All Forum Posts by: Mathew A.

Landlords are sometimes faced with tough decisions where win-lose situations come up: what's best for the tenant isn't best for the landlord, and vice versa.

Hi Thorney,

I'd like to hear more about your work at Jones Lang LaSalle. I just recently applied for an analyst position there.

High School: I got a job to buy a car, but also needed the car to get to the job. :) That first job was at Jack In The Box. Next, a cashier at Michaels. Then, a busboy at a nice seafood restaurant where I made good tips and found $1600 (no one ended up claiming it, so it became mine) my last week there.

College: I started playing poker to pay for school and save up money.

Now: I graduated last December and moved back to Thailand (where I studied abroad) to tutor English. I'm also taking six online real estate classes. I've bought my first two investment properties and have a third in the works. I'm going back to the states in June, and have started applying to Real Estate Analyst jobs.

Those cheap houses offer substantial returns, but I'm curious about the risk involved. Despite doing your due diligence, have you had any unfortunate surprises? Have all your $50-4000 houses turned into profitable rentals?

Thanks.

Last month, I bought my first solely owned property which was an REO in Phoenix. (My "first" property was a half-purchase with my dad in 2009.)

Listed at $23,900, I offered $19,000 in which the bank countered at $22,900. After my second offer of $19,500, the agent said there was another buyer and that I'd have to offer more than the other buyer's $29,000 offer to get the house. I said no and asked the agent to call me back when the house comes back on the market. Sure enough, the other buyer walked, and the house was back on the market after only ten or so days. The agent resubmitted my $19,000 offer, and it was accepted. The house already had a tenant who has been in the house for several years. They lost the house to foreclosure, but signed a lease with the bank to stay in the house. The lease transferred over to me, so I receive $500 in rent per month. Upon closing on the house, I spent $2000 in repairs. So far, I think I've made a good purchase, but I'll have to wait and see to be sure.

When you're multiplying the gross monthly rent by a factor to realize value, you're using the gross rent multiplier approach (GRM). You need to figure out the range of the GRM in your area (it's not always 50). For example, if a typical property sells for $80,000 and rents for $1200, the GRM is 67. You would then apply the GRM of 67 to your subject property. If your subject property rents for $1000, multiply it by 67, to get a value of $67,000.

Keep in mind this is just one simple way of getting value from income. Using NOI and cap rates is a better approach, in my opinion.

Am I understanding this correctly?

A pedestal sink and water heater from Home Depot that cost $1000 would not require a 1099 because those are goods and bought from a corporation.

A plumber charges $300 to install those items, and you don't have to issue a 1099 because the total is under $600.

But if you pay a plumber $1300 who installs a sink and water heater bought from Home Depot ($1000), then you have to issue a 1099.

This just doesn't make a lot of sense to me.

Thanks for all the input. I have a much better idea of what these things should cost now. There's a fair amount of junk, so I'll estimate the cleaning cost at the high end. Surprisingly, the house doesn't need painting so that's a plus.

I'm going to have a few other handymen to go over and give me estimates. I originally had three who were going to do it, but only one got me a bid. It's as if I'll have to call ten, five will return my calls, three will make it over to the house, and one will give me a bid. Is that similar to your experiences?

Thanks Brandon, Mitch, Charles, and Sanjiv. I'm glad my suspicions of the estimate being too much were confirmed. Should I send the guy an email like below, or just move on to someone else? Someone referred him to me.

"I appreciate you giving an estimate, but it is higher than what I expected. Could you break it down so I know exactly what each item cost and the amount of labor involved? That way, I can decide if I want to do the cleaning or not."

Repair 2 windows (replace the glass)
Install 4 vertical blinds
Install Smoke Alarms
Replace front/back door locks
Clean inside and outside of the house

Total estimate including labor and materials $1250.00

I want to get this property ready to rent out. (In Phoenix.) What do you think of the estimate?

Thanks.