All Forum Posts by: Tom A.

Sounds great. Check your email for the listings. Let me know if you have any questions or want some additional data.

Bryan, I'd be happy to do it. Send me your email. And I'll take you up on the drink.

Just a reminder, this is tonight. I've received around 16 RSVPs on facebook plus a number of others have mentioned they're attending, so laugh at the cold and come on out!

You're absolutely right Robert, lenders will look at comps. I wasn't talking about how lenders look at junkers though, I was referring to their valuation for investment purposes.

When I talk about junker homes I'm referring to homes in rental-dominated neighborhoods. They're bought and sold primarily by landlords who care about cash flow, ROI, NPV and IRR. It's different from nice homes that are in neighborhoods dominated by owner-occupied homes. Values for nice homes are driven by what other owner-occupants will pay, not what investors will pay per dollar of cash flow. Investors may buy some but pricing is dictated by the owner-occupant market.

I question the assumption that nice houses in owner-occupied neighborhoods will appreciate and junkers won't. Historically, owner-occupied houses have appreciated at around the rate of inflation. Of course, some areas have boomed and some have busted and some have done both, multiple times, but in the long run appreciation roughly equals inflation.

Junker houses aren't valued as owner-occupied homes, like nice homes are. Rather, they're valued based on their cash flow, like commercial and multi-family real estate is. An appraiser would calculate their value based on what they call the "income method".

Rents historically have also increased at roughly the rate of inflation. All things equal, assuming rents and expenses all go up at the same rate (inflation, roughly) then cash flow will also go up at around the rate of inflation. Since an increase in cash flow translates into an increase in value when valuing real estate via the income method, even junker rentals will increase in value at around the rate of inflation, like nicer single family homes do.

Now, I'll bet some are thinking about neighborhoods where junker prices have either stayed flat or gone down over time. Of course, that can happen. Values can also stay flat or go down in B or A neighborhoods. I've seen values in nice neighborhoods stagnate as the neighborhood ages and homes get built on the fringe, or as jobs and population migrate away. I've also seen bad, junker-home areas get trendy and appreciate to the point that C and B class tenants can't afford the neighborhood anymore and junker homes get rehabbed, added on to, and knocked down for new construction, with the junker home investor reaping the rewards.

Bottom line, I don't think appreciation is a valid point of differentiation between nice and junker rental homes.

@Jessica H., the brown cabinets are called Adel Medium Brown.

I noticed Tim used the Ikea farmhouse sink. They have good pricing on this sink compared to other suppliers, around $300.

You asked Tim about the subway tiles, and I'm sure he'll answer that for you but I'll chime in with my 2 cents as well. I did a bath surround with Home Depot white subway tile. Very inexpensive, under $2/sqft. I've seen other white subway tiles that sell for as much as $15 - $20/sqft. They're thicker and have a slightly different look, but for most purposes (non-high-end homes) the HD ones work fine.

http://www.homedepot.com/p/Unbranded-Bright-Snow-White-3-in-x-6-in-Ceramic-Wall-Tile-U072-36-1N/100123655?N=5yc1vZarsz

There's an attorney/CPA/investor out of Ohio who I've heard speak several times at local REIA meetings. He's an aggressive, hard-nosed businessman who doesn't suffer fools lightly, which is important because he owns mobile home parks and lower-income rentals.

His advice regarding asset protection is the same as Bill's. Run your business well, and treat your tenants fairly. He stresses the "treat tenants fairly" part. In his experience as a landlord and attorney, tenants usually don't sue just because they have an issue, or because they have dollar signs in their eyes. They get to the point of actually suing because they're very angry at how they've been treated.

I've used the IKEA kitchen cabs a couple times and I'd recommend them in appropriate situations. In terms of quality, I found the doors and drawer fronts to be good quality and the hardware to be excellent (Blum brand, which is known to woodworkers as an excellent hinge company). Their soft close hardware is attractively priced and gives the cabinets a higher quality impression.

The cabinet boxes are where they clearly save some money as they are particle board and melamine, but once assembled they seemed sturdy enough. The overall impression is pretty good.

@Ryan S., I love some of what you've done with the decor and I hate some of what you've done with the decor. Exactly what falls in my love or hate column doesn't matter, because I'm not looking to buy a house in that area. By the same token what you love about it is also irrelevant, since you're not the potential buyer.

You need to make this house closer to what most successful flippers in your area would do with their houses. They know what gets buyers. That probably means tone down the walls to a modern neutral color. Paint the vertical stripe bedroom like the last one in the photos, a light brown, or an even more neutral color. Same for the diamond wainscoating bedroom. Undo the clock.

I'd drywall the laundry room that currently clearly has old siding painted over. It's jarring when compared with some of the more over-the-top treatments like the coffered ceiling and the heavy crown in the DR.

One more thing, the main bathroom with the cool vanity has oil-rubbed bronze sink fixtures, gold shower/bath fixtures and chrome or satin nickel vanity drawer/door pulls, and a gold door knob. It can be hard to coordinate all your metal finishes, but it's worth a try.

It also has what looks like an older woodgrained door. At this point I'd paint that white, though that may have been a good candidate for replacement with a six-panel door during rehab. Are all the doors like that one? It looks out of place.

Finally, the price. You are fighting the market. The market has been telling you for seven months that you're overpriced. You need to do more than token price drops. Your carrying costs and opportunity costs will eat you alive while you wait for the 1 in 100 buyer who shares your taste and will pay top dollar for it.

I don't know what you have in this project but at this point you need to look at it as what economists call a "sunk cost". Do the fairly inexpensive things suggested to depersonalize the house. Then drop the price to where it needs to be to sell in 30 days. If you and your agent are not sure where you should be pricewise, try a $10K drop, then $5K per week until sold.

I know that sounds like "giving up" on making the money you probably had in mind but your profit margin on this was established when you bought and when you made your rehab and selling price decisions. You're just trying to minimize future damage at this point.

If this had sold 30 days after you listed it last June you could have been closing on the sale of your second flip right now. And taking into account lessons learned on this one, you'd probably have a pretty nice payday. That's the opportunity cost of not accepting that you need to address the price and appearance issues.

Don't take this too hard, there are some real positives to what you've done, we're just all pointing out the issues so that you can fix them and get on to the next one.

Welcome to BP Bryan! You'll find a wealth of information here and a good number of Detroiters. We're having a casual meetup on Wednesday at Champps in Troy - details at

http://www.biggerpockets.com/forums/521/topics/115567

It's a great way to meet others at all points on the real estate investing experience spectrum. Typically 20 - 30 SE Michigan investors turn out for conversation and camaraderie which also plants the seeds for doing deals together. We do these every month, hope to see you at one.