All Forum Posts by: Kyle Steiner

@Christina Sieber Yes, I have a property manager.  I was under contract on another property and ran into similar problems.  They were able to get a quote on the roof that needed replacing but not on any of the other items that needed repairs.

I'm not sure I follow what you're saying when you mention that it's $1,000/ month to recover the costs.  It seems like you might be saying that my $12,000 estimate for cosmetic repairs, divided by 12 months is $1,000 per month.  The way I look at the money spent on upgrades to increase rent is, what is my cash-on-cash return of the money invested.  

If I can raise rents by $100 per month on 4 doors, that means I'll make $400 more per month, or $4,800 per year.  $4,800 additional rent / $12,000 investment = 40% cash-on-cash return, which seems like a pretty good return to me.  

Of course, if large capital expenditures eat up all my cash flow and then some, there is a potential for being cashflow negative, which I would like to avoid.

I'm an investor from California and I am under contract on a 4-plex on a property that is in Tennessee.  I just received the inspection report back and there are some items that give me pause on moving forward.  The market is super hot right now and I have been searching and offering on properties for several months at this point so I am eager to close.  However, I don't want to be stuck with a money pit.  

I want to get bids for the issues identified in the report but contractors are busy and even if I can get one to come out for a bid, it is difficult to let them in to look at the place given that it is 100% occupied. As a result, I don't know if I will be able to get bids for the major items prior to the expiration of my inspection period which is about 10 days from now. 

I really don't know how much all of the big items are going to cost (i.e. roof, plumbing repipe, electrical) and I don't know what is important to fix today and what can be fixed later. Also, if I'm going to fix it later, how much time should I give myself so I know how to calculate a reserve amount each month? I don't want to have a place that is in a state of disrepair but also don't want to break the bank fixing every little thing.

I'm posting here because I want to get others' opinions to find out if I am being too picky.  Also, I'm looking for how others have overcome this problem in their own investing.

Here's some background on the property:

Pros:
Each unit has in-wall A/C units that are fairly new.
All 4 water heaters are less than 4 years old
All 4 electrical panels have been rebuilt
5 minute drive to downtown

Cons:
Built around 1950 so some items are showing their age.
No washer/dryer hookups in unit, no on-site laundry

Minor issues (in my opinion):
Damaged siding
A few small areas of wood rot

Issues I'm concerned about:
Roof:
Roof deterioration - Roof age is 14-16 years
Roof sealant at ridge caps, flashing, and accessories should be resealed
Rafter sag - this caused the roof to sag in certain areas, which my inspector said is typical for older homes that have no collar ties installed.
Attic access was sealed off, caulked and painted over by the current or a previous owner.  There is no way to access the attic without cutting a hole in the ceiling.

Electrical:
Electrical wiring includes copper, aluminum and cloth sheathed.  Electrical is ungrounded as it was not required at the time the property was built.

Plumbing:
Galvanized Pipe used for distribution piping - my inspector says this can contribute to low pressure, rust colored water and may need to be replaced in the near future.
The property still has the original cast iron drain pipes which have an average life expectancy of 40 to 50 years.  According to the inspector, they corrode from the inside out.  The property is about 70 years old at this point.
The water heaters, while not very old, already have rust/corrosion on the top and bottom of the tanks.  I think there might be high humidity in the basement area where they are installed and that they could fail prematurely as a result.

Financial Summary:
I am putting 25% down and will be securing a 30-year fixed mortgage. With current rents, after my fixed expenses (PITI + Property Management), I will have about $675 of monthly cash flow (this assumes no repairs or maintenance), which obviously, there will be repairs needed. The rents can be raised an additional $70 to $100 per unit over the next year or so. After rents are raised (which will probably take $12,000 total in cosmetic renovations) , I'll be around $950 per month positive before capex, repairs and vacancy.

I'm interested to hear everyone's thoughts and advice!

@Gregory Greene Palmdale has good and bad areas. Check crime maps on Trulia to get an idea for the crime in different neighborhoods. Generally though, East of Highway 14 are higher crime neighborhoods. Quartz Hill, west of 14 is a bit nicer. You said buying a condo looks like a good idea right now. What specifically about buying a condo seems like a good idea? Are you running the numbers and getting anticipated returns that exceed returns on single family?

I'm writing an offer on a property that I'm planning to pay all cash for.  My wife and I are each contributing to the purchase and we would both like to be on title.  However, we have a long-term plan to accumulate more than 10 properties and want to be strategic in the way we structure which one of us is on each of our loans now so that we can max out at 20 Fannie/Freddie loans in our individual names. 

My question is, if we buy this property with all cash and later, refinance with the bank, will the bank allow me to put the loan in my name only (assuming I qualify with just my income)?

Hi Isidro, there are many ways to generate leads. Some cost money and others cost time and "hustle."

If you have no money, you could try door-knocking. People who door-knock typically find a neighborhood they want to invest in, look for run-down properties and knock on the door to ask the owners if they'd consider selling.

If you have some money, another way to target potential sellers would be to get a list of pre-foreclosure addresses or addresses of absentee owners (people who own property in California but live in a different state). Then you could do some direct mail in which you send letters or postcards to properties that are on your pre-foreclosure or absentee owner list.

You could also drive the neighborhoods you're interested in, write down addresses of houses that appear to have deferred maintenance and send letters to those addresses as well.

Good luck on your investing journey!

I haven’t invested there yet but have been looking for the past few months. Are you looking to invest in this deal yourself or are you looking to wholesale it? If you want to wholesale it, I’d be interested in hearing what the deal is.

Interesting question since I am in a similar situation in terms of using a HELOC for purposes of rehabbing property. I’m interested to see what responses you get.

Hi Everyone!  Hopefully there is a CPA among you for this question.

I put my first offer in on a property that I intend to flip. I've read in these forums that it makes the most sense to set up an S-Corp for the purpose of flipping homes. I intend this property to be the first of several flips to be done in the future. My question for you all, is, if I get this property under contract and close under my name, can I quit-claim it to an S-Corp and get all the same tax benefits and asset protection as I would if I had purchased it in the S-Corp's name to begin with? Also, does it make sense to have a separate LLC for each property I flip or does it make more sense to just buy properties under the S-Corp and leave it in the S-Corp's name?

Thanks for any help you can provide!

Thanks for the suggestions everyone! There are lots of good ideas in this thread.

I'm looking at houses to flip and I came across one with an outdated fireplace.  What would you do with the stone here?  Paint it white?  Rip it out and replace the drywall?

I'm wondering from a cost/benefit standpoint, would it be better to just leave it in there rather than incurring the expense of ripping out drywall, rebuilding a basic but nice brick fireplace, then hanging new drywall, taping, texturing and repainting?  

For some context, this is in a suburban neighborhood with prices in the $180 - $230k range and I would plan on repainting the walls regardless of what I did with the fireplace.