All Forum Posts by: Henry LiChi

If you had a full inspection done and could get an estimate of how much repair cost would be, you can go back and ask for a reduction due to the repair estimate and purchase as-is.  I purchase all my properties as-is, typically 10-25% below asking, contingent on a full inspection.  If repair is found to be extremely costly, I either back out of the deal or ask for a reduction in purchase price.  

CAP rate and COC is less of concern if you're going to owner occupy it, in my opinion. Your main factor should be, does the other unit pay for your mortgage and possibly more? What is your estimate for how much rent will go for? Assuming you're taking the 2 bd and renting the 3 bd out.

50% of the gross rent for expenses is about right, based on my numbers for the several properties I have around Cleveland (you're self managing it so 10% of that will go right in your pocket).  Of course, that number doesn't include the mortgage.  As far as, 400$ a year on repairs and maintenance, that seems low to me, but I am very conservative with my savings and like to know that any repairs or capex doesn't come out of my net income.  I usually allow 10% of the gross rent for repairs and maintenance and another 10% for capex (or replacement reserves, in your words).  But in landlord insurance, as well.  It will help you sleep at night knowing that you have a million dollar liability coverage in case your tenant gets injured and is suing.

I am still learning a lot about Cleveland as I acquire more and more property, but Lakewood is a nice area (for the most part) and there is some appreciation.  But as far as my criteria for Ohio investment, this property wouldn't even hit my radar, but I don't live in my investment properties and people are willing to pay more for places they really want to live.

I think @Greg Hamer was referring to, is the way the property exist (1 main house, duplex, and a mini house) common in that neighborhood?  In many cases, to stand out from your neighbors is great, but when it comes to property type, it is better to fit into your neighborhood.  Don't want to be the one to own a 4 story apartment in a suburban neighborhood with only single families (at least not in most case).

@Tamyra Campbell

You should let your realtor do the communication.  I wouldn't wait for it to go below 300k, if it even does.  If you think 300k is feasible, go ahead and offer it.  I never pay full price offers on my properties, and have gotten some for less than half the original asking price.  

@Greg Hamer, this is very true.  Any offers I make on my properties are always below asking not because I am cheap, but because I want to be able to exit if it doesn't work, without losing money.   

Always have an exit strategy.  It may be different if you're an owner occupant, but if you're not able to fix up the duplex and only the mini house in the back is getting any sort of income, would you still be able to float?

@Tamyra Campbell

Him being motivated to sell can be used to your advantage.  The duplex not being fixed up and rented is a sign that the seller wants to get rid of it.  If everything was fixed up and the seller is cash flowing nicely, he can just sit on the market waiting for a full price offer, but with half his units not being rented, he can be in the hole or barely breaking even (depending how much he is getting for the other two units).

It is a pretty sweet deal at first glance.  But would need estimated proforma to justify.  

Just wondering, how did you estimate 100k rehab cost on a 1,400 SF duplex?  That's over 71$ per sf rehab, which puts it at the higher end of rehab estimates with very high quality material.  

Regardless, you have to look at it as 4 units on one property.  Numbers have to make sense for when you live in it, just as much as when you move out.  At 349k purchase, you're looking at under 1800$ per month mortgage payment.  I would factor in, how much rent you'll get for one of the duplex units + the mini house.  Does it get close to 1800 per month?  If so, you pretty much have your mortgage paid for and you're just paying for expenses/insurance/property tax instead of rent.  Of course, this doesn't factor in the renovation cost to bring the duplex to rent ready status.  

Also, are the similar houses in the neighborhood that are going for 320-390k all the same criteria (main house, duplex, with mini house or 4 units, I would doubt that).  If it has been sitting on the market for several months, more than likely, you can offer a lower price than the 349k.  Find a number that works for you, worst that can happen is the seller says no, or counter.

Welcome @Jessica Wang.  Most people build in-law units to rent those out but sounds like you are more financial minded and rather make more from the main house.  I've been looking into R2 properties that allow in-law units to potentially AirBNB them out.

Welcome @Michael Dwyer.

Love the motivation but I would pump the brakes slightly to analyze your finance.  Yes, those of us that work in the Bay Area are fortunate to make a generous income, but so are our expenses.  Unless you have 5 to 6 figures saved up, I would work on achieving that saving first.  More so, in the six figures if you are planning to invest into properties in California.  Unfortunately, properties in the Bay Area, especially investment properties are getting bought up cash for well over asking price.  Personally, it frustrates me when I want to find local properties.  That is why I turned to out of state investing.  Returns are higher, allows less capital upfront.  Definitely would read "Set for Life" by @Scott Trench, if you haven't already.  Great book that would be perfect for your situation.

I always do my proforma and due diligence before even talking to agents about making a deal on a property.  It lets me be in charge of the numbers in a way that I am comfortable with.  If the agent doesn't think the deal will go through, I will still request to submit the offer with a number I am comfortable with.  Worst case scenario, the seller doesn't accept (who cares) or the seller counters.  Or best case scenario, the seller accepts (jackpot!).  I never offer above listing unless I know the numbers work and I really want the property.  Don't get attached to the properties unless it will be your primary home.  You don't need all your offers to get accepted, you just need one.  

It depends on a lot of factor:

Are you just overlay or will you be doing a clean tear of the existing?  I've always budget for $3 per SF, if tear down, but that depends on the complexity of the roof.  But with the many houses I've had re-roofed, it never exceed that amount.  Prices range from $1.5-$4, sometimes under $1, if not licensed.