All Forum Posts by: Chris B.

The wholesaler's ethics have been covered in this thread so I'd like to add another issue I'm seeing. I'm looking to buy a wholesale deal locally and I'm restricting my drive to within 30 minutes of where I live in the Phoenix area and I'm not seeing appealing offers. I'm seeing minimal margins for me that are not worth my time. I'm not an established buyer so maybe I'm not getting offered the real deals, but I have cash and I'm genuine. I'm not going to get into a BRRR to only profit $10K to $20K after my investment of work and time with a $195k purchase, $30k remodel and the place having a ARV of $240k.

I took a look at the website and there appears to be a free and 2 paid memberships for landlords.  However there is no comparison or description of what the plans provide.  Can you provide some useful insight into the service and what you get?

Speaking as a property owner, I actually feel this is a fair request.  Prior to my joining the BP forums, I've spoken with several of what ended up being wholesalers who were interested in my rental properties however they didn't tell me they were wholesellers.  They they claimed they were real estate agents and various other things.  They always portrayed they had a fantastic deal that was a big win for everyone.  The last pair of guys I dealt with tried to talk me into letting them find tenant in a 2 year lease to own deal.  The catch was there wasn't really any advantage for me to go ahead with the deal as the numbers were twisted and when I unwound them, there was nothing advantageous for me.  In addition, it appeared the offer to purchase in two years was actually for these guys to buy and not the renter.  They were extremely deceiving with the terms and when I asked if I could have a copy of the contract to review, they refused.  As a result, I'm probably never going to engage a wholesaler in the future when I sell property.  There are a lot of this type in the industry and they give the whole industry a bad name.  If your offer is up and up, you have nothing to fear providing your offer in writing.  If they shop around, really, that is their prerogative and a good decision.  Your offer should be fair enough to stand on its own merit.

Are you sure you can get 2.75% for an investment property?  I'm seeing near 3.5% here for investment.  I'm only seeing sub 3% for primary homes.  Assuming your rate is accurate and it will save you $100 a month, do the math.  How many months will it take to recoup all of the new closing costs? Generally if you plan to keep it for a while and you can recoup the costs before you sell it in the future, it was an OK decision to refinance.

Most of this damage is not normal wear and tear.  It might be expected in a D class neighborhood, but not in B areas where I rent and I've never seen this kind of damage in my own home during my entire life.  This family was clearly careless.  It looks as if they had something hanging over the doors that scraped the door jams as they slammed the doors.  Holes in the walls are not normal wear and tear whether it be gouges taken out or screw holes.  They were caused by accidents / carelessness and screws don't accidentally end up in walls.  I have seen this damage before and it is clearly outlined in my contracts that tenants pay for these repairs.  I back it up with tons of pictures I take before they move in and after they move out.  Keep receipts for everything.  Absolutely have it fixed by someone other than yourself and take the bill out of the security deposit.  Have your handyman fix the door locks also and bill for that.  If this damage was truly done by the tenants and didn't' pre-exist, you have every right to fix and charge and not feel bad.

As mentioned above, you have let this get out of control in so many preventable ways.  RE management may not be your thing.  It's not for everyone.  Get an eviction attorney to get them out and hire a property manager to help obtain better future tenants and let the PM enforce the rules.

More on what Jayson is saying.  If the seller is already paying commission, then either their agent gets it all if you have no agent or it gets split between your agent and theirs.  In either case, the commission is the same so you should have one representing you also.  What you don't want is an agent representing you with no knowledge of multi-family or investment property.  Go find an agent that specializes in this.  No offence to your friend, but if they specialize in single family homes, this isn't their area of focus and it may end up burning you.

Make sure they are willing to provide the deposit you require by the date you need it.  No credit card transactions or anything reversible like Paypal, and those instant payment services.  Make sure all funds clear.   Don't fall for any over payments where they ask for some of it back and then you come to find the initial deposit never cleared.  Talk with them yourself and make sure their situation is reasonable and that they understand your contract in full.  If you have no pets and no smoking and no excessive guests.  Make sure they fully understand this.  You can never get a good feel for them if you let your broker do all of the communication.  In this situation you need a rock solid broker if you trust them to do all of this for you.

