All Forum Posts by: Andy Luick

Take a very hard look at the property. I was thinking it was a 3/2 on both sides but it sounds like it is a top/bottom set up. Did the previous owner add a 2nd story here? It sounds like he was trying to build it out and just never got done?If that's the case, I'd probably walk as well. You're going to spend a ton of time and money undoing whatever nonsense he did. I can just image the guy knocking back beers as he was wiring! Was it legal or is there no permitting process in your area? The thing to remember with the 203k...it's a blessing and a curse....it allows you to buy something that needs work but a lot of sellers don't like the paperwork.

You might want to find an agent who specializes in multi-family props in your area. There are a lot of bargains in this area as many a husband/wife team has started with duplexes or tri-plexes but learned the hard way that they weren't landlord material. I've seen it quite a bit here in Atlanta. I'd prefer a unit that was already builtout for you as a duplex as opposed to a conversion.

You might also consider well built 3/3, 4/3s or bigger in a single family where you could add a couple of roommates and still live for free. I've had this approach since I was in college and it works well. Try to get involved with local real estate investment groups as you might find some off-market inventory that would work for you. A lot of the REI groups will clean a foreclosure up and handle the heavy lifting before selling it off...at which point you could go with the streamlined 203 which is a lot easier to use. You're on the right track!

While every piece of real estate is a simple investment decision for most of us here, yours is a different animal for a couple of reasons. You're buying it to live and you're a property virgin so to speak. It's very smart of you to use the 203k program as most buyers don't even know about it. Unless you are a cash buyer, it's about the only way to buy REO props from the asset managers. Most agents don't even know this and their client's offer end up in the trash without a response.

If the other offer is all cash - you lose anyway! Appraisal and market values really don't mean that much today...not to me and really not to you either. You're getting very cheap money with minimal down on a property where the rent on the other unit will have you living for free. For that reason, I like you making a full price offer. Just make sure you get multiple bids from contractors with some references. Ask your 203k loan consultant for some suggestions as to reputable contractors in your market.

Do you have any history on the property? Why was one side gutted out? Is the one unit rent-ready as-is or what has to be spent there to make it so? If you can go month-to-month on the apartment, it might make sense to rent the other unit and keep the newly rehabbed one for yourself. I'd also suggest using shared housing and renting the 3 rooms separately, include the utils and you are probably looking at a much higher net rent. That's the model that I use almost exclusively. Just make sure you have adequate parking and a good lease. You'll be on the scene so that makes it easier. Happy Investing!

Develop a relationship with the asset manager you are dealing with at 1st Citizen. Ask them what other REOs they have and maybe they would consider doing a package deal with you and even providing the financing. Smaller banks will do a lot of things the big boys would never think of. A tanked loan costs them more in reserved funds that they can no longer lend against. Might be worth a shot if they had one or two more that made more sense than this one...then blend this one back in at $10k or $20k......might be fun to play with the numbers. Another good group to hunt from is Springleaf Financial.

It all depends on where you and what your revenue goal is for the property. I have converted tons of garages and carports over the years. It's very profitable for me to do so especially with our shared housing model. It sounds like you could make a 4th bedroom and still have room for the original garage? We've done this on our rentals but also created senior housing or a teen suite for our retail clients who needed extra living space. We have also swapped out garage doors a few times for french doors and created additional family room space for a couple of clients. I'm a 4th generation contractor and still run that business in addition to my real estate investing.

Do you have an HOA? If so, check with them first to see if there is anything that would preclude a conversion. I'd also check with several local real estate agents to get a feel for how it might effect value. If you do decide to proceed, get an opinion from some HVAC guys to make sure your system is designed to handle the extra load which wouldn't be all the much. Mistubishi makes a through the wall system that works well for garages and basements. Cost really depends on what you want and level of finishes

Just for fun, find out which bank has the mortgage. If it is one of the big 4, then you probably won't get anywhere with them. Get multiple bids for a turn-key repair and present the highest one to the bank. Let them know the seriousness of the problem and you just might get your wish of a free or pretty cheap house. Some of the smaller banks will be happy to just get rid of it. To me, it's only worth a peek because it is within walking distance for you. Let us know if you end up doing anything with it!

Since we switched from single family rentals to shared housing, we have almost none of this stuff. When it does occur, shoot a video documenting the damages and take plenty of pictures. We use to video the single family rentals before and after each rental. The damages during and after tenancy was one of the main reasons I stopped renting to families.

