All Forum Posts by: Jacob Elbe

@Matt B. 

Welcome to BP!

I'm no expert, and don't have nearly the experience some of these other guys have, but I have purchased out of state properties (without ever having stepped foot in the city) and am currently closing on a duplex that meets the 2% rule.  

So the out of state properties first.  I have bought two SFRs in Euclid (Cleveland market) from a turnkey provider.  I am active duty military and was living in Europe when I started my RE investing search.  I didn't want to wait three years until I returned to the US.  So I started calling turnkey companies until I found one that I trusted.  It took some faith, and I've talked to a number of providers that I don't trust and were pointing me towards lower class properties then they would admit, but it has worked out great.  These turnkey properties didn't meet the 2% rule, but so much of the work was done for me that I didn't mind paying a little more for a property that was already rehabbed, with tenants and property management in place.  I think it was a great way for me to get started and I learned a lot in the process.  These properties were both in the $60k to $70k range and rent from $850 to $950.  So not quite 2%, but around 1.4%.  Definitely positive cashflow that I've been happy with.

The duplex I'm buying right now is in Indianapolis. It was listed on the MLS at $75k with rents of $600 per side. Some research in the area showed that updated 2 bedroom, 1 bath units around 1200 sq ft in this neighborhood should rent in the $650 side. So my agent went and checked it out and inside was a mess. Mosly all cosmetic, but one side does have a 1960s kitchen, while the other kitchen is new. Walls have holes and poorly done plaster repairs, doors are missing door knobs, lights are missing fixtures, and some faucets are missing knobs. Lost of little things that just look bad altogether. I was told the seller was motivated when my agent did the walk through so after seeing that it needed some work I offered $65k. They accepted! Rented at $650 per side (once I do some rehab) this will meet the 2% rule. The home inspection uncovered some other issues so know I'm even asking for a reduction down to $60k. My local property manager will oversee any necessary rehab and in the mean time, the property is fully functional (just beat up) and has tenants in place. So I don't have to do all the rehab at once.

I've never been to Cleveland or Indianapolis.  I don't know when I will visit either city.  But I work with people I trust and get my own home inspector and contractor quotes for repairs to try to maintain some independence.  There are companies that specifically work with out of state investors to help them invest where the returns are strong.  I found one I trust and it has worked great for me.  

Sorry the post got so long, but hopefully it helped!

Jacob

All,

Thanks for all the input!  I called a few people regarding installing the liner and quotes came in quite the range!  A chimney guy estimated $1500 without see it, while an HVAC guy said he installs them for $560.  So I'm including it in my home inspection response to the seller and asking for them to just have a liner installed.  We'll see if they go for it.  They've already come down $10k on their original asking price from $75k to $65k, but I know they want to sell.  Wish me luck!  

Thanks @Jon Holdman !  

Is it something I need fixed immediately?  Obviously if I can get the seller to pay for it I will, but if not then what's the risk if I wait until next summer or even a few years before I have one put in?

I'm buying a duplex and the home inspector brought up a concern about the furnaces and hot water heaters venting into the old chimney on the house.  There are no fireplaces.  I've never heard of this before, so am hoping some of you can tell me if this is really a big deal or not.  He explained that over time the gas going into the chimney can erode and deteriorate the inside of the chimney and cause a lot of damage.  He also said another concern is these gases leaking into the house.  He recommended having a chimney expert come out and give a quote on putting in a stainless steel liner.

Should I ask for the seller to have a liner installed?  Or just use it as a negotiating point because it's not really an issue?  

Is this a normal issue in a house built in the 1930's?  Has anyone actually had a problem caused by the lack of a chimney liner?

Thanks!

@Peter Sanchez 

Yeah, I'm in a contract now to purchase a property that needs updating, but it just needs a new kitchen and some painting.  I felt comfortable enough with that to start, but we'll see how the actual rehab part goes!  

I've looked at condos before (mostly in college towns) but they never came out with positive cash flow by the time I added in the condo fee.  Are the fees lower on your FL units?  Or is the rent just high enough to compensate?  

A cash flowing condo in FL sound pretty good! And not a bad option as a fall back property either!

Here's the background:

I made an offer to purchase a Duplex in Indianapolis for $65k.  Seller was asking $75k, but accepted the offer.  Advertised rent was $600 per side, average in the area is $620 to $650 for updated units.  One unit is updated, one is not.

We both signed the PA, and I got copies of the current leases.  That show:

Unit A: Father

$500 rent / month to month lease

No security Deposit and he agreed to fix some things.

Unit B: Unit A's daughter and two kids

$250 twice a month ($500) rent / 6 mth lease ends in April

$300 deposit

Pet that's not allowed in lease

Both pay on time with no issues.

Unit A is updated and could rent for $650 a side with minor cosmetic fixes like paint. Unit B needs some work, including updating the 1950's kitchen and might be harder to rent until summer demand. The neighborhood usually rents easily but most units are updated.  

Would you try to keep the current tenants until summer and then up the rents and screen new tenants?  Or would you ask for deposits and long term leases at closing? 

Thank you!

@Peter Sanchez 

Welcome to BP! You've come to the right place to network and learn more about REI. But you obviously know that if you're already listening to the podcasts!

I live in Arlington, but also invest out of state mostly due to the strong returns I can get in other markets like Cleveland or Indianapolis that I have yet to find in DC.  I look forward to hearing how your live in flip goes with your current townhouse and about your Florida flips!  Did you have to rely on your Dad to manage the flips locally?  I've stuck to buy and holds that need minimal rehabbing because I haven't been comfortable managing a rehab from a distance, but hope to do more of it soon.  Any recommendations or tips?  

Happy investing!

Jacob

@Alex Russo 

Welcome to BP! 

I live in Arlington, VA but love investing in the Cleveland market. Does that count?!

@Pawnee Davis 

Welcome to Bigger Pockets!  You have definitely come to the right place to learn about real estate investing.  And wholesaling is one of many ways to make money that you can learn about here.  The forums contain an abundance of information, but check out the podcasts and member blogs too!  

I'm a local investor that actually invests out of state due to the high prices relative to rents making it hard to find positive cash flow properties.  Best of luck in your investing!

@Daniel Shadle 

Welcome to BP! This is a great resource for learning about real estate investing.  

How far are you willing to move? Do you want to stay in Virginia or are you open to moving to a great but and hold market in order to give you the best opportunity for success? I live in Arlington because of work, but invest elsewhere because of the better prices and returns. I like  Indianapolis right now, but do some searching on the forums and you can find a number of strong markets as options.  If I were single and just getting out of school that's what I would do. Move to the best market u can find and get a job in the industry to learn the ropes.

You might consider a duplex or multifamily as your first deal in order to live in one unit and rent the others.  I think you will have a hard time jumping into but and hold full time without a job or significant savings though. This is because of a few reasons. First you will have a hard time qualifying for a  conventional loan without a source of income. Second, with only one property to start, your income will be minimal from that rental property and probably not enough to live on. Especially if you also need to build up reserves for unexpected maintenance, vacancies, and to private another property.  Third, even to start with wholesaling or flipping you will need some money to advertise or invest in that flip. So full time might be tough but that doesn't mean you can't get a job in the industry and build your buy and hold portfolio part time until you are in a position to do it full time.