All Forum Posts by: Corey Demuth

Is it possible to obtain a mortgage that includes funds to renovate a property, other than via the FHA 203k program? For example, could you go to Chase or some other typical bank and obtain a loan for say 175k to buy a property for 120k and put 55k worth of work into it? A low down payment is not needed and credit is decent.

@Mark Del Grosso I personally have found that the condition of the building can easily fit into one of 4 categories, but the neighborhood is a much grayer area... so I used A/B/C/D to rate the building's condition, design, and features. I use 1-10 to describe the neighborhood as I mentioned earlier ITT. The 1 - 10 comes from some factual research (ie crime stats, school quality, transportation, etc) but it is also largely, heavily influenced by how I feel when I walk or drive through the area at daytime and in the evening.

When I am really conflicted about a particular rating I sometimes add a + or - modifier to the letter, or use a decimal for the number. So on rare occasions I have noted a property as like a B+7.5.

What about lead pipes? And with the lead paint, if you buy a home old enough that LBP was used, what precautions do you need to take - ie what happens if you want to do renovations that would disturb the lead paint?

Bump.

It doesn't hurt to try submitting an offer at the price point where this would actually work for you.

Also, how did you come up with $1500 for closing costs? That seems insanely low, unless this is a co-op.

Is there a way to find out whether a house or condo may have lead, asbestos, or mold before you purchase it? What about radon - does a home inspector typically test for this in SFRs or MFRs? 

(Let's assume for a moment that the seller/agent may not be honest, in other words I am asking how do you know other than "the listing agent said there is no lead.")

Are there any other health hazard items that you check for before purchasing?

LMAO. Yeah, in NYC $1200 won't even get you a 1bdrm in a decent neighborhood, never mind a 3bdrm SFR!

I still think neighborhood and property need to both be assessed, and not combined into one rating. Which is better - an old badly outdated unit in need of major repairs, that is located in a great area, or a brand new modern unit in a seedy area?

As I was reading this thread, I was thinking how A/B/C/D is meaningless by itself for our purposes. You could have an "A" property but it's on the corner of Get Shot st & Get Raped ave. This is actually somewhat common in NYC; there are blocks in medium to bad neighborhoods that are literally a checkerboard of nice new houses mixed with run down dumps that look like they could be crack houses. I doubt you are going to get "A" rent in that situation but you will be paying "A" maintenance and the seller will no doubt try to get an "A" price for such properties.

@William Robison touched on this when he mentioned that a crime statistic should be included. I have found over the last few years in trying to get into investing around the NYC area, that the only areas around here that could cash flow well, are in what I would consider to be rough neighborhoods. This was a much bigger factor than the condition of the buildings. The numbers never worked on any places in areas where I would feel safe to walk around with my girlfriend at night. Thus, investing in the five boroughs is out for me.

As an aside, on one of my property research expeditions in the Bronx, I remember as I was getting off the bus the bus driver stopped me. She gave me a grave look of concern and said "Honey, you do me a favor and make sure you get yourself back on this bus before the sun goes down, you hear me?" Her statement turned out to be very sound advice indeed. I think I checked out about 2 out of the 10 properties I had planned to see before getting the hell out of dodge. One does occasionally need to temper their desire for cash flow against their will to live.

Frankly I don't think a brand new renovated rental (a so-called "A") is going to produce a better return on your investment than a "C," provided they are in the same class of neighborhood - you will just spend more to acquire and maintain them. (And the people who rent those types of places will expect you to go crazy bringing it back to near-new condition in between tenants.)

I think the real trick is finding an area that isn't super gentrified - I hope I am using the term correctly - but yet isn't a horribly dangerous, sketchy neighborhood. Based on months of preliminary research, it seems like the sweet spot for me is going to be B/C properties in terms of the building condition overall. For neighborhoods, I use a numeric scale from 1-10 where 10 is Mr. Roger's Neighborhood and 1 is Mos Eisley Cantina. 5 is about as low as I am willing to even consider. So basically, I am looking for properties between C5 - B7. Anything above B7 is overpriced and not going to cash flow much if at all.

Live in an A10, but rent out B5's.

Is either tenant an IT person? If they suddenly decided to set up a few extra computers and/or servers, that could explain the spike in electricity usage. Some IT people build extra computers to mine bitcoin and other cryptocurrencies, or set up small labs (consisting of a few computers, servers, and some networking equipment that would normally be found in a business) to practice for IT certification exams.

I agree that shared utilities with one tenant paying is a recipe for disaster.

It's usually a really bad idea to lend money to family or friends, and the extremely high 18% interest is likely to cause some friction later on. You alluded to him having an unusual tax filing situation and an unfavorable debt ratio... These are red flags that you should be concerned about. If he has 300k in equity but can't get a 200k loan, his credit history may be very bad. If he makes a habit of paying late or not paying back debt, don't expect that to change just because you have a personal relationship with him - people are generally either responsible with money or not.

Just my two cents.