All Forum Posts by: John Chapman

My vote would be spend a smidge on curb appeal, but do not sink another $5-$10k into it.  (Put that towards a price reduction).  I just sold a flip in Fort Worth about a month ago and it took several price reductions to get the home into what I would call the correct bandwith of buyers.  Nine times out of ten, it's just getting it priced right.  My guess is that as you get into the mid to lower $200s the pool of buyers will get significantly larger.  Plus, we are going into slower season, so there's that.  

@Brenda Whittaker, you really have two options:  (1) sell; or (2) raise the rent. It's kind of a good problem to have in that it sounds like your house has significantly increased in value.   (Higher property taxes generally correlate with higher property values).  It also sounds like landlording might not be for you if you are so far below market in terms of rent that you cannot afford the home and cannot bring yourself to raise the rent.  Moreover, it sounds like you are empathizing way too much with your tenants; this is a business that should be handled with dignity and compassion but at the end of the day, it's still a business.  Given everything you say above, I would probably opt to sell.  I'd call your tenants (don't just send a written notice), and explain the situation.  If you're kind of on the fence, tell them that the rent needs to go up however much just for you to hang on.  Tenants know when they are getting a phenomenal deal  and often (in my experience) will just eat the increase because they know there's nowhere else to go as cheap.  At the end of the day, this isn't that big of a deal.  Just some perspective.

@Mike Khalil, that first deal in particular has some pretty impressive numbers.  I'm impressed you were able to get such a large bump in appraisal given size of rehab, and certainly was an impressive equity play.

I'm not sure what types of houses you're buying I'd caution you to slow down a smidge or pivot to assets that cash flow a little better.  I don't know what kind of rents you're getting (I could guess), but those higher priced properties in DFW do not cash flow well, if at all, as rents tend to flatten out pretty quick.  If property taxes haven't caught up to you yet, they will and they hurt.  Those rehab numbers are light so watch out for increase maintenance going forward.  Finally, you need to make sure you are not buying too large of a house (make ready and maintenance will kill you).  Could be worrying for nothing, but I see alot of people buying houses that don't make much sense.  (Not saying that's you)  Been doing this for almost twelve years so I've made tons of mistakes over the years.

@Anthony Van Gilder, this sounds like a bad idea unless you have a partner or are from the area and have tons of contacts.  There's no way an agent with a video cam is going to be able to give you information you would otherwise get from physically walking the property.  (maybe if they're with a turnkey company or something)  Plus, sticking inspection contingencies in your offer only makes your offer weaker.  Perhaps if you had a super trusted contractor to walk and tell you what it needs, but man, trying to do an out-of-state rehab strikes me as really risky.  

Do not build a 2/1 new house that you will rent for $600-$650 in rent.  (That seems super low rent, unless you're in a rough/really rural area.)  It will never appreciate (nobody except another investor will likely want it)  and the rent is not sufficient to cover cap ex in the long term.  Cool idea to utilize your skills as a builder, though.

Yes, the deal is lost.  No, you could not have persuaded her.  Usually (okay, almost always) sellers can net more by listing with a real estate agent than by selling to a wholesaler, particularly if the house is in okay to good condition.  Assuming you were being honest with her (disclosing you were going to find an end buyer to sell it to, being honest about market value, etc.), she probably just decided she wanted to net more by listing it and waiting a little longer.   Note, I'm assuming you had it under contract for significantly less than what it's going to be listed for.

Yeah, @Jay Hinrichs, those numbers are about what I would expect.  I dumped a rental a few years ago, and I think it was between $15-$20k to get it retail ready.  (That seems pretty standard if you did a good job on the rehab on the front end.)  Depreciation recapture is a downside that is significantly minimized on BP, it's a real thing that you have to deal with if you ever want to get out of rentals.  (Which after a number of years, most sane people want to do.)  The rate is generally higher than capital gains and it just eats up a significant chunk of net proceeds if you've been holding for a while.

I just shake my head when I see all these newbies proclaiming stuff like, "I just bought 10 units in 10 months" or whatever, particularly if it's in historically flat markets like the midwest.  Sure, they're cash flowing for a few years and feeling like geniuses (I did the same), but then those big expenses creep in and after 7-10 years, and the next thing they know they're staring a nice big fat rehab bill that eats up all that cash flow from the previous years.  (And if they bought them all around the same time, those bills just stack on top of each other.)   I got bailed out with appreciation and rising rents, but I wouldn't bank on that again, at least in my market, for some time.

Honestly, after nearly twelve years of landlording, I'm pretty much in favor of new construction if you can somehow make the numbers work.  A while ago, I would have said complete rehab because it's a "like new" house that you can buy at a discount.  As I've done this longer, I've realized that, no matter what you do from a rehab perspective, it's pretty hard to get a brand new house from a rehab, at least here in Texas.  Maintenance is generally always going to be higher on older houses, period.

Also, I'm not even sure anymore that SFRs make sense for the super long term.  As @Jay Hinrichs points out, after 7-12 years, you're looking at a complete rehab in the tens of thousands of dollars.  (Unless you want to run it into the ground, which comes with its own issues.)  The truth is that these buildings were not built to be rentals and so they're inefficient from that perspective.  If you buy in super high quality markets (like on the coasts), massive appreciation can bail you out.  For "normal" markets, I'm just no as convinced anymore.  I say this, too, as someone who has benefited from very good appreciation.

@Maneesh Joshi, water leaks often go for a very long time before detection so, again, this is not an uncommon situation.  Mold is the great boogey man of real estate investing.  Floors and subfloors can replaced, joists and studs can be bleached etc.  Still doesn't sound that huge to me.  Heck, I had a really serious kitchen fire before closing on one I bought.  (Totally had to be redone down to studs.)  Just adjusted the price and closed.  

In terms of stipulations, I'm not sure what else you can ask for other than (1) repair the damage; or (2) get a credit/price adjustment so you can repair the damage.  I think if you demand a lot more than that, you may risk killing the deal.  Not sure if it's that good of a deal, so this may be not be an issue to you.

@Jonathan R McLaughlin   I actually think we are in agreement, though my post was probably less than clear :)  I was stating only that it appeared he tried to promptly address the situation, and it took a long time to get it fixed, which can sometimes happen.  (Nothing nefarious like ignoring the problem.)  I can tell you from first hand experience I have had issues weird issues that have taken a month/months to figure out. (In one case it was a weird sump pump issue, multiple plumbers, diagnoses, think it was fixed and it wasn't, etc.)  Maybe I was reading a little too much into it, but it appears that there was a lot of troubleshooting that went into it.  Pretty much agree with everything you say about how it was handled.