All Forum Posts by: Raymond M Dalida

Yup. Had depreciation mixed with loan pay down. Guess this will be one of those embarrassing posts I'll look back on in 5 years and ask Josh to take down. Doh!

Thanks for the correction and lesson Natalie Kolodij

Make it happen!

Ray

Hey Travis,

I don't have any experience buying properties with fire damage but I do work in Emergency Restoration and deal with fire damage all the time. I would assume it seems like a daunting task, but from what I've seen, it's never as bad as it seems. Obviously every situation is different, but essentially you'll have to replace anything in the structure that isn't sound anymore, have an electrician check the affected electrical or plumber check affected plumbing and what not and work off their recommendation. After the structure is structurally safe the cleaning process can start. You'll want to use essentially a filtered shop vac, using a particulate filter or hepa vac and vacuum all the soot with that first. Then use chem sponges also referred to as dry cleaning sponges (Quick tip: You can tear them in the middle like opening a sandwich and get double the use out of them and get a pole that extends with one of those plastic adjustable mop head clamps) to wipe everything that's left. For everything else you'll want to use chemicals to treat the area. You can find those at Home Depot. I can't recommend any of them though. I've only used commercial chemicals. After the clean up you'll want to use a sealer like Kilz sealer primer and coat everything. If there's smoke damage in the attic you'll want to remove all the insulation and clean and use Kilz up there as well. Rebuild damage and you're ready. You'd be surprised what you can save. Framing that is black but still sound can be treated and reused. Make sure bare minimum to ventilate using fans pushing outside air through the house and out. We usually use an air scrubber to catch particulates in the air and your commercial venders have access to machines like a hydroxyl or ozone to help with the odor. I recommend the ozone for large areas. I hope this kinda gives you a real basic knowledge of what goes into it. If you have any specific questions please feel free to PM me. You're local Emergency Restoration company will come do a free estimate for you. Get multiple quotes. I'd stick to the bigger names like ServiceMaster and Servpro. They typically have more employees than your ma and pa and therefore be able to turn it faster. Also, they charge everything per line item. So if you have a contractor that can do the demo or painter to do Kilz or what not at a cheaper rate, you can deduct those from the estimate. Also let them know you can have that line item done for $X and a lot of times they'll work with you to keep their staff or contractors on the job.

Hope this helps and let me know if you have any other questions about the process. We do this all the time and make it look and smell like it never happened. 

Make it happen!

Ray

I don't have any personal experience with security systems but Simplysafe is one BP advertises for. Depending on how much material you have, you could always rent a pod or something similar for worksite storage. If you lost $500 already it may be worth it. That's assuming you don't have a basement or garage to store it. Otherwise you could always leave a guard dog. And hey, from what I learned from the BP podcast show 49 with CPA Amanda Han, you can write off your dog food at tax time when it's used in that capacity. Check it out at www.biggerpockets.com/show49. Found that podcast super helpful for tax stuff, but she talks about an example of writing off dog food for a guard dog. Hope it all works out. You should post what you end up doing. I'm curious.

Make it happen!

Ray

Hey Chandra,

Did you mean depreciate or appreciate? Depreciation happens when paying down the principal. Appreciation happens in 2 ways. 1. Forced appreciation. Adding value to the property via rehabbing the house, landscaping and what not. 2. Market appreciation at which the property will appreciate over time based on the market it's in. For example in my area the median annual appreciation rate is around 3-3.5%. So for your property assessed at $275,000 with the house would appreciate to $283,250 next year in my market. Adding $8,250 in appreciation for that year. For a more conservative estimate I would use a 2% appreciation rate in my market. Hope this helps!

Make it happen!

Ray

Hey Kevin,

Where you at in KC? Just moved from there and know that area well. Plan on investing there as well.

I came up with that number by adding all his expenses together including his mortgage and subtracting that from what he would make in rents.

