All Forum Posts by: Bradley Bogdan

An excellent article and an awesome journey. Congrats @Joshua Dorkin ! Thanks for the read!

@Marcia Maynard 

I entirely agree that with only a small % difference in rent between the two, I would definitely be choosing on the basis of smoker v. non-smoker, and leaning to the non-smoker. You're in NYC and in a rising neighborhood. You should be able to re-rent quickly if there is turnover. 

In general, when purchasing an occupied unit, its definitely preferable that you have them sign your own lease or rental agreement when you're able, but you'll need to honor the current lease unless you agree to mutually terminate it. As for your housing authority, I would contact them to ask what paperwork you will need to provide them to prove that you're changing ownership of the property. If they operate as the PHA does locally here, they'll ask for documentation of the closing, a copy of the new rental agreement/lease (if you get a new one), they'll provide a new HUD lease addendum for the lease to be completed as a new landlord (so that their agreement is with you and not the previous landlord), and ask for your payment info so they can send you your monthly payment. They will not need to inspect again because of the sale, they'll just remain on their yearly inspection schedule.

@Sean Brooks 

I'm not saying Trulia/Zillow will continue to access the MLS for data. As I mentioned, they will have to create their own set of data, not merely copy the MLS' to display, if they want to continue expanding and improving. The MLS isn't free for anyone, for Realtors or crawler websites. Everyone who has access pays for such. If you look at the history of MLS, the concept of restricted access/monopoly of the database has been challenged in the courts on many occasions. This alone should tell you that there's significant financial incentive for access to the database. If there wasn't, full MLS access would be open to anyone. On average, it wouldn't have an effect on the market, the same properties would still be for sale, so restricted access has been a tool to gate keep for the profession, just as stock brokers had. I don't know how for sure it will happen, if I did, I'd go work for one of those companies and make a ton of money.

If you'd like an example in another industry, look at the car industry. Pricing there, like real estate, in the pre-internet age was tough for a consumer to establish what their current of future car was worth. Kelley Blue Book was a start, but obviously couldn't account for regional variation or supply. There was financial incentive for someone like cars.com to come along and provide listings for both dealers and individuals. I could see Zillow/Trulia offering some sort of package deal in the future, where an individual can list their property for a flat rate or a low percentage that includes things like escrow, estimate, etc. and doesn't include the MLS. Once they develop a certain amount of business through this budget, low frills service, they pressure buyers agents to take a lower percentage to work the buyer half of the deals as well. If successful, Zillow/Trulia makes a ton of money being a budget middleman, like eBay or cars.com, and breaking the monopoly on information.

As I said before, this won't replace good real estate agents, but it will create a big change in the way properties are bought or sold, and it will happen probably sooner rather than later, because there's big money involved. 

@Margo Roberts and @Richelle T. I believe the program you're referring to for Veterans is the HUD-VASH program. It is a hybrid VA-Section 8 program where your PHA does the actual issuing of vouchers, paying of rental subsidies, usual safety inspections, etc. and the VA (or in rare cases a contractor) handles the screening of vets, provision of other supports, helps coordinate the paperwork, regularly checks in with the vet, so on and so forth. Sometimes your local PHA will be able to point you to the program coordinator locally, but its usually easier just to call your local VA clinic/hospital, brave the phone tree, and ask to be connected to the HUDVASH program. If either of you want more information on the program or a contact for your area, feel free to PM me. I'm a social worker for the program in my area.

A few people have started down my path of thought, but haven't quite followed it as far as I do, so I'll toss in my two cents. 

IMHO, we are discussing two separate things when we discuss the profession of agents/brokers in this thread: The profession itself, and the MLS.

I'll start first with the MLS. People have pointed out that its a local database, with exclusive access and information. Currently, the only real competitors to the MLS are websites that "scrape" data and compile it, ala Zillow, Trulia, etc. This is why they aren't able to ever match the speed and accuracy of the MLS, they're always depending on the MLS to provide the data first, and then only checking back every so often. With that model, everyone pointing out here that they will always be a step behind is correct, they absolutely will be. They don't control the information themselves, they just compile from what they can scrape.

