All Forum Posts by: Sean Chen

@Chris Martin, I like the comment "Try not to become a motivated buyer". It requires a bit discipline and self-control when you have some cash and ready to build your investment portfolio in real estate. Every day I watch many income properties went under contract and sold, I am asking myself why do they commit themselves to these properties at this price point. Did they see things that I did not see? Shall I follow? I have been stepping aside for a couple of years now, no deal is fine with me but I am sure anxious to land a deal.

Yes, I agree. This one does not meet the 2% rule (0.81% current and 0.96% with basement update). Using 50% rule, it does not work well either (negative $155/m current and positive cash flow $210/m after update). Even with positive cash flow, the income produced over the down payment and overall investment produces small return.

In the area I am looking to invest for passive income, you will occasionally come across advertised cash flow properties that do not meet 2% or 50% rule at all, except back in the period of year 2007 to year 2011. Appreciation is another factor you have to take into account when investing, otherwise, you would have to be sitting aside waiting for 5 years or longer till situation turns around. 

There may be pocket of areas down further south (Pueblo for example) where one can find properties meeting 2% and 50% rules but it is becoming rare. Even you find them, they probably won't appreciate as fast as the ones close to home. There has to be some sort of balance (cash flowing vs. appreciation) to be found to invest, or is there? I understand that these are general rules to help filter out non-performing investment, and cash flow is the king but these rules do not seem to be practical these days. I wonder what people's view on this. Do you determine your next investment by strictly abiding by these rules or you go off a bit with your instinct? Do you still think they are golden rule to guard against worst investment?

Hi Gurus,

This is a duplex with one unit having finished basement rented out to a Section 8 and anther side to a non-Section 8, both would like to stay. Here are the numbers:

Purchase price: $290,000 (I could spend $30K to finish the other unit's basement to increase the rent)

Mortgage (principal, interest, and tax): $1330/m

Rents: $2,350/m (If I finished the basement in the other unit so to increase the rent, I could get $3,080/m)

Down payment: 20%

Property Management: 8% of rent collected

The property is in decent shape but the roof needs to be replaced (but not immediately) which cost about $6,000.

Is this something I should consider or run away? After reading similar threads (Is this deal worth pursuing ...), I began to shift from interested to runaway mode. But it is really lack of any deal out there at all. 

I have been buying rental properties in the area I know and 50 mile radius from where I live. I have not given any consideration of other areas outside of my one hour driving distance. But that is just me and some of my friends. I could tell my friends who live in bay area to invest in Colorado, but they do not like the idea of remote managing or hiring property manager. So best area that I consider is not of interest to them.

But I am fairly new to the game and do not consider myself knowing a whole lot about RE business. When many friends flock to Florida and buy rentals, I did not follow. I just know my local area and I stick to my plan. To me that is the best area.

I remember reading about a British couple started small and became rich owning thousands, millions of units over the years. The secrete to their success: they always buy in the same city they know very well.

I had the same situation two years ago when a couple in their late 30' with kids moved in my rental house with their brother co-signing. The brother is a RE attorney in San Diego. My property manager assured me that the co-signer has great credit.

Guess what, the couple split during the lease and left. They caused about $3K damages to the house and nowhere to be found. Now my property manager became worried - not because the co-signer has great credit but he is a RE attorney!

At the end we negotiated with the co-signer who agreed to pay about 3/5 of the damage we demanded. The payment was on time and the process was not nasty at all in gentleman's manner.

The neighbor's house is about 100 years old. So the re-touch work is better done by an experienced masonry. I would prefer my contractor to pay for someone else to fix neighbor's brick/mortar. Yes, I will be hold plenty enough amount for the cost of the repair. So far both parties are willing to work things out, provided the repair expense is not exceedingly high. I am helping my contractor to get some second opinion bid or best bid.

Thanks, Steve. My previous response was not clear but I understand your first and second reminder.

Is it too late to ask for adding my name as additional insured to contractor's liability insurance in this situation?

Should I follow through with neighbor and the contractor to get this settled as soon as possible? What additional precaution I would need? Shall I find people to bid on the brick/mortar repair?

#1 lesson learned. I have added my property manager and his company to the additional insured but did not check with the contractors :-(.

Question on additional insured: will you apply this to all contracting job, small or big?

I found BP not long ago and have used this site extensively as it provides rich info on RE. This would be my first post of question on the site and hope to hear from many experienced investors/landlords.

I obtained a duplex early February this year. Hired contractors to remodel the basement and fix many other issues this old building has, including a slightly tilted front porch due to the expansive soil in the foundation. In order to fix the front porch, the contractors wanted to pour concrete to the base and used the neighbor's front porch as an angle point. I did not know the exact details but there was a crack that the neighbor found out and complained.

I have used the contractors in the past. They are honest and hardworking but not fluent in English. When situation arises, I got called in and heard neighbor's complain. We agreed to hire a structural engineer to inspect. The neighbor designated the engineer and my contractor paid the fee. The first sentence the engineer said after inspection was "it is not a big deal and you guys should settle this". To be on the safe side, I also obtained second opinion from other contractors. The general consensus is that the crack is tiny and may have been there before (but with this incident, there is no way to claim that any more).

According to the structural engineer, the fix is to use epoxy and drill holes to fill the gap. But as a side effect, the mortar between bricks above the concrete wall (where the crack is) needs to be repaired on the side of the concrete wall where the crack is.

The concrete wall crack was fixed by contractors hired by the neighbor using the exact technique and process outlined by the structural engineer. The total cost to my contractors was $135 (structural engineer) + $200 (concrete wall foundation repair). But neighbor wants to have the brick/mortar repaired, and with the stress and frustration, they would like to be compensated with the entire porch repaired (re-touched to be precisely for all the mortar). They found a contractor who can do it for $900 but my contractors think it is too expensive (double what the others charge). So this is the part not settled for almost a month as the neighbor could not find another bid due to time constraints. I interviewed an experienced mortar guy who can safely do it for less than $400.

My contractors will be done with their work in a few weeks and leave. I would like to get the whole thing settled so everyone can move on. What would be the appropriate steps for me to protect myself in this situation?

Thanks in advance,
Sean