All Forum Posts by: Greg Scott

Quote from @Henry Lazerow:

@Greg Scott your in MI right? “A new Michigan law bans many landlords from rejecting tenants based on source of income, like housing vouchers, veterans’ benefits or Social Security.

Gov. Gretchen Whitmer signed three Senate bills of a five-bill package Monday, Dec. 30, that prohibits landlords from discriminating based on source of income.”

I live in Michigan but have no rent property in the state.

This month's Units magazine from the National Apartment Association has a good piece on fraud detection.  Sadly fraud is everywhere.  You can access that article here https://naahq.org/application-fraud-search-silver-bullets

Regarding Chicago and Section 8, YIKES!  In my experience, the average Section 8 resident behaves differently than the average market rate resident, and the government-backed rent is not worth the added hassle.  We don't take Section 8.  If I were ever forced to take Section 8, I would start selling off anything I had in that jurisdiction.

The behavior is a bit off, but not surprising for a mom & pop landlord.

We tell our residents exactly what we need from them for the application.  The only time we need additional information is if they are denied.

Once accepted, we tell them exactly what we need from them to move in.  For example, we need proof of renters insurance and proof they put electricity in their name.

So, it seems odd that you are accepted but they keep wanting more information.  They've probably been burned before.  They probably want to be certain YOU are legit.

Most of the scams I've seen are by non-owners. They are trying to rent a house they do not own. Since you have verified this couple owns the property, you are good there. The fact that you cannot find much information about their LLC is not a concern. Many of our LLCs have virtually no digital footprint.

#3 Sell and invest elsewhere.

Condos add risk.  Renting in NYC adds risk.  Negative cashflow adds risk. 

There is way too much risk here and no profit.

The most important thing is to ensure your loan is covered in the event of a loss.  You can wargame scenarios to decide what you think is best.

On the other hand, that is a pretty sizeable rehab budget.  Let's talk roofing.  If a storm damages the roof before you begin, but a new roof was in the budget, you've lost nothing.   If a storm happens immediately after you replace the roof, the actual cash value is the same as replacement cost, so you've lost nothing.

The only thing you would have to worry about are items you did not intend to repair

Quote from @Jack Cottrell:

Quote from @Greg Scott:

Jack:

I wouldn't argue against you doing your first deal.  There is nothing you said that I find particularly scary.  You would learn a lot from doing this deal.  Still, it is not a great deal.  It is not a great deal mostly, because of what you did not say.  

I was hoping to hear you add something like this...  "I'm going to put $30K into rehabbing it and it will be worth $200K when I'm done and rent for $300/mo more than it does now."

This is the piece savvy investors know how to do to unlock outsized profits..

Thanks Greg. I appreciate the feedback. I'm not opposed to finding deals like what you talked about. I should have mentioned that I am out of state in Colorado and I'm not connected yet to contractors that I trust to do a rehab. I was hoping to do a deal and get my feet wet with something relatively simple to start. So I gather this isn't a deal that most of you with experience would do?

The early portion of my career was buying turnkey rentals, like the one you described.  The returns were OK, but nothing to write home about.  The marginal returns drove me to seek other strategies.

So, this is not a "bad" deal if you consider it more of a learning experience than one that will make you a lot of money.  The most important thing is to start, so I wouldn't discourage you from buying.

Jack:

I wouldn't argue against you doing your first deal.  There is nothing you said that I find particularly scary.  You would learn a lot from doing this deal.  Still, it is not a great deal.  It is not a great deal mostly, because of what you did not say.  

I was hoping to hear you add something like this...  "I'm going to put $30K into rehabbing it and it will be worth $200K when I'm done and rent for $300/mo more than it does now."

This is the piece savvy investors know how to do to unlock outsized profits..

Given your assumptions, you are not going to be able to get enough of a loan to fully cover the rehab, even with a hard money loan, so you'll need to pull in cash from elsewhere.

One possibility is to have your mom sell you the house with a personal loan, not one attached to the property.  That way, you could use Hard Money to fully fund the rehab before refinancing to agency.  There may be tax implications to that maneuver, so check with a CPA.

Good post.

"I'm looking for something that meets the 1% rule in a B or A class neighborhood."

Tough situation.

Sounds like your mortgage forces your hand.  Unless you want to continue having negative cashflow, you pretty much have to raise rents.

One long-shot option is to offer a lease at something like $1,300.  That is lower than market and puts you in a cashflow-neutral situation, but it is unlikely your residents can afford that.