All Forum Posts by: Jay Orlauski

Hey Albert - congrats for educating yourself and getting out there to do the legwork involved with finding a good deal. It sounds like you have your fundamentals down - I feel like part of your problem is that you are looking at "ON-MARKET" homes which (in California) will almost never cash flow. There are some good things mentioned here about other aspects to look at such as appreciation or tax benefits, but I totally understand wanting to cash-flow out the gate. That has always been one of my primary 'must-haves' for an investment. 

You might want to consider starting a marketing campaign or partner with someone doing a marketing campaign so you can identify properties that really are below market. A marketing campaign can help you find sellers who are in trouble and need to get rid of their house right away. It could be due to foreclosure, a death in the family, or they need to move out of state/town right away. There are several reasons that someone would liquidate a home quickly, and a targeted marketing campaign like sending out mail pieces could put you in front of those sellers. Homes on the open market are typically not in a situation where owners need to dump the property as soon as possible and so they can ask market price for the property. These are not the kind of homes that are going to cashflow for you. 

I also agree with one of the other posters that a cashflowing 3.5% down property would have investors flocking to it with their own 20% down. It's going to be a tough gig to cashflow with only 3.5% down. You may want to see if you can start putting away more money so you can have a larger down-payment. 

What you are looking to do is not impossible but it is not easy either. You may have to deal with negative cash flow while your living there ( basically pay rent)  - add improvements that add value to the property so that when you do move out, you can increase the rent. Even if you never move out to rent it - it could be a situation where you live there for a while - improve it , then sell it. 

You will still have to pay someone to live somewhere anyway so you may as well build equity at the same time and as a backup plan, sell the property if you are not going to be able to rent it out. You'll have a roof over your head, some equity, and options for the future. Best of luck to you. 

Welcome to the forum @Jordan Bemboom - always happy to network and talk shop. Feel free to DM me if you ever want to discuss investing in the Central Valley.

If you are interested, I can help you look at the deal closer to see if there is really something there. If so, I can help plug you into some resources to help get started or at least walk through a couple of possible scenarios that might apply so you can be ready to jump on the next one you come across. 

Have you looked into Obligo? We started using Obligo as an alternative to security deposits and have had a good experience with it so far. I'm not sure if they have a minimum number of units. We have over 100 units but we do not have 500 units.  They get a small monthly payment from the tenant and at the end of the lease they will cover any damages that you submit, up to the amount of the security deposit and then collect any damages from the tenant directly. 

A lot of the questions I get from landlords vary depending on their experience. Inexperienced ( inexperienced in using PMs)  landlords mostly ask questions about what does a PM do?  what services are offered? How much does the services cost? Can I use my own handyman? Do I have to accept Sect 8 tenants? and many more similar questions.  

More experienced landlords tend to ask questions like how long have you been managing properties? How many people are on your team?  How do you screen potential tenants? What are your policies regarding late rents? Do you have experience with evictions? etc.

Generally speaking - I think the most important information to know is how well they screen applicants, how maintenance is handled and how often do inspections/services take place? This is because you want to make sure that they are looking out for your interests and only placing qualified tenants. Ideally, they would have set parameters of what is acceptable and what is not, such as a minimum credit score or a 'no evictions' policy. Once a qualified tenant is placed, maintenance is the bulk of what happens when managing properties so you want to make sure that they have policies in place for taking maintenance calls, handling invoices or payments, and following up with the work. Inspections are important too - you need to get eyes on the property periodically to make sure that your investment is still holding up and is not getting trashed. Inspections can help identify a $50 problem before it becomes a $500 problem. Some companies inspect as part of their scope of work - others charge extra to do an inspection. Either way - find out their policies regarding inspections.

Ask to review their PMA so you know what to expect from them and their expectations of you.There is some other great advice on this thread about checking their reviews, making sure that someone is available to get in touch with, and finding out what they DO NOT do. 

 Best of luck to you - let us know how your search goes. 

 I was thinking the same thing - seems like the moisture is coming from the cooking itself and not exactly the fuel source. May want to consider an additional window as well as ventilation. 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $125,000
Cash invested: $85,000

1 bed 1 bath home from a wholesaler for $125k - added a room to make it 2 bed/1 bath. During construction of the addition, the city happened to be working on the street and noticed our unpermitted project. They red-tagged us and we were forced to pay for plans to be drafted, approved, and several inspections before they permitted us - set us back several thousand dollars and an extra two months as a result - still, we were able to complete the project and still appraised for more than we spent.

