All Forum Posts by: Mike Wood

@Sarah Bachman Time to walk. Unpermitted work and lack of separate utilities is a deal breaker. If you have not done the VA inspection, my guess is that will find even more issues. Walk and find another realtor that can do some due diligence on your behalf, as this one sounds like they knew nothing (hard to miss if bedrooms are legal and a missing electrical meter, as they are very obvious).

@Dax Squillante  Using your numbers (which I would be very surprised if you can keep your costs that low), your breaking even with zero cap ex reserves (one piece of equipment needing to be replaced like an AC system, furnace, refrigerator, etc, would put you at a loss for quite a while).  You appear to be banking on appreciation, which can be a dangerous game and not something that helps a long term buy and hold investor (appreciation does not help cash flow).

For me, without now much information, I would not be interested in the property for anything more than $200k, and that would assume that rents are at market rate and the property is in pretty good condition with little deferred maintenance.

@Dax Squillante  Non-debt related is everything else, which would include to name a few, insurance, taxes, management, lawncare, shared utilities, repairs, maintenance, vacancy, etc.  As a general rule, most investors use ~50% for quick numbers.  I personally have six (6) duplexes, and self manage and my expenses range between 25%-35% (with 25% being on new build properties for the first few years).  If I had them managed, that would easily add 10-15% to the expenses.

I think if you actually itemize all of your costs, you will quickly find that a $250k duplex with rents only $2k a month to be a marginal deal, and a bad deal when you try and finance 100% of the deal.  I would not personally look at that deal past the price and rents.  I am a firm believer in the 1% rule (gross monthly rents should equal 1% of the total price of the property) as the floor for any deal.  All of my properties are over the 1% rule, and there are some on BP that want it to be 2% (which I find impossible in my local market).

@Dax Squillante You really did not provide alot of detail for others to comment on. If you assume that your non-debt related expenses are 45%, that leave you with $1100 for debt service and profit (if any). If I assume your main loan is a 75% LTV, with a rate of 4.5%, that puts the first mortgage P&I payment at $950. Add on your 401K loan of $433, and your monthly cash flow is -283/month. Even if you self manage it and somehow get your expenses down to 35%, your still loosing -$83/month. This is not a good purchase, given the amount of debt your are looking at.

@Adam Steinberg This will be dependent on your area and your competition. I personally provide a fully equipped kitchen (Range, Refrig, OTC Microwave (do not provide stand along microwaves), dishwasher) and provide washers & dryers in each of my units (but they are all duplex houses). Most of my units have garbage disposals, but I am starting to phase them out. If I rented SFH, I would supply a fully equipped kitchen, but only hookups for washer & dryer.

@Joey Buono You may want to see if there is any conditions to the rental assistance that your tenant agreed to.  In my area, rental assistance paid to the landlord requires the tenant can not be evicted for a certain length of time, basically extending the eviction moratorium for even longer. 

Only way I would hand over the cash for cash for keys is when they are moved out, unit cleared and cleaned and hand you the keys, not before.

@Consuela Adams If the lot is in a flood zone, almost every lender will require flood insurance to back up the mortgage. If you are building new, you will be required build the house up in elevation to at lease the area's base flood elevation (BFE) as determined by FEMA. While this will minimize the cost of flood insurance, it will not eliminate the requirements from lenders.

@Douglas Gratz Most construction loans will be interest only, paid on the balance drawn to date.  In my local area, our loans are going for 1% origination and around 6-7% interest rate (usually prime plus some amount), max 12 month term.

@Chuck Payette I have multiple up/down duplexes.  I have used closed cell foam on one of them, back when I started.  I would not recommend it as sound damping between the floors.  I currently use 3' mineral wool insulation between the floors, and suspend the first floor ceiling using resilient channel.  I find that does a much better job, and its cheaper.  But with that being said, there is NO way to eliminate foot steps and heel sounds if the building is wood framed. 

Carpet would be a huge help in eliminating the foot noise.  But the draw back is its carpet, and the short life span and eventual replacement, if its to be held as a long term rental.

@Joel Geisel I am not surprised.  While I do not do Section 8 rentals, I can tell you that the more over priced the rental is, the worst the tenant inquires are.  I can always tell when I am over priced by the inquires, if I am not getting any decent applications (bad credit, rental assistance, no rental history, etc).

Additionally, just cause you have a ton of inquires, its the amount of applications that matter.  From my experience, less than 25% of initial contact convert to showings, and of those showings, less than 25% (likely around 10%) turn into applications.