All Forum Posts by: Ron K.

Did you have the septic system inspected when you purchased the property last year? If not, lesson learned. You may want to check with the local municipality to see if they have information of past problems with septic. If there are, the seller may have not disclosed problems that they may have known about. Additionally, how much confidence do you have in the inspection company? You may want to get a second opinion.

0 Votes

Chicago, Illinois

Single family bank foreclosure with past owner still living there. RE listing agent said I would have to do the eviction or work out a rental agreement if I purchased the home. In addition, there are no showings and I'd have to buy sight unseen (although she suggested I knock on the door even though the listing clearly states not to). Property is attractively priced.

I haven't bought a bank property in many years. Is it common to not evict before listing? I do plan to meet with occupant to determine if he is a good rental candidate. I do not want to buy and evict (it's in my neighborhood) so using as a rental and rehabbing later would be my plan. I am open to thoughts and suggestions please.

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I'm from Huntingdon but do a lot of work in State College as a home inspector. My investments are in Huntingdon County.

0 Votes

Katie, It may be helpful if you share your pre-screening questionnaire for others input

1 Vote

We never know the actual dollar return of any investment. The best we can do is projections based on past numbers. I'm sure many landlords with nice cash flows were feeling pretty good at the end of 2019. 3 months later many of their "actual numbers" weren't what they had expected. Thinking you can project the future is very dangerous. I love the old saying, "he who lives by the crystal ball eats a lot of shards of glass".

So why did i use 5%? I selected that rate because it was the rate of return she needed to get for an equivalent cash flow that she was receiving from the rental property. It was to show that she had other options other than keeping the property. I think we can all agree that a 5% long-term return is very conservative. Over the past 100 years the stock market returned 8.5% - 10% return. Is it guaranteed? Of course not. But neither is any projected return on real estate or any other investment.

This is a very simplified example of course and doesn't take into account other variables (inflation, loan rates etc), but it should illustrate that she doesn't have to feel locked to the rental property and can find other viable alternatives.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

5% (.05) = conservative return she could expect long-term in other investment classes.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

Where did the ".05" in your formula come from?

Percentages like this are at best misleading. They are not accurate enough to make an informed decision. I prefer to work with dollars, and only dollars in my analysis. Percentages are just guesses at best. I've seen many deals I have done (and others) where if I, or they did rely on a percentage for analysis or projections, made a yes/no decision based on it, and either lost a great deal or walked into a terrible one.

Can't do that when you use dollars, when the dollars are based on actual numbers from the market the specific property is in.

0 Votes

5% (.05) = conservative return she could expect long-term in other investment classes.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

Where did the ".05" in your formula come from?

1 Vote

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

4 Votes

PITI will eat up the cashflow. All other expenses will be out of pocket for the foreseeable future. Roof and A/C replacements will be very costly. You will need to keep a drastically higher cash reserve on this property and be prepared to watch is dwindle. Accounting for Roof, AC replacement, vacancies and other maintenance, be prepared for a negative cash flow of $5000-$8000 per year.

1 Vote

Second what Russell said. Homeowners typical know next to nothing about the system. As long as everything goes away when they flush, all is good.

2 Votes

Is there a legal issue with the municipality due to the tank size? Was a non permitted addition added? If no legal issues you will just need to pump the tank more often. If the building was added onto, then the drain field could be undersized also.

What did the septic inspection report say about the functionality of the system?

i am a home inspector and septic inspectors so feel free to message me for more help

1 Vote

All Forum Posts by: Ron K.

Ron K. has started 16 posts and replied 70 times.

Post: SFH requires $30,000 in repairs to septic and well system

Post: Foreclosure with past owner living there

Post: State College, PA?

Post: Pre-Screening - Are We Being Too Tough?

Post: This might be dumb. I want to sell it.

Post: This might be dumb. I want to sell it.

Post: This might be dumb. I want to sell it.

Post: Help me analyze this deal: Overpriced Duplex?

Post: Seller did not disclose under-sized septic

Post: Seller did not disclose under-sized septic