All Forum Posts by: Chris Sellers

J,

I've done this for a few years in the Charlotte, NC area (while working 50+hrs per week in a full time job).  I like buying small multi-families or single families that are distressed.  Landlord wants out, only taking cash offers due to the condition.  No bad renters to inherit.

I've also done them where there are some bad renters to inherit, but high vacancy.  

My advice:

• Create your minimum criteria for entering into a deal. What ROI would be your minimum? What's the maximum you're willing to do on rehab? What's your maximum all in for a deal?
• Become an analysis junkie.  I mean spend an hour+ a day looking at houses on line, seeing if they meet your criteria.
• After a few weeks of analysis, make contact with realtors operating in this space.  This won't be the best dressed, Caddy driving realtor that includes her dog on her business card.  This will be a hustler type, probably with a property management company or used to work at one with a 10 year old car.  
• Get a realtor or two to set you up on auto emails from the MLS that meet your criteria. Until you build some cred, even this hustler type realtor won't want to spend more that 15 minutes with you.
• Keep analyzing.  It's like a funnel.  You'll analyze 300 deals on line, 30 will meet your criteria.  10 will still be interesting after driving by, 3 after looking inside.  Make offers and get 10% hits.
• After you get the first deal, nurture it like a baby.  You probably can't hire a general contractor, they'll take too much of your profits.  You'll need to hire subs (plumbers, electricians, painters, roofers, flooring guys) directly and manage them.  Don't pay them until they're done, or they become ghosts.
• When your rent, be picky.  You only need 1 or 2 renters and you have the time to screen hard.  No criminals, druggies or pit bull day cares.  
• After it's done and rented, relax a bit; then start building systems from what you've learned.  The next ones will be easier.

Good Luck!

Chris

Patrick,

High taxes are like a stomach punch (same as high POAs).  Just have to roll them into the analysis, like you've done.

I would have dual tracks going to satisfy your new housing needs.  Chicago is a poor rental return area (like SF, LA or NYC).  Renting a place may be the best way to take advantage of this reality, or make a ton of offers and try and get one at 60%.  Another idea might be a duplex or triplex and live in one unit.  This can bend the curve in your favor a bit.

Outside Chicago a bit can be quite good actually.  If you have to rent, it doesn't mean you can't invest nearby (couple hours out).

Good Luck!

Chris

Scott,

This sounds like a very stressful way to invest.  I wouldn't want to be so leveraged with such little margin room.  A few months in a row of higher vacancy, renters not paying you or big repairs could turn you away forever.  

Instead, look around for a niche where you can provide some value in your area.  Maybe it's mobile homes, or buying houses that require bigger rehabs, or buying 2 br houses near colleges, adding a bedroom and putting in 3 renters?

Think less turnkey investing, more value add.  

Good Luck!

Chris

Rolando,

Living in CA, investing out of state is very popular and a lot of people make it work.  I hear a lot of people investing in the rust belt for cash flow, the SE for a mix of cash flow and appreciation.  

However, I would recommend getting at least 1 deal & 1 year experience under my belt locally.  I know CA is crazy, but maybe you can partner up or find a good deal on a mobile home fix-rent-flip.  You'll be so much more prepared to navigate a long distance deal if you've learned a bit locally.

Good Luck!

Chris

Michael,

Buying for location and improving the property is always a good idea.  From your numbers, looks like a great idea.

A few things I'd confirm during due diligence: 

1) Your lot is really 1.3 acres (you list 5,500 sf, which = 0.13 acres).  Just so you evaluate what it really is.

2) You can expand according to your plan.  Municipalities put up tons of regulation to make this hard.  Check with the local experts.

3) Your finished product would support the ARV. Are there $1.45M / $550/sf houses in the neighborhood?

4) Triple check your construction estimates. $150k sounds light to add 1800sf and $800k in ARV.

Of course, you wouldn't want to rent a $1.45M house for only $4400 for very long, unless you're speculating further appreciation on a steep curve.  Sounds like a flipper.  

Good Luck!

Chris

Byron,

Congratulations on the 1st deal!  I think living in the duplex is an excellent idea (my first deal was like this).  Easy to put that $130 in mgt fees + the $180 outdoor maint. to your bottom line, since you're on site.  

Good Luck!

Chris

Jack,

Congratulations on the 1st house!  Sounds like a good project.  Hope you get it rented soon for a bunch of $.

Good Luck!

Chris

Fernando,

Condos can work out too.  It depends on a lot of factors and is very location dependent.  You just have to carefully run the numbers each time for a condo or a house before pulling the trigger.

Be sure to verify the condo HOA/POA fees and any upcoming special assessment fees before you run your numbers. This can vary wildly, you can't really predict it based on similar properties nearby. Some condo fees can equal the mortgage with no real amenities to show for it.

Good Luck!

Chris

Jesse,

Man, I can feel the stress in your post.  I hate that you're going through this.  I've been frustrated in the past with an under performing property or two, but never so much of my portfolio at once.  

My go to is always to get really involved in the details when things aren't going like they should.  Pour over all the revenues and expenses to find out why you're not getting enough each month.  If you're in the same town, you might need to spend real time there to "manage" it to the black.

If you're not in town or don't have the experience, it might be time to partner with a pro with a track record of success.  Entice the successful pro to assess your situation and recommend a course of action to right the ship.  Incentivize them in a way that works for both of you (fee, partnership, whatever).

I hope you can find the answers to increase the revenue and reduce the expenses so you can keep all these properties.  If you find out, however, that they just aren't the deals you thought they were and paid too much, it's best to dump them sooner than later.  Better to be happy with a simpler portfolio than constantly stressed with a bunch of doors.

Good Luck,

Chris

Andrew,

A 100 year old house has likely settled unevenly as gravity takes over.  The floor system is the most obvious clue of this, since you notice when it's not level.  I'd suggest taking a look underneath to see what's going on.  I've seen where just one side of the house settled into the earth more (some 100 year old houses just setting on stacked rocks) and has likely stopped.  I've also seen where a main beam has broken and is setting directly on the dirt under the house, rotting away.  

If you don't see any rot, broken beams or joists, the floor seems solid when you jump around and is only out 1/3" across an entire room, I'd be comfortable with it if you think a renter would accept it.  If you have the above mentioned conditions, better call in a contractor for some estimates before you pull the trigger.  Can be a large bill ($25k+).   

Good Luck!

Chris