All Forum Posts by: Jonathan Johnson

@Jacob Anderson Thanks! That's very helpful. I didn't think about the materials.

@Wilson Adams

Check out the success stories forum and pick a few to show her. The realness of the people, the pictures of before/after, and the numbers speak for themselves.

Also, the BP calculators are super impressive. Find a random house for sale or one that "could" be a good deal and plug in the numbers to the calculator. Show her the results. Not only do good deals give you equity, but they appreciate over time and cash flow. 

Practicing my number crunching, perhaps this will help:

Purchase price: $120,000
Cash in: $34,000

Gross Rental Income: $1600/mo   $19,200/yr

Expenses yearly (percentages off income):

Vacancy @8%                 $1,536 
Maintenance @5%             $960
Management @8%         $1,536
Mortgage,Tax,Ins           $9,600
Total Exp                       $13,632 

Cash Flow                            $5,568

Net Operating Income = $19,200 - $13,632 + Mortgage

Cash-on-Cash Return = Pre-Tax Cash Flow / $34,000

Didn't know the specifics on some of those. The percentages were average but different people have different percentages for different areas (vacancy, maint, management) 

I would knock and try to talk, but I'd also have a letter in hand like what Colleen said to just slip under the door or tape on door. I wouldn't be too worried as it's probably just a scare tactic meant for someone else. If cops come it would probably be an easier conversation than "I need to talk to you because you don't want to talk to me and I'm suspicious now." 

Cop: "What are you doing here." 
You: "I own this place, there was a note addressing a common place where we were doing repairs that she would call the cops. We haven't been able to contact her."
Cop: "Let me try." "Lady, they own this place and can occupy common places. They were trying to get ahold of you to tell you as much. Bye."

As long as rent is coming in and nothing to your knowledge is happening illegally I'd stay out of it. Even if the rent is $125 below market, it would be a while to make that back along with vacancy until to you get a new tenant and also the eviction process, assuming the new tenant pays on time and for a full year.

@Mike F.

Scheduling for Thursday or Friday to walk through with him to do exactly this. Thanks for the input.

@Aaron Vergason

That's awesome. Super helpful. I didn't think about going to a construction site. 

@Trevor Scott Totally agree, the book I'm reading mentions about 7 different contracts you have the contractor sign before work begins. Insurance, 1099, scope of work, and other agreements I can't remember. Super professional to get all that signed up front.

I like systems like these because it makes it professional and clear that you are providing jobs and have expectations.

@Aaron Vergason

Thanks for the input, I was hoping a contractor or project manager of sorts would comment on this. Do you have any tips on finding legit contractor companies? I've heard about going to Lowes or Home Depot early in the morning to meet them. That seems really awkward. I'd have no idea how to approach that.

What do you guys think about this from "Rehab Investors Bible":

It's an achievement style system of paying contractors. Start with the smallest payment first and end with the biggest payment last. This gives incentive for the contractors to complete the job and keep working in a timely manner.

15% - after demo and frame out. For those who say they need money upfront, this initial achievment doesn't require a lot of money up front. And the author says that if a contractor doesn't have credit enough to get basic materials at the store before being paid then perhaps he has bad credit from a default or bad spending.
20% - after insulation, sheet rock, doors, and trim
20% - after installing kitchen and bathroom cabinets
20% - after countertops and flooring
25% - after punchlist and final closeout

The key is having things spelled out beforehand so that the contractor can go to work quickly and efficiently without having the investor breathing down his neck and making a bunch of changes mid project.

@Joshua Dorkin @Scott Trench

Congrats guys, you are making news and helping America. I appreciate all the help BP and the community gives out freely to improve people's lives.

@Michael Hassell 

I plan on being strategic and prepared when I talk with the owner. I'll have a few comps and pictures of what could be, and what his apartments are, to justify a rehab. The deck is concerning, not sure what to do with it.

@Owen Dashner

He's not motivated, but people can be made motivated. He knows he doesn't have much longer (grim, but he mentioned this) and he wants to enjoy the rest of his life with buying toys and traveling. That's a motivation to get rid of this apartment. I'd agree that there may be more than 100k in renovations, this will be used in negotiations. 

The cat lady mentioned that she doesn't live there, but is only the property manager. This confused me, but apparently she has a place elsewhere. I didn't see any bed in the entire apartment so I guess this can be confirmed.

@Colleen F.

I didn't think about the lead, asbestos, and wiring. My contractor, which I will admit is turning out to be not very professional, saw some knob and tube but didn't have a testor to see if it was live. He believes that they were all replaced, but left hanging. 

I'll have to look into the fire code, you made a good point with it probably not up to date with today's code. He was so proud of the last time the fire department came, I wonder if he'd invite them over again today?

@Courtney Sorrell

I was just reading about building codes and realized I don't know much about them. I am considering just going to the building inspector office (?) and start asking questions. I bet this apartment is all but invisible to them as of late.

As far as it being a massive project, from what has been shown to me it doesn't seem incomprehensible to fix and rehab and set a price on it. It's the things I haven't seen (Apt 3 & 4) and things unseeable (stuff in walls) that I need to set aside a percentage to discount off the price to anticipate.

Everyone - I am having fun with this and learning a lot through all of you. I understand you all can find better deals or less stressful deals. I'm not serious about these apartments, I'm more learning what to look for and how to analyze and ask the right questions. I don't want to give up simply because it's scary or "probably" not a good deal. I will give up when I have a certainty that it's not a good deal (price). Though it may seem I'm wasting time on this, every one of your comments, questions, and suggestions offer more value to me than giving up on it. Just yet. I won't make any dumb decisions without asking you all first.