All Forum Posts by: Darrell Lee

I'm from California and some cities rent control are far worse than Vermont. Now living in Springfield, I've not had much luck finding acceptable, creditworthy tenants. But my goal was to be able to convert them into buyers.

So I furnished the houses for Airbnb rentals and mostly good results. They prepay with a credit card, no worries about evictions as a bnb falls under hotel type laws. Traveling nurses, doctors have rented 2-3 months at a time. Also skiers I.e. one house was rented 3 months for ski season by a young Connecticut couple who only use it on weekends.

But it is more management intensive and for small units. But properties I believe are undervalued and can be very profitable.

$40 sounds low if you need plumbing, electrical and heating work. Depends on s.f. the smaller the house the higher the s.f.

Take your time unless you find a smoking hot deal and this ain't it...

One REO house I bought took 9 months to get it under contract. My 1st offer was $91k bid that didn't meet the auction reserve and was declined. A month later is was reduced to $89k, my bid of $79k not accepted. This went on for 9 months until they reduced the price to $33k, I bid $29k and they accepted the offer... LOL A gorgeous 7br/2nd Victorian house...

As I said earlier, can you afford a negative cashflow of $100k per year? I thought the consensus was more like $250k-$350k expenses annually...

Current events see rising interest rates... So values could decline... Can you live with a $500k to $1 million loss of value?

With large cities... my theory, the Bigger Fool Theory, is this... Investors buy a property that has negative cash flow and the numbers don't pencil out but they buy anyway as they believe they can sell it in the future to a Bigger Fool. Right now, it is working for a lot of investors in big cities such as Los Angeles. I sold my  free and clear Hollywood Hills home 3 years ago for $850k cash and the buyer totally remodeled it and has put it back on the market beginning at $2 mil and recently reduced to $1.88 mil... So I was a lifelong Los Angelean and I took my cash and bought 12 properties in 4 different states including my current house that is in Vermont and is a MUCH better house and I paid all of $62,500 cash for the house, sight unseen! It was worth $150k the day I bought it...

Everyone here has been warning you that it won't cash flow but it is your right to make your own mistakes. But if I were you with $500k in cash, I'd recommend you buy undervalued smaller properties so that no one property will hurt you...

You should talk to a property management company that will analyze the property for you and hear what they have to say...

You've been warned...

9 Times Gross Rent Multiplier? 10% DP... I agree with the others that your expenses are way low and I'd expect you to find that your expenses are at least $100k/yr low. That large of a building I'd estimate 40-45% expenses at best. At a 9x GRM and 10% down, I doubt you will be breaking even.

As a life long Los Angeles person now living in Vermont, I've learned a lot of expenses in the NE are very different. I turned off my pilot light to my L.A. furnace 10 years ago and the few times it got really cold, I'd use a $15 space heater at my home. Fast forward to today, I purchased a couple obsolete municipal buildings with underground oil tanks... one is 10,000 gallon the other is 15,000 gallons. I bought a 12,000 s.f. mothballed school and it took at least 4,000 gallons of oil to keep it from freezing up. At today's prices of almost $3/gallon, that's $12k maintaining a temperature of about 50f degrees so it doesn't freeze up. Your heating expense is way low. In 60 years in L.A. I've never had a lawn... In Vermont, New Hampshire and Ohio, I now own several lawns with expenses I hadn't included.

But I bought REO and municipal surplus auctions, paid cash and paid a fraction of the median average prices. After rehab of a duplex for example, the GRM is around 2.5x...

That's a big building you are looking at... Can you afford going $5-10k per month out of pocket if things go wrong? I prefer smaller investments to be more diversified. Boston, like LA, NY and DC the prices have gone sky high. But you said Boston Area so it depends a lot on the area. In Boston proper 9x may not be too bad but if you are 30-50 miles away, you could be overpaying...

Easy. Just go to the town/city you want to invest in and ask the Town Clerk if the town has any tax owned or surplus properties for sale.

However, you will generally need to pay cash for the properties. But you might get it for the cost of the back taxes and interest. There's usually a lot of problem properties so do your due diligence before making a deal. In hot areas someone's already beat you to the punch so you might need to look at less attractive areas that haven't boomed yet for the best deals.

I bought many bank reo's from auction.com and Hubzu.com a couple years ago. If you buy at least 5 from auction.com, you might make their VIP list and they will waive posting a deposit with every property you are bidding on. Really helpful if you are bidding on 5-10 properties simultaneously.

Drawback is you have to pay cash for your purchases and mostly sight unseen. I never bought properties at the foreclosure auctions as usually the banks will bid the amount that covers their loan and costs. 

Sometimes I'd be patient to buy a property and save a lot of money. Also be careful as there is shill bidding by the auction site allowed that is just below the reserve so if you bid, you will hit the reserve, so do your home work and stick to your price. They will eventually lower their price when it doesn't sell.

One property took me 9 months to buy... The bank foreclosed on the house for $111k. By the time I bought it, they probably had at least $135k into it. My 1st bid was $91k but the reserve wasn't met. They kept lowering the reserve and I kept lowering my max bid eventually they accepted my bid of $29k! LOL! This is why I don't bother going to the live foreclosure sales.

Depends. What did you pay for the house, add your closing costs, improvements for a true total basis.

If you sell, add commissions and closing costs and you are probably looking at breaking even at best.

Rent covers loan pmts? What about taxes, insurance, utilities, maintenance, capex... You need to have a realistic view of rent vs sell.

The BP calculators are very helpful. Use them to help you make your own decision. Only you can determine what is best for you as there are so many factors only you know.

I called the Springfield Chamber for demographics and the Exec Director told me about a commercial building... And I ended up buying it for $3.00/s.f. @ 10k s.f. paying $44k. Insurance company wanted to insure it for over a $1 million... I tried to insure it for a lot less, the lowest they would go is $800k

Call Chamber of Commerce...