What made you interested in investing in this type of deal?

The opportunity to add value to something that needed some TLC

How did you find this deal and how did you negotiate it?

It was sent to me through a wholesaler and as soon as I saw it I knew that I wanted this to be my next project - I was able to negotiate a little off the top - but overall was satisfied with our purchase price

How did you finance this deal?

Down payment was my own cash , hard money lender for the balance, and credit cards for the rehab

How did you add value to the deal?

Add 1 bedroom to the house, HVAC and ducting throughout , rewired interior electrical, all new dual pane windows, replaced doors, new carpeting in the bedrooms and wood plank flooring in the living room, tile in kitchen and bath, added new baseboards and painted interior, replaced all doors in the house, granite countertops, new cabinets, all new appliances, a laundry room / new closet, remodeled bathroom, new tile in shower, redid some roofing, and painted the entire exterior.

What was the outcome?

A beautiful 2 bedroom 1 bath house that has become our next rental and is already rented out

Lessons learned? Challenges?

Don't do construction without permits while the city is working on the street in front of your house - also don't pay for cheap labor - you'll just end up spending the money having it done the right way at the right price. Timing was really bad - the contractors lined up to do the work were not available by the time my lender funded, so we sat on the backburner a couple of weeks - just in time for the city to be doing work in front of our house and notice our project had no permit - major delay

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am my own agent, but it was a wholesale deal anyway - also worked with a local hard money lender that I will NEVER use again - not naming names, but I'll tell you if you ask me. We refinanced with Owning and we were pretty happy with them for most part -

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $125,000
Cash invested: $85,000

Started off as a run down outdated 1 bedroom 1 bath home in Sanger - was purchased from a wholesaler for $125k - Added 1 full bedroom to the house, replaced wall heaters and window AC with HVAC ands ducting throughout - replaced old circuit breaker panel with new updated one and rewired interior electrical, replaced all windows with dual pane windows, replaced most of the doors, laid new carpeting in the bedrooms and wood plank flooring in the living room, tile in kitchen and bath, added new baseboards and painted interior, replaced all doors in the house, granite countertops, new lower cabinets, all new appliances, added rails to the front porch, converted an older closet into a laundry room / new closet, completely remodeled bathroom to make way for a new door to the new bedroom ( not shown in pics), new wall tile in tub/shower, redid some roofing, and painted the entire exterior.

What made you interested in investing in this type of deal?

The opportunity to add value to something that needed some TLC

How did you find this deal and how did you negotiate it?

It was sent to me through a wholesaler and as soon as I saw it I knew that I wanted this to be my next project - I was able to negotiate a little off the top - but overall was satisfied with our purchase price

How did you finance this deal?

Down payment was my own cash , hard money lender for the balance, and credit cards for the rehab

How did you add value to the deal?

Just read the description - almost every part of the house has been updated

What was the outcome?

A beautiful 2 bedroom 1 bath house that has become our next rental and is already rented out

Lessons learned? Challenges?

Don't do construction without permits while the city is working on the street in front of your house - also don't pay for cheap labor - you'll just end up spending the money having it done the right way at the right price. Timing was really bad - the contractors lined up to do the work were not available by the time my lender funded, so we sat on the backburner a couple of weeks - just in time for the city to be doing work in front of our house and notice our project had no permit - major delay

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am my own agent, but it was a wholesale deal anyway - also worked with a local hard money lender that I will NEVER use again - not naming names, but I'll tell you if you ask me. We refinanced with Owning and we were pretty happy with them for most part -

@Steven Navarro  based on 9 other 3 bedroom units within 1 mile - they are getting on average $1400 - $1500 / month per unit - you may be able to go up a little for a brand new build - but the chances of $2400 per unit are slim to none - you can rent out a mini mansion in Clovis for less than that. I have looked into building a 4 plex previously but got caught up in all the regulations and school fees - in the end it was not going to profitable so we shelved it for another project. At the time we going to buy the land for a great discount but even at a discount the construction costs put us way over budget. Not saying it can't be done - but be sure to do all your due diligence and understand all the costs involved.   Sounds like you've done a lot of legwork already so your starting to get your beak whet - feel free to reach out to me if you ever want to discuss anything. I'm always happy to provide a some perspective.