All Forum Posts by: Max Householder

Hi Ryan, I am in a similar position to you; young, married, living in the STL Metro area and saving money to start investing in the next year or two.

I'd recommend listening to all the BP Podcasts starting with #1. Even the ones about Note Investing or Spec Builds that might not sound helpful to someone looking at buy and hold rentals have nice tidbits of information scattered throughout. I listen to many different podcasts on the way to work, at work, while mowing the lawn, making dinner. It's a great way to mainline information during what would otherwise be "down time" for your ears, lol.

I live in South City and have been looking at property listings the last couple months to get a grasp of the market while we save up cash. I set alerts on Zillow and http://www.stlouisrealestatesearch.com/. I get a daily e-mail and it's easy to check the new listings and price changes each day to get an idea of what's for sale, where, and for how much. If something looks interesting I'll plug it into a spreadsheet and see if the numbers would make sense.

I've lived in south city for 3 1/2 years. It took a while to get a good grasp of where the good neighborhoods start & end as it can be block-to-block in many cases. I'd recommend taking a Saturday afternoon drive to see it up close if you haven't spent much time down here. Write down what streets have a lot of inventory for sale and see if it feels like a place you'd feel comfortable living in and taking an evening stroll with your wife. I feel pretty comfortable out and about in ~60% of south city area, but some areas are quite sketchy. I personally try to avoid "state streets" (Montana, Idaho, Wyoming etc.) and most anything east of Grand Ave and/or south of Gravois.

I've spent a total of maybe 20 minutes north of Delmar Blvd. in 5 years living in the metro area; all of it trying to find a good place for a U-turn. North City & North County probably have great deals somewhere, but I wouldn't feel comfortable living there so I'm not even considering it.

Wish I could help with some practical advice based on experience, but I don't have any either! Good luck

I know we're talking reserves specifically for an investment property, but also think about reserves for your personal expenses. If you're saving from $0 now (you haven't said this, but I've seen people say, "I started with $100 to my name and bought a property!") and you get 6 months of mortgage & repairs saved up for a REI, buy a property, but lose your job, then that reserve is going to disappear in a hurry. Most financial advice would say have 3-6 months of your salary saved up first before thinking about making any investments that you could lose. You might say, "No kidding Sherlock!", but just thought I'd throw that out there! haha

It's all about diversity. Would a smart investor hold their entire net worth in just cash? Just stocks? Bonds? Gold? Silver? Real estate? Even within real estate, do most investors hold ONLY multis or ONLY SFR or ONLY notes?

Someone with a well-rounded net worth should have a little bit of each while focusing on what they understand or have a competitive advantage in. If your friend has an strong education in the stock market, why would he leave it entirely and go into real estate if he doesn't understand it as well? If you were a pro bowl quarterback, would it make sense to try out for the NBA because someone convinced you it was better?

The "general public" has been sold the idea that a "well-rounded" portfolio of stocks, bonds, and cash, allocated according to your age, is all you need to have a diversified net worth. It's just not true for most people, as someone quoted Kiyosaki. The more I grow in my financial education, the more I believe I need some cash, some paper assets (stocks & bonds), some real estate, some gold, some silver, maybe even a non-RE small business of some kind.

Your friend should probably consider making a real estate investment as part of his overall portfolio, but convincing him that one is "better" than the other seems like a waste of time.

I know the correct answer is, "It depends on the property, call a local insurance estate agent!"

That said, for quickly screening multiple properties, I'm interested in getting a sense of how the scale works for insuring investment properties.

I'm looking at properties near my own home, so I know what it costs to insure a 1,000 sqft single family home here: roughly $800/year. I've seen many rules-of-thumb for estimating insurance on a duplex and most say bet on roughly $100-150/month ($1200-1800/year). This makes sense to me since a duplex around here is roughly 2x the sqft of my home and when you factor in 2x the occupants you'd figure insurance should be ~2x as much.

Now, when I look at a 4-family quad, am I doubling the duplex number? This seems really high and I would think it's not consistent as you go up, i.e. insurance on a 50-unit building won't be 50x the cost of a single-family home, but maybe it is? I feel like a quad should be more than a duplex, but not 2x as much. On the flip side I think just estimating $1200/year for every SFR, Duplex, or Quad I screen doesn't make sense either. Is it better to do an estimate per sqft?

