All Forum Posts by: Michael S.

One thing I have not seen mentioned anywhere in this entire thread is the neighborhood this house is located in.  I did not see it in the property breakdown, and I did not see anyone mention this in the thread.  If I missed it, I apologize.

To the original poster, the neighborhood affects multiple factors to evaluate this deal.  It will affect appreciation potential (if any).  It will also absolutely impact repair costs - I don't care how good the rehab is, if this house is in a C/D neighborhood, all the money spent on rehab may be toast if your tenant likes to sell copper piping, or turns your bathroom into a flood zone, or has keg parties every Friday night.  While your numbers are really tight, it makes the deal a bit better if this property is in an A neighborhood.  Just another factor that needs to be considered.  

@Nathan Scott - just a heads up, many local banks in Huntsville will not work with OOS investors (and some aren't even interested in local investors as well).  Definitely worthwhile to make sure your financing is ready to go before even looking at properties here.  

@Kevin Seiler - I would strongly recommend you visit Huntsville before you do anything else.  What you will discover is the following:

-MFHs in Huntsville are few and far between, in incredibly high demand, and many are in C neighborhoods.

-MFHs near Huntsville Hospital and Crestwood are unicorns  

-housing in the "medical district" has exploded - now commonly selling for 150 to 200 per sq ft.  

-SF housing near UAH is quite affordable - however, it is fiercely competitive. The last SFH we put an offer on near UAH had 10 offers in under 48 hours, went for 5 figures over ask without inspection and cash offer (we lost out on it).

-a lot of sellers, per several agents I talked to and my own experience here, are declining OOS offers in favor of local buyers if the offers are reasonably comparable if they are in high demand areas of Huntsville and Madison

Not trying to discourage you - just figured you needed someone to give you an open and honest direct response to your inquiry.  

as a general rule of thumb with 90% of all businesses (real estate or otherwise):

no debt = no growth

@David Adams - completely agree.  That is exactly what we do as well - if it is negative cash flow with a 15 year amortization, we pass on the property.  

That's why "cash flow" is such a variable term - there is a big difference between my property that cash flows $100/month versus someone else who cash flows $100/month on a 30 year note - it's apples to oranges.   

@Ben Feder Best use of your $1495 is to use it as part of your earnest money on your next investment property. You can get more than $1500 worth of education right here on bigger pockets, and also from a local real estate agent who specializes in investment properties.

My wife thought I was insane when my business partner and I got a contract accepted on our first investment property.  She pointed out everything that could go wrong, noted how I "didn't have time for this", and was afraid of how much money we would lose on the endeavor.  

So what did I do?  I completely ignored her and proceeded.  And with time, she has even admitted it was a wise decision.  

I would never spend that 10k on real estate education - I would spend your free time reading this site and listening to the podcasts, as well as going to your local REI group meetings. In the meantime, I would also consider finding a business partner who has assets available to use, and meet with local banks to see who would be willing to finance your first real estate purchase and possibly give you a line of credit as well should the HVAC go out or the roof need repairs. Then you can also interview local RE agents who specialize in investment properties.

Then, after you have a business partner, a lot more knowledge, a bank, and a real estate agent, you're ready to start hunting for your first property.  Meanwhile, the person that spent 10k on a guru is still stuck at square one with no assets to invest.  

You'll learn a lot more with your first investment than ANY class will teach you.  Every property we've acquired has taught us something that no "guru" would have informed us about.  First hand experience is huge.  

By the way, my current expenditures on real estate education is still zero.  If I had spent money on it, we might have missed out on our first property, which may end up being our best appreciating and cash flow property long term.

In regards to Huntsville, there are way more investors for A/B properties than there are properties available;  demand in general greatly outweighs supply right now.  You may have better luck in Birmingham right now unless you are willing to pay retail or higher in Huntsville, or willing to look at C properties.  

One of the realtors I talked to recently said OOS investors making low ball offers are simply being laughed at and not even responded to by sellers.

@Peter McDonough - I believe I walked that house too a while back.  Every room had the worst cracks I had ever seen in my life.  It looked like the house had sustained earthquake damage.

@Asa Ifill - this is not a simple repair, if it is the house I walked before it went to foreclosure. Sure, you can put piers in. But I think the issue with that property is actually the soil it was built on. There is a realistic chance that the piers will slide down in the soil as well with time. It would be worth your time and money to meet with a structural engineer and do soil testing before you close on it. Its possible the reason the bank owns it is because the owners realized how underwater they would have been on the house performing the repairs. This is the type of property that can end someone's REI endeavor very quickly.