All Forum Posts by: Rachel Luoto

I really appreciate the input, I do have a nice big umbrella policy - my background is insurance :) Went by the property today to make sure they didn't decide to take out their anger on the place, and all seemed well.

Just goes to show, you can't go by your gut - they'd seemed like a very nice person, until the truth came out and they showed another face!

3 Votes

Hi! First time I’ve had an applicant threaten to sue. We said we could overlook credit with good landlord references, last landlord had documented that they owe a balance from withholding rent, so we denied. Tenant disclosed this on their application, however when we had talked in person prior to submitting the app they said good references wouldn’t be a problem I know I’m legally within my rights to deny for this reason, but can they sue anyway? I live in Washington, a tenant friendly state.

16 Votes

Originally posted by @Jason Hopkins:

@Rachel Luoto What zip code is the property located in?

38112 :)

1 Vote

Originally posted by @Steve K.:

@Rachel Luoto @Rachel Luoto Congrats on the purchase. I want to be happy for you but I have to be honest, nearly every sentence in your post caused concern, and my alarm bells are ringing at a deafening level on this one. Sounds like the previous out of state owner was losing money and really wanted out. Doesn’t that make you cautious as an out of state owner yourself? What’s the plan to avoid being in the same situation the seller was in? Sorry to be the voice of reason, I just can’t ignore my gut feeling that a sub $35k property with desperate out of state seller and eager out of state buyer just seems like a recycled disaster. Also I’m afraid your numbers are very aggressive for example the rehab budget is extremely light for that scope of work no matter what part of the country the house is in. New windows, large water damage/leak repair, new floors, new water heater, two bathroom renos, paint throughout and general repairs and fixing all the usual make-ready stuff etc. on a $15k budget? Not happening even if you do all the work yourself. I would double that rehab budget or even triple it knowing that unexpected items are always hiding in properties like this once walls are open. Also renting a $35k property for $900/mo rings some alarm bells when $900 is more typical for a 3/2 worth $100k in Memphis. Sorry I want to be happy for you, this just isn’t adding up. Even if your numbers are accurate (I hope you’re using 50% maintenance/repairs and 20% vacancy rate on a property like this) and you end up getting $200-300/mo. CF, I don’t see this property being a money maker long term I’m afraid to say. That’s not a lot of gross profit to cover cap ex on a house. Don’t invest that money elsewhere, put it in an emergency fund for this property because you will likely need it. Honestly I would wait and see how this plays out for at least a few years to see if it makes any money at all before buying any more of these. I hope it works out for you, just gotta call it like I see it. Good luck!

Thanks for your comment Steve, I appreciate you taking the time! I'm gonna PM you to see if anything helps add up more. Dissenting opinions are too often dismissed in the world today, I want to always be humble and open to instruction!

1 Vote

Originally posted by @Ryan Naylor:

Originally posted by @Rachel Luoto:

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $34,900

Cash invested: $50,000

3rd property in Memphis closed today! Bought $34,900 cash, have contractor quote $10-15k to renovate, comps/ARV $70-80k, $900/mo rent

This last month was our first time actually visiting the state (from WA), as we were under contract for a larger deal that fell out on due diligence. Honestly, I think buying out of state is way easier because you're forced to outsource! (this is our 5th property/8th door total)

What made you interested in investing in this type of deal?

Returns, low price point

How did you find this deal and how did you negotiate it?

MLS listing day-of, came in low and was accepted - it was clear from what the too low prior, selling for less than they paid, and poor property condition that this other out-of-state investor just wanted out!

How did you finance this deal?

Our own cash

Lessons learned? Challenges?

The unit is listed as 3/2 but had at one time been a mirrored duplex. There's opportunity to leave the layout 3/2, move some walls to make a 4/2, or re-convert to duplex. All houses on this street are nice except the direct neighbor - we will try to tactfully market to them to get them to sell to us now or in the future

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Aaron Bloodworth is our agent, he works mostly with investors and he's awesome :)

Just curious of your intent on this property, Are you planning on a refi to pull your cash back out? or being that you paid with your own funds are you planning on just letting it cash flow without the debt?

Hey Ryan! I could refi but not planning to soon, if anything I'd want to refi them all in a blanket loan down the line, or 1031 them :) On turnkey websites I'm seeing houses in the 80s getting the same rents I am, idk how they are projecting cashflow but I call BS!

1 Vote

Originally posted by @Michinori Kaneko:

Congrats! sounds like a pretty sweet deal. what are your expected cashflow on this property? Are you looking to refinance? Looking forward to before and after pictures, if possible!

That's a great idea, I do have before pics so I could update it when it's done :) CF 200-300/mo after repairs. Not looking to refinance right away, I often use the free and clear properties as collateral so I'd only need to refi if I needed actual cash.

0 Votes

Originally posted by @Jake Coyne:

Hey Rachel, Congrats on your third property!

I'm intending to start applying this investment method as well for my second property, however I haven't done any renovations or fixers before. Could you share what your $15k will be going to (i.e floors, kitchen, termites, paint, etc) and the breakdown of costs for each?

Just based on my imagination, I would think a $40k property would require more than $15k for habitability. Also, what red flags do you look for in a home of this price?

Thank you!

Love the question Jake! A lot of the price of a fix up is labor. For example, my friend couldn't get a quote for an 800sqft interior paint job in Seattle for less than 30k! However, our quote included fixing a large water damage leak in the kitchen floor and wall, cleaning the carpet in the bedrooms since it's not bad just dirty, new vinyl plank in the common areas, light renovations on the bathrooms, new windows, new paint throughout, new hot water heater... more I can't even remember. It's pretty thorough. It would be a lot more if the house needed the drywall/electric/plumbing gutted out, or a new roof, like a lot of fixers do, but I wouldn't go that far unless it was desperately needed or selling for flip.

For me, a red flag will always be neighborhood, and after that, the only renovation item I've shied away from so far was foundation/structural on an apartment complex I had under contract.

0 Votes

Originally posted by @Junior Soares:

@Rachel Luoto

Congratulations! Things should start to snowball now assuming you reinvest your cashflow. Best of luck!

Thanks Junior! We actually reinvest with our friends company Exequor Capital to quickly grow our cash for the next deal, you should check them out!

1 Vote

Originally posted by @Jeremy Clark:

@Rachel Luoto

Congratulations!!

Im definitely interested in hearing more. What is the cash flow on this property after you factor vacancy, mortgage if you’re refinancing, capex, management and maintenance. Wondering if I’m better off starting out with out of state investing as my area is so high priced.

Hey Jeremy! For us it looks like 200-300/month - I give a range because no matter how many times you do it on paper things are different in real life with the cost of evictions, tax increases, insurance increases, etc :) We could have higher cash on cash with leverage, but we have other high risk investments and like a simple and stable cash flow source!

0 Votes

Originally posted by @Thuy Twee Nguyen:

@Rachel Luoto Congratulations! I heard Memphis was a great place for the price/rent ratio. I actually read that Tennessee as whole is really good to invest in. Were you able to find the PM and the contractors through the RE agent?

Yes, my PM came recommended through my agent, and talking with other investors on BP they confirmed they liked that company. It's actually the PM branch of a turnkey provider, so they have a contracting team and pre-negotiated rates, which kept things simple for me. Other people may say to shop around more, but frankly to me it's not worth the time when I'm already getting the returns and service I want and building trust.

1 Vote

All Forum Posts by: Rachel Luoto

Rachel Luoto has started 28 posts and replied 170 times.

Post: Freaked out, applicant says will sue

Post: Freaked out, applicant says will sue

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!

Post: 3rd out of state property - closed!