All Forum Posts by: Robert Smith

Great job on the closing and sticking it out, also glad you are willing to share and help others. Patience is paying off for you it sounds, that is a nice find and an even nicer cash flow for such little out of pocket. I would start working with a lender now who can work with your rental income to approve you for other properties, this takes time but when you are ready to build your portfolio you would be ready if this is something you want to do. Some banks require 6 months to a year as a "manager", just a heads up, to be able to use rental income. Homepath homes are a great find, some of them have even been completely repaired by the lender before they list or sale the home, and doing the "house-hack" also kept other investors out of the bidding since you were in the first look. Good job again. 

This would vary greatly. I was actually down there volunteering last week and I saw a lot of the damage and heartache first hand. The subdivision I was working in we could save most of the homes, however the subdivision next to us the city told them they would either need to 1) tear down and rebuild 2) raise the home 9 ft even though not in a flood zone 3) walk away from the home and let it go back to the bank. None of these are viable options for most affected in the area. If you treat the home and abate the moisture and mold correctly you can sell the home eventually, look at the homes in a hurricane area that sale for example. Inspectors are going to be brutal as will appraisers I believe but it is hard to say the end effect of the flooding. Prices and areas will recover if the home can stay but it will take time. I would consider renting the home out for a while if your mother will no longer be living there if you can fix it up. Look into the loan programs they are offering for the flood victims, there should be a few. Spend the extra money now, hire professionals, and document everything so that you can prove you did what was needed to transfer a good, mold free property. Mold is the four letter word in this business. Sorry to hear of your mothers loss, hope things look up for you both. 

Your gross is $3200 a month but what is your net? This will make a difference if a deal or not. You will need to know any taxes and insurance cost along with any management fees, utilities or lawn care you have to pay while owning, along with taking repairs and vacancies into account. These all build into your cap rate. If you have more information please send that for the group, if you don't have that then I would be asking for it from the current owner. For owner financing I would pitch it to the owner however you would like to lay it out, or ask if they would do payments and a balloon within a few years to let you build equity and income on the property. He is a investor obviously so may be open to financing, multi fam owners usually are open to this more then single family owners. Draw up an option to purchase that allows you to sublet the property or do a land contract if they are legal in your area for the property if he is unwilling to transfer the deed without getting paid in full so you both have something in the deal but benefits as well. Find their motivation for selling and work those angles. It could be a deal based on the numbers you come back with. Good luck.  

It would sound to me that you have enough money to do a few things, if you can get a loan you would be much better off in my opinion, you can make your money work for you and have a small interest rate on a mortgage rather then being cash poor and not having anything to put into a home incase of repairs needed. Other peoples money is the way to go and age doesnt play into that. For your options, a duplex that can pay you to live there would be the best choice if you don't need a single family home. There are many different insurance options you can look into, generally you would look into an umbrella policy if you are in the property with other tenants, if you have a single family home as a rental usually you would only have what they call a "fire policy" to cover the building but not the tenants belongings. They can also get renters insurance, which is something you could require in your lease agreement. You can have an attorney or title company help you with the legal matters or find a local property management company in your area and see if they have a non-managed option where they rent the home and complete the paperwork then you deal directly with the tenant from there. If you hire a management company they handle all the legal issues and screen the tenant for you and charge a minimal fee, that varies by location so discuss this with them. It is a scary issue to have bad tenants but screening and doing your due diligence can go a long way when picking the right person, especially when living next to them. Evictions are a huge pain and are a waste of your valuable time, however they are pretty easy to do, there may be a good landlords group in your area that can help you with this. Use your cash for the rehab or appliances rather then an all out purchase. 

