All Forum Posts by: Andy Luick

Check into and qualify for the 203...its the best deal out there for an owner occupier and you can roll repairs/improvements into the deal.  They then look at the after improved appraisal value.  If you plow through all of your cash...and then something major breaks....you're stuck.  I'd hold the cash, do 3% down.....the taxes there are a huge issue.  I sold what I held there about 10 years ago as it was killing me....upstate taxes support downstate.  Plus I didn't have a home exemption so was taxed as an out of stater.

Was it run as a rental before...if so, for how long?  Why is it being sold now?  Projections and pro formas are as rosy and promising as an online dating profile.....most aren't close to reality.  Most of us factor 8% to 10% on vacancy.  With a rental.....and we mostly purchase failed rentals.....there is always going to be deferred maintenance and things you don't expect that lie hidden in walls or under floors.  Even a good inspection won't catch all of this stuff.  That's why many investors prefer to buy a single family that wasn't a rental.  Investors tend to go cheap on maintenance and that little drip or leak that goes unattended gets expensive when finally discovered years down the road.

You'd be surprised....some zero down deals are back out there for investors in limited markets. We just had one brought to us that is no doc, credit line with a 720 credit score. I don't think it will be around long but we have a few frontenders with our model who want to us it. Most of our folks are all cash but some want to get into a deal and just have great jobs and credit. I saw a no doc, cash out refi today at 70% LTV.

The only thing that is constant in our business is CHANGE.  I was mostly in single family rentals at the last crash and it about killed me....it was eviction court every week.  I shifted to a shared housing model and I have different headaches but much higher net rents.

I like your idea to keep it. That's exactly what I would do in your shoes. I believe this next big correction to be much deeper than the last one and more of a global front. I don't know much about TX but I love austin and plan to be there in the next couple of years. With our model, we work with homeowners, investors and our own book to create shared housing. The next correction won't phase us as my rents went up on shared housing last time. You have to find your niche....and with the performance you have with this rental....its' going pretty good. Your equity gets wiped up in a correction but rent will go up and your other payments will mostly remain the same. That's not so bad. If you had the equity, you should have been able to get a credit back on the PMI. Normally refinancing takes a few years to recover your closing costs. However, if you keep it....you can't get much cheaper than what you locked into...another good reason to keep it. If the market corrects....you won't be able to get a loan anyway!

It's hard to know what's really going on here.  What was the scope of the project?  If you pulled the permit as a homeowner...you've already tried to sidestep the system and now have a problem.  If you hired a contractor to turn a large renovation and he isn't a GC, that was the beginning of your problem.  What was the initial scope of work and what was the cost?  Investors....all of us...tend to be too cheap on rehab and then, especially unseasoned investors....end up with huge problems.  I knew an investor in NY who did a huge rehab without the proper permits....the town waited until he was done and made him tear it all down and start over!  Can you imagine?

Putting two different contractors on the job like this is a mistake...one will interfere with the other and the finger pointing starts.  You can't really rewrite the contract.  Taking him to court is a waste of time for both of you.  Either sit him down and see EXACTLY what the problem is and what it will take to finish up his portion....write it up and sign off on it.  If you can't work it out with him, get him to sign off on a full waiver and release, return the architectual drawings/plans whatever you are referencing in the post....and part ways.  You are best to clear out the other contractor or get him to finish before bringing in another guy.

We recently got brought in to finish up a project for a flipper in atlanta.  The project wasn't overbid at all....the contractor had plenty of money to get it done.  The project was 6 months behind....the investor hired a relatively inexperienced contractor who spoke fluent spanish and ended up using whatever scab labor he could find off the street.  My group was brought in by the buyers to finish the place up so it could close.  It almost came down to a fist fight with the other contractor.  All kinds of issues...electrical outlets ungrounded, plumbing issues, flooring issues, a deck that was built wrong, a new master bath that didn't make any sense with a shower door hung wrong, a shower pan that had been nailed through, roof repairs made with 3/8" plywood, roof leak "fixed" by caulking the shingles.....new vent boot that wasn't nailed or seal, bath fan this venting into the ceiling....an unreal list.  The seller made most of it right but it was a ton of headache for everyone involved.  But the investor was new to the business and went with a personal referal that turned out to be a nightmare.

