All Forum Posts by: Randy E.

Thanks Chris.

If you're uncomfortable signing the agreement, maybe you could agree to pay him a fee for running around and doing your legwork.  Maybe $50-$100 per address.  That way, he gets paid for his time in the event you have him check out 25 houses, but eventually decide to not invest in that city.

 Chris, please clarify for me.

If the loan is not Fannie financing and is an investment mortgage, what is the cap for seller credits?  I've wondered about this before, but never looked it up.

Great info!

 One other thing.  IMO, that bath isn't in bad shape if your target price is $110K.

Pull up the floor and install new tile.  New toilet.  New vanity and sink and medicine cabinet.  New handles, faucet and shower head in the tub. Pull up the caulk and recaulk.  And paint.  I bet that will make the bathroom look much better.  Maybe a new door, but I can't see that in the picture.

The floor will probably be the most expensive part.  The rest will take an experienced guy about a day, maybe two.

If you decide to remove all the tiles in the shower, definitely come back with a tub surround package.  Much less expense for materials, easier to install, and thus much less cost in labor.  But I still say call a company that does reglazing for tubs and tile and see what they charge.  You might be surprised.

 Tomiko, last year in NC I had a full bath completely remade (rotten floor, removed tub, toilet, sink/vanity, all new tile, paint, etc) and added a brand new half-bath that wasn't in the house originally, and I paid less than half of the $13K you were quoted.  I won't say that guy is a thief, but if you use him you'll be robbed.

One of the hardest parts of starting out as a RE investor is finding contractors who do good work for a fair price. IMO, $13K is an outrageous price for a ARV of $110K. Either reduce the scope of work, or call other contractors for more quotes.

Tomiko, keep in mind that you are new.  Unless you've had experience working with tradesmen and contractors, it will be difficult for you to figure out which inexpensive guy is going to do a good job and which is going to do a bad job.  Also, it's hard for you to figure out which expensive contractor is going to do a good job and which is going to do a bad job.

I don't want you to overpay, but I also don't want you to pay a guy $5K and he does a job so bad you have to redo everything.  Keep in mind, you could pay this guy $13K and he could ruin it and you have to start over anyway.

Get 5 quotes.  Get references from previous jobs.  TRUST NO ONE!  Never pay upfront!  Even if it's a guy you see sometimes at your church. At most, pay for materials upfront -- meaning you meet him at the store and pay while you're looking at what is being purchased.  It's easy to get rolled in this business.  This is your first deal, and you have to be extra scrupulous.  

Good luck.

You said you have a tenant in mind.  Have you told them what the rent will be and have they agreed to pay it?

There are many shortcuts to deciding if a purchase is a good investment.  One shortcut is the 1% rule.  That instructs that the monthly rent should be at least 1% of the total price (purchase+rehab). 

Assume a purchase of at least $195K (because there is apparently a bid of $185K already made and a reasonable assumption would be that bidder isn't going to crack because of a few more thousands dollars.  

Assuming "new floors" means a minimum of new carpet and a max of new hardwoods.  Not knowing the square feet and inserting 1500 sqft.  Maybe some painting and other minor touch ups too.  You're looking at $3K-$7K more on top of the purchase price.

Even if we cap the all-in price at $200K, the 1% rule says the rent has to be at least $2000/month for this to be considered as a good investment.  That's a good jump away from the $1375 you mentioned as your starting point for rent.  Do you know if your intended tenants will agree to pay that much?

Unless you're counting on rapid appreciation to be a major factor in this investment, I'd say keep looking.

@Joe P., I had a similar incident a few years ago with a SFR. Thankfully with a SFR. No bug problem before. A few months in, wife complains of bugs. I check it out and the kitchen was not quite filthy but generally unkempt. Trash overflowing and dishes with left-over food all over the place. They had three children, including two very young children, two jobs and a PT job, and I think life overwhelmed them.

When I talked to them about the need to keep the place cleaner and the roaches being a result of the trash and food, they seemed sincerely oblivious to the possibility.  It was as if they had never put the two (dirty kitchen + roaches) together in their minds.  Their thought process was "see roaches, call landlord for pest control appointment."  I told them to clean and told them to spray for bugs themselves.

They never really got the place clean and the bug problem never disappeared.  Not long after, we mutually agreed they could move out early.  I called a pest control company and the guy said "No problem."  Two visits in three days, $75, and all I had to do was sweep up a lot of dead bugs.  Years later there have never been roaches again.

The problem you face is it is a MFU.  In your case, I would give the tenant a week or two to clean adequately and have a pest control company (at landlord's expense) treat the unit and bottom unit.  If you treat only the top unit, the roaches will migrate to the untreated unit.  That's the last thing you want.  That's why I would not make it the tenant's responsibility to pay -- it he doesn't want to or can't afford to pay, it won't get done.   If the dirty tenant does not comply with cleaning, see if you can evict him -- I don't know PA law, but hopefully there is something in the lease he has violated by being so filthy.  Or, if the lease is close to expiring, simply provide notice that you will not renew and tell him you won't penalize him for moving out early. 

And I agree with the others who said a pig will probably not stop being a pig.  He might be a great guy and an otherwise good tenant, but a pig is a state of mind.

 I have a slightly different take most of the others.   I agree with Splitrock.

You said that, at walk-through, you did not notice the damage in question.  I assume you then told the tenant (or implied) that he would be receiving a full refund of his security deposit.

At this point, stop and look at it from the tenant's point of view.  If you inspected the unit and he was told he would receive full deposit, but he later was blindsided with a $200 deduction, that would have made him feel you were taking advantage of him.  That feeling might have made him respond as many landlord here on BP say they respond: with force to demand what they want and think is fair.  At this point, you look to him as just another "greedy landlord trying to harass the poor tenant."

My opinion is if you did indeed tell the tenant he was to receive a full refund, you should refund the deposit in full.  It is not his fault you missed the supposed damage.  After all, it is entirely possible the damage occurred after you performed the walk-through.  You really don't know.  

The mistake of missing the supposed damage was yours -- as such, you should bear the cost.

 Exactly!

I just hope the OP hasn't texted the tenant and mentioned the excessive late fee.  It might not go well for him if she appears in court and shows the magistrate an illegal threat.