All Forum Posts by: Liam Goble

Derrek, I'm a contractor as well. My personal 'specialty' is MEP and Insulation, but my company does entirely new construction. Given my background, I decided fix-and-hold was the best way to go. I could purchase homes in need of significant repairs at steep discounts, repair them, then rent them out for pretty good cash flow.

Good luck, it can be a lot of fun.

When you say you're renting your first house, is this your first rental property (you live somewhere else), or this is your primary residence and you plan to move and rent the residence? Then, I assume you're looking to purchase a 2nd residence, correct?

Generally, a bank will require anywhere between 15% and 25% down for a 2nd house. You will have to show proof of income, tax returns, etc.

Just like @Dean Letfus says, leave the deal and find another one. For a short period of time, I looked at the Memphis area but only found deals like the one you provided. One of the biggest red flags from some TK providers is the 'need' to put +10-30% over the appraised value to purchase the property. Someone's making a killing, and it won't be you.

Check out some other areas. @Mike D'Arrigo can probably chime in as well, but he usually operates out of KC and Indy. Mike's pricing and numbers seem much more in line with my expectations.

I own a duplex in a FEMA flood zone. The only caution I would give is that the insurance can be difficult. My original plan was canceled and I'm being requested to get a FEMA Elevation Survey ($1,000) and then my insurance will be redetermined (costs probably going up). My plan is to pay off the mortgage as quickly as possible, then self-insure the property.

I don't plan to purchase any additional properties in flood zones, unless I can pay in full in cash (and it's still worth it).

Quick update on the flip:

I mentioned it in a different post, but my contractor gutted the entire bathroom, rather than just the tile. That was last Friday. I was getting ready to line up another contractor to take over the work, a contractor who would execute the plan, not 'think' too much about the plan.

By Sunday, I had received a phone call from the contractor (working on the job) and he actually had a good idea for how we can repair the space and add value to the house. The lone bathroom was a really weird arrangement with a beautiful vinyl accordion door which blocked access to the only closet in the bathroom when the door was closed (ie:: if you ran out of TP you had to open the bathroom door to get more...)

We decided to make this bathroom part of a 'master suite'. The only problem with that arrangement is that with the tub in place, there was no location for a closet (there was no closet in the bedroom at all). By putting in a shower, rather than a bath tub, we can take some of the space the tub occupied and make a small walk in closet, making the 'master suite' actually really nice (for the neighborhood).

We have completed the demolition/tear out and have started reassembling a few bits and pieces of the house. Contractor spent significantly longer on the tear out than anticipated, but I had negotiated his rate down, which more than makes up for the extra time he spent.

I'll post some 'before' pictures by the end of this weekend. I'll also post some 'during' photos in the very near future.

Marion, I've bought two 'winterized' properties in the past. Both times it was more of a 'buyer beware' type situation. It wasn't even possible to get the property de-winterized for inspections. I had to do visual inspections of the pipes and electrical system. I just went into a 3-unit property on Homepath and was told by my agent that HUD requires the plumbing systems to be tested prior to listing the house. Once the systems test out OK (no leaks), the house is then winterized and listed for sale.

This most recent 3-unit I was in did have a few sections of pipe that had been replaced...I assume they had burst at some point and didn't hold pressure.

For the two houses I purchased, the first instance, I purchased a bank owned REO (JPMC) and paid cash at a ~30% discount to the asking price. I had a few pipes to fix, but nothing major.

The second property had been 'winterized' but was still owned by the owner, not a bank or HUD. I included a clause that all the pipes and boiler system had to be intact (no leaks). We did get the house warm again, and determined there were significant leaks. I got this house at an almost 45% discount on the asking price ($18k purchase on $30k asking price). I do have to replace the boiler in this house.

I wouldn't let the inability to get the house de-winterized detract from the sale. Use it to your advantage and get a lower sales price.

I would think a degree in economics, rather than a specific business interest, would be very valuable. With an economics degree, you would be able to look at market trends as a whole and determine (hopefully) where the market will be going.

I would echo @John Adamkewitz 's comments about reserves. There can always be unexpected expenses. I generally look at my returns based on projections. If I'm buying a dividend producing stock, is it worth putting my capital into a stock generating 5% returns, or should I shoot for 15% returns (less taxes).

My personal goal is cash flow from my rentals and to have enough cash flow to offset 95% of my personal expenses. If I were to hit 100% offset, all of a sudden, my IRA becomes icing on the cake, not just the cake.

Casey, From what I've seen, 'typical' management fees are 10% per month, but do not include the lease up fee, which can be 1 month's rent, or about 8% of your gross.

For your vacancy, I would actually say that because the tenants have lived there longer, there may be a higher probability they will leave sooner, rather than later. Again, I simply try to be as conservative as possible. I would rather have cash in my account at the end of the year, than to scramble to pay a mortgage because of a vacancy. I live in a university town, so there is actually more 'churn' with tenants than what I think may be experienced in non-university areas. Undergrads are usually year to year, grads and PhDs are 2-5 years, depending on the program.

Once you have a healthy savings account for vacancies and repairs, you can devote less per month to that account (in my opinion).

Lastly, my aunt in Silver Spring doesn't know any Realtors; not sure how she doesn't, but she doesn't.

Not a problem. NYC should actually have some good roof top rental rates if I remember correctly.