All Forum Posts by: Alia Ganaposki

Us: Hoping to invest in our second out of state property 

Them: Velociraptors

After we saw all the properties we were interested in we made an offer on the one that needed the least work. It had lots of work recently done, including a new HVAC, just needed a weatherproofed deck out back.

Our offer was higher than I was planning, but the numbers still worked ($850/month after property taxes and insurance) so I decided that this was a risk our family could handle for such a quality property.

And then Thursday we got the inspector's report. 

Bless all careful inspectors.

Improperly installed bathroom vent leading to active, long term leak (huge black stain under the roof, small stain on bathroom ceiling)

Broken (!) outlets in the living room in the "rewired" house

Long term and bad water damage in the crawl space that had been professionally dealt with after the fact, but the increased moisture had left behind mold.

Shudder.

If we were local and weren't trying to get a renter in by August 1st (school starts the 15th), we might have just accepted a heavy discount. But honestly, the sellers should have gotten all this taken care of before they listed. And since they appeared to be hiding it (no disclosures), it made us worried about what was under those new laminate floorboards.

We're not afraid of known problems; our first property was a fixer upper. But I do not like lies. 

So we are walking away. I'm disappointed, but i'm also relieved. We are stable financially, but we aren't paying cash. This investment would have meant taking on debt. 

I'm much more interested in using that debt-money to add an income-generating studio apartment to our own property, which long term plan seems like it might finally come together this year. 

I'm calling this a win, even though we didn't get the new property. (And we've offered our inspector's report to any other potential buyer. It's not a bad little house, it's just not a good investment property for us. But I want any buyer to know exactly what they're buying.)

Hope this is helpful to others. 

We looked at the only multi in our price range, and it was too much work for our caretaker to handle. It's a small community, so multis don't come up very often. 

The time pressure we have is that my husband's schedule suddenly opened up so he could look at houses this weekend. We won't be able to visit in person again for at least 6 months. 

But thank you, I did ask the realtor if we could look at one (multi) listing outside of our price range (hoping it might drop down later), and I didn't argue when he didn't schedule a viewing. Your comment is making me think about how I can communicate more clearly with him in the future. 

Cheers for that! 

Tl;dr: I don't have enough knowledge or experience to feel confident in my next choice. 

(Side note, I usually consult with my friends on important decisions, but when we first started real estate investing I actually lost a circle of friends over it, in a quite public and spectacular fashion, so now I keep it close to my chest. I'd like to think my ex-friend was projecting, but it was still emotionally devastating so I am posting publicly here as a huge act of faith.)

We invest out of state (Arkansas). Our team on the ground has visited all the houses in our price range (under 100k) and together we've narrowed it down to 6 single family homes my husband will be looking at... tomorrow. 

The last time we did this, we had a very specific goal (2 doors, under $100k, keys in less than 3 weeks) which we met. We know that niche and what they'll pay to rent what we've got. ($650 & $500/month, respectively)

Going in this time, we have more time and more options. Alas, i'm a maximizer and feel compelled to make the perfect decision.

There is the $65k "Ugly But Upside" 3 bdrm. Barring a nasty surprise from the inspector, it needs major cosmetic work but nothing structurally wrong. It is in a perfectly fine school district and would rent easily for $850-900 month. We could (probably) sell it for over 80k if it was less ugly. This became a favorite because not only could we make enough rent easily, if we put in a medium amount of work we were likely to be able to sell it for a profit... eventually. (We're buy and hold, but we're flexible.)

There are 3 houses that are all about $87k, 3 bdrms 1 bath that only need cosmetic/ easy fixes. We could rent them for 1k-$1200. (Our caretaker thinks over 1200, but i'm conservative when I don't have enough data. HUD says the fair market value for a 3 bdrm in our county is about $1010. Not a lot of comps.) However, I don't think we could do much to increase their value beyond inflation.

And then.... there's the foreclosure. (Can't tell if that sound effect is angels singing or devils giggling.) It's just under $90k, 3 bdrm, 3 bath. There are a few structural issues (some missing siding, 2 soft spots on the ground floor) and a lot of cosmetic (oh, the wallpaper) work. Because we haven't had to do anything big on a deadline before, and we don't know what's truly broken, we have no idea how much it would cost to get it up to rentable. I won't pretend otherwise. *jazzhands*

Houses like it nearby are selling for over $180k, and we think it would rent for over $1800/month without changing the counter tops, but- again- there isn't a lot of data to compare it to. (Small town) More importantly, we don't know how long it would take our guy to fix things. He's popular.