What do you guys use for an estimate on insurance costs when screening properties?

Also, I'm interested in the landlord's perspective on dishwashers. As a tenant, I had a dishwasher in every apartment I ever lived in. I only actually used the dishwasher in half those apartments though because the other ones were either so old or lacked service/maintenance that they weren't even worth using. Nothing would get clean by running it. That said, I never really considered it a huge downside since doing dishes for one person doesn't take that much effort.

If you were starting from scratch would you add a dishwasher to a rental unit or just skip it? Do you find that people will choose a unit with a dishwasher over one with similar amenities, location, and price that doesn't?

I lived in a urban duplex with on-street parking for a year. 95% of the time it was no big deal, but if I had to work late and got home after everyone else was already home & parked or it had snowed or there was a weekend parade or festival in the area, it was a HUGE P-I-T-A. Had I not moved to a house the following year, I would have paid a little more each month for a place with off-street parking, especially now that I've gotten a new vehicle.

Also, squirrels are looking for warmth, shelter/security, and food. Sealing off your attic and access to it might deter them, but it might not and they can be persistent. If there was a nice dry hollow tree around with a feeder on/near it, they might rather stay there than being chased out of your attic over and over again. It might sound like a lot of work to create a habitat for squirrels on or near your property, but it's more likely to be a long-term solution than chasing them away time and again.

Beware that mothballs are a pesticide and it's clearly stated on the packaging that it's against Federal Law to use them for anything other than their intended purpose. Doubtful that there would be any Federal agents rooting around in your attic, but if somehow your tenant's or a neighbor's pet (or child) were to ingest some and die, you could be in trouble were they to trace it back to you.

A few quick questions about the 1% rule while digesting the BP Intro to Real Estate Analysis.

Do you subtract vacancy from gross monthly rent to get the numerator?

What do you use for the denominator? A) Just the purchase/list price of the property? B) The the total cost to acquire it (including closing costs, repairs, etc.)? C) I also saw another website that said to only use the mortgage principal, but this seems strange since you might be paying cash.

Thanks in advance!

Hi, I got turned onto Bigger Pockets when I found the podcast sometime last year and have listened to almost all of the shows (up to around show #045 now). I've always been interested in real estate, but with zero experience, I've felt like the knowledge barrier to entry was pretty great. I was plugging along trying to learn as much as I could while searching for the right niche when show #039 with Seth Williams really peaked my interest. It sounded like something anyone could do since it eliminates having to work with a bank (assuming you have cash on hand).

I understand Seth's techniques for finding motivated sellers. I also do a fair bit of property research virtually for my day job, so I'm comfortable with doing the due diligence online.

So, my questions begin here: If I did everything right and found a motivated seller and the property seemed like a good enough deal to make an offer, what now?!

Do either myself or the seller need to be represented by an agent? (I am not a licensed agent)

Do I call a title company and order/pay for a title search at this point before making an offer or does that come later? Where does title insurance fit in?

Once a price is agreed, how do you close the sale? Would I have to call a title company and ask to set up a closing or is this step unnecessary since there's no financing? I sold my car recently on Craiglist, so I know that can be done with simple cash and a few signatures on the title. Does land work the same way if you know where to file the paperwork? A local title company charges $620 for a closing on a typical SFR with a mortgage. If I could indeed find someone willing to sell their land for a few hundred dollars, those closing costs would really eat into my profits when trying to flip it.

The concept of flipping the land sounds so simple: Find a motivated seller, make a low offer, they accept, then you flip it for more. Seems like there are a ton of steps in between the the acceptance of an offer and "the flip" that don't get covered in the podcast or in various blog posts I've read (I read all the ones on Seth's website and quite a few forum threads on here).

Lastly, could this be a blog/podcast subject some time? I feel like most of the people I've heard interviewed had some prior connection to real estate either through a previous job or their current/former day job or through a spouse or family member. I don't have any immediate connections like that, so the nuts-and-bolts of closing the various types of real estate deals is a little lost on me and usually skimmed over on the podcast as simply "buying" or "selling". I'm able to adapt along the way when learning something new, but initially I like to know the parameters of "how it's supposed to work" as I am very much a step 1, step 2, step 3 type of guy. Thanks in advance for the responses! Sorry this is so long.