All Forum Posts by: Dave Savage

@Derek Hansen I think you are stretching at $60k on Shelter St near Genesee. I just drove that exact street last week. As you move towards Earl and Magnolia you could probably be safer at $60k as those streets are starting to transition up, but Shelter is still rougher.

Definitely one or two streets in this area can make a big difference. I think long term Shelter could be a good investment, but at $40k each. I think the appraisers are pretty close.

Remember not every deal is a "deal" and there are plenty of other properties out there.

@Parker Odoms You definitely need a contractor to walk the property with you before you put any offers in if you can't estimate rehab costs yourself. If you don't get the property at the right price you won't find any buyers.

2 ideas:

1. Read J Scott's BP book on estimating rehab costs

2. Contact 3 or 4 contractors, tell them what you are doing, and ask if you could pay for them to walk the first few deals with you to give you price estimates. Even if you are paying them $200 or $300 per visit that could be a valuable education on how to estimate rehab costs, and a lot cheaper than getting a property under contract that you can't sell. .

I would consider keeping the $50k in stocks and mutual funds - you may want to check out the teachings of John Bogle.

The other $50k I would consider putting into a multi-family that you owner occupy. You can get a low down payment loan as an owner occupant and get the tenants to pay the mortgage. Rinse and repeat every 2 years(keeping the first property, and moving into a second one) and you could build a nice portfolio at low interest rates.

It would be good to experience the tenant headaches first hand, but you could even hire a property manager to manage the other tenants in your house to avoid that hassle.

One thing I don't want to foget to mention. Make sure you verify you perform your 1031 exchange with a qualified intermediary to ensure you don't lose the tax benefits.

@Scott K. you have a very good problem on your hands. I think there are two ways to consider going to minimize risk.

1. Look into Triple Net Leases - like Walgreens or Applebees. They typically sign long term leases and you don't have to manage the building day to day. Returns are lower - maybe in the 5-6% range, but it would be a stable income for your family.

2. Consider finding a syndicator who is putting together commercial or multi-family deals and join with them. Your returns potentially could be higher but there is slightly more risk. I would want to have solid referrals to any syndicators I did business with, but you might be able to ask in your circle of lawyer colleagues and find ones that have done multiple deals.

A lot of other ways to go, but personally buying single family rehab rentals would be a lot of paperwork headaches with that many units that you would need to buy.

@Robert Conroy Those basement systems when I looked into them were almost the same price as a local basement remodeler without the ability to easily make changes in the future(which doesn't matter as much to you I realize).

Personally unless it is a really bad DIY job or your target price range is high I would paint the paneling a light beige color to brighten it up put down some new carpet from Home Depot without padding (~$0.69/sq ft + $150 install from a local installer from my last basement job) and call it good. In general unless it is really over the top I doubt the basement will significantly increase the sale price compared to putting the money into kitchens and baths upstairs.

Good luck with the project

@Mindy Pearmon I see a few things here that are concerning, and maybe others will jump in.

If you take the $10k personal loan the mortgage company will see that as a deposit into your account and take that into consideration when considering your ability to qualify for the mortgage.

Also you talk about getting a personal loan, and then using a credit card to pay for the kitchen. No reason not to do those things if the property is going to cash flow, but this leads into the question of what your emergency reserves are. If you need to replace a hot water heater, or repair a roof for example you should have some cash 5-10% minimum in my opinion to cover this. Especially if it is a $45k house it may need a number of other repairs in the near future, especially if you have to get a Certificate of Occupancy in your area the city could come in and require $2-4k of additional repairs before you rent it out.

Personally I would take a second job, save up some cash, or wholesale/birddog for a wholesaler to get some additional cash so you have the money for a downpayment in the future. There are always deals floating around, don't rush in just because this one is next door.

Welcome @Benjamin Hauser . You'll find a lot of Rochester folks on here, so if you ever need any help while out of town let us know by putting Rochester, NY in your post and many of us will see and would be glad to help.

@Alex Jones I tried to set up a meetup in Feb but had to go out of town at the last minute. I am going to try and set one up in April, but if you wanted to take the reins feel free to pick a place and time and post in the forums here about the meetup. I had a pretty good response last time ~8 people I think and I am sure over time we could grow it.

I think it is hard to say what to really look for in a Property Management company. I would flip the question around and say try and find as many PM company customers(other investors) as possible and get their referrals. A little time networking in the area you want to invest in(use BP as a tool) will save yourself a lot of headaches.

That will go a long way toward finding someone responsible with reasonable total management fees (including maintenance charges, etc)

If you are interested in potentially wholesaling one or both of the properties just wait a week to lock down the loan with the HML and get them listed on craigslist and out to any other investors you know to try and get them assigned quickly.

If that doesn't work and you do want to keep them, then engage the HML