There might not even be a rental market for family homes at this price point. We hadn't considered this market until a week ago. Since we don't know the rental market (and that's a lot of money to tie up in one project) the smartest thing would probably be try to sell it. But that wasn't the plan! *flail hands*

Oh, and the 4th option is a flip that a local realtor bought last year for $19k. It is a gut renovation and is perfectly nice but even though it's listed as a 3 bdrm it's actually only a 2 bdrm and they're asking $85k for it. Owner financing is available, $12k down with 5% interest, any term we like up to 30. (We know it's overpriced, don't worry.)

They told our realtor they were about to put a renter in, so I think they need cash. Cough.

I do not want to be in their position in 3 months, trying to unload a property any way I can.

We are self financing through a HELOC. It's an adjustable rate 6% interest only line for the next 8.5 years, then becomes a fixed 15 year mortgage if there's any debt left.

It's a buyer's market; I expect we will be offering much less than asking on all of the properties. (We got our last property for 70k, down from an original asking price of 149k, so i'm comfortable lowballing... but mostly it was luck on our end.)

I'm also ok with walking away from all of these properties now... and checking in with the sellers in November if they still haven't sold. 

(I'm a sahm, but my youngest is starting school this September so I have time and patience.)

With what I know, I don't think there's a wrong decision here. I'm just not sure if there's something else I could know if I asked the right question. 

(Oh, and taxes run between $300 and $500 annually; i think the 50% rule is a little conservative for this market but i'm keeping it in mind when I do my numbers.)

So... what question would you ask?

Cheers! 

Sorry, i'm in the wrong end of Queens. But I can tell you that here in Astoria, rents are about $950/bedroom.

I went to college in Oberlin, Ohio, which is in Lorain County. It's beautiful flat farmland. There's no industry, it was hard times 20 years ago (when I graduated), and I have only heard it's gotten worse. The main way locals made money was renting to college students, but the college decided they wanted a piece of that and a few years ago they started buying up the off campus housing and they require students to live in it.

I would not invest there except under very specific conditions... like my kid got accepted there *and* got a waiver to live off campus. 

Happy to answer any questions. 

I live in NYC. This is such a huge issue here. 

We invest in rentals out of state. We replaced the floor because it broke, we put in french drains because there was water damage, but we didn't make it fancy and we aren't going to refinance it any time soon. 

Being a good capitalist robber baron means exploiting the most you can out of every resource and damn the communal cost. And now we have melting polar ice caps.

The ex-landlord of one of our tenants set her apartment on fire for the insurance money. 

While our tenant and her family were asleep in it. 

He didn't care, he was just trying to extract the greatest value out of the property that he could. It just made good business sense... if you don't value humans. 

So much of our family's wealth is due to luck, it feels wrong not to share. We are white and present as middle class, but I grew up on welfare and government cheese. Even spent a summer homeless when I was 12. 

I don't want to burn the house down. I want to make a safe shelter for locals from the storm. Which is why, last week, we signed up to accept Section 8 vouchers and this week are looking at properties in the "good" school district that we hope will appeal to Section 8 families. 

I am sure BRRRR can be done thoughtfully and compassionately, but real estate investing in that manner exploits resources that others don't have access to at a greater rate (thanks to leverage) than even "traditional" (the last 150 years of) real estate investing does.

My two cents, 

Alia

Roth IRAs are magic. You can withdraw from them after 5 years if you need to (though I would only do that in a true emergency). It's still a comfort. 

When we bought our home, the bank used our retirement accounts as collateral/to reassure themselves we were good for the mortgage. 

I'm another vote for retirement first, property investment second. 

FWIW, yesterday I googled the terms "are we heading towards a recession?" "Are we heading towards inflation?" And "Are we heading towards stagflation?" And I found multiple recent articles from experts arguing that each one of these was imminent, armed with very convincing graphs and acronyms.

Which is to say, i'm nervous, or I wouldn't be googling.

A long time ago I read a thought piece by Heinlein, talking about how if you stockpiled enough canned goods to get you through a dystopian future event, you better have space to hide the used cans or your neighbors would kill you for your food. 

I would rather share my cans of homemade jam with my neighbors now, than fight them off later.

Or, "before recession, chop debt carry cash. After recession, chop debt carry cash" 

... and be kind. Good luck. 

I've been STRing for 6 years in my home. 

I strongly recommend reading the archives of https://airhostsforum.com/ to learn from others' experiences with in-home rentals. 

Most of my guests are tourists and don't want to cook, but if I had the space I would put in a small daewoo refrigerator and matching microwave so they could store and heat up leftovers. Even if I had room, I'd be uncomfortable putting in a hot plate because people on vacation are easily distracted and I don't want them burning my house down.

I'm in NYC, hosts in other areas focus on different amenities/ markets. 

 Excellent!  

My caretaker and I swap "no way" stories. Before it became too disruptive, we rented an air mattress in the middle of our living room for $50/night. 

Location, location, location...