All Forum Posts by: Michael Anderson

@Michael Anderson what was the reason for pushing ? State closures ?

Can you actually get it to close on time?

more and more states are shutting down non essential businesses, highly questionable you can get appraisers, inspectors and surveyors for physical visits so most likely there will be a delay? 

I would increase your reserves to include additional months of operating expenses.  Also, take a look at your tenant demographic and evaluate what industry they're in -- what is the likelihood of an increased vacancy or leasing period if your target residents are employed in sectors most likely to see hourly cuts?  

If the rehab is not immediate, consider conserving cash by postponing these items if possible.  

If the deal still pencils after adjusting your numbers it sounds like you're okay.  As mentioned above, if the numbers come out just mediocre, it may be worth pulling out due to uncertainty.  Where are you in the inspection process - have you removed all contingencies?   

@Michael Anderson If current sqft. is $75 and you're getting it for $37 per then you're ahead of the game. 

Can you do a smaller rehab and get it rented? i.e. paint and flooring. Do you have to do a complete rehab to get top dollar in rent?  I could but it is a construction loan so the $ left in the deal won't really change.  Thanks!

If you have the reserves then I'd move forward. The news is always doom and gloom. 

Yes we are in un-chartered territory but life will continue.

You're a new investor..... trust me cold feet /doubt will be there if the economy was good. 

Run your numbers, decide which rehab option is best then close the deal.

@Michael Anderson. This is not a good deal and will lose money long term. If you haven’t realized it yet we are headed for a recession. It could be long or short but it’s inevitable. It’ll be here in full swing this summer.

What you need to do is not buy this. Your 10k rehab won’t raise the value Like you think it will. This will likely appraise for what you paid plus 10k when you go to refinance

I agree, that's where my hesitance is... I feel like we are going into a definite recession but am not sure if that necessarily means I won't be able to rent the property...  I won't have to refinance as I'm using a construction loan, the appraisal has already been done and numbers cleared.  Thanks for the feedback!

Thoughts:

1. Unless it is uninhabitable, I would consider holding your reserves and doing a minimum necessary to get it occupied. There's no shame in getting it filled less than ideally to help prevent bleeding funds. 

2. If you are sure about your numbers it sounds like a decent deal.

3. Do you have enough reserves to ride out at least one year of vacancy? To me that is a minimum litmus test. I personally think you should have more, but that at least buys you time. 

4. Depends how much earnest money you have in the deal and how far along you are.

I think you need to separate the two issues holding you back. First time fears and economy falling apart.

Economy falling apart: The US had one of the best economies ever before the virus hit. Is the virus going to kill 100,000,000 Americans or 10,000,000 or 25,000? No one knows, but I've not seen any expert predictions that indicate American deaths in high numbers. Hundreds absolutely. Thousands probably. Tens of thousands unlikely. What reason is there to believe that the economy won't bounce back after the virus is contained? If the rental is in a tiny town whose main industry is the manufacture of something for cruise lines, I'd be worried. Otherwise, you're probably OK. Also, unemployment numbers are misleading. The news reporting that claims jumped 300% this month doesn't take into account that we had historically low unemployment to being with. It's not 2008 when it was 10%. A 300% jump back them would have been horrible. A 300% jump now is undesirable. 

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” ― Warren Buffett

First time fears: Every single landlord had first time fears. Anyone who says they didn't is either a liar or a fool. Is this really a good deal? Should I wait for a better deal? Should I wait until prices go down more? Should I wait until the economy turns around? What if I can't rent it? Do I really want to be a landlord? I'm not commenting on your deal, but at some point you need to take the leap. These same fears will be there if you back-out and there is a next first time.