All Forum Posts by: Brandon Roof

Today is all about trade with China and if/until an agreement comes to fruition we'll have days like these from time to time.  This has been going on for months.  An off the cuff tweet ignites a selloff and things are choppy for awhile until another leader tweets about progress being made or something else takes over the headlines.  As a long-term investor I don't approach today any differently than less volatile days.

Will the market continue to pullback in the near term?  Some would say yes given the current uncertainty regarding trade, but again, this has been going on all year and the market is up like 13%, so clearly the initial headline shock has worn off on more than one occasion.  Could this time be different?  Maybe, but will it continue to be the driving force behind the price direction of a U.S. based service provider that has no exposure to the effects of a trade war with China?  I would certainly hope not, but we have certainly seen overreactions to events in the past where seemingly unaffected companies become innocent by-standards.

I don't believe you are being overly conservative, but I would categorize myself as being extremely cautious and conservative when it comes to estimating rehab budgets and ongoing expenses, so with that in mind, can it be a good deal?  Possibly, but I tend to walk from these scenarios.

I always go into an offer knowing my best possible offer because it helps remove emotion from the equation.  Using your case as an example, I see a listing, schedule a showing, determine my expenses versus expected revenues and determine the highest offer I can make based on the return I am seeking on my investment.  If that number ends up being $62.5k and somebody comes along on offers more, I move on.  Either they beat me and have a better grasp of what revenues and expenses will be, thus securing themselves a good deal, or they just ended up taking on decades of headaches in a marginal investment.  I'd rather miss out on a close call than up my bid in desperation to land a property.

When deciding between the two I know some that favor Ohio due to it's landlord friendliness, but that all depends on how much of an advantage an investor views that as.

If this is the property in Rocky Mount, you are unlikely to get your target price of $16k when the current owner paid $16.5k just five months ago, and now they have some carrying costs into with taxes and insurance.  They would probably have to be pretty desperate to even let it go for $20k.  Also, I don't know if you've seen the interior yet as there are no pictures online, which would lead me to believe the entire interior needs redone, we don't know the condition of the HVAC, likely needs appliances and probably a new roof within the next few years, so $16k for rehab is likely low.  A big ticket item or two will easily eat half that budget.

Zillow rent zestimate pegs this at $615/month, below your expected $700.  We all know the zestimate is far from being the end all be all, but it may warrant a closer look at comps in the area.

With all that said, you still may be able to fit this within the 1% rule, so it may not be a bad deal, but I believe you're going to need a heck of a lot more than the $32k you're planning for.

Don't try moving the goalposts in order to make a deal work.  Raising the $/sqft you expect to get to justify a higher offer is a slippery slope.  You may also be investing too much of your time and thought in this project as it is listed at $100k and with your offer your not even likely to receive a counter, unless there is additional information that would lead you to believe your offer would be entertained.

If you just purchased this property and it does turn out to be a worst case scenario, you may want to explore the possibility of legal recourse regarding the previous owner's failure to disclose the issue.  I would think the likelihood of these issues occurring for the first time once you take over ownership are slim to none.

In your description, it's listed as three mobile units and two suites.  Can you elaborate as to what these suites are?  Are the mobile units in a park or will you own the underlying land as well?

Also, many of your expenses are insanely low.  If they aren't unattainable already they'll certainly be unsustainable.  Vacancy, repairs and capex all need to be ratcheted up at a minimum to 5%, though 7% or more may be reasonable.

Property taxes seem insanely low as well unless you only own the land under one of the properties, and even then it's iffy.  Same with insurance.  I can't imagine you'll be able to insure five units $780.

Depends on your market and what type of units are in demand, but there are many areas where a small 2 bed/1 bath would have no issues being rented.  Also, if you are confident in your numbers of being all in at $40k, renting for $700+, you should be in good shape as long as taxes and insurance aren't too high and there's no other immediate big ticket items in need of repair such as the foundation or basement waterproofing.

I would expect your contractor may need a little more time to heal and assist with any family obligations.  My guess would be at least a week or two and it could be even more depending how much involvement he has in his brother's estate and if he's inherited additional responsibilities now.  He's going to need more time but if your pressed for it you may need to find another contractor to wrap up the project and settle up with your first contractor when they are back to work.

Looks more like burn marks to me.  Appears that some sort of wire or cable may have went through the baseboard and was excessively hot/caught fire at some point.  I'm by no means certified to make any sort of judgement, so it may be best to have some form of inspector provide some insight.