@Joe Gore - what the law requires and what a magistrate judge, who in many states may not even be a lawyer, decides can be very different things. I've been using the same lease form for over 20 years....modified here and there over time to contend with situations that came up. I've only had one paragraph that a judge threw out - it had a dollar amount for each period of lateness. The judge made me switch to percentages instead. The previous dollar amount version was perfectly legal and I would have won on an appeal....but those are expensive and time consuming.....so I just made the change and moved on..

You're a brave man for even pondering this one. You would almost have to get the unit for free for this to make sense. Estimates on foundation repairs as serious as these are just that.....beginnings. I walked away from a property once that had an underground aquifer under it.....it was unfixable and the best we could ever do was install a system to "manage" the water. I bought it during a long period of drought so the symptoms never showed until we started getting heavy rains. The seller hid the defect so at least here you know what you are potentially dealing with up front....that's why you should RUN!

If you're still into this deal....not sure why you would be...but have a chat with the neighbors and try to track down the original owners to get more background on the house and its issues. Improper soil compaction is a big deal but it's solvable....though expensive. I faced similar issues....a $50k ticket for solutions that might not actually solve the problem....just make it easier to live with...and then I was still stuck with a home that would always have a defect. I decided it was better to just walk away from it. Think it through carefully.....being an investor mean making sure that what you are planning to do it profitable! Happy Investing

Give up on the option and walk away to something more meaningful and easier to do. That's MHO but if you want to do it...and I can't imagine why you would...you'd almost certainly have to buy the other guy out or reframe his property for free! I'd contact the building inspector in Newburgh and explain the situation. I would think, once you touch the party wall...which doesn't really exist....they are going to make you bring it to code. Are you trying to rent or flip this one? What was your total rehab budget? At least you haven't bought it yet!!

This is a pretty involved flip for a first timer and I'm crossing my fingers for you. I can't imagine doing a 3/1 for a flip but I don't know your market and, these days, I don't take anything I do to full retail. We buy ,repair, rent & sell to passive investors looking for at least a 10% net return.

On the mold, you will see varying opinions from a lot of well meaning people. Mold is serious stuff. Before you start work in the basement, I'd suggest you turn off the hvac & mask any vents to the basement area. Get some Microban and thoroughly spray down everything..and I mean EVERYTHING before you start removing anything. Once you get the drywall and paneling out, spray everything again. Microban is the industry standard and kills mold on contact. The problem with blogging is now you've publicly acknowledged the presence of mold in the property so handle it properly. A pair of $12.hr workers isn't going to handle it properly and, if there is a problem with it later on, you might be on the hook for far more than you bargained for. Mold is very serious stuff and can make you sick or even kill you if you mess with the wrong one. Always wear a respirator when working with mold.

Is there a way to add a 2nd bath to the master.....somehow splitting the existing one? What would that add to the resale in the area?

I'm not sure why you want aluminum fascia and soffits...except to cover up the rotted wood....which you really need to repair the wood FIRST then cover it over if you wish. I'd just repair, prime & paint everything. I prefer seamless 6" gutters with 3"x4" downspouts on most of what we do. We fabricate them onsite and hang with hidden hanger screws. We usually do this as it's best for long term maintenance.

I'm not sure if the flooring budget includes the new tile for the kitchen....or is that in the kitchen budget? If it is...then you're budget is low. We use screwed down underlayment on our tiled floors...be sure they don't use roofing nails as that's a standard practice. We are working on a home right now where the kitchen tile is all cracked and bucking because they nailed the underlayment. The cabinets look great for a retail flip.

Take a look at your market and run through some of the houses in the $200k+ range and try to duplicate some of those finishes in your homes. Even on our flips, we use nickel or bronze finishes and always spend more on ceiling fans.

Happy Investing!!

I believe we have the same law in GA....however, again, as I said above, most property managers inner city are unlicensed and some are very good at what they do. I'd happily take the risk and pay them provided I either knew them or had good reviews from others that I knew on them. Inner city markets are an entirely alien world for many of us posting here...unless you've lived it, most investors would have no clue...especially the foreign buyers. In every state, you also have those who operate via joint venture and then the licensing requirement no longer applies. While you are correct legally Curt, the reality is that some of the best inner city operators are unlicensed...and, yes, you will take your chances with them but it can be an educated risk.