All Forum Posts by: Jeremiah B.

First - GO COUGS!

As a pure investment, I'm not crazy about this deal at anything near asking.  With a total gross rent of around 1900, with two units, in a 1947 house, in Pullman - a purchase price of anything near 185K is probably cashflow negative.  Granted, I'm cheap and I don't buy in Pullman.

With that said, you're in a sweet spot where you can live in half of it.  That makes the math more complicated, but also much more favorable.  This will probably not cashflow well, but it may still be a decent investment. I think there are some key questions:

Ignoring the rental component, would you be looking to buy yourself a house to live in today?  If so, this is probably a better deal for you than a single family house with no rental.

Do you want to learn to be a landlord?

Can you hold this for a while?

Can you stomach the volatility of extended vacancies?

Happy hunting!

This isn't a horrible deal, but I wouldn't suggest it as your first investment. Inexpensive properties like this (especially older ones) can have super high expense ratios - though to your credit you have a big number plugged in there.

I also worry about your first bite being a bite of 5.

At the same time, this may be a decent option.  It's just more risky than I would suggest starting with.

I have strong feelings on this, though my approach probably isn't or everyone.  Two things:

When possible - buy in cash!  You will get your offer moved to the top, and will be able to offer less because you have such favorable terms.  I've only purchased a few places like this, but I feel strongly that cash is the only way to go, if you can swing it.

When possible - hold as financed.  Long-term, if you hold a place in cash, you will both experience smaller returns (total returns) from that one property, and will slow down your growth rate buying additional properties.  

With that said, the buy-refi strategy is not common enough that all mortgage people get it.  And if you don't follow the guidelines precisely, you can be caught without a chair when the music stops.  Do research in delayed financing (a key term) and then find a mortgage agent with experience working with investors.  

If you can pull it off, the strategy is a good one to get properties at a discount, and keep your money working for you.  

Happy hunting!

@Eric Petersen 

Welcome to BP man - and props to looking for a RE investment.

It sounds like you're hoping for a discussion more than an answer, so forgive me for meandering a bit...

You need a certain set of skills and expertise on your team - but whether it's you or your team that has them is somewhat open for discussion. For example, I've become pretty well versed in SFR investing, and am more savvy about the topic than the RE agents I work with. What I value is her work, responsiveness, eye, character, etc. etc. She looks at tons of properties, puts in tons of offers, and keeps deals together with duct tape. My RE agent is a more valuable resource than my cash. But, I would not advise someone new to the game using her.

It sounds like you're newer to REI, and that's great. But that does mean that you should have a RE agent who really gets investing!!! I would educate yourself on the following questions, and then ask them:

1- What are your feelings on the 1% rule no today's market? (THEY MUST KNOW WHAT THE 1% RULE IS, OR YOU SHOULD NOT USE THEM.  The answer is a big one that you need to decide on.  This will also answer your cash flow question).

2- What expenses should I be factoring into my proforma? (correct answer is taxes, vacancy, normal repairs, big repairs, and maybe property management, mortgage, HOA, etc. If they don't list taxes, vacancy and repairs, run away)

3- What vacancy number should I use in my projections? (google the rental vacancy rate in your area and expect to hear a little lower than that.  If their number differs by more than about 50%, really consider your next steps)

4- How many investors have you sold to in the last 12 months?  (They will talk about individuals, but get to a number.  I think you want at least 3).

5- I plan to look at lots of houses and put lots of low offers in. Are you comfortable with that? They will all say "yes" to this, but it sets an expectation, and lets them opt out shortly afterwards if they prefer. Any REI focused agent will already assume that this is the case.

Happy hunting!

A few ideas:

First - do a good job!  Good PM's are a rare breed, and very valuable.  If you can stay on top of things and take care of your landlords and your tenants, you are almost certain to grow. 

If you want to speed up the process, offer your current landlords an incentive to refer other landlords.  Something like "2 months of PM fee waived for each new signed landlord referred by your current landlord.

Some other ideas include: managing and responding to reviews (this is a big one for me), incentives for new landlords (such as no leasing fee for the first property), attending RE investing meetings, reaching out to real estate agents and offering them services (free rent estimates, kick-backs on clients not ready to buy yet - if  legal) and so on.

But again, I really feel that if you're doing well, you will grow organically.  If you focus on growth rather than your core business, it's likely to all fall down around you.

Happy hunting! 

Thank you @Ivan Oberon 

I did some additional digging.  Here's what I know:

First, you can not get flood insurance without an elevation report.  These reports are done by a surveyor with a special designation and kept on file as public record by the county.

Not all 100 year flood plains are created equal.  In fact, the term "100 year flood plain" is very misleading.  In actuality, the 100 year flood plain is a discrete value, and properties significantly higher than, or lower than this level still get the AE label, and titled the 100 year flood plain.

This means that insurance can vary crazy amounts!!!  My property will cost 171 annually!  If it were 6 feet lower, or right about the discrete 100 year flood plain level, it would have been in the thousands.  If it had been lower than that, rates skyrocket quickly.

So, even though my property is classified as high risk on the 100 year flood plain category of AE - the actual threat of flooding and impact on rent or future sales is negligible.  

Seriously have they got @Dion DePaoli on the podcast yet?  I'd pay money to listen to that.

I have learned more about notes from Dion's posts than... well... yeah.

We just got a great deal under contract, with the one caveat being that it's in the 100 year flood zone.  

At a high level, this will be a buy-and-hold rental for us.  The property is newer house (2001) and has never flooded.  An elevation report has never been done, but the county maps place it on the 100 year flood plain (these maps will be updated next year).  We will pay in cash.  We will shell out the money for an elevation report during our due diligence, and will get flood insurance (we will back out if the flood insurance is simply too high to sustain).

But my question and thoughts are two fold, and I'm looking for thoughts on both...

First, as a landlord, what additional information do we need to do to rent the property?  Our plan is to have a signed 1-page addendum stating that the property is in a 100-year flood zone, and to encourage the tenants to get renter's insurance with a flood rider.  This would be included as part of the lease.  We do not expect the flood plain issue to affect rental amount or the number of prospective tenants interested.

Second, what challenges will this present in the future when we try and sell it? Will it affect the sale price, and if so, by how much?  Will it affect the time to sell, and if so, how much?

What else are we missing?  Looking for some guidance on this!

Heyo,

I'm an out-of-state investor who also invests in Charlotte.

First, I'd strongly suggest that you not buy a house without having you, or someone who works for you (such as your agent) look at it!  Charlotte is one of those cities where a street or two can make a world of difference.

Second, I think you do need a team. An inspector is part of it, but you also want an attorney as well.  And a property manager.  Maybe a rehab team. And my personal view is that a real estate agent is the single most important person you can have.

If you're interested, drop me a message - I have an awesome agent who I would highly recommend.  If not, I would still suggest you try and find an agent to work with.

Big props to you!  The buying/investing in real estate gets all the glory, but the pre-work that you're doing is often times the difficult, and important stuff.  So, props to you for doing it right.

I think your next big step should be to accumulate capital - thought the amount that you will need will vary based on your specific strategy.

I echo your small multi-family strategy as the best first-step, but that's a bummer that they aren't common where you live.

In an ideal world, I would target a lower middle-class SFR. Try and buy it around 80% of ARV, with 20% down, with 10K in rehab needed, and with your cash reserves in place. For example, find a house that's worth 100K rehabbed, but is listed for 80K due to cosmetic issues. Try and get it for 70K (~20K down/closing), put 10K rehab into it - and for 30K cash (plus reserves), you have a great investment.

There are plenty of plans out there where don't need that much cash. FHA loans are the most common option.