All Forum Posts by: Greg Scott

The first question is are you planning on living in this home or making it a rental?  If you are going to live in it, especially long-term, make it into something you love.

If you are going to turn it into a rental, it concerns me that you are talking about very sizable rehabs that may or may not add any value as a rental.   The easiest way to know what is smart and what is not is to do a market survey of that area.  Go look at a number of rental houses.  See what level of finish they have for the price and then note how quickly they get rented up.  

You may find that all the houses in that area have unfinished basements.  If so, putting in a finished basement may not add value.  Or maybe half do have finished basements and those that do get $100/mo more rent.    Get the idea?  

Let the market tell you what rehab is needed.

Tom:

Congrats on getting in the practice.  Running numbers over and over will help you easily spot the great deals.

Here are my thoughts....

The cash on cash is low compared to the cities where I have invested, but you are in an expensive area.  I typically like to see rent at 1% of the value.  (So $1000/mo on a $100K house)   You are at less than half that.

Looks like you are assuming a loan for 3% down.  True?   If you were thinking hard money loan, I didn't see any costs rolled in for that.  Be careful of restrictions of financing with special types of mortgages.

I noticed that you just show Purchase Price.  When buying single family I like to capture equity from the start.  So, I'd buy a house for $80K that's worth $100K.  That helps with cash flow and limits out of pocket.   It also reduces risk because you can usually sell the house right away and get all you money back.  Of course, it is hard to find a house that is "on sale" like that.  Typically I'm buying a house for $60K that needs $20K of rehab, but when done it will be worth $100K.   That is why I typically use hard money to limit my out of pocket costs.  You can't use a 3% down loan for that (as far as I am aware, anyhow).

Hello neighbor.

You shouldn't need a lawyer until that point at which you have a letter of intent accepted and need to start working on the purchase and sale agreement.

Are you familiar with apartment evaluation / modeling?   You may want to get some education first.  With your single family experience you should do great, but if you don't know the major differences between SF and MF you can get in trouble.

Do you come over to Detroit?  I put together the occasional RE meet up, including apartment investors.   Let me know if you are interested.

That sounds like a decent deal. Would you still buy it if the NOI was $130K or 120K? The 142 figure sounds just a bit high to me, but could be accurate.

Financing on commercial properties can actually be easier than single family.  But, lenders do like to see a track record.   A good lender can help.  There are probably lots of local banks and credit unions you could talk with.   

Or, given your specific situation, you may want to look to a broker who can offer you more options.   I've used Old Capital Lending.  Their Dallas office does lending nationally and can get good rates.  (I'm actually meeting with them tomorrow regarding our next acquisition.)

@Patrick H.

Let's back up a bit.   I want to confirm that you realize that this means you are likely to be kicked out of the house in about 4 months.  You know that, right?

The other interesting thing here is that he owner clearly has not been paying their mortgage.   In effect, this means they have invalidated your lease because they cannot guarantee you can use the property for 20 more months.  So, the very first thing I would do is stop sending in rent payments.  (Drives me crazy when unethical landlords stop paying mortgage but keep collecting rent.)   Instead, you should open a new bank account and send your rent payments to that account.  Then inform your property manager of what you did and why.  (You may want to talk to a local lawyer to ensure you are complying with local laws on this)

This will have three effects, 1) it screws your unethical property owner  2) It protects your monies which you might get to keep after the foreclosure and 3) gives you leverage with the bank that is foreclosing.  They might be interested in obtaining these funds and if they are in this legal limbo area, you have some negotiating power.  Give the funds to your unethical property owner and they are gone forever.

I wanted to see what the oldest unanswered post was on BP.    The oldest was a closed account, so I chose this one.

I am quite amused by this post, made 9 years ago.  I loved this comment: "If you are naturally risk-averse, Egypt is probably not for you"  If you recall, in 2011, two years after this post, there was a revolution in Egypt.   Shortly thereafter ISIS started rampaging across the region.  Now oil prices have fallen and Middle East economies are in recession.  Wikipedia indicates that Sharm el-Sheikh hotels are using fake bomb detectors to give guests a sense of protection.

Does anyone know how an investment in this community fared over the last 9 years?

@Paul Cabrera

"Getting started" can mean a lot of things, so the answer has to be "Yes!"

 - Education can be time intensive, and the more the better.   Start by reading, listening to podcasts, joining groups.  All of that is helpful to get the ball rolling

 - Clean up your credit.  That is a two prong approach, of course.  It starts by controlling your expenses today and living within your means (i.e. dont create new credit problems).  Then, start cleaning up credit history.   Cleaning credit is not an common sense approach.  Engage a reputable credit repair company.

 - Network with people in the business so you can start to develop your team and define your strategy.

Ideally you want to put the pieces in place so that the moment it is apparent you are ready, you can move fast.

Ugly situation.  Good luck.  

Be careful.   The State of California's laws are written to favor this parasite and not you.

First, I would stay in lock step with your insurance company.  With your umbrella policy, they are more in the crosshairs than you.

Next, I would get my own representation, someone with experience in these matters.   A huge nightmare for you is if the insurance company tries to find some "bad boy clause" to invalidate your liability umbrella.   Better know what to say / not say.  Keep your insurance company as your shield.

Finally, document everything and retain those documents some place safe.

Let us know how it goes.

I will just share a few thoughts for you.

 1) All real estate is local, so just be careful.   The various categories won't behave the same in every place in the country

 2) Retail is very dangerous right now.  Have you noticed how many stores are going out of business due to online shopping?

3) Industrial can be very lucrative if you have a niche and are in the right area.  On the other hand, regulations have have become increasingly biased against industrial companies

4) Office comes in many shapes and sizes, but is getting influenced by technology and demographic factors.   Baby boomers are retiring and more tech-types work from anywhere.

My personal preference is residential real estate, so from your list I prefer Multi Family

@Tarunveer W. Instead of a bank, reach out to a Mortgage Broker. A bank has one set of rules, but a broker has more than one tool in their tool belt. You can usually google them or look to your local REIA for recommendations.

Are you wanting to get to 20% because you feel the deal will be better or you are short of cash?   (I had a sense of panic from your note.)   If having to put another 5% down puts you in the cash danger zone, you may want to rethink this.  How will you handle emergency repairs such as the furnace dying in January?   That is not an optional repair.   Make sure you have enough cash to survive several bumps in the road.  Otherwise, a string of bad luck will destroy you.