The issue for NAR is that its highly unlikely that they will be able to maintain a monopoly on that data forever. With the money and clout that sites like Zillow now have, and the potential goldmine that would result from breaking NAR's monopoly on the data, all of a sudden you have a strong financial incentive for someone like Zillow to find a way to incentivize agents/brokers to list with them and not just the MLS, or perhaps instead of the MLS if access is made cheap/free/or even profitable. It hasn't happened yet, and may not happen tomorrow, but it will happen sooner than later. There is too much money involved for it not to happen.

The profession of agents/brokers, unlike the stock brokers and travel agents mentioned in other posts, is a value added profession as well as a gate keeper profession. By this I mean that most people can't effectively search for and purchase a home on their own without access to data, regulations, and contacts with title companies, escrow, etc. (the gate keeper portion) but also can't evaluate, negotiate and manage the functions of buying or selling a property (the value added portion). As I explained before, whenever there is strong financial incentive to break a monopoly on data, it usually happens, which means the gate keeper portion of the profession isn't something that agents/brokers can bank on forever. When the gate keeper professions of stock brokers and travel agents lost their stranglehold on the data, most didn't have value to add and thus disappeared. On the flip side, the value added portion of the profession is something that will likely never go away, simply because most buyers are not well read investors like those here on BP, most are buying a house with no intention of ever doing it again. Agents/brokers that make the process easy, understandable, quick and friendly will continue to earn excellent money and can charge a good commission. 

@Tyler McKendry 

I hate to jump on the bandwagon, but the method @Dave Savage explained above is really how you should evaluate deals like this. Start at what ARV will be, then work backwards, including firm estimates from your contractor/inspector of what needs to be done, a realistic allowance for holding costs, and your profit margin to arrive at what you should pay. Just as you wouldn't buy a used car for $1000 that needs $3000 worth of repairs when there's $3000 used cars that don't need repairs out there, you don't want to pay for a house like this and find out it will cost you more to rehab than you'll be able to raise the value.

Further more, the (potential) double structural whammy of both foundation issues and the large termite issues you mentioned should scare you. Those are the kinds of repairs that are tough to budget and could be huge costs. They are also the kinds of repairs you are not going to be able to teach yourself. 

I'd run away from this deal as well, especially since its your first. 

@Nicole Generette Welcome!

Section 8 can be a great program if you have a good PHA, which most seem to be. Inspections are usually just for safety, and despite the horror stories, most inspectors don't want to nit-pick. There's no incentive for them to fail units, it just makes for more work for them to have to come back and re-inspect. So long as your rental works correctly and has the basics (doors that lock correctly, outlets that have covers and work, sinks that don't leak, hot water that works, etc.) you'll probably pass with flying colors. 

The key, which @Dick Rosen and others have mentioned is screening. Just because people are poor doesn't mean that you should ignore all red flags (I'd still recommend avoiding anyone with an eviction) or assume they will be bad tenants. Screen well and you'll be fine. 

@Leon Henry It seems that your issue has come down to what kind of time and effort a $20k hit is worth to avoid. I would take a look at how much time you spend a month on the rental, and how long it will take you to pay down the mortgage to your break even point. If its a pain of a property and you're spending 10 hours/mo on that unit on average (120 hours/yr), and it would take you 3 years to pay down that 20k difference (360 hours for 20k of capital saved) you're looking at a $55/hr job for the next three years to raise back (or initially not spend) the capital. For some people, that's entirely worth it. For others? Not at all. You sound like you've got a nice day job, so your family time might be much more valuable. 

As for the property itself, have you looked at local subsidy programs like Section 8 and HUDVASH? It might help minimize turnover and shore-up non-payment issues. If the neighborhood is too bad, they may not help as most people still won't want to live there, but its worth investigating if you haven't already.

 Whoa, how much do you estimate the rehab to be? I'm guessing it will far exceed any deposit they may have paid.