All Forum Posts by: Manley Woods

@Manley Woods

Agreed with Sloane. 

The cross-collateralization with two properties in different states is kind of a deal killer with lenders. This opens the lender up to take on too much risk especially when states have different foreclosure processes. 

If you want to do a cross-collateralized deal, I would target a property in Missouri where they can take your already existing rental as collateral. 

@Manley Woods

Agreed with Sloane. 

The cross-collateralization with two properties in different states is kind of a deal killer with lenders. This opens the lender up to take on too much risk especially when states have different foreclosure processes. 

If you want to do a cross-collateralized deal, I would target a property in Missouri where they can take your already existing rental as collateral. 

Thanks for giving your input. I’ll just be more diligent about searching for properties in the same state and saving for a down payment. Have a great day.

Any reason you are looking to do a cross collateralized loan instead of single asset loans for these new properties? Crossing state lines on a blanket loan, especially for this size, is probably too much of a headache for most lenders. The reason is being is because I don’t have all the funds needed for  the down payment. I guess I need to be more patient. Thanks for the input and have a great evening.

 Have you ever worked on a job-site with any sheetrockers ;) ? Ideally they keep it in the porta-potty, but you never know with those guys. That would be the most obvious place to look IME, then the painting crew, then the concrete guys. We're talking trace amounts from smoking it on the job-site here, not enough to need full mitigation. Remembering some of the people I worked with while building new homes as a carpenter is a big part of why I don't trust new construction (and also why I laugh when people say I should just hire everything out and not do any work on my properties myself now that I can afford not to). A lot of new construction is crap materials slapped together by people who just don't care. Some of the meth contamination could also be from after hours, kids and vagrants getting into the job-site and smoking it, but probably most of it is from workers.   

Hi Manley,

It is crucial to have reliable inspectors/contractors you are working with. Contractors can kill a deal by over quoting you, or kill your investment by not doing good work on the home. A good contractor can separate between what you CAN do to maximize the home's value vs. what you NEED to do to keep the house standing. 

I had a few things come up this week that made me think of this thread: 

1. A colleague had a client under contract on a new build, and they have a mold sensitivity so they tested for it. Turns out the builders buttoned up the walls during a storm while there was significant moisture present and now the insides of the walls are full of mold. They terminated the contract. 

2. I learned that 80% of the new builds in our area are testing positive for meth. 

3. I did an inspection on a new build and found that heavy equipment had been driven over the brand new sewer line, breaking a connection and offsetting the line. 

4. I talked to a structural engineer who said he much prefers older properties because he can see where settling has occurred, and assess how bad it is, whereas with new construction it's harder to tell. 

So, newer is definitely not always better! 

The list of things to look for on older properties is well-known and pretty straight-forward. Electrical: check for knob and tube, aluminum wiring, Federal Pacific Electric panels or old fuse boxes, ungrounded outlets, lack of GFCI's etc. Plumbing: check for galvanized pipes, leaks. Sewer line check for bellies, cast iron/ old clay/ offset lines, broken connections, roots, mud in lines, main tap. Check for foundation/structural issues. Mechanicals: check age and condition. Asbestos, lead, etc. 

The list for new builds can be a lot trickier (poor construction/ construction defects, new materials being used that haven't stood the test of time yet, foundation issues from expansive soils or bad concrete being used (harder to know because the damage isn't visible yet), sewer line might be already jacked up or done wrong, windows or roof may not have been flashed properly but water damage isn't visible yet (I've seen new builds where you could literally see daylight coming in through gaps around the windows), grading or drainage issues, truss rise, nail pops, water intrusion, cheap appliances only made to last a few years or poorly installed, dirty ducts from registers not being covered during construction, wood shrinkage cracking the sheetrock, doorframes off/sticking doors and windows, apparently mold and meth may be present already... both old and new require due diligence and an experienced inspector. 

A very good home inspector will have you covered for most of these concerns. If you are buying in A or B class neighborhoods, chances are these older houses have had some updates to electrical, plumbing, etc over the last 120 years. A lot of people just avoid all together, but in my city that is nearly impossible. We have buildings from the early 1700's. I am working on 2 properties from the 1940's right now, I'd consider them very much below average for the area, and it really no more of a reno headache than something from the 80's would be. 

Moral of the story, be careful and do your due diligence! Old homes can be wonderful once restored.

@Manley Woods

Hi there, two houses one built in 1833 and one in 1800! Structurally these homes aren’t goin anywhere and the main problems have been from previous owner’s diy renovations.

My real estate investing journey is just beginning, but a few things I’ve noted for older properties are the

following:

-Make sure the electrical has been COMPLETELY updated since the 40s. It is possible to splice it to Romex and still be running electricity through the old knob and tube.

-Check the main drain pipes and if they’re old cast iron check for soft spots or rust. I personally would replace asap because both properties for me needed them swapped already.

-If you have to cut the walls be super gentle not to loosen the plaster you’re leaving, or turn into something much bigger. In a lot of cases, I’ve found it a lot easier to get a good finished product by just tearing out all the plaster and sheet rocking it. (Either dusty as all, or expensive)

-Hard to keep little mice out in the winter months. Both places have old stone foundations, and one home has spray foam in the basement, one does not. There isn’t a mice problem but definitely more of a concerted effort not to leave food out on the one without spray foam.

-Remove all old chimneys as they just put weight on the house (I work in masonry so I was going to do it anyway)

Either way, don’t be afraid of an old house, it should just be a way to confirm you have a good inspector and practice your due diligence. Don’t get me wrong I definitely can’t wait until I own newer properties, but someone’s got to do it and if no one else wants to, that is your advantage!

@Manley Woods, I prefer to purchase new construction 4//2/2 brick single family homes. I like to buy in brand new neighborhoods go under contract as early as possible and wait a year for my house to be built and closed. Rent it out for 2-3 years the sell it and take the 30% appreciation. If rents increase enough so I have positive cash flow, I keep renting it out.