All Forum Posts by: Braden Leonard

@JD Martin All good points. After repairs I believe the house will easily be worth 200k. It's in a good area, near Saxapahaw NC, easy access to Chapel Hill, Greensboro, Pittsboro, Graham etc. Part of my calculus is the size of the lot too (2.5 acres). Where the house is situated on the lot leaves a perfect second lot that could split off as another home site in the future. We intend to hold on to it for a while and for what we're getting it for we should cashflow at least $500/mo when we turn around and rent it down the road. Market is slowing down around here but overall is still going up and the price of rent in Chapel Hill will continue to push people further outside city limits, exactly where this house is.

Sleeping on it for another day but after looking at everything and hearing what everyone here has to say I'm leaning towards closing the deal. Either way we'll be living more of less for free since my other rental cashflows enough to completely cover this the mortgage on this house, which will give us the opportunity to put more money away for our next property in addition to the profit we get from the sale of our current house in Durham.

@Nick Rutkowski Unfortunately no, that is one of the things we asked for & the seller is unwilling to do any work on anything & we don't really have enough time to schedule any more tests.

@Megan Phillips We had the septic inspected too, it's an old site-built cinderblock tank and the condition of the drainage field could not be determined since it's too old to have a permit on file. It's not full so it has been serviced at some point. Had an old cinderblock septic tank at the first house I purchased years ago and I went ahead and replaced it for about $4500. DD ends in 2 days so we don't really have time to get many estimates, but owning another property with septic and a well in the area I feel I have a pretty good idea of what I'm looking at to replace both. I agree that it could definitely be animals waste causing the E. Coli, either way I feel a replacement is in order. Just hoping they'll go for the 125k. It's not just the well and septic that it needs, but those are the most expensive things it needs to at least make the house livable.

@Mary M. Yeah, I had considered that, but given the age of the well and the fact that it's hand dug with no liner I'd rather just bring it up to date along with the septic--especially considering that we will likely be renting the house out eventually--less headache down the road.

@Jason Hirko According to my agent, all houses in NC are technically sold as-is, but you still have the right to try and negotiate anyway. However, it is pretty typical for that fact to at least be included in the property description or somewhere on MLS at the very least. I am aware that the selling agent will now have to disclose the info about the E. coli and the asbestos so hopefully they will take that in to account. The house was on the market for 41 days before we offered on it and I got the impression that they hadn't expected it to sit that long.

@Greyson Dixon Yes, we're financing & putting 20% down so our monthly payment should be under $700. Long term plan is to be able to rent it out after we've put some sweat equity in and if we decide to move on to another place.

Looking for some thoughts/advice. We're currently nearing the end of Due Diligence on a home & have uncovered a few issues that I consider pretty major & we're trying to get some concessions to bring the price down. Here's some basic background:

-House was for sale for 150k

-Our offer of 135k was accepted

-Appraisal came back at 135k

-Overall, the house needs work, most of which we are prepared to take care of and expected prior to making our offer (has new HVAC which is nice)

-The biggest issues that the inspections uncovered that we want concessions for are:

-Hand dug well, contaminated with E. Coli, likely from the older septic system. Given the age of the septic and the contamination and age of the well, if we were to move forward I would replace the well and septic systems. Based on my previous experience I expect that would likely run between 10-15k for both. There is also asbestos present, though not in the old ceiling tiles as I was expecting, just in a small amount of linoleum flooring that shouldn't take much to remove.

We asked for a 15k concession, they came back with a 5k concession, bringing the price to 130k. My feeling is that the appraisal generally assumes that the house is habitable, meaning that it at least has clean drinking water. Given that I will almost certainly have to install new septic and a well, I'd rather be at 125k at the most. The selling agent tried to tell us that the house is being sold as-is AFTER we were already in DD. That's not listed anywhere in MLS, in the property description or in the contract as my agent pointed out. I feel that 125k is more than fair considering what we know about the condition now. Thoughts? Should I walk away over 5k?

I should also add that we do plan on living in this house as we fix & update it.

@Caleb Heimsoth That had crossed my mind as well, the way the market is going in Durham I know we'd gain much more equity if we just waited an additional year.  My main concern is limiting our liability right now though, especially with my partner trying to launch a business soon. I don't want to be on the hook for two mortgages if I can't cover them on my income alone, at least for the time being. Another option is renting out the Durham house--I'm not sure we'd do more than just about break even--mortgage is $1300 and I'm not sure we could rent it for much more than that. That said, it is a 3br 2 1/2 bath, built in 2016 in Duke Park, 30 min walk or $5 Uber to Central Park or Downtown & the Durham Beltline Trail is coming soon & will end a block from the house. So I guess there's another option. Should I rent out the Durham house and wait for more equity?

I'll look for the details on the next meetup, I'd definitely like to attend!

Thanks @Dawn Brenengen

My income is very stable & I can easily cover the mortgage on the old house with just my income even without refinancing. The interest rate on that mortgage is currently 3.25% so I see your point about not being able to find that kind of rate if we do refinance now. As far as just pocketing the proceeds goes, I was originally somewhat concerned about capital gains tax, but the more I've looked into it, it seems we won't be on the hook for anything since the profit will be less that 250k after paying the bank.

Hello BP! 

Just recently joined after starting to look more into acquiring more properties with the aim of eventually being able to replace my current income with rental income. I'm in the Triangle area in NC.

I have actually been a landlord for a couple years now, having rented out my existing house in Carrboro/Chapel Hill when my partner and I wanted to move to Durham so she could be closer to her job at the time. I purchased the first house with part of a life insurance payout so the mortgage was low enough that it was worth more to us as a rental than just selling it. I've lucked out with tenants & haven't really had any major issues, currently on my second set of tenants. The rental income from this house currently covers half the mortgage on the house in Durham, which we financed 100% (may not be ideal, but it's worked out so far).

So here's the part where I ask for advice from the BP community: Given how well the Durham market has done in recent years, we have seen pretty decent appreciation on our house (purchased for 215k 2 years ago, now valued at 295k, hopefully 300k or more next year). We are considering putting the house on the market next year, & hopefully getting close to 300k. We are currently thinking about a couple different things to do with the proceeds:

-Refinance our first, currently rented house to get a lower monthly payment & move back in to it. This looks good to me because my partner would like to go freelance soon & this would significantly reduce the monthly bills we're responsible for, limiting the risk of her launching her own business. The house could also use some updates & it would be easier for me to do while we are living in it since I could work at my own pace and do much of the work myself. When we turn around and rent it out after moving again, we'll get more monthly cashflow thanks to the lower mortgage payment.

-OR, take the proceeds from the sale of the Durham house and invest in another property, one we could live in, fix up then potentially rent out as well. Our current rental (Chapel Hill/Carrboro house) does need some work, but nothing terribly urgent that can't be done with a tenant in place. The mortgage just went up a bit due to property taxes--$711 & it is rented for $1400, which I plan on raising $1500 when the current lease is renewed. So the cashflow isn't bad as it sits now. I figure if we get another property, it will be easy to get a mortgage since we will live in it for at least a year and my credit is excellent, we can fix it up while living in it, then we can move on to another property and rent it out--hopefully with some good cashflow since we will have put a large down payment thanks to the equity from the Durham house. This option has a bit more risk with my partner trying to launch her own business soon however, but it seems to me may yield more monthly cashflow in the long run, not to mention building equity on 2 properties rather than one.

SO...those are the two strategies we're currently looking at. Just looking for some thoughts, advice, tips, etc.

Thanks!