All Forum Posts by: Timothy Allen

@Timothy Allen That's great man. Yeah moving is a sacrifice but it doesn't have to be forever. Honestly I think you're underestimating your skills and ability to renovate yourself. You can find contractors willing to do work especially for cash. My fear given what you described is so far... everything is verbal, you "discussed a number" but once that renovation is complete the expectation changes. It happens all the time. Fixed up or not it's a numbers game. Personally I'd walk on this deal if it didn't cash-flow or at least break even on it's own. 

You mentioned it's rural. It sounds similar to my Dad's house. He bought it 25 years ago for $140k, and today's it worth $180K. If he remodeled he could push $190-200k max. That's seriously low appreciation. Not saying this deal is the same but from an REI prospective it's a cash-flow or die.

@Timothy Allen You're making good moves and asking the right questions so don't slow down. Everyone has a unique path for REI. Off market opportunities gets me excited.

 "and they plan on freshing it up to sell" - DON'T LET THEM DO ANYTHING. Make the transaction as easy as possible. If possible buy "as-is". You need leverage to buy deals like this. Anything they fix, repair, paint, update, or remodel will hurt you're ability to get a better price. I missed out on an opportunity like this in the past because a seller started remodeling a bathroom and paid for a dumpster ($$$ tied up). The motivation had changed. The conversations were different. The price they wanted went way up. If they gave you a rough number work backwards (like you life?) and see if the numbers pencil out. You're offer should be less or close to there expectation. House hacking is fool proof way to get into REI. You can't go wrong even if you have vacancy from time to time. You're cutting living expenses massively.

Renting your primary is completely different. You can't "prop" up the duplex purchase with another property and think it's going to work. It's either a good investment (as a rental) or it's not. What would be the potential cash-flow? What is the ROI? Does it make sense to hold given the condition (roof, HVAC, age of property, renovations) or market conditions? Maybe selling for profit and moving on makes way more sense. In a lot of cases buyers didn't factor holding a primary for cash-flow.

 I did the written notice !

@Timothy Allen, Yes we will be online. Did you get the email for the inviation?

Duplexes, much like single family homes, will be mostly comps. The appraiser may give some weight to income/cap, but probably not a lot.

The truth is, you can calculate, guess, and hope all you want. But you will be paying for a professional appraisal anyway, and it will be gospel for the most part. Ultimately, the V in LTV will be determined by one individual on one particular day: The Appraiser.

The good news is appraisers use a very standardized methodology, and there's no reason to think you're going to get a value that's way out in left field. 

And because of this very standardized methodology, one thing appraiser love is data. 

Rather than doing your own self-appraisal, I would spend my time putting together a packet of information for the appraiser that consists of:

1. Any recent past appraisals done on your properties (or on comparable properties nearby if you can get your hands on them somehow). Also note, if you have an appraisal of your property from two years ago, and you know your market has appreciated by 10% (or whatever) annually, that alone can give you a pretty good idea of the current value. 

2. Details info about any improvements you have made to the property. Focus on value add things like new kitchens and bathrooms, floorplan changes, new flooring, landscaping, etc. Sure, it's nice to let the appraiser know about new roofs and HVACs, but these are capital expenditures, not improvements, so they won't add as much value as one might think.

3. Any recent comparable sales you are aware of, with as much detail about the transaction and the property as possible. Especially anything that was not listed in the MLS. There might be 10 comps in the MLS that sold for $400k. But if you know the duplex next door that's just like yours sold for $500k off market, the appraiser might completely miss that if the data isn't readily available. 

4. Copies of your rent roll and leases. They will need this for their rental analysis. Make their lives easy. 

Finally, speaking of making their lives easy, make sure you are on top of the actual appraisal appointment when the appraiser visits the property: Make sure your tenants receive proper notice, maybe hint to them to tidy the place up as much as possible, make sure the grass is freshly cut and the exterior is spic and span, and make sure someone is present with keys and all pets are secured. Nothing will annoy your appraiser more than having to make two trips because your keys didn't work, or your tenants refused entry or left their pit bull roaming the apartment when they left for work. 

 If the property is a single family residence its going to be based almost entirely on comps (recent sales of comparable properties) - if the property is multi-unit then the value is more going to be derived from the income potential.  Generally value is determined by the buyer pool, mots buyers of SFRs will value it not worried about income potential, while multi-unit buildings are de facto investment properties so income potential will drive the value for them