All Forum Posts by: Bonnie Low

The Book on Estimating Rehab Costs by J Scott was pivotal when we were starting out. Before we got our first flip under our belt, we had looked at probably 50 houses and made offers on about 30. We have a great Realtor so we were really confident in the ARV she would give us, but calculating our repair costs was a total guessing game until we read that book. It allowed us to create a template for doing our walk throughs to make sure we don't miss anything important and really served as a guide to what metrics to use (like calculating square footage for flooring and linear footage for counter tops, for example). It pointed out things we might not have considered, like making sure we're adding in the cost of disposal of old roofing materials as well as the cost of installing the new one and that a double layer tear off is going to cost more than a single layer and comp shingles are more costly to dispose of than shake. It also gave us some idea of where to look to find reliable pricing in our market. We can now do this all fairly easily, but our methods are based on the lessons we learned in this book. I can't recommend it enough for anyone doing flips or rehabs, particularly if you don't have the background of having worked in construction.

We've never put them in a rental unit, but we're focused on SFR and duplexes for now so it's not as relevant. I can share a personal story from my childhood, though. My folks thought it would be a good idea to buy a laundromat (it was NOT). We spent evenings and weekends cleaning them because we couldn't get reliable cleaners. Let me tell you....you cannot imagine the things people put in appliances that they do not own! I'm talking dirty diapers, greasy rags from car repairs, floor mats from cars, lots of horse blankets (where we live), and they constantly overfill them with laundry soap or worse - dish soap! We would have to clean the machines (unbelievably gross job) every single night. And people constantly broke into our coin exchange machines, the soap dispensing vendors and the machines themselves. I realize I have a very jaded view of the coin op laundry world, but there you have it. The cost to repair all of that constantly ate up any scant profit my parents ever could have hoped for. I just would not do it.

I think some people legitimately do enjoy managing their own rentals, but I tend to agree with you. We always use PMs and have been incredibly lucky to work with good ones. I would much rather leave the hassle of advertising, vetting tenants, managing complaints and repair requests, evictions and inspections to someone who has the time to do it and the systems to do it properly. To me, it's money well spent. That said, I do know people who own rental in towns where there are no property managers or there are no good ones. So sometimes you just gotta' do what you gotta' do (and it could be an opportunity to start a PM company I suppose!)

Very nice! I love to see quality renovations.

Yes. Always buy title insurance. I can't think of a single instance in which I wouldn't do that - even if I was buying from someone in my own family. You just never know what is owed on the property or who else has claim to it. And in the off chance you get into a situation where there IS a claim or a problem with title, it will cost you far more than the title insurance cost to fix it.

I second your recommendation that you need to walk the site with them (or have someone you delegate this to who really understands your plans) and put in writing your expectations. I am constantly surprised at the number of instructions I thought were clearly communicated that get screwed up. For example, we had a contractor install tile back splash and brackets for open shelving in the kitchen and bath recently. We walked it through with him and showed him what we wanted and where. The day he did the actual install, though, we weren't there. Sure enough, He did not install the back splash as high as I asked him to (it was supposed to go right up to the under side of the shelves) and he somehow managed to install two different size brackets so the shelf on the right of the vent hood is shorter than the one on the left. All of the brackets were the same size, except for the one for the bathroom, and yet he installed that longer one in the kitchen and told me "I thought it looked better this way." I could have asked him to change it, but it would've left a hole in the drywall that had to be patched and that would've been more work and more of a delay so we decided to leave it as is. But it was very frustrating because we showed him what was supposed to be installed where. We just didn't write it down. Lesson learned. It doesn't seem like you should have to be that detailed, but 9/10 you do. 

We just completed THE most awful refinance we've ever experienced and it was through a large lender with a national presence. So size does not necessarily equate to professionalism or success. The lesson I learned from this experience is that I'll never again use a lender who doesn't have an office nearby that I can go into when I need help or need to escalate a situation for resolution. Ask around this forum to see what experience others have had working with the lender you're considering using. If you don't get any answers, very few answers, or the information is dated more than a year or two ago, I wouldn't use them.  

So if I understand correctly, your plan is to max out the number of conventional mortgages you can have then convert them into a portfolio loan, then repeat the process? Interesting. I hadn't thought about it like that. Thanks for sharing!

Have you thought about partnering with someone for the next year or two until you have the income and credit history needed to go it alone? Maybe look for a partner who can carry the expenses while you supply the hustle? If you haven't already, read Brandon Turner's book Investing with No and Low Money Down. Lots of good tips in there.

Start with wherever you get your property insurance for your home. We use State Farm for both our home and investment properties. There are lots of companies that offer coverage for rentals.