All Forum Posts by: Race Ostler

I recently purchased a home built in 1915. There is a cellar room in the basement that has a moisture issue. The room has brick flooring and stone walls. There is a well 15 feet away and water seeps through making the brick and stone damp which creates mold.

It would be expensive to dig up the exterior lawn to fix it from the outside. I am thinking about coating it from the inside, thereby blocking mold. I wanted to see if anyone out there in the BP world had any suggestions as to the type of sealant/epoxy I could use for this

Stephanie,

I recently bought in the Ogden area and just in case you were unaware, there is a crime heat map feature on Trulia that provides very useful crime statistics by area. This could help you find areas where there will be a greater likelihood of meaningful appreciation as opposed to just the cash-flow game from depressed purchase prices (a lot of Ogden). North Ogden and South Ogden are their own separate cities with different demographics and higher home values. Rentometer.com and Bestplaces.net can also help you get a feel for the local market and prices.

I for one am bullish on the area long term. The Utah job market, i.e. the four counties mentioned above, is very very good: if you look up the individual MSAs they are at or close to the lowest unemployment rates in the entire country. Welcome to the state and we hope you like fry sauce

A year and a half ago I bought a fourplex on a 5/1 ARM. Right after I jumped through all the hoops to qualify for the loan, I ended up taking the quit-your-job-and-not-make-any-money-for-a-while entrepreneurial route. Interest rates are so low that I'd love to refinance to a fixed but I don't have a j-o-b. Does anyone know if there's any way it can be done? Here are the numbers:

-It nets about $500 monthly with a PITI of $2,000

-I'm at a 15-20% equity position

@Levi Terrell

 The gold standard for all things credit score related is myfico.com.  There is so much misinformation regarding credit scores so it's important you trust your source and that is THE source.   I've spent countless hours on their forums and they have moderators and contributors who are very experienced in the industry.

There are a lot of websites like FreeCreditScore.com and CreditKarma that have a lot of feel good ads and appear to offer free credit scores.  The problem with this is, it's almost always their own scoring model that banks don't ever and will never look at.  In other words the whole purpose of a credit score is to determine credit worthiness from potential creditors- that means that we only care about what potential creditors care about.  And something like 90% of financial institutions only care about and only use FICO scores.  So if it's not a FICO score I don't care about it.  FICO is an acronym of a company that has been producing scoring algorithms since the '50s.  FICO scores range from 300-850 where some of these "free credit score" websites' own scoring model might range from 400-999.  These sites can actually mislead consumers because their scoring ranges are different.

Because FICO knows they have the scoring model that everyone wants (banks and therefore consumers) you usually have to pay for your FICO credit score.  There are three different credit bureaus that provide FICO credit scores (with slightly different scoring models) are Equifax, Transunion, and Experian.  It's important to note that each of the 3 bureaus provides a "FICO score".  So to personally check all three it will cost around $40 depending on the promotion going on at myfico.com.  Another myth is people think that checking their own credit score counts as an inquiry and dings their credit score.  This is not true if you personally check your credit score.  Where it does count as an inquiry and lowers your score by only 5 points or so is if you initiate a potential lender to check your score, e.g. you apply for any sort of loan.

Technically those free sites can provide some value but only if you use it to see how you're doing relative to previous scorings from the same site.

Johnny, I'd use your VA loan on a multi-unit. IF you have confidence in your ability to analyze deals, then the sooner you get in the game the better. It also depends on your risk appetite. Credit score of 640 isn't too bad. If you're going to occupy the home and you find a pretty good deal on a fourplex, I can't see any other route that's better than that.

Most investors have a huge barrier to entry on a tri or fourplex because they've got to put 20 - 25 % down. Which will create less competition. And most people who CAN afford the down payment of a fourplex don't WANT to live in one so the seller will like that you're going to occupy because that will say to him that you are more vested in the deal going through if he accepts your offer and puts you under contract. So the more units you get the better (up to 4 with a VA) because you're leveraging your 0% down card which is an absolutely amazing card you have. But the numbers have to make sense from day 1

Lindsay a year and a half ago I bought a 4plex.  I had previously got bought out on other offers I had put in on duplexes by all-cash buyers.  So finally when I came across this 4plex where the numbers made sense, I offered asking price.  And I got it.  All along I've been aware that it wasn't a great deal.  But it was a good deal.  And the nature of real estate and all of its advantages (tax deductions, principal pay down, appreciation, time value of future payments, etc.) in the long run can turn just a good deal into a phenomenal one.

The area has seen some awesome appreciation and rents are rising so I'm very glad I did it even at asking.  I may not currently own any real estate had I tried to lowball.  My opinion is that in the scheme of things, a few thousand dollars difference on the purchase price on such a good cash-flowing property is nothing especially if you plan to hold it for a while.  

