All Forum Posts by: Leo Kotschenreuther

I don't have any properties in the area but I'm one of the millennial techie types in the area who also is a renter. For me personally, I want my interaction with the landlord to be as simple as possible. This includes being able to pay rent electronically and to be able to communicate with the landlord via email or text. So far I found all the places I lived in here via Craigslist. Otherwise you could also try to find some facebook groups that are for people who are looking for or offering housing. Never heard of rent.com or hotpads.com

Another idea that I have, many people are just looking to rent a room rather than a full house or apartment. You should consider to rent by the room and not by the unit. It might be worth the extra effort.

Thanks @J Scott and @Allison Stewart, your answers were really helpful!

Dear BP-Community,

I read J Scott's book about how to estimate rehab costs. That is a really great book and I find the technique he describes very helpful.

However I feel like there are a few items where it's going to be hard to estimate their cost by myself, even with the described technique. Specifically, I'm thinking about issues that will only become visible after an inspection by a professional. The items with open ended costs J lists in his book are septic, foundation, leaks below slab and mold issues. I'm sure there are possibly others like the plumbing or electrical behind walls.

How do you estimate the costs for such items before making an offer? After all I don't want to pay an inspector or contractor to get me a bid before I made an offer. That would slow me down quite a bit and cost a lot if I needed to make 100 offers to close on one.

Do you just estimate an "average" cost for those items and if something unexpected comes up during the inspection, would you just renegotiate the deal (making use of the inspection contingency in your offer)?

Or do you rather assume the worst case and estimate a high cost and make your offer based on that?

As always, I'm looking forward to hear your opinions!

Dear BP-Community,

my rental property in Lufkin, TX is currently vacant and needs a little bit of work, especially some fresh paint.

Can you recommend a handyman, contractor or painter who offers fair prices and does good work?

@Ross Yeager My experience so far was that the large expenses happen more often than you think they will do. I had two issues come up that were not mentioned in the inspection report. So far it seems like I spent about 100$ on average per month for smaller repairs and maintenance. Only setting aside 50$ a month for bigger items seems quite small.

My property is currently vacant and will get some more things fixed and fresh paint as well. I haven't seen any bills for that yet but I'm sure it will cost a bit of money as well.

The point is, things break quicker than you expect, the property is vacant every so often and needs fresh paint, and you quickly spend a lot more than what you expected to spend.

150$ a month for both repairs and CapEx could be a little low but I can only speak from half a year of experience.

Great post about your experience with Roofstock!

Somewhere in your blog posts you mentioned that you were aware that the market value of the property was a lot less (you said 10k+) than the list price of 120k. So why did you offer to buy it for 115k then?

Additionally, I had a look at your numbers (the screenshot of your spreadsheet), you didn't calculate any budget for capital expenditures for once you own the property. Wouldn't that likely lower your monthly cashflow?

But yeah, overall a great way to learn. At least now you know how the whole process of buying a property looks like and that closing costs are a lot more than what Roofstock assumes in their pro forma calculation. A lot more than 1.5% of the purchase price, at least for sub 200k properties.

@Kevin Sobilo @Jaron Walling Thanks for sharing why you prefer all cash, that was in fact my intended question.

Good point Kevin, I lose no matter what the market does when I sell the property. So the risk is that I could lose more if the market goes down.

@Joe Villeneuve @Kevin Sobilo Let me share the actual numbers with you.
I currently have about 16k equity in the property I mentioned. My estimate was that I would lose 6k of that equity when I sell it due to closing costs. I also currently have 15k in a money market savings account that is earning 1.8% interest per year. If I were to put the 15k into the mortgage now, an extra 52.52 would go towards the principal every month. Over the course of a year, that would sum up to 630.24 and compared to the 15k that is about 4.2% (the interest rate of the loan is 4.25% so this number checks out). In addition to that, I could probably also contribute another 1250 every month and get the "saved interest return" as well. This brings me to the mentioned 40k.

Long story short, making additional payments into the mortgage saves interest and the ROI is better than in a savings account. On the other hand the money will be locked up and I would have to sell the property in order to access the money. Considering the risk of the property loosing value until I sell it (maybe the market drops), this is probably not a great return and the savings account might be the better choice. Since I'm having a job that pays well, I could also save up about 2k every month and would get to 40k of savings (within 12.5 months) even without selling the property.

@Joe Villeneuve For every dollar of the mortgage I pay off in addition to the monthly payment, the portion of the payment that goes toward the principal gets a little bigger and the portion that goes towards interest gets a little smaller. Not a great return on investment though considering the low interest rate on the mortgage.

Let's leave the mortgage aside for now. Would you rather wait a year and buy deals all cash or start now and use hard money or private lenders?