All Forum Posts by: Will Barnett

Eviction and criminal history are way more important for screening tenants, IMO.

Let me rephrase myself: no decent person would WANT to stay there. It was not my intention to degrade or put down poor people and if I have offended anyone, I apologize.

That being said, I currently live and work in Oak Cliff. While I have never lived in properties such as this, my parents rented and I wouldn't exactly say I ate from a silver spoon. I'm just letting the OP know that in my experience, while working in this market and the DFW area, properties like this almost always have huge tenant problems. Those are the facts.

I first started out buying these types of properties thinking wow what a deal. I soon realized what a headache it was. I had to collect rent in a bulletproof vest and pack a firearm (I'm 100% serious). In almost all cases tenants never fulfilled their lease contract, and either disappeared or had to be evicted with a constable present. They almost always left a huge mess. I'm talking about stolen appliances, holes in the drywall, broken windows, drug paraphernalia, and even sometimes urine and feces.

What is the exit strategy? I assume you're buying this package from another investor. Why are they selling? Because they are tired of dealing with it. I can assure you in a year you will be tired as well. I know I was.

There are house like this that do have good, decent, hard working people. Talk to the tenants to see what they're like. However, 9 times out of 10 you won't like what you hear. Once again I'm not trying to denigrate the poor. We're all poor starting out. I'm just letting the OP know my experiences and giving him other options to think about.

I did not know that you could refi on a single family house based on NOI. I thought you could only do that kind of value play on a big, commercial multifamily.

There are tremendous opportunities for yield plays as far as SF is concerned.

I would stay away. 2 main reasons: type of tenant and amount of management. Those properties are gonna attract gang bangers. No decent person would ever stay there, why would they? If you do some research, you could find 2 SFR for the same price which would collect almost 2000 in rent and you would be dealing with only 2 honest, hard working, blue collar tenants instead of 7 drug dealers, crackheads and ho's.

Always, always get a full inspection. Depending on the size, around $300 to $500

Get a job at an apartment complex. Think of it as paid training in property management.

Banks either bend the truth or lie outright. Last week I made an offer of 74k for a SFR listed at 80k. They told me the property was already under verbal agreement but if the buyer didn't contact them within 24 hours they would look at other offers. However there are 5 other offers and mine is the lowest. So I asked what is the highest and I'll be happy to exceed that. Unfortunatley that information cannot be disclosed, why I don't know. Well I said I'll stick to the 74k and take my chances.

2 Days pass and I figure I lost out. Then they call me and say they will accept my offer. Guess the other buyers lost interest. :roll:

Mike thank you for your honest and quick reply.

Don't be sorry for telling it like it is. This kind if hard nosed, practical advice is why I enjoy this forum. Frankly it's a breath of fresh air to get blunt, honest opinions from seasoned vets rather than all that sugar coated crap from so called gurus.

I guess I had hoped that a short term play and SF instead of MF would need less than 50% operationg costs, but hope doesn't pay the bills. I'll significantly lower my offer and if they take it great. If they don't move on to the next one.

Hey everyone I enjoy reading the posts here but need your thoughts on this deal.

SFR 3-2-2
Purchase price $65000 plus capital expenses $5000 = $70000
similar homes in area selling for at least $100000 so a 30% yield

30 year conventional 5% down at 6.75 rate
closing costs $700
total out of pocket: $8950

mortgage is $422
insurance is $35
tax is $185
PITI is $642

Using the 2% rule the rent should be at least $1400 but I don't think the market can support that. At $950 I know I can fill it in a day.
So $950 - $642 = $308.

At first glance it seems reasonable. But I'm violating 2 rules this forum has taught me. The 2% and the 50%. Well not exactly violating the 50% rule but using it would give $53 positive cash flow.

What other operating expense am I missing that justifies a $255 allowance? I know I left out vacancy and maintenace. My plan is to rent for a 1 or 2 year period and then move the property, capturing the equity yield and 1031-ing to other properties, so vacancy shouldn't be a problem. Capital expenses include brand new HVAC and the make ready. Inspections revealed no foundation, plumbing, roof or electrical problems.

Let's say I use a 6% maintenance allowance which is $57 to cover the small stuff which leaves me $251 cashflow.

Now I know one bad tenant can totally screw things up but with proper eviction procedure and the right deposit amount based on their screening I should be alright. (I hope) :roll:

Keep in mind I'm not trying to build equity over the long haul but instead using the yield to build my portfolio, only renting it out short term for the tax benefits. I like to think of it as a long term flip.

Is this a good or bad deal?
I live in DFW if that makes a difference.

Thanks Joshua for the quick reply. I know agents can do it but they frown when I ask them to do it for numerous properties. They tell me to pick one I like and then they'll do it. Heck, how do i know which one I like without a proper CMA? I'm still a noob so it'll take me a while to do an accurate window appraisal.