All Forum Posts by: Cy Saelens

The only extra thing I would do is stage the home. Probably different in GA but here in CA, money invested in staging is always worth it and helps sell homes faster and for more. 

Everything else is perfect and your remodeling looks great. Did you change the floorplan (add an extra bedroom for instance)? Because going from $125k to $225k (+80%) in house value is a tremendous forced appreciation (unless you bought it way underpriced). Does the recent sales in the area support your selling price? 

"Best Cities to buy investment property" is such a general title and is bound to generate completely opposite reactions.

What best for somebody else is not necessarily best for you and depending how long you plan to hold on the investment, the amount of liquidity you currently have, your age, the amount of monthly cashflow you need and how much risk you are willing to take and so on....

Have your plan in place first with your financial goals and possible exits strategy first. Review your finance to see what you can afford and qualify for. Determine the type of products you want to invest in (SFR, duplex, appartment buildings). Then finally start researching which market fits your plan (not the opposite) and stick to your plan.

As a RE agent, I see too often "investors" who have no plan and just asked me to find them a "great investment deal". My answer is always the same, I always ask them to first assess their financial situation, look at their personal balance sheet and determine what they really expect to gain from a real estate investment.....Once we are on the same page, the fun part can begin.

With the help of your agent, try to find out what is very important for the sellers. 

For instance:

- They may need want to stay longer after the sale and you may offer a rent back option at a very interesting price (sometimes it can be OK to be cash negative for a couple of months if it helps secure a deal)

- You may give your guarantee on the purchase agreement that you won't ask for any credit and repairs (and won't try to renegotiate).

- You may add that you are ready to pay a per diem penalty if you don't close on time

- You can make a part of your earnest money deposit hard (meaning that a portion won't be refundable and will be released to the seller as soon as your offer is accepted)

In other words, you have to understand what the seller needs and add value to your offer to try to balance the low down payment.

Kareem,

The first deals will definitely come from your sphere of influence: friends, family member, schoolmates...Not necessarily that they will buy or sell from you but they will refer people who will then refer other people and so on...

Find any opportunity to talk to people and handling your business cards when grabbing a coffee, at the grocery store, pumping gas and soon, you may here the magic words "I know somebody who needs to sell his house".

Developing a farming area is a completely different animal and can be very costly. Unless you are ready to start knocking on doors and introducing yourself in the neighborhood you picked. 

Good luck

Cy 

Your low down-payment loan is most likely the issue. In hot market, you are against 20-30% down offers (or even cash offers). For sellers, 5% down offer is too risky because it is most likely to fall out of escrow due to low appraisal, problems found during inspections that may impact the loan guidelines... In other words, any little thing can derail the process when a bigger down payment provide a safety net to counter any problems that may rise during escrow ( and problems will happen for sure).

But don't lose hope, a seller may decide to take the risk of going with a lower down-payment offer as long as it has other benefits: Higher price, short contingencies (or no contingencies), short escrow period, hard money upon offer acceptance....

Cy

Hi,

I am starting investing in cashflow markets after focusing in the past only on appreciation (no other choice in California) . However I realize that in these markets, profit per unit is so minimal that even a short vacancy can turn into a negative cashflow situation.

Here is an example, please let me know if I am missing something;

Assumptions: Purchase price: $100k. Monthly rent: $1000 (1% rent/value ratio). 20% downpayment. 10% CoC return (or $2000). Vacancy rate: 5%. In addition, let's assume that all other expenses were correctly estimated including property management fees (10%). I think that this type of property would look like a good cashflow property for most investors.

Now let's assume that we have a vacancy and between the time needed to repaint the unit, change the carpet and for the PM company to find a new tenant, we lose 30 days of rent. In addition, the PM charges their "new tenant fee" equivalent to one month of rent ($1000). So our CoC is now only 5% ($1000). And in addition, one month lost is actually 8.3% vacancy (more than budgeted) so our CoC is lowered further to 3% ($600 annual or $50/month).

Since a vacancy is normally expected every 2 or 3 years max, does it mean that every 2 or 3 year, I must expect to pretty much make $0 annual profit? And possibly lose money if I get an unexpected maintenance issue costing more than $600.00

Thanks in advance for your comments and thoughts.

Best,

Cy