All Forum Posts by: Jeff Bridges

I usually do background checks last and they are important but not the most important part of the screening process. They are mainly to verify what my tenant already told me about their qualifications to rent my unit and I'm going to check this last before I am prepared to decide whether to accept their application. I really want to know if they have income stubs to support 3x rent in income and good feedback from landlord references. Smartmove works fine for me so I think that's a reasonable tool to use. But I'm literally only using it to confirm no criminal history, responsible use of credit and to make sure their landlord references match up to their prior known addresses. Have they left out any landlords who might have negative things to say etc. Sometimes I go to recorder of deeds and verify that the landlord reference matches that of online records as owner of record. I think the main takeaway is don't do all of the extensive background check until you confirm they have met prescreen criteria and have paid app fee and submitted app to show they are serious based on their tour. otherwise, you are just spinning wheels evaluating people that might not even be interested once they visit the unit.

Are you ok with felons or sex offenders living in your household? If not, I continue to require that they be on the master lease and be subject to background checks and approval by you and your preferred sources like smartmove.com etc. When you delegate that control, you lose the ability to perform quality control on the individuals and also if they were to be a holdover, you might not have all of their contact information and background check info, license etc to be able to do the eviction. I think everyone needs to get checked and approved by you....

You can really only pre-screen over the phone or email using applicant responses to see if they fit your criteria and to weed out people that won't meet your criteria, not ones that are outright lying to you. If they are serious, they fill out an application, pay the app fee, and then you run their info to verify that their application matches up to whats on their credit and criminal history, along with prior landlord references. The best you can do is verify applicant word later on. See some pre-screen questions are below in the link and are good to include in your response. I usually respond to zillow/ or online showing requests with the below 5 questions and say that I will be happy to schedule an appt once they answer those brief questions for me. This helps me avoid wasting time doing a showing with someone who won't meet my criteria. Doing it over the phone can be efficient as well. googling is not always effective for those that dont have a public or social media presence. You need to do paid background searches for that or search court databases for your state if they are publicly accessible.

https://www.rentalutions.com/education/articles/five-questions-you-must-ask-your-potential-new-tenants-2/

I've paid $200 for a GC detailed walkthrough and estimate and was willing to deduct that from the project cost if I hired them. That covers travel, walkthrough, research on materials, time, and then writing up the estimate. Other GCs have done it for free, esp ones I've used before on prior projects. I actually create a simple SOW by rooms and by interior/exterior organization based on the inspector report and my own walkthrough so I have a detailed list of repairs for them to review and know what types of materials I have in mind for flooring, fixtures etc. This allows me to get pricing estimates for identical work between each of the contractors so I can compare apples to apples. While contractors will find things you dont notice initially, they might also "assume" you want to put porcelain tile in the bathrooms when all you need is sheet vinyl for your rental. Each contractor might assume different repairs or level of materials for each repair project, which can throw off your comparisons. If one guys estimates vinyl plank and the other guy just swapping existing carpet, those costs will be wildly different. I think your chance for getting charged for these walkthroughs/bids is higher if you look like you are fishing for them to not only identify the repairs needed but also estimate the costs for those projects and then provide a detailed estimate with the same. Even with free walkthroughs, I don't necessarily get a formal estimate in a timely manner unless the project were to start next week. This is understandable because good GCs are busy focusing on more immediate paying gigs.

For foreclosures besides HUD, you are usually allowed to make an offer with an 10 day inspection contingency, if accepted, you get your inspector inside within that period, evaluate the report and findings, and then decide whether you want to move forward with settlement or back out due to unforseen repairs or costs. I only pay for an inspection if/when an offer is accepted and I invoked that contingency. it protects my money from being wasted on inspection fees if they wont accept offer and protects my deposit so I can get it back if I want to back out after acceptance. Be sure not to conflate tax assessment with actual market value. The tax assessors won't buy your house, buyers do so those values differ. Use recent sale comps for similar condition and size/ age houses in the immediate neighborhood to identify After repair value. thats how you tell if throwing 25k in repairs will result in some built in equity (or not) and help you not overpay based on predicted repairs. last thing you want to do is have your purchase price plus rehab cost be more than the house is worth fixed up..

I cant contribute to the auction/ court approval aspects, but I can tell you that you CAN negotiate the water/sewer lien down from the original amount, however know that your results will vary by municipality. That and looking into tax details before paying could reduce up front costs for you sometimes by calling customer service for each bill and asking... They add lots of fees and penalties which they are willing to drop if it means they will recover a good portion of the original balance...

Good luck!

