All Forum Posts by: John Chapman

@Russell Brazil has given you the best advice.  No broker is going to want his agents threatening to sue over lost buyers' agent commissions, particularly as I'm guessing there's not a lot at stake.  

Yeah, I agree with @Jay Hinrichs, this was just a bad flip, but pretty mediocre returns for the private lender.  There's just going to be deals where the lender makes more than the investor, and that's the investor's fault.  (We've all been there, so I'm not saying that to be mean.)  That being said, you did right by your investor, which is the most important part and I suspect you'll enjoy far more long term success as a result.  Good work and as long as you didn't get totally creamed on this, move on to the next and make a killing with your new knowledge.

@Brenda Whittaker, Based on your post above, you absolutely should sell.  You're burned out from rentals and don't like the business.  You just need to be done with it, and move on. Delaying the problem or trying to get the tenants to buy the home is quixotic,  pointless, and ultimately going to cost you more in terms of stress and money.   There's no magical solution to address your issues as this is a pretty simple business.  Sorry to be blunt, but you need to hear it.

This is a pretty common issue here in Texas.  Nothing to get too worked up about.  Mold is generally the boogey man of real estate investors.  First, it's not even clear you have mold.  Swelling from moisture is pretty common.  Open the wall up and and see if there's any mold or mildew.  If there is get rid of the affected insulation and sheetrock, apply bleach to the affected area, and let it dry out.  Also, make sure cause of moisture is fixed (which you've done already)   99% of the time, this is all that is required.

@Nathan Veech That's kind of what I figured.  I think you're going to find that the price to rehab your existing home is going be the most effective way to deal with it. You really need to look at what you will end up with as a finished product and what it will rent for.  (Haven't looked at 2/1's in a while so I don't know)

I'm really not sure what build costs are in Watauga but they could easily be $100/ft.  If you're GC'ing yourself, then probably less.  (It's really hard to throw numbers out in a vacuum)  More fundamentally, rents tend to be pretty low compared to market values in Watauga.  I'd also be surprised if Watauga continue to appreciate significantly.  The prices you are seeing now are about what people can generally afford in the area (Watauga has always been a little more blue collar).  Just my  two cents.

So even if you build new, I'd be surprised the house will cash flow at all, given those rents relative to square footage.  I realize the calculus is a little different since you already own the land, but what I found in looking at other areas, is that even if I could build profitably (i.e. with a margin for profit), it never made sense to hold the property long term because rents were too low.

I own rentals in Watauga and am spec home building in Fort Worth.  I've looked at building new stock to rent in the Polytech area and could never make the numbers work. Really need rents and market value to match up.  If you don't mind me asking, what part of Watauga are you in and what are homes going for?  Given your cost basis and size of home, my gut says rehab will probably be better than new build, at least as to the existing house.

That makes sense, @Vijaianand Thirunageswaram.  That's some pretty cheap dirt!  Love that your staying at a super safe price point with those margins!

Realize I'm a little late to the party, but those margins are really impressive @Vijaianand Thirunageswaram.  I've been doing new construction as well and $20-$30k profit on a $200k house around here  is pretty good.  ($30k is about 15% profit margin, which I understand is about average here)  I'm actually moving into the $300k price point, just so I can get those 15%  margins.  If you don't mind me asking, did you get a smoking deal on the dirt? 

I've been fortunate enough to find two banks that lend to me for new construction spec building, but they are super small and super local.  I'm sure if you pound the pavement you'll find someone, particularly as you now have the experience under your built.  My impression is that this makes a huge difference.

I'm pretty much done with flips.  I'd rather spend my time looking for dirt and building new where at least the costs are fairly predictable.  

Kudos again to your success!

That's a pretty big range in terms of cash flow. Have you done STR before? I haven't so I have no idea if your numbers are right. Rehab experience? Big rehabs often go over budge, fact of life.

Short answer, as always, is "It depends." What are your goals? If it's to minimize cash outlay so you can acquire as many properties as possible and 30k is all you have to invest, then it's not a good deal. If that's not the case, then you need to see how this compares to other STR deals in terms of returns.

@Rousner E. it sounds like you did it right.  Sounds like you kept your cool and got them out peacefully and without any drama.  I, personally, am leery of terminating leases for violations that don't involve non-payment of rent (in your case, smoking weed).  Tough to prove and less clear cut so better to get them out cooperatively.  

I've done it all sorts of ways, notices to vacate, evictions, cash for keys and combinations thereof.   @Joe Splitrock is totally right that the notice to vacate should always be sent, but I always follow up with phone calls and keep the lines of communication open.  ("I want to work with you to get you out of the home" etc., etc.)  Even after I've filed for eviction, I'm super nice and polite and try to work with them.  ("I don't want to have get an eviction against you so what can we do?")  Learned this the hard way. As landlords getting stiffed on the rent, it's real easy to get made or irritated but swallowing our pride and trying to be accommodating usually turns out to be more profitable.