In my experience usually the subdivision of that home will dictate what you should do especially when looking at future value. If every home in the subdivision has a garage and you don't that could be an issue, if it is split or few garage homes then I would take the hsft all day over a garage, mostly in part that hsft you will make more money on as opposed to a garage when getting appraisal value. If you are looking to buy and hold you can ask more money for the property per month, and once you make your money you could always turn it back into a garage if it is that difficult to sell. One thing I have come across is knowing if permits were pulled when the conversion was completed and if you are on a septic system or a sewer system. You will need to make sure you can sell the home as a 4 bedroom. For us in TN and NC you can only sell a home for as many bathrooms the septic is rated for however you can list the additional bedrooms as "bonus" rooms, and if you want to sell the garage as a 4th bedroom and permits were not pulled they will want to pull all permits and may require you to take down walls and such in addition to having a licensed plumber, electrician, or structural engineer inspect and sign off on the property. Check with a local agent or appraiser for more info. A detached shed turned into garage could be an option as you suggested. Mentioning the HVAC is also something to look into, the hvac unit is usually based off the hsft of the home and you don't want to over build the home without upgrading the system, or at least having it checked if it is not a separate unit for the conversion. Again, I like the extra hsft and income from it, sounds like you might have a deal if you can cash flow well. 

Sounds like something I would like to be a part of. If I can get free I will be there. Looking forward to it and seeing everyone there. 

You stated they are negotiable, would they look at doing a sub 2? This may put a little more meat on the bones and make it more interesting to someone looking to do a deal without a lot of cash. If it is close to Nashville then it is a hot area for the most part but there are some areas that have not caught up to the rest of the area. For the disclosures, they must disclose anything they know about in the home. There is a standard TN state form that they can provide you or the potential buyer with however they may not know about any code violations if they purchased the home in the current condition, you stated many owners have done their own work to the home. I would even think of pitching this to buyers looking to buy and hold. If they can put a few dollars into the home and make it livable and take the appreciation that could be another avenue of sale for you to pitch when trying to wholesale this home or any other home, this is when a sub 2 is really goode for the buyer you are pitching the deal to.  

After cost to sell (commissions, closing costs, home warranty, tax liability) and holding costs (cost of money, utilities, insurance and taxes) this one could be more of a buy and hold then a fix and flip. When looking at the option to buy and hold or rehab and resale I always look at the area and projected income within the next 2-5 years. The money now is good and can end up funding more deals down the road, however if your money could be doubled by holding onto something for a little while longer then that is the route to choose. Having funds tied up for a long period of time can be a deal breaker for most investors. I would make sure that you do not sit on the home any longer then you have to if choosing to sell it and remember that your repairs on a home to hold will be different then the repairs needed for a home to sell. You can get away with lipstick on a pig many times with a rental but when choosing the repairs to sell the home you need to see what everyone else is doing and maybe even go one step beyond that to make sure you sell the fastest for the most profit. A resell once in a while is good to do as long as you always profit, you may find that you like this strategy better and do a few of each. 

I believe the cost approach is something that no one has fully grasped. I know that the "traditional" way of doing real estate is to charge a commission and go about business, but many people who are limited on funds when selling their home need a few options. I am not talking about a flat fee service, I am talking about a fee for services brokerage where you get what you pay for and agents get paid up front a portion for their services with the rest being paid at closing. This will give options to the agents in the firm as well as the sellers. The old way of using agents has been out dated for a long time however most agents and companies fail to see this. No longer do buyers need to come into an office and flip through a real estate book, they find the home online then make the decision to call an agent, same with sellers, they can post their house online almost better then most agents and get hits immediately for people who want to purchase their home. They need some help in marketing but really need our help in navigating the documents and making sure only qualified people come through their home. Look into the ACRE (accredited consultant of real estate) approach. I would love to see more firms doing this. This is the future of business structures and practices in my opinion. 

The one thing all agents want is training and leads in the end, if you can provide them with this as well as the opportunity to market their brand and bring in max commissions you have a game plan that will make both you and the agent money. 

There are not many options out there for assistance. You could have this money given to you by a friend or family member however you would need to provide the lender with a gift letter as they will not loan based on you having to pay this money back, especially if your DTI is close to their max. Look into an option of a USDA loan if you have no down payment, this may or may not be an option depending on the homes location and your income level.