When you are shopping for insurance and your agent asks you if you had had any claims in the last x years, you ideally want to be saying no as prior claims increases your premiums. Insurance should come through for you when you have catastrophic multi-thousand dollar damage. Your roof is telling you that it needs maintenance or replacement. You can make repairs now for $$$ instead of $$$$ in repairs plus damage later on.... also FYI roof are high risk repairs so I'd advise you shop for licensed/insured roofers and get proof of insurance prior to starting work. You don't want a handyman to get injured falling off your roof and then come after you for medical bills because they didnt carry the proper workers comp/ liability insurance at the time. also protects you if they do a bad job and you have recourse with their insurance company if they damage your house or make the leak worse....

You pretend like you are accounting for things you know are important like vacancy, insurance, and capex, but your calculations are not adding up. Its like you know what you need to be considering, but refuse to acknowledge it in your financial due diligence. let me show you below:

1725rent-811mortgage-759Coopfee=$155/month before vacancy/insurance/capex/Management fees

$155/month= $1860/year cashflow best case scenario

lets say you had your first vacancy next year. Your $1860 cashflow would be reduced to $135/year since you lose $1725 (one months rent) and you have to continue paying mortgage/coop fee and insurance regardless. If you had 1 month vacancy every year in a bad streak, you just wiped all your cashflow for the year just from a simple vacancy. Insurance, which is not optional, would put you into negative cashflow territory. finally, the coop fee inevitably will go up since it includes all utilities and you are just now subsidizing the tenants utilities. That you cant control and will also erode your cashflow.

landlord Insurance is not optional. even though your coop has a master policy, all of the appliances are your personal property. If there was a fire, you would be on the hook for replacing your own appliances if you had no insurance. You also need to read the master policy and see what it would cover. You should also talk to a insurance broker and have them review the policy with you to eval your exposure in the event of a catastrophic issue. insurance also covers lost rent and it also covers liability if a renter injured themself in your unit and sued you. You need a landlord policy with liability insurance protection when you become a landlord. You're not getting normal homeowners insurance, which you might have calculated for 250.

yes the roof is not your responsibility, but repairing the fridge or having the disposal replaced is totally on you. replacing appliances is also on you when they finally die. lights, faucets, toilets, flooring, ceiling fans all have a finite lifespan. Thats your responsibility. capex is smaller than a house, but its still there... I didnt even bother to add this 500-1000 a year you might spend on repairs because i stopped when cashflow became negative above after insurance and vacancy. but you should add this for future unts you analyze. good luck.

You should circle back in 30-60 days to the listing and find out the close price. this would help you figure out the winning bid and help understand the market and get some data points for your local market to see what it takes to get a winning offer. That doesn't mean you necessarily up your offer since you're are calculating your Max offer based on ARV, but awareness is important. If it was 90 plus your 36k rehab (40k conservative), would you still buy with 20k equity after repairs or 86% of ARV? bank would only let you take out 112k at 75% appraisal. would that work? The reason I ask is that its unlikely you can bid 10k under asking for a REO without it being on market without bids for over 30 days. Chances are someone will be offering asking price and have different resources like their own crew or mindset that allows them to bid higher. I typically go after mis-priced REOs that are underpriced perhaps by accident or lack of knowledge by the listing agent on the unit, and that allows me to offer list price or higher and lock the unit under contract. underbidding in current market for REOs usually doesn't result in success for me within first 30 days of a listing. good luck.

you'll encounter the best and highest gig from many sellers. You pretty much have to bid the highest you are willing to bid where the numbers still make sense for you. sometimes that could be over asking, othertimes, not so much. lets assume you did your own research and confirmed the 90k ARV is correct, you could use the 70% ARV-repairs to get a good idea of your maximum allowable offer. You also need to identify your cashflow requirements to make it worthwhile to you, run the numbers in one of the BP spreadsheets, then see if the positive cashflow gets you a good ROI financed or unfinanced depending on your long-term goals for leverage. I agree, I dont see repairs less than 50k even if the stars align and you find a reasonable contractor to bid you that amount and also is high quality. I also don't recommend this level of rehab to be your very first project. You will likely have time and money overruns and its better to test your chops on a house that does not need lead/asbestos/mold remediation trifecta on the same property. These are all wildcards that usually you dont know how much it costs until you begin working on the project(there can be surprises behind walls). Even with quotes from your contractors...

with the 70% rule: 90k ARV means you can bid 90x.75-50k repairs= 37.5k or

90x.75-60k repairs (if your repair calculations turn out higher)= 27.5k

I would say you shouldnt be bidding any higher than you already have, and if by luck you get that offer accepted, you get a contractor to bid on the project before the end of the inspection period to double check your repair figures are accurate. Back out of contract if the repairs are any higher than 50k... dont be afraid to walk away if the numbers dont work....