All Forum Posts by: Kai G.

I've been looking for a buy-and-hold in the local area (Seacoast of NH), and I have trouble finding places in decent neighborhoods that offer a decent cap rate.

I've just looked at a foreclosed condo in what used to be a big apartment complex, which apparently converted to condos. It's in decent shape (mostly needs paint, some water damage in the kitchen ceiling, time for new appliances), listed at ~ $100k. I actually think I might be able to get the place at ~$75-$80k. Other (updated) apartments in this complex are advertised for $1200/month, so that's looking good.

But there are a bunch of red flags:

- condo fee has kept going up every year: $180 -> $225 -> $275 -> $325 (2016)

- the place was apparently poorly managed / not maintained, they're now doing major work (new siding, new parking lot, ...) I just learned there is a $2500 special assessment for the parking lot coming up. There's already been some special assessments (< $1k) in recent years, and with the siding etc coming up, I expect another one to come next year.

- It seems some investor has been buying up almost all units (most of them were owned by the original apartment complex, anyway, only a few seem to be owned by individual owners). Obviously, they control the condo association (I think they own like 90% of the units), but I suppose they still have an interested to make this place survive.

- I suppose it's not possible to get conventional financing because of the investor concentration above, which means it'd be probably hard to get out of this deal.

- I think the place has been nearly (or actually) bankrupt, and the association has no reserves.

- The only recent "comps" I can find is the large investor buying up two units which had been previously foreclosed, then owned by another party for a couple of years. Those were sold at $75k each. The investors bought the majority of the units in 2013/2014 for <= $45k (in package deals from the original complex, I believe).

Should I run from this? Most signs seem to point that way. On the other hand, the rents seem decent, and if that complex managed to pull out of the bad times, I could see a lot of potential upside, in particular if the condo fees get back under control. The unit I looked at last sold in 2006 for $140k.

Thanks everyone for your input, it's reassuring to know that I don't have to look for a 80% of FMV deal to get started.

While I think I'm fairly handy (but extremely slow compared to a pro), I don't think I have the time to get into rehabs, neither in DIY nor in the managing sub-contractors way. I'd actually have fun, but I'm sure it would take so long that the holding costs would wipe out any profit. So my idea is to try out buy and hold, and at a fairly high level (A/B neighborhoods, I guess), where dealing with tenants shouldn't be too stressful, even if the profits aren't as good.

Thanks for your input, everyone.

@Brandon L., don't take it personally, but I can be too stubborn to accept "trust me, PM is worth it" until I get my own experience. I've read the "stupid things tenants say" etc threads here, but I think that mostly doesn't apply to a $1295 for 530 sq ft apartment. I may get to talk to a property manager here, so I may get a better idea what PM actually does for me...

@Thomas S. I don't have an accountant, but I'm aware of the various tax implications/1031 possibility. As of now, it's a non-issue, because the 1 year of appreciation more or less just covers closing costs. And, my wife actually lived there for two years, the first year as a renter before we bought it -- so we know the association allows rentals ;). So we could take the capital gain tax free, if there were any, and maybe that's something to consider in 2 or 3 years.

I'm admittedly brand new at this, but I'm trying to wrap my head around how you're supposed to buy rental property at 70% ARV (or maybe 80%) after repairs costs. I do understand how that's rather desirable, giving you better cashflow, an exit strategy, etc. But I wonder how it's possible, because what's a good deal for the buyer is a 30% left on the table for the seller, and I wouldn't think too many sellers are up for that.

Here's what I can come up with as to how deals like that could happen:

• The seller goes FSBO and doesn't have much clue, so underprices the property. (but I gather that most people do FSBO because they're trying to get top dollar, so they're more likely to actually overprice).
• The seller uses a realtor/MLS. In that case, I'd expect that at least the realtor will have a clue, and not price the property way low. I suppose there is the occasional distressed/desperate seller who's willing to accept 30% below list, but I suppose it's hard to tell from the listing. So how would you find those? Make a hundred lowball offers until one sticks?
• Properties that get sold outside of the public (MLS/zillow/craigslist) market. But again I don't quite see why people would sell for substantially less if they could get more in the open market?
• I guess the exception I can see are properties that need substantial repair before being sellable in the regular market, because regular buyers would shy away from them, not get financing, etc. I can see getting a substantial discount there, though even that may be limited somewhat now, since rehabbing/flipping properties seems to have become rather popular since the last bubble / HGTV, so I suppose there's competition there, too. Anyway, personally those feel like too much of a risk for me at this point, as I don't have any experience with hiring/supervising contractors etc, and I suppose doing this the regular remodeling / general contractor way, any potential profit would go to the GC rather than me.

So maybe I'm missing something, but it seems that for a newbie it's rather hard to get those kind of deals on properties? (And of course that makes some sense, too, because otherwise everybody would be doing it...)

