All Forum Posts by: Ian Halter

Ah I understand now, thank you!

@John Morgan I'm reading this much later and really enjoyed what you shared. I keep rereading this sentence trying to understand, what do you mean when you say:

> "I’d rather have 18 properties that cash flow way more than just a few paid off properties cash flowing much less"

Assuming equal renovation investment - properties that are paid off should cash flow more than properties that haven't correct? (PITI at a high level) I can only see one scenario where every time you REFI'd you were able to obtain a lower interest rate.

And given high interest rates today, how would you adjust your strategy to be successful?

I will agree with @Nathan Gesner. Short answer to this question is no to rental arbitrage.

While I do not have experience with allowing renters to do this, nor have done it myself, I have rented a place where with someone who did this. It won't work to the extent you want it to. Rental arbitrage seems like a slippery slope (from a landlord's perspective) and furthermore, since you own the property you should dictate the terms. 

It's not to say that it can't be done, and can't be done well, simply that it likely is not worth your time and money.

@Brandon Durant Pawtucket is a good strategy, especially if you're close to the East Side or East Providence, since you'll get better tenants and enjoy the lower tax rate. I've been seeing rental inventory at the top of the market increase, and I buy the story that there's little incentive for people to move and pay more rent when everything is already so expensive. Factoring low inventory of well-kept houses (a pessimistic view) - I would be more conservative in what you could charge for rent and increase what you expect repair expenditures to be

Bottom line: I'd suggest looking outside of Providence, but nearby and following a house-hacking strategy instead of renting a SFH. When it comes to financing folks here may be able to suggest how to get that 380K increased.

My perspective: There are places in Providence where 380K will get you solid duplex, but it is in B/C rated neighborhoods (think towards Providence College or East Providence) and people are asking 2 arms and 2 legs for poorly maintained properties. I recommend against buying a single family and renting it out, because unless you rehab and cash out refi, you'll be hampered by lower cash flow. The value of the single family house (SFH) (in the greater providence area) is the primary benefit of that asset today.

I recommend expanding your search in northern RI - there are towns like Lincoln, Smithfield, North Providence that fewer, but solid multi family opportunities that are less overpriced and more importantly, within your approved price range. Because of the amount you got approved for I would also highly recommend house-hacking, where you live in one unit of the multi-family and rent the other(s).

Looking for local/nearby contractors specifically those that have refinished existing floors and have experience with the nuances that exist with old wood. We have ambered pine tongue and groove flooring. Thanks in advance.

@David Coughlin Old homes are great to cut your teeth on, given you have enough liquidity and go in knowing extra repairs can happen. Prior to purchase you need to set yourself up for success: a great 3rd party inspector that is no-nonsense, a local agent that knows your type of home and area _very_ well, feedback from other owner/investors with similar homes (i.e. what to look for) and contractors who specifically work on old homes and know their nuances. At the end of the day there's only so much you can do and I can't understate how valuable local knowledge is. Below are tasks I encountered, outside of renovations, that incurred extra costs and whether or not I could do them myself. YMMV (your mileage may vary)

Fixable alone: boiler maintenance and steam system rebalancing, minor lead paint sealing, plaster patching (even very large ones), thermostat installation, insulate flooring and rim joists, painting, floor repair, skim coating walls, installing thresholds, weatherproofing, installing/refinishing door and cabinet hardware, adjuster gutter drainage

Needed professionals: sewage main unclogging ($), knob and tube disconnection+removal ($$), flooring ($$), adding joists for structural support within walls ($$), replacement and removal of old brass/cast iron plumbing where necessary ($$$), new gas line for laundry and lines for appliances ($), wall demo + replacement ($$$), steam line moving and radiator repair ($$), gutters ($$)

$ - hundreds, $$ - thousands, $$$ 5K-10K, $$$$ - tens of thousands

Hope this helps, best of luck with the old home!

@David DuCille IMO original hardwoods, refinished well, always outsell new flooring. Yet, I recommend against refinishing old hardwood floors in the winter. Installing new flooring in the winter using real hardwood will be very expensive and extra challenging given the temperature outside.

You're not off base though. We've put Pergo engineered hardwood (hybrid laminate) through a lot and it looks fantastic in our 100 year old duplex. Pergo is a brand that offers vinyl flooring or luxury vinyl flooring (LVT) and their LVT, like most LVTs, detracts from keeping your home's original character. Our contractor showed us other homes with LVT and it looked to "new", like this was a flipped home. In my opinion you want people to feel like it's a home, not an apartment. Engineered hardwood is, on average, a little more expensive than LVT. 

LVT does scratch easily, but engineered hardwood isn't as water resistant (there are product lines that are enhanced to address both of those issues respectively depending on the brand). My recommendation is LVT in the kitchen and areas where water could be and where you haven't already tiled/stoned. Then put engineered hardwood in living spaces and either/or in entryways. You already seem familiar with laminate so this may be stuff you already know, I'm leaving the info here for other folks in the forum.

One thing I've learned with flooring is that the single most important factor is the person(s) installing it. You can get waterproof flooring, but if the flooring isn't leveled correctly, isn't not flush with the baseboard or baseboard trim isn't added after the fact, water will find a way. If budget necessitates, pay extra for a good installer and do 100% LVT.

I am currently working on a house hack in Providence (we live in the bottom unit) and can give you the latest on inspections, codes and share some of our reno repair issues and costs.

@Meredith Dove

Taking a stab at some quick analysis.

Costs: 580K at 5% with 20% down, guessing taxes and insurance tells me you're paying between $3100-$3400 as a mortgage payment. Once you move to a different home, your taxes will increase by probably $200/month due to losing homestead exemption.

Best Case Costs: $3300/mo minimum

Revenues: Given what I know about the greater Providence area, if your house is not in a great location or great neighborhood (think B/B- rating) it would be tough to rent a 4bed 2bath for > $3500. Many prospective homeowners can find a home elsewhere in an equally good neighborhood, it would be smaller, but they'd have a similar monthly payment even with rates today. However, let's say you somehow found someone willing to pay $3600/month for a B/B- entire-house rental on a busy main road.

Best Case Revenues: $3600/mo

After all the work involved with landlording and assuming absolutely nothing goes wrong (quick to find a tenant, no extra rehab costs to ensure up to rental code) best case you make $300/month. There is a much larger and very real chance you make no money on this house by renting it. Hire a property manager and you're likely in the red.

Reviewing the options:

- Sell the house: likely incur a loss (market has cooled) while increase your living costs (you want a bigger house and rates are higher) and with kids likely move in ready (more expensive)

- Rent the house: small likelihood of profit, more likely breakeven even with landlording work

With the market where it is - you're not in a great spot, I won't sugarcoat it; however I think there's a 3rd option. Contractors will be looking for work, as builders can't sell homes. The increase in supply of large build contractors should drive down bids for large additions (competition). I highly recommend investing what an addition would look like, a few people I know have already seen bids for large additions or ADUs (500-1500 sq ft added) drop by 20-30% by waiting for this market to cool.