All Forum Posts by: Catherine Lacey

Hi All - We're currently under contract to purchase a multifamily home in Grand Rapids. Inspection is Monday and closing is set for the 15th, though with the flood of mortgage/refinance applications I was just informed the appraisal can't even take place for at least 30 days. (I hope the sellers don't balk about having to extend the closing date).

In any case, its a great deal and the cash flow is excellent. My mortgage plus escrow is going to be $1,300 and current rents are at $2,650. However, it needs some updating, a new roof, and I'm worried about the "seepage" issue into the basement. I cannot join the inspector due to COVID-19 new rules, but he said he'll take videos and call us afterward. 

Any thoughts? How much would a seller in this market be willing to help fix inspection issues, whether small or big given current economic conditions? Appreciate any input from those of you with more experience. 

Catherine

Thanks, Marky. This is a GREAT experience for you. Much like dating a horrible person and learning what to avoid moving forward. So don't be discouraged. I made a HUGE mistake with my second investment. It was a money pit for 10 years until we sold it last summer. But as a result, I was determined to find ways to make up for my loss. I was more savvy, determined, and eager than ever to make smart real estate decisions. I'm not a huge investor, but I have since bought five more properties and sold one of them. They range from breaking even (another lesson learned) to making $1k/month on a single residential rental. 

I've often told people I am tremendously grateful for that first terrible deal. I am now doing well as a result of applying lessons learned from that mistake. 

Good to know. Thanks, @Jay Kadlec!

@Jay Kadlec OK - thanks. Good to have this option in mind.

@Jake Thomas, Thank you for your response. We will be sure to sell with the one completed, or just hold onto it and do the others over time. Of course, the longer we wait the more we lose the income needed to make the investment worthwhile. Note, also, that he common area is also in horrible condition: Matted, stained, frayed carpet, beat up wood, hideous/peeling wallpaper. Just thinking about it is giving me a headache...ha ha. I've gotten mixed-response on how nice the finishes need to be. We put laminate countertops in the one we just renovated, but stone remnants could have been used and I don't think it would have been much more. But again, I"m not there to go to the stone suppliers and pick that kind of thing out. When you say high end, do you think wood, tile, and stone counters are required? Or does it just need to be new? Any finishes that you think are particularly attractive to renters? For example, do the stone countertops, full tile back splashes, stainless steel appliances, other etc..., matter more than others?

@Ben Durwood, That's encouraging, thank you! We had a chance to buy in Heritage Hill but got outbid before we even had a chance to respond! I was bummed, as it was a beautiful 4-unit that needed less work than the one we ended up with. So yes, it is in extremely rough shape. The kitchens in the 3 units we have yet to renovate are the spatial equivalent of a patchwork quilt, the bathrooms are horrible, and plaster is cracked all around. $700 is fair as they are. When we first got it, one was even going at $600/mo. The units are 1,000sf. I'd love to know who did your renovations, and who your property manager is. If you're able to share with me the details of what you did and what you paid for the work, that would be great, too. It's difficult to compare given how much we need to do in each unit.  We really like our property manager in terms of staying on top of rents and taking action immediately with any issues that arise, but he's not the best to manage renovations. Do you it would be best to find another property manager to oversee the work? Or could we could find a trusted contractor to work with directly? We can visit GR as often as needed, and will do so if necessary. If PM'ing me is better, please do let me know what you're willing to share that way. Thank you!

@Charles Kao, Thank you very much for your insights. The money we've already put in was to cover a whole new roof, a new furnace, and 1-unit reno. So yes, it's cost a lot and we still have a ways to go with the other 3 units and common area. Could you tell me who you used for your reno work? And who your property manager is?  Would it be better to PM me with this info? We actually really like our property manager in terms of collecting rent and taking immediate action when issues arise. But we don't think he has the experience necessary to oversee the work we need done. For the first unit reno, at his suggestion, we used a company that gets excellent reviews online. But the finished job already looks dated.  We trusted the property manager to see that it would be done well but he clearly didn't share our vision...lol. I don't think its a cost issue, as countertops are inexpensive and they picked one that looks straight out of the 80's instead of any of the newer styles. If/when we do the other three, we want a better result but given the problem with the first reno, we're not sure how to go about selecting a contractor that REALLY knows how to deliver a nice result. To me, it shouldn't be that hard but I assumed wrong.  In terms of selecting a realtor that invests - that's a great suggestion. My husband reminded me that our realtor (when purchasing) hadn't said we could get $1,200 per unit, he actually said we could get $1,800! So he was way off and maybe we could have avoided this mistake with a realtor that invests as you're suggesting. Once again, though, it's difficult from afar because our realtor also had decades of experience and was selling other multi-families at the time. We assumed he was in the ballpark... Basically, we're experiencing all the challenges that people are warned about when investing remotely. We still have our old Maryland property as an investment and its smooth sailing, so assumed we'd have a similar experience in Grand Rapids.  But they're far from the same! You're pretty confident the market will slow in the next couple years? I'll be sure to listen to your podcast episode next chance I get. 

