All Forum Posts by: Don Petrasek

@Sean M. check into virtual staging.  Professional photos are enhanced to show what the house would look like with furniture.  A few hundred dollars vs thousands.  I’ve seen it used in my market-with success, haven’t had the opportunity to try it yet myself.  An empty house is not ideal, most buyers don’t have a lot of imagination when it comes to furnishing so can get stuck with open concepts or a lot of windows.  

@Phillip G Alexander  @Jonathan Bombaci's advice is spot on.  203K is the best financing option for what you are trying to accomplish.  Very low down payment requirement and you can ask the seller to cover your closing costs and prepaids.  I have a good Cleveland lender contact for you- experience loan officer well versed in renovation lending.  PM me if you'd like his contact info.

Haven’t pulled a credit report on a tenant in at least 5 years (possibly longer, can’t remember when I stopped). 7 properties - no evictions (ever 10+ yrs experience), can’t remember when someone even paid more than 10 days late.  I look at income + public record info.  Have been using 4x rent lately.  It seems like a lot, but when you do the math on a $950 rental, 3x doesn’t leave a whole lot behind for other expenses.  And there are plenty of people who can meet that criteria....

No evictions ever is a hard and fast rule.  My feeling is that if you let a situation go as far as another landlord having to file against you, I’m not comfortable that you aren’t going to do the same with me.  Also no judgements >$2000 in last 3 years- worried about my tenant getting garnished. 

I’ve found that my tenants pay rent first and if needed let other things go.  It’s all about how you manage.  If you’re loose with due date, they’ll pay the creditor that’s calling them everyday before they pay you.

@Matt Lorenzo I can't think of any advantage of using an equity line on the condo to pay off a fixed rate mortgage on the duplex. You're going to wind up trading a fixed rate for a variable rate (equity lines come with variable rates) on the money. You're probably also going to find that you're going to be limited to 65%-70% LTV on the condo if you can find a lender who will do an investment condo. I used to be a mortgage broker and advised people to take the long term fixed rate option. You can always pay more and save yourself the interest (even on a fixed rate 30 yr mortgage you only pay interest for the time you have the $s outstanding).

If you have extra funds, you'll want to do the math and see if you can achieve a better return by paying off/down your mortgage or acquiring another property.  

@Brandon Metz have you talked to a mortgage loan officer yet?  With that much of an increase in pay and your credit score, switching jobs may not impact you especially if you stayed in the same line of work.  I have a couple of good mortgage guys that I work with, one if particular understands the investor mindset....PM me if you want their contact info.  

@Dan Hoelter price per sq ft is a good directional indicator of value, but not something you should rely on to zero in on ARV. I just sold a property in Newburgh Heights that is a two family in front, single in the back. To set the price, I relied on the income approach. Basically you take rents, identify a return that will appeal to the average buyer (in my case it was 12%) and work backwards to get the price that generates that return. I came up with ~$95,000.

Then I looked for comparable sales to compare to that value.  There aren't a whole lot of transfers in Newburgh Hts to start with, so finding a similar property in the city wasn't going to happen.  I found that two families were selling between about $55K-$85K and single families $45K - $75K.  So if you take the low end and assign $55K to the two family in front + $45K to the single in back it more than justifies the $95K value that I got from the income approach. 

The appraiser did the same thing, but went 2+ miles out (into 44109) to find identical properties for the comparable approach.  I could have done that too, but if you know Newburgh Hts you can appreciate that its a unique area and comparing a property there to one in Clark/Fulton or Old Brooklyn didn't seem like the best approach to me to price it.  The appraiser did use rent comps only from Newburgh Hts. 

PM me if you need help estimating your ARV.

@Jeffrey Boyce I'm a St Ed's alumni and my son goes there now. The area around the school has always been a good area to invest in (or live in). The rental market in Lakewood is probably the strongest its ever been. The challenge - now more so than ever- is getting the numbers to work due to the price appreciation that's occurred. The MLS shows that the median price increased over 11% from Jan 1 2017 to Dec 2018. So what you should expect is a property that's going to rent easily to good tenants (assuming its in good condition), will likely appreciate, but won't cash flow much or at all. Low risk profile investment.

@Ryan Jackson  another thing you can do is to bring any comparable sales you want the appraiser to consider with you when you meet him/her at the property.  Most appraisers will appreciate the help and take them from you.  

I also give them an itemized list of all repairs done with receipts.   I’ve found that this helps justify an increase in value- especially if its a significant one.

Its not a hard and fast rule that the appraisal will always come it at or below the purchase price.  I had a single family last week come in at $7K over contract price.  My buyer was pretty excited about that.....

@Jim Cran try contacting the Neighborhood Development Corp for the area that the house is in. 

http://www.clevelandnp.org/cleveland-cdcs/    

They should be able to give you direction as far as working with Cleveland Building & Housing, financing and may even help champion your project along.  

Go with Option #1, put the same amount of $s as your friend in the LLC and most importantly have a written agreement spelling out who does what, how profits are calculated/distributed and what happens if one of you wants out.

Best friends and good business partners aren't always the same thing.  Its going to seem like overkill putting the details in writing when you are partnering with a person you've known forever, but trust me you'll be glad you did if something goes south.......and it will likely save your friendship at that point as well.