All Forum Posts by: Anna Laud

@Tyson Sadler

Hi Tyson! 

So as far as the numbers on the manufactured home go, you're looking at over 20% down on one at $50K- which is good. Now if we look at the projected monthly rental yield- again you're good there too at actually over 2%. Most of the time, being at 2% is pretty great so being over this is well within the realm of a 'good deal'. 

The cavate to all of this is you're without funds for anything that comes up as far as repairs go. So in theory, one or two repairs (which always happen and need planned for financially) would maybe have you in the red on funds. This seems why you're getting advice from others in waiting another year to make your first investment transpire. 

You'll still have homeowners to account for as well, property taxes etc- so again, some other things to take into account before working off of the rental income alone without having any reserve. 

I'm not sure about which state you're in, but there's another possibility of maybe not getting as much as you think as far as the inheritance goes with an inheritance tax coming into play (a question for an elder law attorney if you don't already know the answer to this). 

I understand being eager to get started, and the deal you've presented (with the details given at least) is a 'good deal' but it does seem safer to wait until you've been able to accumulate some further cash reserves maybe- but if you're truly still on the fence about this, a quick chat with a CPA would clear it up and give you a professional and unbiased opinion. I would maybe suggest connecting with a local REIA in your area and asking to connect with a financial advisor who's used to working with real estate investors and maybe help you come up with a solid plan of action.

Hope that helps some in your decision! 

@Brady Boyer

Hi Brady! 

It makes sense that your typical policy is to include anyone over the age of 18 on the lease as well, but I'm sure there are a few exceptions to this that you've maybe encountered already or might again. 

It seems like this is a situation where the 18 year old should be considered as a dependent, therefore excluded from the lease. Unless laws have changed that I'm simply not up to speed on yet, a full time college student up to the age of 24 is still a dependent, an 18 year old student who lives with the parent at least six months of the year- these both fit the situation you're describing. 

I'm not sure how others usually go about this, but from a landlords point of view, it seems like if this person age 24 or younger, but older than 18, is a full time student, still able to be claimed on taxes as a dependent (often still under parent's health insurance and car insurance as well) it seems maybe not so necessary to include them on the lease as well. 

I can say personally there might be cases too where this seems a bit unnecessary - for example; (while I'm not a renter) I really wouldn't want my 18 year son on a lease I was signing, even as he is with me year round, as he attends a local university on an academic scholarship. He has medically diagnosed disabilities and this would really not be reasonable to ask/expect of him. I say this as you may run into situations where a legal dependent far above age 18 would likely still be excluded from the lease for various reasons. 

I maybe am not seeing what the benefit would be to having an 18 year old on the lease as there is zero to minimal credit history to pull from, usually never any long term employment history, and the idea of having the 18 year old on the line for something such as damages or missed payments seems (at least for most 18 years old's!) would be like trying to squeeze blood from a turnip - it simply isn't there. 

It seems that in most cases this would simply not be a necessary thing to do. There are however those renters who might see this as an opportunity for their child to begin to establish reported rental credit history and see it as a benefit. 

So to recap, I suppose I could see it from both sides, but overall say its seems unnecessary in this case- or for 'home bound' during summer break only college students (who are already exhibiting responsibility enough {in most cases} to be on a continued education path, having more of a 'merit' based stay in the rental it seems) to be on the lease as well as parents. 

At the end of the day, it's likely that anything you ever sought from the lease holder (rent due, damages, etc) would be coming from the parent's end anyway it seems = ) 

Hope that helps! 

@Chris C.

Hi Chris! 

I'm not sure if you're married to these locations and having "people" there, but in lieu of Chicago and for a much more modest purchase price offset, I can suggest Indianapolis. $200K in Indy would very likely open up both buy & hold doors  as well as fix & flip for you in different areas of the city. 

This is from a previous post, but I'm going to include it here as it does contain some area specific info- areas within Indy to look into if you're even remotely considering Indianapolis;

Indianapolis has been at the top of the list for many investors historically speaking dues to being a flat market (pretty much the opposite of TX right now in reactive real estate as people flock in groves from CA realizing work from home could be here to stay & want lower tax rates/cost of living) and perks like cheaper purchase price point and lower tax rates (Marion Co for example just above 1% {for comparison NJ is right around 2.49%} ).

