All Forum Posts by: Tomi Stoya

I have an accepted offer for the purchase of a duplex. The septic tank inspection however did not come to be very good. Inspection of the drainfield indicated 10" of ponding effluent. Also, there is no effluent filter in place. Based on the amount of ponding and the age of the system, the inspector recommends replacement of the absorption system.

How big of an issue is this and could it trigger the private sanitary system inspection contingency? Having effluent (waste water) in your backyard would be a health hazard, wouldn't it? Per accepted offer the sanitary system "is not disapproved for current use (is hydraulically functional and structurally sound)". Per inspector complete replacement of sanitary system will be between $6K and $12K.

I am still new to real estate, so I very much appreciate the opinion and feedback of someone who is more experienced?  

Thank you all for the invaluable advice.

I have also talked with a local investor. When analyzing properties, he does not consider CAPEX at all, does not allow for vacancy at all and estimates repairs at $450 per door (vs 5% of rent). On the other hand I always put CAPEX ($183 or 8% of rent, whatever is higher) and allow at least for 5% vacancy and 5% repairs.

The rationale for not including CAPEX in analysis is that by the time you'll need to replace the roof, flooring, plumbing, etc, you would have most likely sold the house. I do not quite understand this logic. If water heater breaks down, it will need to be replaced? If sewage pump breaks down, it will need to be replaced? One can not really control these expenses and if a landlord allows for too much deferred maintenance to accumulate, this will definitely impact the resale value of the house?

I live in a mid-size Midwestern town. I have not researched other markets for investment properties, besides the town I live in. Could major metro areas such as Chicago and Minneapolis/St Paul offer better returns?

Dear community,

For the past 6 months I have been actively looking to buy my first investment property. I looked for a property to yield at least 8% CoC return, but unfortunately I could not find any such property. I have seen a total of 20 or 30 local properties so far. The cap rates that I have calculated on almost all of them are around 5-6% and cash on cash returns have been between 2% and 4.5%. Below I have shared my analysis on 3 of these properties.

One would think that properties would not sell at 2 or 4% projected CoC, but below properties sold and they sold fairly quickly. This makes me wonder whether my analysis are reasonable or whether my expectations for return actually match local market conditions?

I would very much appreciate to hear the opinion of other investors.

Can a monthly CAPEX estimate be $200 for any kind of building? For example it would certainly be more expensive to replace the roof on a 3800 sq ft 4-plex than on a single family house. A 4-plex would have 4 water heaters, while a single family house just 1.

Hello everyone,

I am new to real estate and I am interested in preforeclosures and sheriff sales. I have read several books on real estate that explain the basics, but neither going into much detail on sheriff sales in particular.

My biggest question is how do you evaluate each potential buy and how do you determine the max amount that you are willing to pay with site unseen? Do you still follow the normal rule 70% of ARV - repair costs? How do you estimate repair costs, given that you have not seen the house on the inside? How do you weed out the properties, where you are unlikely to get a deal? For example, is there a certain (judgement amount owed)/(ARV) % that you could use as a rule of thumb to decide whether to research a sheriff sale listing any further. As far as I understand, banks usually start the bidding at the judgement amount owed. Is there an ARV (absolute amount) under which any house is unlikely to be a good deal? For example if ARV is $80K and judgement amount owed is $40K, the listing may look like a good deal. However we are talking about a margin of only $40K here even though percentagewise it is impressive 50%. Price of building materials and labor is the same regardless of the ARV of the property.

Is it possible to talk to homeowner in preforeclosure stage to get access and inspect the property?

Could hard money lending potentially be an alternative to all cash buy in a sheriff sale transaction?

Are there any books or materials out there that specifically focus on buying properties in preforeclosure stage and sheriff sale?

Sam,

Was $116,927.83 only the balance on the mortgage or the judgement amount? The judgement amount should include past due payments, interest and taxes I believe?

I am in Wisconsin and I am also interested in lien searches. Can all existing liens against a property be found in the local registry of deeds? Or there might be additional liens that must be looked for elsewhere? 

Hello BP,

I am interested in a REO Triplex, that recently showed up on MLS in my area. The property is in a pretty rough shape. The kitchen has only bare walls (no appliances, cabinets, countertops), certain sections of the roof have been patched with felt paper instead of shingles (most likely the whole needs to be replaced), basement has limestone walls and is moist (I believe that water is leaking into it). Before deciding how much to offer (or whether to make an offer at all), I need ARV (after repair value), as well as estimated cost of rehab. While I have a generally good idea how to estimate the rehab, I am a little bit confused on how to determine ARV. What most books say is to find comparable properties that have been sold in the last six months in the area (0.5 miles radius). In this case however, should I compare this property only to other triplexes? While I did find data on other triplexes sold in the same town, all the history that I have for the immediate vicinity of the house in question (0.5 miles radius) is for single family houses only? I live in a small town (<70K population).

I am new to real estate and I appreciate any tips on how to approach this.