All Forum Posts by: Anna Buffkin

If you plan to move to the new home, then no. If you plan to continue renting the same house and rent out the investment property you are purchasing, then yes.

I am by no means the pro others are, but here are my thoughts:

First of all, what is your property criteria?  For example, my husband and I purchase 3 bed preferably 2 bath homes and 2 bed 1 and 2 bath condos or multifamily units in the 29210 and 29205 zip codes of Columbia, SC as well as 3/2 homes in Irmo, SC (Columbia suburb).  Homes must meet the 1% rent/price rule and condos/MF must meet 2% rule.  

Next, what type of tenant are you looking for?  I feel like the risk/ reward is best in the lower middle, stereotypical "blue collar" tenant in my market.  To me, poor tenants in "war zones" are too risky and A class properties have too little reward due to the low risk.  Based on my desired tenant, I want to be in the second quartile of median rents.

Based on my criteria above, I start looking for a new property and I want to BRRRR. As condos in my area are mostly a cash play not good BRRRs, I narrow my search to houses. Median rents for a 3 bedroom house in my area is $1200. Which means I'm looking for a house that will rent for $900-1200 (2nd quartile rents targeted at lower middle tenant affordability). If I refuse to buy a house that doesn't met the 1% rule even after refi (your percent may be different, but this is what works for me) , the most I can refi is $120,000. This knowledge has me looking for houses under a $100k including all repairs in order to BRRR out at least $20k.

Based on the above, I have now limited my search to 3 zip codes, a certain type of property and max price.  Many, if not most, will be weeded out just on this criteria alone.  

Beyond that, the house tends to find you as much as you find the house.  

BRRRR a fixer upper. Though I agree you may want something newer.

I just purchased a 3/1.5 built around 1959 (the tax office says 1958, another agency says 1960) in March.   This is by far my oldest property. It was neglected for 5 years and foreclosed on by the previous owner on a seller financing gone bad.  It was a piece of work.  Everything that could go wrong has.  A  small tree even fell on it last week. I replaced the 20+ HVAC and found the old duct work couldn't withstand the force of the new unit.  New ducts had to go in and so on; however, despite everything, I cash out refi-ed in May. It still cash flows, and I am still about $12k to the positive on cash generated from this property (including refi cash).  It is not as much as I was hoping for, but still not a total flop.

More than once I have warned new or would be landlords that buying the property is the easy part.  Owning and maintaining is the hard and expensive part.    I was reminded of that first hand this week.

My tenant called me Saturday to tell me the roof was leaking and texted me a picture.  Ok. I figured I would need to replace that roof in 2019 or 2020.  I guess we will do this a little early.

Wednesday night, I get a call the HVAC is out in a unit.  This unit was old and this was not unexpected.  My contractor called me and recommended replacement as the unit was old and the repair would be over $1000 on a unit that was starting to nickel and dime me.  I bit the bullet and said replace it.  

At this point, I'm almost $9000 in CAPX in less than a week.  I get a call at 9:30 last night from my contractor.    His tech had been out there 4 hours trying to get the duct work to stay together.  The ducts are falling apart under the air flow of a quality newer unit.  Ok. Do what you need to do and bill me.

On top of that I have a vacancy in one of my condos which I thankfully took a deposit for Tuesday.

The good news was I had money set aside for the ac unit and I was able to cover the roof with cash generated from my rentals.  If I hadn't had the cash, I also have a line of credit available for things like this; however, I would have been in trouble if I were new investor with no reserves. 

Thanks for reading my CAPX PSA.

Property taxes are one of my biggest line items can be 1-3 months rent.  Unfortunately,  the residency deduction is for owner occupied only regardless of in state residency elsewhere.   Be sure to watch for city specific taxes,  fees, permits, and licenses.  I live in Greenwood, but purchased mainly in Richland County (Columbia metro area). Greenwood has crazy high property tax compared to Columbia with lower rental rates for similar property.  In Richland County, I find rental rates higher and taxes lower. I only have 1 property in the city limits.  Beware, they require a permit ( only $25), BUT you must have a PM or other responsible party locally ( with 45 miles) listed on the form.  I use a friend, but knowing no one in Columbia, you would need a PM to comply with law.  

SC is more landlord friendly than many states

Also, @Chirag Shah, I did not have $36k lying around for the down payment and repairs.  My lender did 20% down on the purchase price and 100% of the contractors estimate which was originally $19k.  We had about $3k in unexpected costs + holding costs +  a few changes that upped the renovation total.

@Chirag Shah 

Real Estate's like baking a pie.  While the basic ingredients are similar, everyone will bake theirs a little differently. I wish there was a simple step by step instead of guidelines of best practices, but every deal and investor is different just like the pies.

Anyway, I house hacked 2 of my rentals, my first and 3rd. My current home was on the market for $115k, I bought it for $100k (put 20% down as I knew I was going to do a HELOC anyway), and it appraised upon purchase at $142k. I have a $30k HELOC which funds down payments and or repairs.

I am in the middle of a BRRR right now. I just got the refi loan approved Thursday!! Anyway, I purchased a house on March 5th for $59k. I have put about $24k into it for repairs. It appraised for $105k when purchased and the appraiser estimates ARV of $124k. It is now fixed and rented at $1095 a month (3/2 SFH). I started the refi on May 3rd. There is no seasoning from this property as this is a commercial loan. I am bundling this with another refi on a property I have held since 2015, but I believe the portion of the loan I am allocating to this property is $93k. $93k less the purchase and rehab leaves $10k (I accounted for closing cost before allocation) in available liquid cash from equity to use. I have this ear marked for some projects of 2 properties I already have, but generally, this would go toward your next purchase.

Hope I didn't make that more confusing.

Worry about deal number 1.  I find the more property I own the easier it is to buy or refi.  I own 9, so I can't speak for large scale, but on small scale, deals have been more of an issue than loans for me.

@Anthony Wick That sounds like every home warranty experience I've ever had.  To me the money saved isn't worth the tenant relationship damage.

After today, I hate home warranties even more.  I had my usual contractor come by and have a look.  The Freon was bone dry.  What competent HVAC guy doesn't check the Freon!?!?

For me the potential saving from the warranty are not worth the run around and potential injury to the tenant-landlord relationship.