All Forum Posts by: Don Petrasek

@Mateus Vakuda I did mine online which worked well for me due to the flexibility (was also working a W-2 job at the time) but there’s no doubt you’ll get more out of in person.  I have a real estate background and had been licensed before, without that it probably would have been tough online only.  Its more challenging to get answers to questions and you have to be real disciplined to complete the online version in a reasonable amount of time.

Choice of broker is key.  Don’t just chose the first one who offers to hold your license.  Make sure they are a match with what you plan to do.  If its just investments for yourself and others, its likely a different choice altogether than if you plan to make a career out of it (even a part time career).  If the latter, go with a big brand you -need that starting out. Finding the right office mgr fit is also important.  I see new agents who clearly aren’t getting the support they need to get going and struggle as a result. 

@David L. great strategy- the get rich slow approach which minimizes risk.  Its basically like opening a checking account with $15K and then having someone else make deposits to the account until it reaches $100K at which point you withdraw.

I’m assuming you are looking at single family homes?  $75K-$100K will not get you a rent ready home in an A/B area.  The homes you might be seeing are either not in an A/B area or need a lot of work that isn’t evident in the online pics (there are a lot of great real estate photographers here, I use a couple of them for my listings).  Parma is a decent area for your strategy - you should be able to find something that works in the low $100s but there’s some competitive pressure when it comes to renting (check the number of Zillow listings).  The 44111 zip code in Cleveland is another option.  Depending where you are, it can go from low B to low C...but at your price point the numbers will work- and rental demand is strong. 

In general you are going to need 20% down + closing costs on a single family. That puts you in the Cleveland zip rather than Parma with the amount of funds you currently have

@Johnny L. read the fine print on the 0% APR, its likely that you'll pay 2%-3% (of the amount advanced immediately) if you do a cash advance to pay a contractor who doesn't take credit cards. Not a show stopper but important to understand you wont be getting the money for free. I bought my first rental house and paid for the rehab completely on credit cards (purchase price was $9000 I think) and it worked out fine. Figure the cash advance fee in to make sure you aren't cutting it too close (Odie's point above)- put a really conservative estimate together of what its going to cost you to renovate the house and then add 25%, that will be closer to the actual cost.

Just checked one of mine.  $616 annual premium.  West side of Cleveland, I’d call it a high C property.  $188K replacement cost, the market value on the house is probably around $85K (its a good sized house).  $1M liability.  1% deductible.  I have 3 others nearby with similar premiums and coverage and I have had a claim (tree went thru garage roof).

BTW $200K seems pretty low on the liability coverage.  Wouldn’t take much to use that up, if that happens then your personal assets are at a bigger risk. 

@Marco Morkous a renovated home will be worth at or above the value of the comparable homes that have sold around it (ideally within 1/2 to 1 mile).  When picking comparable sales (I usually try to focus on the 3 best like an appraiser does) try to find homes that are in the same age range as yours and then you have age factored in. In general that’s going to happen any way- usually homes in the same area were built around the same time. 

Not sure what market you are in, but if its a more established older market 1951 is an average aged home (that’s true here in my market Cleveland).  I show homes all the time that were built in the early 1900s, current condition is way more important to buyers than age.  

@Dallas Easter Greg is right, unless your contractor is bringing something of value that you can’t yourself- stay away from a partnership.  Even if he is, I’d still try and stay away from a partnership as they tend to go south more often than north in my experience.....unless its someone you’ve worked with before and have history with.

If you want to incent your contractor - give him some skin in the game- think about a bonus for finishing on time/early and/or helping you achieve a certain sale price.   E g if property sells for at least $250,000 by XX/XX/XX contractor receives $XXXX.XX bonus.  This is in addition to his normal rate.....not in lieu of it. Far better doing something like that then creating a partnership in my opinion. 

@Antoine Pippens check into the tax ramifications of selling, you may be subject to a big tax hit depending on how long you’ve owned the property and what you do with the proceeds.  Also did the city purchase come with any strings attached?  I’ve seen those type of transactions here in Cleveland come with penalties for selling quickly (e g <5yrs)....usually they want owner occupants in the property to stabilize the neighborhood. 

The other comments are spot on.  A totally rehabbed multi family, especially a big one is appealing to both first time buyers and investors.  If Indianapolis is as short of inventory as Cleveland is, I think you’ll see either group pay up for your house.....and a multiple offer situation is likely.  One strategy is to price it just below market in an attempt to get a bidding war going. 

@Pete Abilla don’t do “hope” investing, that’s the quickest way to lose money.  As Bob suggested, put together a reasonable number (at least 3 in addition to the house next door) and then compare them to the property that’s available.  Then assemble a good estimate of dollars you will need to spend on the renovation to get the house in a condition at least equal to the comparable sales.  Determine how long you will likely own the house and costs (taxes, utilities, etc).  This will all help you determine 1) your estimated profit. 2) risk. 

The house next door could have sold under extenuating circumstances and if its way off the market an appraiser might not even use it as a comp.  Let me know if you need help with putting the numbers together. 

@Account Closed you should talk to a mortgage loan officer to determine the best financing options for you. PM me if you’d like a few names.  There’s a lot of competition right now for multi families as they are in short supply, I’m often seeing multiple offer situations.  It should be easier for you to find a single in the price range that you mentioned that maybe just needs a good cosmetic update.  Think estate sale with pink tile bathrooms and aqua carpeting.  Upgrade the single while you live in it over the next year or two, then sell take your profit & if there’s a better inventory purchase your multi family.  

Hi Jack, I’d suggest that you start with two things 

1) figure out how you are going to finance the purchase. It is a seller's market, so you are going to need either a pre-approval or proof of funds to even present an offer (even a lot of off market non MLS sellers will ask for that)

2) determine what neighborhoods you are comfortable with.  It sounds like you plan to live in the house?  If that’s the case, find a neighborhood(s) that you’re comfortable in but that still will give you a reasonable return when you move on.....and that also align with your max purchase price. 

I understand why Melanie is saying that you should work thru the listing agent to get a better deal - its a pretty common belief- but the reality is you shouldn’t get a better deal by working thru the listing agent, if anything you may not get the best deal possible because you aren’t represented.  When I take a listing in Ohio, I have a fiduciary responsibility to get the best deal for the seller - regardless of where it comes from- not to maximize my commission.  If I put my interests ahead of the sellers (getting all the commission vs a potentially better offer with a co-broke), I’m putting my license in jeopardy.   

PM me if you have other questions or would like more help.  I’ve done a number of renovations and can help with estimating repair costs as well.