All Forum Posts by: Jessie Harrison

I feel comfortable with resources I have in this small town, because my wife and I are from the area and have gotten referrals. Not sure the cash flow justifies the investment, but I am more interested in the forced appreciation with the BRRR strategy. This is exactly why I'm torn.

BP, I NEED YOUR HELP ON THIS ONE. I floated a similar question last week, but now have more information. 

So today marks the end of my option period on a property that I'm unsure about. I stumbled upon an out of town deal for $55k and was going to use a conventional loan (20% down payment) and fund the initial estimated $25k of repairs out of pocket, which would have taken most of my cash.  After further contemplation, I think that I am going to use hard money to purchase, rehab, rent, and then refi.   The reasons that I am undecided are below:

1. This property includes a 2,000 sqft SFH and a stacked "duplex" (both units are 860 sqft - top floor is a 2/2 and bottom floor is a 1/1). The SFH is in good shape, but needs a few updates (mainly roof and does not have central AC).

As for the duplex, the bottom floor of the duplex has been completely gutted due to prior leakage from the top floor. It also has ceilings that are lower than 7ft (as does the top unit). Also, the top floor is basically move-in ready with minor upgrades. Is it just me or will it be next to impossible to have someone rent out a duplex unit with ceilings lower than 7ft?

I am considering making the top floor a 3/2 by consolidating the bedroom from the first floor to make this one unit. My logic is that is may be more cost effective in the short run.

2. The local economy is tied to oil and gas so much so that in 2014 Forbes listed this place as a top 10 fastest growing small cities in the US.  However, the local economy has since gone down given a couple of major companies moving out of the city.  Oil prices are starting to improve and it looks like the market may be coming back, so I guess it's ideally better to buy at the bottom of the market, right?

3. So this sounds like a pretty shaky deal, except the property next door which is about 400 sqft smaller (but updated) just sold for $101k. It seems at the very least to me that the SFH has upside and could carry this entire investment.

Estimated Rents:

SFH - $800/month

Top Duplex unit (ceilings lower than 7ft) - $450/month

Bottom Duplex unit (ceilings lower than 7ft) (if repaired for an additional $20k) - $350/month

4. The property sits on 0.75 acres and future units could be built if I so desired.

Please let me know your thoughts and suggestions. Thanks for your help.

Thanks @Edward Hamill! There's already a bathroom on the first level. It needs an entire makeover, but your suggestion is well taken.  However, I am concerned about the ceilings being less than 7ft tall.  Maybe is far less of a deal than I'm making it out to be, but I'm just not sure how many people are willing to rent given the low ceilings.

@Roshan Koppuzhayil thanks for the advice.  I still have two more days of option period before I have to make a decision. I just do not know where else I can get 3 doors for $85k (after repairs). Either way I just got the inspection which revealed a plumbing issue that I wasn't aware of. Not sure how expensive the repairs will be, but this may ultimately be the deal-breaker for me.

Thanks @Thomas S.!

Thanks @Andrew Taylor! I agree with your/my assessment. However, is it a realistic expectation to find a great deal in a thriving economic area, where rentals are booming? I would assume supply/demand would keep prices normal and killer deals scarce. That's primarily why I'm in limbo on this property. I was told that existing occupancy levels in this small town are very high but the market is saturated and the oversupply is causing rental rates to decrease. I was also thinking I could conceivably list well below the comps and still make money in the short term. Also there likely won't be much appreciation on this property in the long run.

@Mike Reynolds thanks for the offer!

Jason Clem I definitely plan to have reliable property management in place. I've already interviewed a few companies. The bigger issue for me is that I'm slightly concerned about investing in a smaller town market that is in somewhat of an economic downturn.

@Mike Reynolds I don't think there are any options.  The property is located in Longview, but since the duplex is stacked (as opposed to being side-by-side) there are no options.  This particular unit is on the bottom.

Just for an update, my repair costs are primarily cosmetic but I also have to add a new roof.  The new roof is the bulk of my $20k of improvements.