All Forum Posts by: Chad Clark

I have one that is wheel chair accessible.    I decided to keep it as is and advertise it that way.  

I got a little lucky as I was using this as a tester for AirBnB at the same time and they had guidelines to be able to call it wheel chair accessible.    The door ways had to be a certain width.  Shower and toilet bars to help them maneuver around and of course the ramps over any steps outside.  There's other things as well so go over the list provided here.    You don't have to do them all, but it's really nice and most are really simple.  Lowering a closet rack for instance.  Not real difficult.   https://www.apartmentlist.com/...

I got lucky and the doorways were wide enough to allow a chair through.   I just ended up mixing sand into a paint to cover the ramps for a little traction.  Then added the bars to the shower and toilet.  Easy enough.  As for finding someone to rent it, I just said it was wheel chair accessible when I listed it.   I happened to have most of it anyway.  

One thing you should make sure of is if you want to refuse a disabled veteran, be sure to read up on this.  There's a lot of protection for them.  Sounds mean, but you don't want to get backed into a legal corner accidentally getting a bad one.  

I ended up with a little old lady who's wonderful really.  Very nice and of course, no worries about crazy parties.   Best part is the disability can be paid direct to you for the rent.  Guaranteed rent is always nice.   It's a little bit of extra work, but kind of worth it compared to the nightmare tenant.  

PS. I haven't read up on how to make things work for someone that's blind or ran into the service animal thing yet so be sure to read up on those if it's a concern.  

In answer to Will and Drew, the drywall was already not worth saving in most spots.  Also, the electrical had been a mess and it was easier to just rip it out and start over.   Three fuse boxes of mystery, if that gives an idea.   I don't mind tearing it down to the studs, it's typically easier and is going to look new in the end.   Drywall is pretty cheap after all.   A lot of work, but I do that part myself.    Time is typically the thing I have a lot of.

Anyway, I got lucky and decided to bring out my framer before I went any further since the frame seemed suspect.  I was going to add bedrooms and baths anyway so he was first.   Turns out he started laughing as soon as he went into the attic and I pointed out what I was wondering about.  Turns out the roof was an add on.  The entire thing was something someone decided to just cut the old trusses and plop and new set of extensions onto those trusses that was much bigger on without any knowledge of load bearing to the floors below.  So it made a weight onto areas that weren't designed to have the weight of a roof on them.  I could easily see what he meant once I thought about what was below.  I had noticed a bow in the beams above the kitchen.  

Made for some bowing on the support beams below in every room.  It was actually scary once he explained how the weight of the roof was on empty space. 

So in the end, I gladly walked away from a money pit.  Sad to miss out on an opportunity, but considering it actually was a pit in disguise, I don't mind.  I'll walk away smiling knowing I didn't get a nightmare.  I had nothing in escrow, I won't jump unless I'm sure and it was only the second day since I had noticed it.    

Oh, and do me a fav, I have a carpenter, plumber, and such so I won't be "Granpa Joe"ing this.  No need to go into that.  I do things the proper way.  I don't like to end up with more problems down the road.  

I'm curious about permits and the problems that can arise from needing them.   Ok, I'm in Michigan and I tend to do simple refresh type renovations.  Nothing too invasive.  New faucets, floors, paint, lights, trim and a bunch of things to make it look way better than before.  I have a ton of tricks to get things looking great.  

Well, I ran into a property that needs a ton.   I don't mind doing electrical, but I'm not an electrician, and this place needs one.  Ok, so permits are going to be a thing and I'll have to hire someone to fix this mess.  It's past what I can do.  Walls are going to have to come out.  I know we have to have an inspection for it if you do that.   I've heard some horror stories about another investor getting into a mess because they called an inspector out and they made him update the firewalls in the walls.  Eeek.  No idea what that entails, but I heard he had to hire an architect to get it fixed.  Ouch.   Since this is already going to get a little pricey with an electrician to come in and sort out the mess, I'm wondering what else can I run into since walls are coming down?  

I'm going to have to do some framing, drywall, and basic stuff, but I just don't want to run into some junk about how something isn't up to code and blah blah blah.   What all do they look for?   Might as well get this checked before I'm in the money pit.  