I think the home is in a real up and coming location as the town is revitalizing downtown and continuing to make good progress. I see a lot of appreciation potential with this really close to downtown proximity and the rent will continue to grow over the years as the town transforms not counting for any general market up and down conditions which we have no control over. It's a balancing act. You can ask top dollar and maybe take 2 or 3 months to rent it and lose 2 months of rent as its empty or you can come in cheap and rent it in a day. However there is a sweet spot somewhere in-between. I haven't used the paid Rentometer site, but have tried it unpaid and haven't found any value in the service. Last time I tried, it wouldn't even give me an estimate for my own home without paying so I moved on. Maybe I'm missing something. I use Zillow and to a lesser degree MLS for my pricing comps. It's easy to see what others are charging in real time right now. Also take into consideration the extra unlisted fees you or others charge… $20 "air filter" fee, signing fees, maintenance fees, Management fees… Some have rentals don't go this route and others have a drastically higher rental than advertised. Compare final prices. The more your management company charges if you have one, the less you can charge. I perform a few searches and compare how my proposed rent will compare to my competition. I start off with about a 1 mile radius, but also consider out to maybe 3 miles. Here is the criteria I use:

1. Size: Search for homes of a similar size +/- 250 sq ft. How does my SFH compare in price?

2. Rooms: Search for homes with similar room count. For example 3 bed / 2 bath or 3+ bedroom and 2+ bath. Consider similar garage parking availability also. How does my SFH compare in price? Comparing my SFH to an apartment isn't always straight forward as tenants seem to be willing to pay a top dollar for a lot less with no hassle and extra amenities in an apartment or condo situation. Good to be aware of these rates, but generally stick with comparing a SFH to SFHs.

3. Condition and "fanciness": With the above searches, how nice is my home compared to the competition in the above searches.

If my home is mid-way with fanciness, I would expect my proposed rent to be just a bit under the mean of the homes of a similar size and of a similar room count.

The following additional factors are my speculation because I don’t have any rentals with top end interiors to compare with.

If there are factors outside the above criteria, try to assess how much value they are actually worth to the target tenants. For example, your remodel job is beautiful and should definitely up the rent somewhat, but given Gilbert isn’t Scottsdale, or Tempe near Mill Ave yet, it may have a restricted affect attracting the type of millennials with wads of disposable income. These tenants do exist in the area as the new stores downtown are frequented by these crowds, but how likely are these young families to opt for a beautiful, but small home instead of a large but nice home? I don’t know but it’s a factor to consider. Also, How much extra rent will you bring in if you maintain the front yard? In my experience, it doesn’t seem to make a difference in someone deciding to rent or not so I don’t include it. If your expenses for this add up, consider offloading it to the tenant. I have a provision where I can help find a service which the tenant will pay for if they like and in 12 years have never had a tenant opt for this.

Best luck on this amazing remodel!

Oh, one more thing tenants may be considering is the utility bills.  Its a brick house which frequently means a poor R values and high AC bills.  Many tenants do consider this and you are competing with some homes that may have 2 or 3 feet of blown in insulation in the ceiling.  If you do have affordable utility bills, make sure to point this out to the tenants and let them know how much money they will be saving during the summer on AC.

Your broker is 100% correct.  They look at the numbers and he's telling you your income is not sufficient to to pay the 2 mortgages you have.  Even if you did declare the income, it only counts at a rate of 75%, so is this enough for them to offer a loan?  Since you told him its a rental (presumably) and didn't file it as a rental on your taxes, his hands are tied.  Your options are to amend your taxes, or to prove you have a large enough income without the rental income, or look for a lender who will want a 30% or so down payment and loan on equity value of the home and not consider your income.  Rates will be higher for this kind of loan.  The right thing to do is to amend your taxes and that will keep the tax man away down the road.