All Forum Posts by: Troy Forney

Mat: We did sell one in a less desirable market.  Now considering the second. Both areas have went up way more than I ever imagined.  

Hi Theresa,  I need to call around and see if raising my deductible would be worth it.  I just heard that from Scott Trench on a recent BiggerPockets Money episode.  So thank you for pointing that out.  It has appreciated a lot.  I paid 55k for it and can sell it for 210k.  I have after this remodel will have about 65k into it.  So not sure how much more it can or will appreciate.  Its always a gamble in this type of market.  Its one of the best of the not so good areas. In 2008 this was one of the areas to get hit the hardest.  

Joe: I will just put the numbers out. After this current remodel I will have about $65,0000. cash in it and expect another $60,000. profit after paying taxes. So $125,000. net profit. NOI averages about $8000. a year so 15 years to get that back in rents. The problem is other than paying down my 6.5% mortgage on primary residence, I don't really know what to do with the money. I mean the best way to utilize the profit. At the current mortgage rates no properties will cash flow like any of my other properties if they do at all.

FYI: currently of my investment 86% is real estate, 10% CASH (high yield savings)  and 4% stocks.

This property is currently the worst area of all our properties.  

Hi bigger pockets! I am looking for some advice. My wife and have 2 duplexes and 3 single family homes. Due to higher taxes and home insurance rates, our cash flow has literally been cut in half. Rents seem to be about as high as they can go for now. One duplex in particular in Hammond just had a tenant move out and has literally broke everything in the place. Cabinet doors and drawers and even the built in!! I am now going to have to put approximately 7k in it to bring it back to rent or sell condition. The cost to repair it is close to the net annual income. The tenant didn’t pay last two months of rent and we have put him on collections. I know it’s the nature of the business, but now with overall cash flow cut in half I am thinking maybe just sell it.  I would double my initial investment even after capital gains taxes. Use the money to pay down my 6.5% mortgage on primary residence. Stock market returns estimated to be much lower next 10 years. So that seems like a gamble to me at 52 years old. My question is have you all seen this cycle before? Do you think rents will catch back up with expenses? It’s a good property, but fell it may be time to take some profit off the top. It has a 4.5% 30 year fixed mortgage. Opinions much appreciated. 

Very old post I know, but had to chime in. Kris like many others has good information. He’s a little full of himself but I know from experience that can happen. For I am better off being humble. I have some moral issues with the rent to own system…. Basically from what I understand you collect a few thousand option to buy that is no refundable. Not sure Kris said this but someone else, you collect the money, and don’t worry you get to keep the property and the no refundable fee because most never buy. Maybe I’m too honest, but I just wouldn’t feel right keeping the money if they don’t buy it. Maybe that holds me back a little I’m too nice and too honest.  Nice guys finish last or at least not first, maybe? Idk

I have heard BP state recently no one is doing HELOCS on investment properties right now. If someone knows of a bank let us know.v

The only thing I would like to add is this….Market Value means the most probable price which a property. should bring in a competitive and open market under all conditions. requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

If you look up the definition of prudent it states: acting in a careful manor that avoids risk.  

When you get shortages of housing and the demand we had from Illinois people moving to Indiana, it was causing and still is to a less degree, bidding wars. At this point I don’t feel buyer and seller are acting prudently.  Then you question the validity of the contract price. Is it still truly market value since they are not acting in a careful manor that avoids risk. That goes out the window and the just want to win.  Bottom line is still let the comps dictate the value. 

Well Scott its probably a combination of a couple things.  If the listing agent did there job and knows the market well, they listed it at the right price.  In that case the appraisers job is easy and just confirm they were right.  Also many appraisers say, they don't like to stick their neck out any more than they have to.  Meaning they don't want to go over because they think that is more risky.  The other is if the contract price is close and you have comps, its easy to let it ride not cause any waves and move on to the next job.  I typically, say it is what it is.  I let the comps dictate the value.  Nothing else.  About a 50% of the time I am on the contract price.  The other 50% sometimes over and sometimes short.  A very small percentage (1%) of appraisers I know, would get the value if the comps didn't support it.   

David Ramirez provided a great description. I will expand on common mistakes I have seen in my over 20 years of appraising and over 10,000 properties. When someone is attempting to do a sales comparison, often we see someone trying to compare a two story with a bi-level or vice versa. They are not comparable. Appraisal guidelines state, if any portion is below grade, that level is basement and not GLA. Bi-levels only have one story above grade. The other is finished basement and is valued at a different rate than the GLA (or above grade square footage). Another big mistake is taking the assessors word or sales agent/brokers for the finished square footage or GLA. For expample, the assessor loves to take the square footage of a 1.5 story and double the main floor. So if you have a cape cod that is 1000 sf on the main level they take 100% of the main floor sf for the upper. The sales agent/broker follows suit and says it's a 2000 sf foot home. No is using common sense. If you look at a cape cod do you see two squares on top each other? No you see a square with a triangle on top! So now the appraiser goes out and measures, our guidelines state we must measure an angled roof line from 7 feet high and no lower than 5 feet. I usually go 6 feet and straight across. Now a novice comped this home at 2000 sf, really it's only 1500 sf. Makes a big difference. When we do our comparisons we then change any comps that are calculated wrong. So general rule of thumb depending on the angle of the roof, upper of a cape cod with no dormers is 50% of the main. With two small dormers in front 55%. Full back dormer, front has two small ones 75% of main. The other big mistake is I see people not comparing condition properly. They will flip a house and leave the outside alone with the old siding and windows, soffit, fascia gutters, etc… They only remodeled the interior. That is fine, just make sure you are not basing your ARV on comps that are 100% rehabs, inside and out. You need to comp it to sales of homes with the interior rehab only. Also you have to compare quality of finish correctly. If some used wood and tile flooring with quartz or granite tops, your not going to say your flip with LVP and laminate tops is the same. Ok, hope this helps.

Thank you Nathan I appreciate it.

I have basically inherited two lots in a C- area. It is hard for me to justify building new on these lots when the market may depreciate, but I was thinking I I could find a couple of used manufactured homes to rent out. Would be an excellent ROI. Has anyone had experience with this? Anyone know the best way to find a used one to move over to my vacant lots? Also how would I find a contractor to build foundation, hook up, set up etc...?