Here's the kicker, potential to earn over 700% ROI.   Yeah, it's that good.  I can get in for virtually nothing, it's the repairs that are going to kill me.  But the land and foundation make this close to a million dollar monster when finished.  Waterfront, horse stables, acreage, huge amount of square footage, etc..  

I need to have an idea of what to look for to not get in over my head.  

There was no mortgage on it.  It was held by the County and they just released it via quit claim deed.   The redemption was over for quite some time.   It had been owned by someone who passed away as well so there's that.  I won't mess with ones that still have a possibility of redemption.  Takes too long to acquire them, though I could imagine if you didn't mind the wait, you could make a decent amount since a lot of people would avoid it.   This one was a tester to see what I thought about tax sales.  It's not bad really.  A little confusing and there's little info, making purchasing one scary.  

Appraisal came in at $154k.   Not a bad guess on my part. 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $42,000
Cash invested: $8,000

Tax auction special. Picked up for higher than normal (COVID made prices silly). Abandoned 5 years. 1 dumpster, biggest they had, filled. Repaired boiler system that froze and burst. Rewired old electrical, some drywall, new fixtures, new ceilings, and paint. New floors and now worth $160,000 or so as a guess. Not bad.

How did you find this deal and how did you negotiate it?

Tax sale auction

How did you finance this deal?

Cash

How did you add value to the deal?

Nice fixtures really added a lot. Commercial faucets, modern light switches, fancy lamps, and new anything that shows in a picture. Palette for the walls with a theme has a nice effect. I did fall in love with faux ceiling tiles. Simple to cover up those old square type 70's tiles. It's such a difference. I highly recommend those. So simple to install and for $2-300, you get a beautiful result.

What was the outcome?

The before and after pictures are staggering.

Lessons learned? Challenges?

Had a slight scare with the septic. Turned out to be only a tree root blocking it. This is now on my list of things to check that may disqualify it for a buy. That stuff can get really expensive fast to put in a new one!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No

I can confirm some of the property taxes can be daunting.  I have 4 properties up in the northern area by Traverse City.   Pay attention to the taxes, they are what kill your cash flow.   Drew talks about this in detail and he's quite correct. 

It's not unreasonable to end up with $6800 annual tax bills for a nice property.  The reason is there's an exemption for homestead that cuts out most of it.   In essence, if you don't live there as your primary residence you can't claim that exemption and get mangled.  It does make it rough on us investors trying to balance out a rental.   It should be your primary concern in doing the numbers. 

I tend to go after the lower priced houses because of this and just make them really nice.   It keeps taxes lower and I get better renters in a decked out place with the higher rent. 

To find out how much the tax will be, you need to know what the rate is for the township it's in.   Usually like 3-10% assessment or some such.  They then take the SEV which is typically half of the last time it sold and you pay the percentage of that.  You can take off any exemptions you qualify for beforehand, but it's usually none for investment property.   Then the town tax is similar.  I'm simplifying that quite a bit, but I give myself a ton of leeway for taxes as they are just going to raise them anyway each year and it's a pain to get them to keep it low.  

I have a ton of skillsets from electrical, plumbing to siding and roofing.   I find it amazingly helpful.   I tend to buy houses on auction so I have no bills aside from taxes and utilities until they are ready.   I come home from work and go over to whatever new place I have and work.   I enjoy it and I pay no companies to do anything.  I save an enormous amount.

Then when it's done over the course of several months, I appraise it and refinance, then rent it. 

For example, I bought a SFH, 5 br, 2 ba for $30,900 and it appraised out at $120k with 16k of materials into it. I refinanced out 70k since that's all rent would cover for it's mortgage and moved on to the next one with a ton of equity. Huge profit margin mainly gained from just not having to pay for labor and being able to take my time and do things right.

I only have three units so far (so far).   So I'll probably go with something inexpensive if it has enough options to justify the cost.  I would like something that can scale up as I won't stay at three units long.   Thanks for all of the info so far, I'll look into each.   I just had no clue where to start so it's extremely helpful.