All Forum Posts by: Pete M.

@Christen G. Thanks for the feedback, Christen.

I decided to pass on this property for a variety of reasons, which I'll spell out here.  Feel free to analyze and comment on whether it makes sense or not.

1. After finding a new financial advisor, I've decided to restructure a lot of my holdings to set myself up better for real estate investing, life insurance, etc. This includes using a whole life insurance policy that we can get a LOC against for buying homes at a decent rate. Figured it would be best to do this before starting to tie up properties.

2. The permitting issues on the house are still unclear to me and I don't want to step into something like that on my first property. I'd rather pass on a good deal than buy a lemon starting out.

3. I'm not sure if this property aligns with my goals of focusing on cash flow vs appreciation.  My conservative numbers showed a positive cash flow, but the age of the unit (even with major upgrades) still has me wondering and one big ticket item could wipe out the cash flow easily.

4. Seems to violate the rule of "buy a C home in a B neighborhood."  This one seems to be the reverse, in my opinion.

5. Not confident we could get those rental prices, as noted. I talked to a PM who works in that area, and he suggested dropping the $2750 down to around $2500-$2550 (gross on both) to attract better tenants.

As to how I met the broker, he's an investor in the area (along w/ Spokane and a few other areas); I was introduced to him by another investor who focuses on apartment complexes (and is a BP member, whom I met on here).  He has exclusive option on that property via a wholesaler for about a week; the $290k price includes the wholesalers markup and his 3% fee.  My understanding is that price was non-negotiable at this point (maybe that'd change if they open it up to others and no biters).

Thanks all for the feedback!

With the competitive market for rentals, I'd think you're safe to make the gamble with bumping up rates.  Turning over the units would also give you a chance to clean them out, do repairs, and justify the extra rent.  Rentals are in-demand in the area, so I'd capitalize on that.  Plus, just because the tenants have paid on time doesn't mean they might not be high maintenance or have other issues (hoarders? calling for every little issue?).  You're inheriting THEIR expectations of a landlord, which could be good or bad.  Putting in new tenants that meet your requirements (and not the previous owners') could be wise.

Thanks.

@Albert Bui Thanks for the feedback.

As far as I can tell, no flood insurance is needed.  Broker says the same, and nothing noted about flood insurance from the two lenders I've had work up numbers.

Electric is paid by tenants, I know that. It's not sub-metered, and I'd likely just write it into the contract to split it by heads in each unit.

Definitely a C neighborhood, but it really varied by the block.  This block didn't feel bad to me.

@Seth BormanThanks for the responses, appreciate the insight.

@Aaron Nelson  The inside of this property has some good character (de-cluttering and re-painting will likely do wonders), and I think the broker is figuring the large sq footage will command a premium vs other similar 3/1 & 1/1.  However, my concern is whether the neighborhood will deter the right kind of tenants.  For example--if a potential tenant could afford to pay that premium, would they rather live in a different part of town, even if that means less space/character to the unit.

I realize some of these are rhetorical questions, just asking out loud.

Thanks.

@Account Closed I'm showing about $500 in monthly cash flow if the target gross rent ($2750) is met.  This is my biggest fear, however--not hitting those would quickly shrink the cash flow.

Thanks.

Pete

Hi all,

Looking to make my first investment property deal, and a broker brought me an off-market deal in the 98418 area (east of Tacoma Mall). The place is a 3/1 (1850 sq ft) and 1/1 (1050 sq ft) currently, converted SFH--I can buy at $290k. He thinks it can rent for $2750 gross monthly rent (about $1750 on the 3/1, and $1000 on the 1/1), but it's currently renting for drastically less (current owner lives in VA).

I've also posted this in the deal advice forum here, but I'm hoping to get an opinion from locals on this part of town.  It's definitely not an "A" neighborhood--I'd call it a "C," but want to hear from others on this area.

Thanks.

@Bettina F. Thanks for the candid feedback.  This home is a little east of the Tacoma Mall, for area reference--kinda tucked into the area where I-5 does a 90-degree bend.  I'd call it a C/C+ neighborhood.  That block seemed in decent shape, though, and I didn't see any overt signs that would have made me sweat about leaving my vehicle parked out front.  I checked out the crime stats on Trulia, and it seems to vary quite a bit by block.  That block is shown as green (safer side of things), but it does vary around it.  The public school systems serving that house aren't the greatest.  Also did a search on familywatchdog.us and found three people with "offenses against children" living within a two block walk... little concerning.

@Account Closed Any recommendations on percentage to set aside for maintenace and CapEx? I modified the document from the broker by bumping maintenance up to 6% of gross rent and added CapEx at 7%. That still leaves a little over $500 in monthly cash flow (again, assuming the $2750 gross rent for both units is accurate).

How would I go about verifying whether the house is legally a duplex?

Thanks all for the input!

@Steve French

Currently looking for the first investment property.  I just toured an off-market duplex in Tacoma yesterday--doing a bit more research and deciding if that's a route we want to pursue.  Spokane is another option.

As to ATL, you have to work with a strategy that fits the area and your goals-sounds like SFH works for you. I'm sure commercial MFR will be different than small (one is Cap Rate-based and the other is not, for example), but I figure it will at least look good to lenders in the future.

Oh, and Spokane is definitely a place I'll be looking at as well.  In either case I'll be using a Property Management company to handle the issues.

@Bettina F. Thanks for the feedback, Bettina.  Any reasons in particular you left that market and would recommend avoiding that kind of property?  Just hoping to understand the reasoning.  

This property shows an adjusted build date of 1961 (still not new by any means), and the major systems have been updated (to my knowledge)--new Romex wiring, copper plumbing, and HVAC/roof/water heater all ~5 yrs old.

Thanks!