All Forum Posts by: Lee Smith

As others have said Lawrence is not bad, but they are hardcore on permitting, and the eviction judge is not as landlord friendly as center township. 

@John T. Ask the different agents why theirs is more or less expensive.. Show them the quotes and let them pick each other apart...

As for what I pay, most of my homes are low income with an ARV of 40-60k... So I pay $400-500 a year for insurance with a $2500-5000 deductible.

Get a high deductible. $2500+. You only want to make claims for worst case scenarios. Hail damage roof replacement is not a worst case scenario. I have only had one claim in the past 20 years and it was because of a fire. 

What do you think the house is worth fixed up? You may only want actual cash value. 

@Craig Hartwick I talked to an appraiser friend of mine, and he said he knows of NO rules from Fannie, FHA or VA that dictate this requirement...

@Craig Hartwick Is this an FHA loan the buyer is getting? Have you asked to see the specific verbiage they are referring to? That may tell you what they are wanting..

@Teho Kim  That's an area that is changing.. At this point it's pretty speculative.. You didn't list whether it's a 1, 2 or 3 bedroom per side.  

Worst case scenario:

1 bedroom duplex should rent for $450-500 per month
2 bedroom duplex should rent for $500-550 per month
3 bedroom duplex should rent for $575-650 per month

In Indianapolis: When dealing with multifams, you need to be aware of a couple of different things.

Higher vacancy rates, instead of 2-4 weeks to fill a single fam, you are looking at 4-8 weeks to fill a multifam. It’s not for lack of applicants, but lack of GOOD applicants.

Higher turnover rates.. While my single fam renters generally rent for 4+ years on average, my multifams only rent for 1-2 years on average. The premium for single family houses is not that much more, and most residents will gladly pay that amount to not have neighbors. Turns(One tenant moves out and you have to prep for next tenant) are what kill you in rentals. A good tenant turn is probably going to run you $1000-1500. It's VERY rare that someone gives you the property back in the same condition you gave it to them.

Watch out for owner paid utilities. These can break the deal. While water/sewer is easy to deal with($50-60 per month per unit), anytime you are paying for heat you are looking for trouble. Residents crank the heat up in the winter and then open a window to cool off...

Most multifams in Indy are in low income areas, and are much older(1900-1950’s). The deferred maintenances wrack up quickly, and you have to multiply that by the number of units.

I am not trying to scare you off, just you need to budget for them.

@Account Closed  Most of it shouldn't be legalese... If you have questions about sections, just ask them.. I own a property management company, and some stuff is in there just to CYA... 

Our contract is for a year, but I have been toying with the idea of just making it month-to-month.. Most of the time I fire the client or we both agree it's time for them to go. What I generally tell my clients is "If I am doing something wrong, give me 30 days to fix it, and if we can't I will let you out of the agreement..."  Never had anyone use that clause, but it's out there..

Piece of advice: since you are a new investor, everything you have read about property management and what to expect.. It may not be true... Kind of like all the advice about having kids, most of that goes out the window when you actually HAVE kids. 

Trust your gut and use common sense.. Do NOT expect the PM to be perfect... Expect that you will not stay with this guy/gal/company forever.. Hell, expect you won't stay with them for more than a year.. You are going to expect certain things from them, and they may not meet your needs. It's ok to switch companies, just like they may ask you to go elsewhere...  It's almost a partnership/marriage... You both have to like each other. 

There is BAD PM's out there. Definitely do your due diligence. The old adage about you get what you pay for is true.  Ask for referrals and CALL them. Find someone you can work with, and USE COMMON SENSE when dealing with them. 

Make sure you get copies of your leases, and make sure you can get a ledger if needed. If something goes south and you need to bail to a different PM you want the transition to be as easy as possible. 

@Tom Bryan  Let's connect and discuss your needs. I may know a guy.

, Unsure if this was in our market(Indy) or someplace else... I have a bit of a different perspective. I own a property management company here in Indianapolis, and last year we worked with a turnkey guy pretty heavily. I really got a front row seat view of what to do and what not to do. 

Let me preface that the below is what I have seen, and my thoughts. I do NOT know what kind of buyer you are, and I am making no assumptions. Well, maybe a little bit.. hehe

1. You probably did get a front office person answering your questions. Heck, you may have even gotten a VA from the Philippines. They are probably making minimum wage or just above. They have been trained what to answer, and you probably got someone who is doing the bare minimum or felt like your question was something you should be getting an answer to yourself(You should btw).
   1. They are also probably busy answering a lot of other peoples questions, and in the end, it's just a job for them. They aren't hungry like a owner/partner would be. Sucks, but it's true.
2. If you are looking for lower income houses, those are usually not affected by appreciation or depreciation. In Indy we see a 3% appreciation or depreciation rate, but that mainly only works on homes 100k+.. Anything below 100k they remain the same for decades... Example: I looked at houses around 38th and Post back in the early 90's.. Still worth the same today. 
   
   1. IMHO: Lower income stuff is not really affected by foreclosures because there is more investors in those markets than home owners. 
   2. You will probably sell a low income rental for the same amount you paid for it. The money will come from the cashflow.
3. As others have said do the macro investigations on your own.. You DEFINITELY do NOT want to count on a turnkey/wholesaler guy/gal to tell the numbers for an area, because you will be sorely disappointed. 
   1. This is the biggest thing I see with ALL wholesalers and turnkey guys.. They over inflate the numbers. You should NOT be trusting these folks for numbers. 
4. Here's the problem, as I see it, with turn key people.. Their whole business model is buying, rehabbing, and selling houses SUPER quick... 
   1. Sometimes they throw tenants into rentals just to get the numbers to show it's producing. I have seen some pretty shady practices where the PM side or the PM they used(not us) would just throw a body in and that could go horribly wrong, horribly quick.  If a prospective tenant is desperate enough they will agree to any price for a rental.
   2. Turnkey guys go through contractors like you can't believe. It's very hard to find good contractors that will work for the numbers turnkey guys need to make better profits, which equates to the end buyer investor sometimes getting very shoddy work. It is a special type of person who will work in these homes. Not always good.
   3. More often than you can imagine, investors show up and don't want 1 or 2 properties they want 10-20 properties from a turn key company. Complicate that by the fact that those investors will pay in advance for a promise 3-6 months down the line for delivery and you may not be the turn key guys favorite customer.
5. They want easy sales!!!  Turnkey guys, and PM's like me, get hit up by a lot of micro manager investors. People who watch too much HGTV, and become book smart but common sense dumb. They read somewhere that your property manager should be doing XXX, and so they demand it. Even though it may not work in the market they are investing in. So a lot of times if you start asking tougher questions you start to look like someone they don't want to do business with. We don't need squeaky wheels looking to get greased.
   1. If they sense you are a squeaky wheel, they will probably go with a perceived lower maintenance investor. 

Hopefully the above gives you another perspective. I am sure I missed quite a few things. Me personally, I buy houses for myself. Rehab them and put tenants in them, for myself.. I get investors who ask me all the time what I have and what I want to sell.. I offer up my own inventory. I know we rehabbed them right, and I usually have a track record on the house, so I feel confident. I am by NO MEANS, a turn key guy though.. I do deals when I find them, so I am slow, and I don't care if I sell them or not.

@Account Closed Either way should be fine..