Annual Expenses: $13,406

Annual Mortgage: $6,972

                            =$20,378

Annual Rents Collected: $21,300

$21,300-$20,378=$922

$922/12months=$76.83/month net income

$76.83/2 units =$38.41/month net income per door

I'm pretty sure that's how to do it. Again. I'm a newbie and just practicing running numbers. Someone with more experience may have it differently. 

When in doubt you can always try the BP calculators @ www.biggerpockets.com/buy-and-hold-calculator

According the Brandon Turner's webinar you can use it up to 5 times free without a pro membership. It's unlimited after you upgrade to pro. It's pretty sweet.

That's tough but what do I know? I'm a newbie. I ran the numbers for my own practice and if I'm right you're only cash flowing like $38/month for each side with getting $1775 in rents. So if the utilities fluctuate enough you're in the hole. It doesn't seem like your appreciation would go up in a declining market and the market values would go down after you buy. From this info I would say no deal. Unless you've got the inside track for the market turning around.

Why do you think you could get $2200 in rents? Are you doing any rehab and if so what's the ARV? What's the actual value of the house vs what they're selling for? There's probably a reason the current rents are lower than average. What do the other comps have that your property doesn't? Newer appliances, fresh paint, landscaping?

Again. I'm a newbie running your numbers for my own practice so take my advice for whatever it's worth. Maybe someone with more experience will have a different opinion.

Hope I helped at least a little.

Make it happen!

Ray

I didn't see craigslist on the list, so maybe post it on there, Facebook or even here on BP. Obviously a sign in the yard. Have an open house, post flyers at the local coffee shops, grocery stores, gas stations etc. or maybe go to other open houses for similar properties in the area and talk to those buyers. That last one may be kinda shady, but what do I know? I'm a newbie. I know I'm not an agent, but I thought I'd give you some labor intensive options. Hope you get some other good insights. 

Make it happen!

Ray

There's a lot of information about the deal that I would be curious about. Can the tenants not get financing? What do you mean by the sellers are financed? Are the sellers willing to do owner financing on the deal? What are the numbers? Do the sellers own it or still have a mortgage? 

Without knowing any of that it's hard to give advice. There are tons of ways you could put a deal together with creative financing. 

If the sellers will do owner financing while the tenants wait to be able to qualify for a loan then you could do a lease option. Have the sellers lease it to you with an option to buy say in 5 years. Lease it to the tenant with an option to buy in 2 with a $5,000 down payment. Offer the $5,000 to the sellers to pay off the debt for them for leasing it to you. If the tenants can't get financing within that 2 years it'll give you time to find other buyers either on a lease option or retail. But again, it's really hard to give any advice really without more information. 

If you're interested in lease options as a strategy I would recommend Making Big Money Investing in Real Estate without Tenants, Banks or Rehab Projects by Peter Conti & David Finkel. You can find that book and other great ones at www.biggerpockets.com/books. That's where Brandon Turner listed his 20 favorite RE books. That's the one that focuses on lease options. Has a lot of good info on the subject.

Hope this was somewhat helpful. Maybe add some of that info to give people a better picture of the deal so you can get some more thorough answers. 

Make it happen!

Ray

Hi Mario,

I'm just a newbie so I don't know much. I can't speak to dis/advantages. But as far as trying to buy from the seller's agent I would think you could find that information from the posting site (MLS), craigslist, a sign in the front yard or even just calling the homeowner. Tell them you're interested in the property and ask for their agent's contact info. I guess it depends on how you found it for sale.

Hi Tiffany, 

Welcome to BP. I think you will find this site very beneficial. I know I did. I'm a newbie just getting into the game so the resources and information here are imperative to my education. I'm interested in learning more on the financing side so I'm excited to see what you post and interested to get your point of view as a loan officer. Hope you find this site as helpful as I did. I know I'm a newbie to REI but I've been on this site, reading their books and listening to all the podcasts. So if there's anything I can help you with finding your way around BP, please let me know.

Make it happen!

Ray