All Forum Posts by: Nick Ferguson

If you have to ask, you usually already know. 

I'm sorry she had a rough patch, but I cannot make assessments based upon anything other than past performance. 

Unless you're talking to a cop or a lawyer, honesty always wins.  If talking to a cop or a lawyer, don't. 

I don't want to be a downer but I live in one of the cheapest markets in the country (Cleveland) and $15k properties in C class neighborhoods simply don't exist anymore.  There are deals to be had for sure, but that price is not C class no matter what shape it's in. 

Can you go to east Cleveland and find a $15k property that needs $60k worth of rehab?  Sure you can.  Hell, you can probably find one for $5k. But that is not even remotely close to a C class area.  

I've worked on some jobs in those neighborhoods (where you'll find a $15k house) and the mailman got shot across the street because he brushed against the wrong person's car while walking.  This was like 6 months ago.  Also, the company had to hire security to guard the worker's cars during the workday so they wouldn't be stolen or broken into (both happened before the security guards were hired). So yeah, you can find the house that cheap but that's the type of neighborhood you're dealing with. 

And B) After you pay $15k for the house and $60k fixing it up, you have a house that is worth $50k (while the rehab is fresh - before it is destroyed by a non-paying tenant eventually).  And that doesn't mention that you'll be hard pressed to actually see the rent you plan on collecting.  

Relatively cheap properties can be found and rehabbed if that's the niche you want to go after.  But IMO, the only people who could reasonably hope to be successful with the strategy you've described (sub $15k houses) are local people who are contractors themselves and ready to do the work.  If I were you, I'd look to step up in asset price a little bit and take down some easy rehabs (carpet, paint, appliances type of stuff) and not jump into that asset class right away.  It's hard to do and, in my opinion, the juice is probably not worth the squeeze. 

Good luck!

Welcome aboard Chris.  I also invest in duplexes in Cleveland (I'm local) and my team and I help out-of-state investors learn the area to make informed decisions.  Feel free to reach out if you have any specific questions about the local neighborhoods or a specific property. 

I have to agree with all the other posts. Exterior improvements aren't going to raise value much at all, let alone 25%. Honestly, with 60,000 in cash, you'll be very hard pressed to BRRRR in Cleveland. In 2017, this was possible. In 2022, it's gonna cost like 80K minimum to do anything meaningful in a neighborhood where you'll actually have sustainable, rent-paying tenants. And with you not being local, 80k will be difficult to stay under.

I've BRRRR'd my last two properties (2021 and 2022). The first, was about 70k purchase, about 5-10k light rehab and appraised at 120. Note, I pulled 80 out, thus getting my cash back but I didn't "profit" from it. The second, I'm just finishing up and haven't done the re-fi yet but it's all done and has paying tenants. I purchased it for about 75, spent about 20k (converted a dining room into a bedroom + minor rehab elsewhere) and I'm hoping to appraise for about 135k. I MAY be able to "pay myself" a little profit on this one but I'm likely to pull out around 95 and "break even" again. I did not do ANYTHING outside on either property that wasn't a necessary repair (removed a dead tree, removed signs from old PM, fixed gutters, etc.). The value improvement is all on the inside.

With 60k, you're going to be looking at a purchase price of no more than 40k.  While that's theoretically possible in Cleveland, you're going to want to avoid those areas/properties. 

If I were you, I'd either keep saving until I had 80/85K OR I'd put 25% down on a ready-to-go property that cash flows and get my feet wet as a landlord. Plenty of those exist - My 75K property that I'm BRRRRing would have been "ready-to-go" if I wanted to not add the bedroom and spruce the place up to get top-dollar rent.  With 60k, you can probably buy a second property with 25% down pretty soon after buying the first.

Don't lie to your tenants.  

Set fair and realistic expectations and then do what is best based on the situation.  If a request is reasonable and you can accommodate, do so.  If a request is unreasonable or sets a precedent that you don't want to set, then tell them that and move on.  If you're fair and firm and honest, you should have a good working relationship.

Thanks for the thoughts @marc rice

So regarding finance, you would recommend buying/renovating with cash, enjoying that sweet cash flow for a couple years, and then refi after that?  Do banks consider that income the same way they do normal rent?  I've always had to show both past rental income AND an existing lease so I was curious how they'd view with no lease in place even if you have 2 years of income to back it up.

I've been a buy-and-hold investor for a while.  I have a small portfolio and self-manage and intend to grow steadily over the next 20 years and then retire.  

I've kicked around the idea of diversifying into short-term rentals (not switching, just adding one or a small handful of properties over time to supplement my regular portfolio). 

I'm in NE Ohio and while I don't plan to completely "self-manage" (ie, do maintenance/cleaning/etc. myself) I do want these properties to be close enough that I can A) check them out personally when needed and potentially tinker/add improvements on occasion myself AND B) if they are vacant for a weekend, go and enjoy some R&R on short notice. 

First and Foremost, how are most of you guys managing these places when you aren't local?  Are you turning over to a full-service management company that handles listings/tenant calls/maintenance/cleaning/etc. OR are you handling booking/listing and managing separate cleaning and handyman/maintenance crews yourselves OR some hybrid/other way?  

I'm specifically looking at Ohiopyle/Laurel Highlands area of PA , Southern WV area (think near New and Gauley Rivers), or rural areas between Pittsburgh and Morgantown. Also, would consider less "destination" type areas like Salt Fork or Portage Lakes areas in Ohio if the price was right and the investment made sense. I've also considered doing a "test run" with an SFR in the Cleveland area and if that does not work, simply converting the unit to long-term and adding it to my existing portfolio. Does anyone have experience with STR's in any of these areas and care to offer any advice?

Finally, how should I think about financing/equity/cashflow factors specific to SFR's? Will I have trouble getting financing on an STR? How do banks look at STR income and debt in regards to DTI and purchasing other properties (whether short or long term)?

Feel free to add any advice but mostly I'm just looking for things an experienced investor should think about when considering pros and cons of diversifying into short-term SFR's.

Tell the truth.   If you're not sure that you'll be buying right away, just say cash reserves and potentially for future reinvestment. 

I've used HELOCs to purchase additional property (well more specifically for down payments) multiple times and I've always told the truth about those intentions and I've never had any issues.  

Thanks @Bill Exeter!  That is what I assumed as it made logical sense but when I called the Exchange place to confirm, I was told differently and wanted to get a second opinion.  Thank you for clarifying what I believed to be true.