Thanks for your reply! I'm certainly open to getting a property management company, but I figured if I don't try myself first, I won't know how doable or not that is (though I suppose it might work fine with one tenant and not at all with the next). Still, something like 10% per month just for collecting rent seems like a lot of money. I mean, if something is broken, the mgmt company doesn't fix it themselves, right? I still have to pay for someone to take care of the problem -- I just don't have to find that "someone" myself.

And yeah, the ARM of course has some built-in risk, but we have decent day jobs, so an increase in payment wouldn't financially ruin us. In fact, as it was owner occupied, the plan was to pay off more of it if interest rates were to rise. Now of course I'm thinking, rather than investing my cash at effectively 2.75% by paying down principal, I'd rather find an actual good buy-and-hold in NH with much better return. But I think I have a lot to learn about the market here first.

We've considered selling it, and that could certainly be an exit strategy if the rental creates too much hassle or loses money. Right now we might be able to sell it for enough to get back what we paid for it after paying closing costs, so that's something, but not great. 

I'm basically pretty risk adverse by nature, but given the situation that we already have the place, I figured I should use the opportunity to do something outside my usual comfort zone.

I just became a first time landlord, and I'm wondering what you guys think (I posted most of this in new member intros, but at the speed the forum moves I think posts get only looked at by a few locals, so I hope it's okay to repost this here.)

The property is a 1br condo in NoVA (northern VA) that we bought since my wife was working down there, but she now found a job nearby (in NH). We didn't buy it with renting it out in mind, but since we've already got it, we're giving it a shot.

We bought it ~ a year ago for $179k, with a $120k 5/5 ARM currently at 2.75%. We just put $2500 and some sweat equity worth of upgrades / repairs into it, so it's in pretty good shape but kitchen cabinets and bathroom vanity are still outdated.

We now found what we believe to be a quality tenant on a 1 year lease at $1295/month. The expenses we know for sure are $283 HOA fee, $161 property tax, $14 insurance, $480 mortgage = $938 total.

That would be $357 cash flow, well, except I didn't account for vacancies, repairs/updates and property management, and if I do that, I end up at about zero. OTOH, the mortgage payment includes $200 principal, which isn't really a cost (though it still goes into cashflow).

Our plan for now is to manage the property remotely from NH -- we've lived in the unit ourselves for two years and didn't have any issues at all, and we just put in a new dishwasher and water heater, so we don't expect too much to happen, but well, I guess we'll see about that... This being a condo, the sizable condo fees should at least take care of bigger issues in the long run like roof / exterior, so we're mostly expecting the occasional appliance/AC problem only.

We're hoping to time turnover to be in the summer, where we can combine fixing things up and showing the place with a little vacation for ourselves, so we can actually get some benefit from the vacancy.

In summary, I think the numbers don't look great compared to what a real investment should bring -- part of the reason being that a relatively large amount of money is tied up in it -- but I think it looks like we should at least break even and I'm actually hoping to make some money off of it in the long run, and gain some experience to get into some real buy-and-hold investing.

Hi, I happened to get thrown into the real estate business mostly by chance (and I'm not really in very far). My wife used to work in the DC area, so after she rented a small 1br condo in Alexandria, VA for a year, the landlord put it up for sale, and we bought it at what I believe to be FMV with a bit of savings due to no realtor commissions.

Fast forward a year later (now), my wife found a job in NH, so we decided to giving renting the condo a shot. It's kind of a trial balloon, and I'm not exactly sure how we're doing, but we already owned the place, so it's not that we had much of a choice other than renting or selling.

If anyone wants to criticize the deal, I'd be glad to know your opinion. It's far from the 2% (or even 1%) rule, though I kinda doubt that's possible in that area right now.

Purchase price: $179k + $4k or so in closing costs. $120k mortgage at 2.75% (5/5 ARM). It's now rented out at $1295 for a year. There's a lot of guessing on the expense side, but I suppose the rather substantial condo fees at least mean I don't have to worry about big repairs like roof or anything. We put about $2500 and some sweat equity into the property before renting it out (some flooring, new dishwasher, new water heater, painting, etc).

income: $1295

expenses: $108 vacancy (guess), $283 HOA fee, $161 property tax, $14 insurance, $130 repairs / updates (guess), $480 mortgage

cashflow = $119

And that doesn't take management into account, which so far we'll try to do ourselves (from NH -- I know that's iffy, but we did find a high quality tenant so we're hoping that not too much will happen). We're hoping that we can manage to get tenants to turn over in the summer, where we can spend a couple of weeks down in DC combining a little vacation in the place with fixing things up and finding a new tenant).

Of course I made some mistakes already, too, but I think I'll get away with them this time...

So after getting my feet wet, I've been reading about REI, and we do have cash / equity (our primary home is just about paid off) to stuff with, so now I'm considering to get into it in a non-accidental way, and it seems more prudent to look at our local area (NH seacost), but it turns out I have little idea about the purchase/rental market here, and it doesn't seem all that easy to find out (in NoVA, at least, there's a very active market, while here prices seem to fluctuate wildly for no obvious (to me) reason. I read that NH has a rather tight rental market, but I certainly don't have a clue yet how find properties that would make a good buy-and-hold deal, it seems difficult...