All Forum Posts by: Lynn Z

I'm rehabbing a 1650 square foot house. Roof/replacement windows/gutted kitchen/paint/new water heater. Going to have to do a bathroom under the same roof because it's a 3/1. My brother in law is a builder/investor and he and I sat in the car after the closing and just talked through what the estimates would be. I keep checking that list and he came very close on most items. Including closing costs, etc. I've spent $28,000 and I haven't paid off the painter nor starting getting the cabinets built. Does include the granite order though. That's expensive and depends so much on what you want.

Of the houses we did last year, the remodeling costs ran from $28,000 to $60,000 and all involved new roofs, some new Heating and Air, new kitchens etc. I have no idea what building a bathroom inside the structure will cost but I'll bet it's going to run $10-$15k. A friend of mine just did his first bathroom and his costs ran $10,000 in a small house. When you get through you could easily spend $40K, $50K and really not be sure the house will sell in this market to make a decent profit for your trouble. Better yet, move in it for two years, let it appreciate and then take your tax free gain. I'm prohibited due to 1031 exchange but that's what I'd do if I could.

Get a builder/friend to run that list of wants with you. It'll be invaluable. Time is money when you're rehabbing and I'm hoping to only have made 3 mortgage payments by the end of kichen and the floor sanding next month. And I had 53% equity in the house when I started.

As you'd expect some are paid off (cash flow is always great looking with those) and the rest have decent ltv's; you know you can't refi with decent lenders for less than 80/20 ltv. The two I spoke of in my earlier post had 55% equity in them. Rents have been REALLY depressed in our area for five years until last spring when landlords were able to squeak up a bit. If you don't put money into your rentals, no decent tenant will rent from you. There is a huge amount of development of apartment complexes offering transportation etc. where students rent a room for $475/month. Four to an apartment. That market segment has been impacted by that trend...but I see that everywhere I travel around universities and colleges. Just figure that' true everywhere.

Property taxes insurance and maintenance (bug spray/termite bond/yards/cleaning/painting) take just about all of the profit. We rehabbed five single family houses and sold them ourselves last year just to keep up the property taxes and insurance due. Is this an unfamiliar story to everyone? I'm guessing most people are in the same predicament but I could be wrong.

That's why I asked what appreciation everyone looks for especially those
in other parts of the country.

My family bought their rentals in the 70's and after expenses they're just breaking even. We started using Quicken Rent Manager and at the end of the year no property netted much after all expenses are considered Since and many are losing money. mma's are paying more than 5% it hardly seems worth it. Depressed in S.C.

Sellers just want to know you are a serious buyer. Get your short term financing source so you can make a "cash" offer, then put in the contract that you may wish to assign the contract. I must be missing a link here. Are you a realtor or an investor or both? You must be asking for long closing dates with your offer in order to find a "real" buyer.

Remember, every 1031 exchange has contract language stating that the seller agrees to participate in a 1031 exchange as the deed, HUD etc. will be in the QI's name not the buyer's. That hasn't bothered anyone selling in my transactions-the biggest problem is getting the replacement property seller to give you enough closing time to realistically close out the relinquished property.

Trying to justify a low ball offer is hard and usually the seller is mad the entire process even throughout the closing. They (and their agent) always think they've been taken to the cleaners but then they don't have to dump $40 or $50k into fixing up their precious asset. One developer in town lies to owners and tells them he's going to live in their house, then he cuts off the back lot and builds another house facing the back street. People talk bad about him everyday but he's become wealthy. He's just willing to tell tall tales and doesn't worry about getting caught later on.

What do you expect as baseline appreciation on your investment properties?
I have a 2/1 on a large lot in a nice area that never appreciates over 7% a year and a bare bones huge old 1910 triplex in an excellent neighborhood that got over 10% every year for the past 6 years. Square footage seems to be a big factor in appreciation. Don't make much profit on rentals due to expenses such as property taxes so appreciation becomes more critical these days. What's your bottom line on appreciation?

Those types of properties are assigned to a single broker to handle everything. They do seem to require more paperwork than a regular listed property. This realtor probably called the broker in charge of the REO to see how things were going and they chatted about the fact that a higher offer was made. He didn't wanted to go through submitted the offer because he knew there was a higher offer but he should have submitted the offer. Then no one thinks there's some type of shopping of your offer etc. Call his broker.

My point is you are "holding" if you continue the original investment without receiving any cash....you're just continuing the investment as opposed to having intent to "cash out" by a "sale". You'd have to distinguish a closing as an exchange vs. a sale. Common sense seems to cry out that a sale involves receipt of "cash" (equity) and I understand why the IRS would not want a "sale" but if you continue to roll into an equal or greater FMV investment, you really haven't altered the basic nature of the investment.
I'm sure greater minds than mine have spent much time deliberating this issue.

It seems if one rehabs a replacement property and sells it to continue the equity that results in a 1031 exchange that that isn't "flipping" -- since the purpose is not to take the money and cash out but "hold for investment". If the replacement property is sold and one takes the profit as cash I can understand that as a good example of not "holding for investment" but according to my tax guys you can rehab and roll into another investment which you might hold for many years as long as you meet all of the parameters of a qualified exchange. Has anyone been involved where they sold their replacement property and rolled into an equal or greater value investment? I would love some input on this.

I once rented a furnished house with a manicured lawn to a doctor and his family for around $2500. When he got ready to load up his few bags of stuff he backed his SUV up to the front door across my beautiful lawn and left tire marks across it. Not to mention there were sprinkler heads in the front that he could have ruined. Tackiness does not have an socioeconomic boundaries.

People are having a hard time with their rents right now, don't you think? We notice tenants paying later than usual -- having to have reminder calls, etc. And yes, they do tear up even the newly remodeled house or apartment. They've never, ever changed a filter in their life and never cut a blade of grass. I can't remember the last time a stove was cleaned. They tell you they prefer to mud their wall holes and match the paint rather than the landlord doing it for $30 with a painter. Truly amazing. That nail hole fee needs to be in ever lease. Automatic amount paid up front, non refundable. Apartment complexes have always had that policy around here.

I've begun to think that if you have a nice house or apartment and there is any doubt about the tenants they should put up the first/last month's rent and the cleaning deposit. A very nice apartment house here in town that rents furnished apartments requires that the maid's fee be paid, even if you're there for one month. The owner is a big real estate broker in town and turns red when he hears the words "cat" and "dog" . Owns lots of rental property.