All Forum Posts by: Alexander Zurn

@Jesse Holshouser Based on your analysis, I would strongly consider rehabbing and then seeing what you could rent the property for. Will the rehab add a bedroom? Will it add a room? Obviously a bedroom would add more value but so would a room. A finished basement I think goes a long way in most neighborhoods, though I don't know that for sure especially in your area. 

Let's say you can't get enough after the rehab, you could sell and I think (although you should be sure) that the rehab would add some value. Find comps in your area with the extra bedroom or storage space. Will the 5-6k rehab increase the value you could sell more by 10k? 12k? 15k? 20k? I don't think the knowledge of a rehab ARV would hurt here.

Good luck

@Keith Jourdan it's an interesting time. Rates are up from historic lows and I think that is partially scaring people because they think it will go down again but these will likely be the lowest rates we will see in the coming years. This puts the entire real estate cycle into a bit of a standstill because those looking to sell also want to buy another home, but they don't want to buy at this rates (yet) and therefore, do not sell. In turn not providing a chance for new home buyers to enter the home ownership field.

With that said, it is the winter. Nobody wants to move in the winter so hopefully spring will have more to offer but 2016 set up 2017 up to look bad because of the year housing had in Summer '16. It will also be interesting to see how the lending business is effect if Dodd-Frank is repealed. Keeping in mind that it would be repealed to less regulations now but more regulations than circa 2008, it hopefully finds that right balance. But we won't be able to see the results of that for a least a decade.

All this really means is that we have to search harder for good deals!

@Wayne Holliman Welcome!

Start educating yourself with the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) if you haven't already. It sounds like this property is a perfect candidate. As I'm sure you know by now, by refinancing the home you will get the cash out of the property and then be able to do the final 'R', repeat!

Make sure the numbers work though (i.e. that the rent is covering the mortgage, taxes, insurances, expenses, cap ex/repair fund). There is a BRRRR calculator the site has so be sure to educate and review that.

Good luck

@Matthew Sidlo Yeah, newport can be tough. This property is in Middletown but same idea. Should be good on flood insurance with this property but, yeah, newport county is riddled with it. Thanks for the insight, I will definitely consider uncovering more damages with my rehab.

@Anthony Thompson that's what I was thinking too... that there are no con's. But I wanted to make sure I wasn't the only one! Very willing (and excited) to start doing work/repairs like this. Hopefully it can work out.

I have a property almost under contract (duplex, Newport county, Rhode Island) and I want to be ahead of the game. It needs immediate work and I am considering a 203k loan on the property. Numbers aside (because they would have to work in order for me to go through with it), I am looking for pros/cons of this idea.

My thought is that I can get the property at a lower price, put the work in while financing the repairs, then once it is complete and I have lived in it for a year, rent it out and possibly refinance to get cash out to put towards my next investment.

Is this possible if I am financing the repairs in the loan?

@Christine Mwai slight pivot, but have you considered taking cash out of the property you have paid off? A lot of things go into this but if you need something like 5k, 10k, 20k it may be a very low loan to pay back in probably 10 years or so? The rent would cover it (make sure of this and it still covers insurance/taxes on the property.)

If you have considered this and don't want to do this, I would simply explain to the tenants what the situation is. If they have 3 months left on their lease, I'm sure they've thought of either re-newing or moving out. If the rents are fair markets rents, there is a chance a new owner would want them to stay too! I think it mostly depends on the relationship you have with the tenants now. Honesty is always the best policy.

@Al Wright not dumb at all. It's actually the opposite! It's really important you understand the process before you take further action.

First, you'll need to have the appropriate paperwork for the potential tenants will you deny. This is likely a state specific document officially giving the applicant notice that they did not receive the unit for "this reason".

If they all pass the background and credit checks, make some minimum requirements that you want to have met. For example, a credit score higher than 630, a clean record of paying rent on time and great landlord recommendations, income that is three times the amount of the rent due so you can ensure your rent will be paid. Follow up on references and vet the applicants more than just a background and credit check. Call their work to ensure they make what they say they do and to know that they job is not "temporary" (this is called a verification of employment). They may ask for a document signed by the applicant giving his/her release/permission for you to do so, which is something you should also have them sign.

Let me know if you have any questions.

@Ty Murray I think you'll find many "successful" people have their licenses but not for the reason you may think.

I currently am very close to my first property. I started 9 months ago and have learned a lot in this time. One of my goals is to one day have my real estate license but not until I have can afford the fees for it and now that I will get a deal or two every year to pay myself back for the fees.

I think for most people success comes first. Then they find themselves loving real estate, wanting to find more avenues to properties so then they get their license, which is fine because at this point many people are successful and can afford it.

This isn't to say it is SO expense because.. it's not. It's something like 2-3k in upfront fees and then similar to join a brokerage (I believe). Then renewal fees every year can be a burden but again at this point in one's REI career, the cost is outweighed by the opportunity.

For a simple breakdown, here are the pros and cons

Pros: MLS access, not reliant on someone else to see the MLS or to literally go view the property, ability to make money off of it, list your own deals..

Cons: Fees (annual and upfront), continuing education of laws and regulation (i.e. time not spent on finding deals), always legally disclosing you're licensed, dealing with brokers taking a %

Now, these aren't all the pros and cons but certainly some popular ones.

Hope this helped. 

@Josue Colunga first you want to establish how much your property is worth. After this determine, how much you own of it (i.e. how much equity you have). For example, say you bought a property for $50,000 all cash, you owe nothing and now it is worth $110,000. So if you sold it, you would get your $50,000 back plus $60,000 in equity.

A refinance would appraise your property and hopefully came back at the value you established early on. For this example we will assume it does and you have a property valued at $110,000. Most lenders would allow you to take out 75% of the equity you have in a property. For this example 75% of $110,000 = $82,500.

SO the refinance would give you a loan of $82,500 of which you can do with whatever you want (i.e. save for another down payment). Don't forget though that with your new loan, depending on the terms (years and rate), your properties may not cash flow anymore so you have to consider that as well.

Go through the BRRRR Calculator on here and look at the numbers you'd have to consider. It should be helpful to give you a gauge on what you'll need to research to make sure the property you refi will be worth it.

Good luck