All Forum Posts by: Chuck B.

You heard the saying that you should be greedy when others are fearful?  It actually applies to this area.  

I have one rental in Smoketown and two very close to it in Shelby Park and am looking for more.  Appreciation has been amazing the past couple of years (40203 saw some of the highest appreciation in the city in 2017, 2nd highest zip for appreciation on the list I saw yesterday).  

@Travis Curtis - You make a good point about energy efficiency. If your rental is very inefficient the tenant will not stay. No one wants to high utility bills. And make no mistake about it there is a lot of competition for section 8 vouchers, if you want the best tenants you will have to have a nice property.

For a three bedroom, one bath house in Portland or Shawnee you can rent them section 8 for between $845 and $910 a month.  The maximum rent you can receive is based on a formula that is not published to the public. You do not have to pay utilities.  The neighborhood is taken into account but generally speaking the nicer neighborhoods in town will rent higher to a market rate tenant and the lower end neighborhoods will frequently rent higher to section 8. Section 8 will put you through a lot of hoops and pain to initially rent the property and can be quite onerous during the yearly reinspections (failures for basic, non life-threatening issues and tenant-caused issues are extremely common).

Good luck!

@Mykael Williamson - I posted the towel/toilet rod backer originally in this thread but it got lost over the years (stopped showing).  I don't have any pictures of those with me but imagine a 1x4 piece of stock, cut a couple of inches larger than the full rod.  Then the edges have a decorative routed edge put to them.  This is then screwed/glued/caulked to the wall and all hardware screws into it.   It definitely strengthens up the installation but takes more time up front.  

@Corbin Wafford - Regarding analyzing deals... for buy and hold, my quick and dirty rule is to not ever buy anything less than a 1% (monthly rent to after-repair-value) deal.  So if you find a duplex that is going to cost you a 185K and you're going to need to put 15K into it to get it up and running, that's an all-in cost of $200K.  I'd need to make 1% of that a month in rents ($2,000) or more before I'd consider buying it.  1% deals can work with long-term (30 year fixed) financing, but they typically do not work with 10 and 15 year variable rate portfolio loans as you'll be coming out of pocket to support the house, capex, vacancy, etc.  For these sort of properties you'll need to do better than 1%.  Think 1.2%, 1.4%, 1.6% etc (or 2%+ in the west end)...

Happy hunting!

Best,
- Chuck

@Corbin Wafford I think you're smart to buy a duplex.  I lived in three different ones over the years, financed as owner occupant, which is the best financing you'll ever get.  I moved into one giant old place and then put an apartment on the third floor using a construction loan that I got at the same time as financing the house.  It was a LOT of paperwork and hassle and hustle, but for a 30 year old without the funds to do it out of pocket, it was the only route I had.  That property today leases out for 3 to 4 times what my other rentals do.  (Everyone loves to hate on the govt., but that was a govt. secured loan and I'm ever thankful for it)

A bad deal, financed well, can still be a good deal. A local guy at the REIA always says he'll give you a million dollars for a $100K home, but under financing terms that won't be very attractive to you. Ha!

Do pay attention to "Firstlook" homes on HudHomestore.com.  Not all of those houses are wrecked, but many are fixer uppers that can be had at good prices and they're reserved for owner occupants for the first few weeks or so that they're listed.  

PS. It's truly a terrible time to be a buyer, so my best advice is to be very patient in looking for a good deal right now.  Even the experienced guys are having trouble finding the volume of deals they could even two years ago.   

Good luck!

@William A. - I use the rent multiplier rule all the time to gauge potential buy and holds in Louisville.  It's harder when you're a little unsure of the rents an area can bring but you can do your research on Zillow and Craigslist (Map View) to see what the going rate is.  

The following is better advice for Louisville and probably does not apply at all to high-value, high-appreciation tier 1 cities:

I personally would never buy a rental property where the monthly rent was less than 1% of the price + repairs / hardening unless there was something else at play... like it was a really nice house/area and I wanted to live in half of the property for a while.  (I lived in two duplexes and turned one of my residences into a duplex as I was building my portfolio and those were mostly 1% deals)  If however you think the appreciation on that property will be far faster/higher than others expect then it might be worth a leaner deal at 1%, but appreciation plays are mostly speculation/gambling.  

If you're a doctor or high-income, hands off individual, than by all means, buy really nice 1% deals in nice-to-trophy areas and let appreciation and equity-build-up take care of you.  That's what I'd do too!  If however you're looking to move into rentals-as-retirement sooner than later, you need some cash flowing properties.  

Your financing terms can make a 1% deal cash flow nicely.  That is, you can buy a 150K duplex that rents (in total) for $1,500 a month if it's financed on fixed terms over 30 years.  If however all you can get is 10, 15 or 20 year financing (and NOT at fixed rates) then the math is very different.  You can only get so many conventional, 30-yr fixed loans, so I'd encourage you to use them for your biggest deals.  After a time and a certain amount of rental properties you'll only be able to get commercial loans and it becomes a lot more expensive each month for the mortgage.  

In Louisville, for strictly rentals, I'm looking for 1.2% to 1.6% deals.  If you want to go to the west end (say 40th street and further west... the "best of the west" in Louisville) then you should be looking for 2% deals.  

For comparison/reference, my last four deals... price+repairs in Shelby Park of 63K, rents for $829 section 8 (I'll fix this up and move it to a market-rate rental of $1,100+ when current tenants leave).  Price+repairs in Shelby Park of 80K, rents market rate for $1,050, Price+repairs in Shawnee of 42K, rents market rate for $850.  Price+repairs of 40K in N.E. Portland neighborhood, rents market rate for $800.  (Portland is for the brave or foolish)

Best,

 - Chuck

@Clay Smith is the real deal, folks.  He's extremely knowledgeable and this is a great opportunity to see it in action.  I've learned an incredible amount from Clay in the past year.  

There are parts of the west end that are quite nice for investors, but this is not one of those areas.  

Great topic!  Should probably be re-created in the local real estate forums though, no?