Right now TX and Vegas among other areas are really seeing some hot activity - but this is more reactive and not what a more truly flat market like Indy does.

When you first look into Indianapolis there's likely going to be a lot of info or posts about Fountain Square- I wanted to touch base on this first and say from the start- FS was BOOMING not that long ago- one of the main reasons being that the numbers here made a lot of sense (I'm talking about purchase price point here mainly) now as most home owners do, they've seen a lot of neighborhood changes, and in most cases talked to neighbors that have gotten "X amount" for their home and the natural thought of "What could I sell for now too??" comes to mind.

Now flash forward about two years to where we are now, and the purchase price of a fix and flip in FS is going to be a considerable amount more in most cases than it was just two years ago- the numbers here might not make as much sense then in this case (it's certainly going to eat away quickly at your ROI).

There are some 'younger siblings' of FS that I would consider more enticing right now for various reasons. (So dig a little deeper in area searches) Irvington for buy and hold properties (this area has been unique as well as stable for some time with buy and holds), other areas for fix and flip would be Haughville (truly seeing some changes in the market recently and level of finish to homes), Brightwood, Bates-Hendricks and most recently near Riverside Park bound by 16th St to the North, 10th St on the South- Indiana Ave & River/Fall Creek East & West. This last little area is "16 Tech Innovation District" a $500M development causing area changes quickly.

Another Indy development is going to include the Children's Museum and just under $30M there for expansions, but not as ready to go (yet) or in progress as 16 Tech area- worth watching however!

If you have any other questions you feel like my reply didn't cover- ask and I'll do my best to try an help = )

I’ve put together an Indy area guide I can send you as well, it may have some more in depth information that helps

@Mark Hayes

Hi Mark! 

If you haven't raised rent in the course of this two year period it may seem (depending on your area and what's normal to do of course) a bit drastic to raise the rent by over 12% to nearly 13% in one year. 

It seems maybe more reasonable to adjust it by 3-5% (at least in some areas) than take this larger jump in one year's time. If you were to increase it by 5% over the next two years, you would recoup to a closer amount, but if that's not an option for you, I would say to go with $1100 this time and $1200 next time. 

5% would be just around $50, which seems very 'absorbable' to most renters after two years, but then maybe allows them to see it as anticipated next year as well going from $975 to $1025- being a difference to you of about $75 from your low end rent rate. After this year, the additional 5% or $50 (rounded up) would have you just under the $1100 mark each month.

Maybe it's more commonplace in some areas to raise rent more than 3-5%, and I can see where not having done so over the course of two years has you a little behind avg. area rents, that just seems like it could be more than some renters could financially absorb30/ with 60 days notice. 

If they've been good renters as well, that itself is worth something it seems- especially after some of the horror stories of nonpayment than many landlords are facing right now for those maybe trying to take advantage of COVID moratoriums/nonpayment.  

I would personally consider 5% (that is if the property was still in the same state as move in and no major improvements had been made) if I could make it work, keeping in mind they were quality renters, then an additional 5% the following year- not having these two year gaps again if that makes sense. 

If that's not possible for you to do, or not an area norm, I would go with the lesser end of rent you'd prefer to ask for of $1100 first. 

Hope that helps some = ) 

@Namit Raisurana

You bet Namit! Yes, feel free to reach out anytime and I'll be happy to answer any questions that come up and try to help = ) 

@Alan Walker

Hi Alan! 

Well this seems a little high for an agent's commission (at least in Indy at 3% usually) at 8.8%, and it's more like the wholesaler's assignment fee. If this is an off market deal however and you're already going to be working with a wholesaler (who had the original assignable contract you're simply, using the realtor to help facilitate- which can make sense to do if you've never done before to protect EMD, etc. ) you're already paying the wholesaler as it's built into the asking price.

If there is no wholesaler involved and you're working directly with the seller, maybe the agent feels this is more if a dual agent transaction as she's working both sides of deal? But that doesn't really make sense either as you could work directly with the seller in that case it seems. 

