All Forum Posts by: Sam LLoyd

This is how I would go about it.  In your walk through, make a decision about which tenant takes the best care of the property.  Also, you'll find out from the seller if they are current on payments.  Usually, the tenant that takes the best care is on top of payments... that's the one you want to keep.  In your contract, you need to have the seller give the tenant notice, and get them out.  For me, it's worth waiting a month to have someone else make sure that the unit is vacated.  Another thing to note... if you have handy, and/or plan on doing remodel/upgrades, you'll probably want to move into the unit that needs the most work because you can do the work while living there without have the cost of a vacancy.

Inheriting a tenant:  You'll need a copy of the lease... read this carefully, so you'll know what' you're obligated to, even if the tenant hasn't.  You'll also need to get an estoppel signed by the tenant that is staying.  This is a statement that there are no other agreements in place.  For example, I have an inherited tenant who... after our closing told me that the previous landlord had promised to do some repairs, and when was I going to do them....  I am not responsible for promises that the previous landlord made, since the tenant signed the statement saying that there were none.  Fortunately, in this case the previous management didn't tell their handyman it was sold, and he finished his work.

That's all I got.  Good luck on your next step into real estate investing.  You might loose some sleep over it, but if you stick with it, the returns will be great.

You're going to be hard pressed to find a bank that is going to give you a regular loan on a property that needs a lot of work.  It's going to be even harder to get a loan on the reahab costs.  That being said, harder does not mean imposible.  Here are several things that I have done:

Get an FHA rehab loan... You get a loan against the finished value... get inspections, and get the bank to disburse funds

Seller financing... Seller  gives you the loan against the property...

Sneaky bank financing... Get the bank to loan on a property that needs work, and cover the rehab myself.

Hard money loan... Subject property + other colateral to secure loan... rehab with credit cards... sell or refi to payoff cards

Hard Mondy rehab loan... expensive loan against purchase and rehab... followed by a refi.

These are some ideas... I'm sure there are more that could work.

FOR YOU: Since you are working on practicing your analysis... Just make sure you have the same loan terms in every calculation so that you can compare them consistantly.. but yes, you do have to anticipate closing costs, holding costs, and rehab costs as cash that you are putting into the deal most likely.

There are two big variables... the potential rent, and the cost of repairs.  You either need to learn how to calculate the numbers to a point where you are very confident, or find proffessionals to confirm them for you.  The last rehab I did, I budgeted 14k (and I've been doing this for a while), but some unexpected things came up, causing our cost to fly past 20 (I'll calculate the damages next April, it's making money now).  That job did not included any expensive items like kitchens, roofs, siding, or more than 2 window panes.  So, yes, to someone who is not in your market, your numbers look very doable, and if you do have accurate numbers for repairs and rents, then I would call it an awesome deal.

Three more things to think about.  Location:  What type of tenants are you going to be having there?  Is it a place you'd want to live?  2nd:  I haven't gotten a loan that cheap in a year.  Rates have gone up.  Never bet on a loan before you have it without a healthy margin.  For example, the last refi I did was 4.75%... the one I'm closing on this week is 5.75%... that affected what I planned on paying significantly.  Also, as far as the loan is concerned.... you either have to have a sweet rehab loan, or some other way to buy the property.  3  Holding costs:  Not the biggest item on your list, but not nothing.  If you have to use hard money to buy the place, plus utilities, this could be $1000/month out of your pocket till the project is finished.

There are so many moving parts to this game, I keep thinking of other small (or large) details.  To summarize, this looks like a great property to go after... you can deal with all those details as they come up.  I'm guessing you're going to put a lot more money into this than you think, so be very careful with your numbers, and build in a margin to them before you make an offer.

I think your plan is great, as long as you follow through. Do the reading! Do the podcasts and analyzing deals! I like Building Wealth one house at a time for a book, and I like Wheelbarrow profits and the old dawg REI network for podcasts that you can really learn from. My first investment was long distance, and it did not turn out well. I know now that it could have, but investing is a skill that needs to be learned. I think long distance investing has a slightly higher learning curve, and waiting a year to avoid the higher learning curve is a solid plan. It's been said that you can make money in any market. That means both location and time. Don't feel any pressure that all the deals will be gone when you get back. The deal of a lifetime is always right around the corner!

I've had what you mentioned happen just a couple months ago, and at various times in the past.  Every time though (that I can remember,) the utility has called or e-mailed to make sure that I was aware.  I think you are right, the utility should have informed you.

I think the answer lies in what you have to offer.  For example.  I do most of my own work, so If I buy a house that needs new paint and roof, I'd be paying less than half of the repair cost just in material... and keep what I would pay a contractor... or pay a seller because they just paid a contractor.   If, what you have to offer is the ability to find properties at incredible prices through marketing, then you'll probably get houses that need work.

 So, if you're not going to do the work yourself, or if you don't have some magical contractor that can do it cheeper (and better) than anyone else, the only reason not to buy it finished is if the price you get it for, combined with the price you're paying to fix it, combined with a very healthy margin for your risk and the inevitable surprises.... There's no reason not to buy it finished.

Summary:  from the info you gave, buy it finished.

I wouldn't worry about it. If you are certain about being able to refinance, you should be able to get a 70%LTV or better residential loan.... so the value would have to come down quite a bit for that to be an issue. Also, I'm hoping you are setting asside money for the property out of your budget.... calculate what the mortgage would be and pay down the principal or put that money aside. If you can't handle that with your budget, or don't have the resources to come up with the difference if the value drops more than 10%, then maybe this is too much house.

So, you drop your car off at the mechanic... they write down all you want done to it and you sign the 'work order'.  The locksmith needs something with your signiture that gives him permission to work on your property... it would be better if the scope of work was spelled out in the work order as well.

I use Integra in Wasilla... I don't know if they have any counterparts in Anchorage.  Around here, I use Country Financial on the houses that are simple to insure, and State Farm has always been able to work with my wierd projects, even though they are a little more expensive.

I think your final numbers look realistic.  I would change some of the details around a little bit though, to get a more accurate picture.  The $250/month Misc helps make the numbers reasonable, but I think it would be better to confirm your other numbers and get rid of this one (or minimize it).  Depending on the property of course, the numbers look good except for management... which I haven't seen that low.  Another thing to look at is how soon it needs repairs.   $500 is a good start, and if it is tenanted right now, that $500 might be what you need in the first month, but you'll probably be digging into your repair/capex budget within the first year to bring the quality up a little bit or make changes that you want, so your innitial repair budget might need to be a bit higher.

Those are my thoughts.  I manage a duplex with very similar numbers, and I feel that was a good deal, so I'd definitely look deeper into this one.