All Forum Posts by: Jamie Derasmo

@Tammy Wiggins if you’re willing to put in the upfront cost of repairs to take it to meet the comps, I don’t think it would hurt to use the comps rental price. If you’ll pick up the lease and it’s less than market rent, you can use that as a bargaining tool because you can’t change price until lease renewal. 

Tammy, I understand the frustration! None of the numbers make sense in the RI market right now either. I agree to stick with the numbers you’re comfortable with. As a real estate agent, you have a leg up on gaining off market deals. Check out other units in the building and feel out the owner’s willingness to sell. You can show them units that just sold and why if they sell to you at the price less what commission would be (because you’d use a real estate lawyer), they avoid having to list and have showings and the commission costs.  you’ll probably get a lot of no’s but you could get that one yes.
Also, it doesn’t hurt to make the offer on the number and terms you are comfortable with, all they can do is say no. And again, you might get that one yes.

Salim, I echo what most people said about doubling down on black accents! I think this bathroom is a good cleaning and fixture update away from looking like new. If it were my bathroom, I would: 

1. Remove mirror, light above mirror, and towel bar over toilet. 2. Clean the floor grout really good and that floor is just as vintage as the shower. It looks like tile and looks like it's in good condition if it can be cleaned well (I think a baking soda and white vinegar mix and some elbow grease should do the trick). 3. Patch walls where needed and paint all the walls white. Replace the vanity for sure, I would do a simple pedestal sink to go with the era of the bathroom. Of course that only works if there is tile underneath, you might get lucky! I would normally never recommend a pedestal but it would look great in that bathroom and it would make it feel larger. 

Once cleaned and painted, add all the fixtures back in. 1. Pedestal sink is optimal or more narrow vanity if possible (black). 2. Install new black and glass light fixture and new mirror. Like someone else commented, you can get a unique looking one at Home Goods or antique shop for relatively cheap. Doesn't have to be your standard rectangle either. Maybe even try one with a gold (shiny or worn) frame (don't be afraid to mix metals!). It would add a pop of color and compliment the green and black! Add black hooks or bar on the wall opposite the toilet. If this is a rental, let the tenant figure out what to do with their items. They could always buy an over-the-toilet stand to put their towels and toilet paper on. I always did that as a renter. You could always put artwork up so it doesn't look like a blank space when you're showing the unit.

The bathroom will look really good for $500 or under with these updates. 

On another note, the shower head is well above the tile line and water could ruin and cause mold in your drywall. It might be worth it to add some tile up to the window height/at or above the shower head. It is recommended to tile about 6 inches ABOVE the shower head. 

20 Beautiful Bathroom Designs with Pedestal Sinks (nimvo.com)

https://www.google.com/url?sa=...

Would love to see final pictures!

Jamie

Hi Jarrid! I think it's awesome you are starting out your adventure into REI. There are so many things to consider for your first rental property. Are you willing to house hack (Live in one unit and rent out the other(s))? Are you looking for a single family or multi-family? Is your goal for cash flow or value appreciation? It can be hard to get replies on your posts if they are not about something specific. You might want to do a new post and include the location you are looking in. A lot of users on here set up keyword searches so if you include your city/town/state, that notifies someone who has an active keyword search for your city/town/state, you can get more targeted advice for your area and possibly make connections. The majority of people have different ideas of what to look for in a first rental.

My advice would be to know what you can afford and then familiarize yourself with rents in your area for SFR and MFR. Getting to know your housing market (or the market you want to focus on) is crucial. This could help determine your goals. I wish I had known about house hacking when I was younger because I think that is a great way to build knowledge about the REI world and to produce monthly income that helps take care of your bills. Even if you buy a single-family house but rent out the rooms to friends/roommates.

To help familiarize yourself with your area, look on the home sites (realtor/zillow/trulia) and see what homes are going for (price, condition, days on market). This is a very cursory step. After you feel like you have a better understanding of what type of property you want and if you know you want to start in the next 90 days, get with a mortgage broker for pre-approval, determine what you have available for a down payment and potential upfront fixes to a property. Most people start with an FHA loan as it allows you to put 3.5% down but then there are restrictions to certain properties. The mortgage broker can best help you sort that out. Once pre-approved, find a local real estate agent who can guide you through the process and help target your search criteria. Don't be afraid to interview a couple and go with one that is investment-oriented. You CAN use a realtor and look at houses without a pre-approval but with how fast this market moves right now, that would be a waste of time because by the time you submit for a pre-approval that house might already go under contract.