For this guy, the budget was correct for the scope of work...he just had the wrong guy on the job.  The permit was pulled by another GC but the other guy was the one running the job.  If your contractor shows up in a honda civic to do your work.....you might just have a problem and that was literally the case here.  Try to video the project at each draw so you can see the progression....the bulk of contractors work on draws so those saying "no money upfront" have no idea.  New construction is pretty straight forward...if it's renovation on an older property budget in 10% to 20% for unknowns.  We're on a project right now that had tons of termite damage and subfloor issues which we had no way of knowing or budgeting for prior to starting the work.  These kinds of things are unknowns until you start....and always put as much as you can into the contract from go.  Luck with it!  

I haven't run through the market in a couple of years....but there are always deals in albany and troy...schenectady...that whole area.  Have you looked into doing a 203 loan and getting a triplex or a quad.  Perfect way to buy for owner occupied.  I've looked at taking myrentedroom up there as I grew up in the area and have a ton of friends there.  There are still some really cheap places to be had..problem is....for me....the taxes are a killer up there!

Part of this is lease language and part of it is based on the relationship with your renter.  We address it in our lease and every once in awhile, we have an issue with an existing tenant that doesn't want to show the space.  It's rare though.  We also shoot a video of every space so our potentials can reserve a space if they aren't able to see it for some reason based on the video.   We often get out-of-towners who need an immediate space and dont' want to run the risk that ours will be gone by the time they get to town.

Maintaining a good, ongoing relationship with renters is key but some of them and some of us are just plain nuts.  It is what it is.  Inserting language in your lease is key.  Here is what we use:

"RIGHT OF ACCESS: Management may enter the premises without notice for inspection, repairs and maintenance during reasonable hours. In case of emergency, Management may enter at any time to protect life and/or prevent damage. During the last sixty days of the term hereof and during reasonable hours, Management may display the interior and exterior of dwelling at premises to any prospective tenants or purchasers, and Resident agrees to provide access thereto."

We always call or text the tenants to know we will be showing the space...and, if it's occupied, I'm the one going out.  We've already done a background check on the potential and have met them before showing space as a further precaution.  Good luck with it.

There are a ton of decent deals in that whole area.  You might want to look a bit further north in south glens falls, hudson fall and fort edward.  Probably wind up with welfare rental but they cashflow all day long.....luck!

You simply can't count on appreciation...it may never come.  In your case, why not just sit on the house and let your renters pay it off for you?  You just refinanced.....why if you were thinking about selling in a year?  There is a potentially large correction coming in real estate and that equity you think you have will be swallowed up either on the property you have now or the two you are thinking of buying...which will then be upside down.  If you keep the current property which seems to have performed well....you ride it out on that one, while you build up to be able to purchase the next one AFTER the correction at cheaper prices.  Many disagree with me and that's fine....but plan conservatively or switch to shared housing which has less risk than single family rentals and higher net rents.  Either way, as Jacob posted on another string.....appreciation is just icing on the cake....when you get it AWESOME but don't count on it...and if you do.....your profitable deal on paper become a loser in real life.

Many have done very well with student housing over the years...depends on the schools and location. It's good to check with zoning laws just don't reference a particular property. If you're a good neighbor, you can do shared housing or student housing...until there is a problem. We only do shared housing now and some of our properties are fairly high end homes. Most problems can be headed off with a conversation...we recently had an HOA that was intent on citing & fining us for the shared housing...which was never addressed by most municipalities. I was able to have a very nice conversation with the HOA president and she had my personal cell now...if there's a problem, she can text me and we will deal with it quickly. In a very nice way, I let her know that it would be a damn shame to have the HOA run through hundreds of thousands fighting me when there were so many better uses for the money right there in the neighborhood. It worked, we're on friendly terms and the issue was diffused.

Most counties speak to number of unrelated people in a house at 3 to 4 people max.  Some are addressing it by speaking to the number of cars that can be parked outside.  This is usually aimed at student rentals but now, you have many families with 4 or more cars in the driveway.  We have one county in metro atlanta that is trying to push to no more than 2 cars outside...and that's partially to address rentals and student housing.  If you do student housing, counsel them on how to live in your units.  We rarely rent to students now but I started out that way back when I was in college and grad school.  Today, we rarely rent to anyone under 30. In most markets, you would be better off to do shared housing with older professionals who tend to stay longer, pay better rents and don't trash the houses.  That's our model.

I've heard good things about demoines.....and indy....although my personal experience in Indy wasn't a good one....it was years ago through a turnkey.  We are looking at new cities to partner up in with our shared housing concept.  I was peeking at some deals in SouthBend and was amazed at how high the taxes were like 10 to 12 times Indy rates.  I think there will be some good growth in the midwest....just a gut feeling.  Happy to network!