear to stay away from the 4th ward in Janesville. I plan on driving hopefully both areas over this long weekend to get a feel them. Also, arguments for Beloit over Janesville or vice versa?

Lastly, anyone know of any good management companies in the area? I'm unsure of whether I'd self manage or not.

Any advice and starting a general discussion on the area would be great!

Glenn Zhao I bought a 1920's duplex and ran into the same problem. It's not cheap in my area (Wisconsin) Luckily only a little over half of the lower unit had knob and tube left. I had a little difficulty finding an electrician to do it because it's a hassle. I spent approx $2-2,500 on just the electrical work. Then had to patch and paint the holes in the wall. Approx $2,500-3k total when said and done and that was just on half a unit. I'd expect a fairly high cost on a 7 unit. Hopefully you'll get a discount for the amount to be done. I didn't even look into insurance that allowed it bc I knew I'd have to deal with it eventually. If you have the means I'd just take care of it. My inspector said that it's still fine to have but eventually it could be a city requirement in my area. Also easier to sell with that fixed. Best of luck!