Best of luck on this adventure!

Jamie

Maryela, assuming all numbers are accurate, this seems like a great deal.  Just a few questions you don’t have to answer to me but that I think about when reading this: How did you determine rental price? General estimate? Current leases in place? Prop Manager/RE agent advice? 
Have you toured the duplex and made sure it looks as turn key as it does in the photos?  Even if you don’t plan to buy it, getting out there and seeing the houses in person is great experience. 
I think 5% is good for capex and maintenance but I would save more along the 50% rule for at least the first year to build up your cash reserve in case anything comes up. Per your numbers, you’d still cash flow a little over $200 which is really good. 
If all those numbers are accurate, I’d say you have a good deal as the asking price is $200K and your rental income is $2K/month which hits the 1% rule. Go for it before it’s gone! In my market, that would be gone the first day and for over asking.

Good luck!

Katie, are they working with a real estate agent of their own? That agent would be able to tell them if $500K is a good price for the home, assessing many factors including the home itself and your current market activity. Where are you pulling the comp information from? In this very bare market, multiple homes are going for over asking and over appraisal price. 

There is a lot of information missing from this that could help you talk it out with your cousins. Is this a SF home for themselves, a duplex for them to house hack, or an investment opportunity they plan on renting out? If it's any sort of investment oriented opportunity, they need to consider how much rent they could get from the unit overall. 

Based off this post, I would recommend your cousins work with a real estate agent to help them make a competitive offer.

Nathan, it could help to talk to a real estate agent to get a better understanding of what you could get per month and maybe to help decide what level of finishes renters expect.
But ultimately I would live in the bottom unit while doing the top floor, you might not be pulling any rent in but I feel you’ll find it challenging to ask a renter to move in to the bottom floor when you have all that going on. Especially if electrical and plumbing are involved, you may find yourself requesting access to their unit and having to inconvenience them a lot. My biggest thing with your numbers is try to refinance faster than 36 months. Get the rehabs done as quickly as possible, get renters in, and then refinance! That’s smart thinking about the Airbnb potential!

Nathan, the numbers are a little tight but could work long term. The cash flow in both scenarios is good as long as you think the expense estimates will really cover you in case of repairs or vacancies. Looking at this breakdown, the things I would consider are: 

1. Is it currently rented for $1550 prior to the renovations you’re going to do? (If so, what could the rent be after the work is done?)

2. Could you refinance quicker than 3 years in order to get some of that investment back out and make your CoC Return better from the start?

3. Why are you paying the water, sewer, and garbage? That is typically covered by tenants where I’m from. That $100 you allocated toward that could go toward beefing up your capex/repair expenses.

Hope it goes well!

Jamie

Demetrius, that's a tough situation! $50K is definitely a shocking number under the agreed upon price. As everyone said, an appraisal is just an opinion and can change depending on the appraiser. There are a few things to keep in mind: Real estate agents and appraisers arrive at their numbers using market comparables but that does not mean they set market value. They give their opinion, but ultimately the BUYER determines the worth. In this current market, do you think other buyers or investors would be willing to pay over the appraisal price? How much would you be willing to pay over to make sure you procure the deal? You need to determine the number which you're comfortable saying you would walk away from the deal. Additionally, the seller and their agent have no obligation to share the appraisal with future buyers and the new buyer will order another appraisal which would most likely be done by another appraiser, who may arrive at a completely different number. I know in my market in Rhode Island, most houses are going over asking AND over appraisal. Buyers are writing in their offers that they are willing to go X amount over appraisal price as a way to make their offer more appealing.

Your agent can use a lot of negotiation tactics. As others mentioned, the seller knows if they reject your offer, they have to start the process over again which can really be overwhelming. But if the property is as rare as you say, the seller may be willing to take their chances depending on their situation because inventory is so bare right now. Explore your options and put your agent to work, negotiate from every angle before you just walk away if you think this could be a good investment. Hope it goes well for you!

Jamie

Orion, is it possible to see if you qualify for an FHA loan with 3.5% down? If you have some friends willing to rent some rooms that would help cover monthly costs and start to build your savings back up. Look for a place that might need a little work so you can put some sweat equity into it. Look at what you can scrape together to use as a 3.5% down payment and base your house price off of that.
Everything is possible and you're never too young to start your REI journey. If down payment is the issue, consider a partner, or a ask family and friends for a loan with a solid plan to pay them back with interest.