I suppose maybe she is not thinking ahead to having the re-list on this one? I say that as that's really where the income is for the argent in a transaction like this, especially if it's for one property alone and not a group of like ten, $45K houses- why asking for this much now, if there's already a wholesaler involved, AND she basically has the re-list in the bag if you want to keep working with her- I don't follow, unless this is typical for % for NC and Indy is just far behind at an average 3%. 

If you're talking about over 8% however, plus the assignment fee for the wholesaler, what ever that is above contract price, you're likely already at minimum 10% above what the seller even asked, for on a deal under $50K- I don't follow that, but maybe I'm missing something. 

I could be totally off here and using Indy thinking as far as the numbers go, but this seems a bit high to me on a $45K deal

Hope that helps! 

@Allan Wu

Hi Allan! 

If this is already a duplex, then it seems you're not dealing with a single family zone, so the difference between 2 units and 3 units seems minimal in legal worries with zoning at least. 

Now if this were a single family residence and you had this basement suitable for renting out, it might be considered trying to convert a 'secondary suit' into something the city doesn't want (as far as zoning in concerned). 

You might run into adequate HVAC capacity and needing to run additional ductwork (then determining a pro-rata billing set up perhaps) or even an additional unit with separate water meter just the same. 

I would probably verify with local zoning authorities as far as any structural changes needed to the façade of the exterior to allow for a separate entrance but that is likely not an issue in most cases. 

If this is a duplex hooked up to septic (like some of the older, converted homes in Indy and more rural areas for example) you would need tp verify that your local code supports this conversion of useable square footage as supported by the current septic tank size or install a larger/additional tank. 

It sound like there are likely to be some additional expense in conversion of this basement into a third unit, however the additional income may in time offset these as well as the deduction of capital improvements (this is for a pro/CPA to determine what adds value, etc). 

Overall, I think it sounds like (at least how I read it!) that the main concerns would be structurally- assuring this is indeed a fully functioning third unit  that complies with any local zoning that would possibly apply. 

Hope that helps = ) 

@Eric Salgado

You bet!

Totally understandable about sticking to areas that you know and are more familiar with and yes please reach out with any questions you have and I’ll do my best to help answer them. I have had family in a very similar job position to you and I’ve been through this with them before as far as investing from overseas, so I know what you mean.

But yes, always happy to help so reach out whenever = )

@Colter Mann

Hi Colter! 

I think that probably depends on the market you're looking in and price point. It's not uncommon still (at least in Indy) to find these deals in Class C areas (some Class B), but the closer you get to Class A and Class B (just historically speaking across the board) areas the % margin tends to go up in a lot of cases. Not so often (at least here) is anyone looking to go with a Class A or B area for flipping anyway- I just say that as it can make sense to get into higher % in some cases but that's very deal by deal based, and not usually a common 'rule')

There are a few areas that seem like they're booming right now and I've heard of people getting outbid on deals- which is driving purchase price up (significantly in some cases) which in turn changes the % instantly. I don't personally know the TX market too well, but this is one state I've heard of this happening in recently.

If you're looking in an area where gentrification has happened to a greater extent for example, some of these asking prices are being driven up from where they might have been not so long ago as sellers are seeing the changes and know there is more value to their property than there was originally thought. Combine that with an overall lack of inventory in a lot of areas, and then natural occurrence is an increase in overall asking prices that will change your 'all in' % accordingly. 

The same thing seems to be happening in other areas where folks are getting the green light for continued working from home, and flocking from major metro areas with high costs of living, to areas where they are able to buy (while interest rates remain low) for the same amount of (in some cases) cheaper than rent- again driving up purchase price point and your % all in changing. So your question makes sense in a natural order of things as to what's going on in various markets.

So it can still be done, yes- I think it's just very market specific in a lot of cases. 

Maybe expanding your search area a little bit would help and speaking with an agent in your area/these areas of investing interest, to truly get the best sense of accurate ARVs- they might even have other areas to suggest to you as well that could possibly get you closer to your 70% all in mark. 

Hope that helps some! 

@Raymond J. Rodrigues

Those are sticker rates yes = ) I don't know the specifics to his credit score, income etc and these are just places that some folks have had decent luck with in the past and may or may not be a good fit - just trying to help quickly window shop for options!