All Forum Posts by: Cj Thompson

@Cj Thompson there is no set answer on the amount of reserves needed. It depends on the quality of the property and location. For example, if the property was completely rehabed with new roof, new HVAC, new water heater, new appliances, then you are mainly looking at plumbing repairs or tenant damage. Reserves for lost rents depends on the location. High demand areas should not need months of reserves. The one thing that has be concerned is your $50K house price. It is harder to get loans in that price range. That type of price point is likely a C- or D area, so you can expect lower quality tenants. They may be rougher on the property or you could have more payment issues. Unless you are there to self manage, I would stay away from $50K properties. I know some of the turn key companies sell properties in that price range, but some of them are real trouble so be careful.

Me personally, I like to do CAPEX proactively, so I pick older roofs or older HVAC to replace before they totally go out.

Good goals you have set for yourself. You are on the right track thinking it through. Good luck!

Yea I get what your saying plus if u have it inspected you should have an idea of what major repairs it may need in the future.

The 40-50k houses I was looking at are in class C areas. The houses them selfs look decent in photos compared to others. They meet the %2 rule. That's what I could afford now and in the near future.

I feel like a house like that would be better off with a property manager. Am I wrong? U say it's better if I manage it?

Most houses that cost $40-50K are not in C areas. That price point indicates higher crime areas and less desirable if it is in a urban area. The fact that they are 2% properties means plan on extra management time and rougher tenants. If the areas were nice, they wouldn't be 2% properties. If you hire a PM, make sure they specialize in that type of property. It is way different managing properties like that versus B properties. You can make lots of money, just be ready for lots of tenant issues.

I actualy don't think that's %100 accurate becuase I think it depends on the area. But for the most part I think you are right don't get me wrong.

In my city you can get a very nice 3 bd ranch style house in a good naborhood for 80-100k.

In clas D naborhoods that are really bad u can find houses 10-30 k

That same 80-100k house I'm talking about in the suburbs of Chicago could be 250k idk the actual number but u understand.

The house I live in was a 45k foreclosure and it's in a naborhood with mostly 80k plus houses in is a nice naborhood however the city has just build project apartments in it so I assume this naborhood is a class be turning class c and maybe worse

You purchased a $45K foreclosure but in an $80K neighborhood. I would call that an $80K house that you purchased for $45K, which is different than buying a $40K house in a neighborhood where all the houses are worth $40K or less. My point is that lower value properties will return higher cash flow but come with more tenant issues.

I definitely get your point and agree. I'm just trying to find a middle ground. Planning for the repairs and vacancy and letting the property manager deal with the headaches. The PM I talked to claims to have 3% vacancy on 500 property's. From talking to him it seems like hes at least able to fill the place when it's needed.

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