@Tim Johnson Thanks again. Yes, we walked through some of those shiny new rentals and they really are very nice. Shocking what they rent for though! We know we won't have a problem selling if that's the way to go, but to recover what we've already put in, my assumption is we'd have difficulty getting that price. Maybe that's the place to start. 

Hi Tim, 

It's on Michigan near the medical center. One unit is still under construction, but with the rents of the other 3 we're breaking even - no cash in or out after paying mortgage and property mgmt fees. We will begin renting the 4th unit on April 1 so we'll have a positive cash flow then. The thing is, we've put $70k in since buying it and we think we need to put another $80k into it to make $1,100/month per unit, at which point it'd be a good investment. 

We're still evaluating if it makes sense to sell. 

Hello! I am hoping to get some solid advice here :)

We bought a 4-plex in Grand Rapids, MI in 2017, thinking it was a wise location for investment since we travel there 1-2 times a year to visit family. We got it for a decent price but it's a 1907 build - a much older property than we've worked with before. It needs a lot of work, as we expected, but we've got kids and other projects that are demanding more and more time, and it's challenging managing the upgrades on the units from afar. After replacing the roof and renovating one unit, we're still in good shape financially, but a little unsure on how aggressive we should be in updating the units from a quality perspective or whether we're just going to end up investing more than we should since we aren't quite as hands on as we're used to. When we purchased the property, our realtor said we could be making $1,200 per unit (HA!) after renovation, but other knowledgeable contacts in GR have told us that's only possible if we do very high end renovations. Currently, in the non-renovated units, we're charging $700. These are 2-beds, one bath units. 

So - do we carry on or sell it at break even and let someone else take on the investment who might do better due to proximity? We wouldn't be nearly as stressed about this if we lived in Grand Rapids. This is our first remote investment. Any advice for how to make this decision?

Thank you!

I'm closing on a 4-unit in 3 days and just today got the closing docs updated to reflect the prorated amount of rent for remainder of August and the deposits due to us. Dropped our cash due at closing by $4,000! So glad that got addressed but we also don't know any of the tenants and there seems to be reluctance to give us their contact info prior to closing. I suppose the only plus for me is that we know they're all on month-to-month. We live 1,000 miles from this building and want to go straight to a property management company to do the condition inventory and set up the payment mechanism for the rents due Sept 1. Has anyone had that experience? Buying tenant occupied and immediately having a property management company step in?

Hi all, thank you so much for your input. Very helpful. I'm certainly looking at modular panel, if anything. I even found a company that does modular log cabin style construction but need to find out if they deliver. The customization options are remarkable. I didn't realize there was so much variety available. 

Construction quotes I was given by a local homebuilder were 250 to 400 per square foot so yes, the modular seem to be more affordable.

And Tanya, yes, they are allowed in the town! We called the building department yesterday to make sure at your suggestion. Thank you for that important reminder.

Turns out the sellers of my current contract are actually considering dropping the price a full 1/3 of the original offer so I may not move forward with the land/build option. But another possibility is that the house I'm trying to buy has over an acre and I would be allowed to put another 1,000 sf unit on it. Might be the perfect opportunity for testing out a small modular home (and creating more cash flow!)

I'm currently under contract to buy what I thought was an excellent ski house. Beautiful views, rentable space, large. But the inspection unveiled problems worth hundreds of thousands. So unless the sellers come down dramatically in price, I'm backing out. 

Another option I've been looking into - since most other homes available there tend to be way beyond my price range  - is buying land and building. Its relatively affordable and the price per square foot quotes I'm receiving  would allow me to secure something in my price range. But my brother is trying to convince me to order a modular home. The options have a lot of variety and look beautiful in the pictures. Not the ivory-colored boxes I'd imagined at all, in fact, highly customizable. Supposedly modular can save significantly over custom home builders.

Does anyone out there have thoughts on this? My goal would be to build a duplex (one for me and the other to rent out for income). There are duplex lots available. Just not sure if there are major red flags associated with modular or if it is a bonafide good deal in many cases. Thanks in advance!