But it comes down to what is your next best opportunity.  If there are tons of 4plexes where you live cashflowing like that for 172 then negotiate a little more aggressively.  I'll tell you one thing though if that deal with those kind of numbers were in my market for even $250,000 it would be gone before you can call your agent. You might try to get it for a couple grand less than 180 but even at 180 it sounds like a fantastic deal.  So I would say to not let the perfect be the enemy of the good!

Test is much better, but there's still a lot of profitable investments that don't fit in the 2% test.  If all of us lived in Phoenix and it was 2009 or 2010 then I would be a huge advocate for the 2% concept.

I really don't like the wording on the so-called 2% rule.  The word 'rule' insinuates to those starting out (like me) that if you dare to do a deal that doesn't fit within the so-called 'rule' then you are breaking the mystic "rules of real estate investing" and that if you "break the rules of real estate investing" then you cannot and will not make money on that deal.  That right there is very misleading, and can make a lot of people stay out of the game unnecessarily.  (The majority of BP users are not seasoned veterans.)  So I'm proposing a swift, orderly change from the 2 and 1 percent rules to the 2 and 1 percent theories. Let me explain why:

My first property was a multi and the numbers ended up being definitely less than the 1% theory.   So does it bring in $2,000 / month cashflow?  Of course not.  But I'm still so glad I did the deal and if I hold onto it for a while it will end up being a huge financial increase.  

I wanted to see if there are others in the BP community who have also done deals that were less than the 1% theory where you were glad you did it (and whether the reason you were glad was due to appreciation, eventual rent increases and hence cashflow, gaining experience, etc.)

The reasons why I believe doing a less-than-1%-theory real estate deal can still be very profitable have to do with all the factors that make Real Estate Investing so attractive when compared to other asset classes.  For example, what other asset out there can you get where someone else buys the whole thing for you?  Additional advantages of Real Estate include: Leverage, slow but steady appreciation of the underlying asset over time, constant inflation-adjusted rent increases, and with inflation and time value of money your mortgage payment is technically going down as time goes on even though the dollar amount stays the same.

My opinion here has one major caveat: If you have a knob-and-tube home that's being held together by duct tape, it is obvious that if you hold, you're going to see some serious expenditures.

In other words, I'm talking about doing deals where the monthly cashflows add up to less than 1% of the purchase price on properties that aren't likely to have major repairs in the short-term / mid-term future- e.g. let's say the electrical and plumbing were all recently completely redone and after scoping the sewage line it was determined to be in great shape.

Jordan don't lose heart.

Two huge factors in the Provo area are 1) there's two 30,000 student universities within 5 miles of each other and 2) that there's a tech boom of sorts going on.  This means that you're probably not going to find the kind of cash flow deals out of the gate that you can find in say KC or Atlanta.  

Certainly, being able to meet the 50% rule and the 2% rule and all the other little made up rules is awesome.  But in our market if you had to fit in all these little rules quite possibly the only city you could invest in is Ogden.  Is Ogden the smartest place to invest in Real Estate right now in Utah?  I'm no expert in that area but I strongly doubt it.  Let me explain:

1) Two 30,000 student universities.  There are exceptions, but the squeaky clean tenant base of Provo is arguably one of the best tenant bases in the nation (definitely not talking about single student housing here) in terms of their ability to pay and the way they treat your property.  I can attest from my own experience.  This fact has monetary value in and of itself. E.g. Your vacancy and management expenses- which are two significant components of the 50% rule- can be a lot lower in Provo than many other markets in the country which is a prime example of why the 50% rule cannot be extrapolated the same to all markets.

2) Minor tech boom.  Ever since silicon entered San Francisco there have been people saying that the real estate prices of San Francisco are unsustainable and overpriced.  But what's happened is that a lot of people have made a ton of money there off Real Estate because of the crazy money people have in the tech world.   I'm not saying anyone should base a particular real estate investment decision based solely on the speculation of the value of the home going up in the future.  What I am saying is that Provo has the fundamentals which is why a Forbes article just barely ranked Provo the 2nd best place to invest in Real Estate in 2015 (http://www.forbes.com/sites/erincarlyle/2015/01/09...).  The Provo, Lehi, and Salt Lake area is no Silicon Valley but I believe that to a certain extent the same thing that has driven up prices there is happening and will continue to happen here because of the boom that is happening in Lehi and surrounding areas and the fact that we're close to running out of land.

There are needle-in-a-haystack deals in all markets. But I believe that in general and especially in our market, focusing so heavily on cash flow and ratios can sometimes lead one to stay out of the game.  Consider the compensating factors of areas like ours that might not have golden cash flows- such as more appreciation and way easier tenants.  The numbers always have to make sense from day 1 but don't let the perfect be the enemy of the good!

Ward was spot on about the Provo Housing Authority.  Go drop by and they'll give you all the info you need to know.  They're near downtown and are very helpful.  

I would strongly recommend going the Section 8 route.  Payment is direct deposit and guaranteed 1st of every month.  The tenants are more longterm and in my experience consequently care more about the property / yard because it's almost like 'their' home as opposed to transitory students who generally view most everything as the landlord's responsibility.