All Forum Posts by: Douglas B.

Update:

I've looked in my market at numerous sub 60k properties and they are nearly uninhabitable. After discussing this with my realtor, we've decided that the sub30k route is NOT the way to go (for me). Here's why....

The sub60k properties had so many hidden and unknown problems, there was real risk associated with what I might find later after buying the home. Many required complete electrical or plumbing overhauls. Many had major structural issues. All had many, many MAJOR problems that needed to be addressed. 

Section8 has stringent inspection standards. I've spoken with the section8 staff and also with landlords who rent to section8. These sub60k properties would NOT meet section8 standards. And frankly, they wouldn't meet my own landlord conscience standards. I will only rent units that I would myself live in.  These places would all fail my own personal standards of decency. 

I think, in the long run, there is major risk with these properties, at least the ones I've found here. I'm shifting focus and looking at normal market quality properties which have been maintained and show it. 

Thanks. Good advice. That's what I was thinking. So you're saying the proforma is just essentially a waste of time and that instead of arguing with the seller over numbers, I should just plug in my own best guess numbers?

It seems like a proforma is only of limited usefulness because it can be so wildly inaccurate. How do you pros workaround the sellers lies and misrepresentation on a proforma? What tips do you have to help a newbie prepare to interpret proformas when I start looking to buy in a few months? What do you do when your seller isn't forthcoming with the financials, receipts, tax documents, etc. Do you just move to the next property?

To clarify, I'm looking for something like the deal analysis tool on the BP website, but one in Excel format for use on my laptop.

Does anyone with better Excel skills than me have a blank spreadsheet file to share? I'd like to have a spreadsheet to quickly determine things like NOI, CASHFLOW, CASH ON CASH, etc.

DAY 1: We go looking at properties: we saw 3 properties.

The first one had the signs (and smells) of a rodent infestation in the basement and the upper unit was in need of complete rehab. Overall, this place was more than we wanted to bite off.

The second place had broken crack vials outside and, when the realtor bravely opened the front door to the lower unit to announce our arrival, the was a line of cocaine and a razor blade on the small table right inside the door. We promptly left.

The third property seemed the most favorable. It needs a lot of cosmetic renovations but, although it needs a lot of work, the seller is motivated to sell and seems willing to negotiate the repair costs into the deal. We are going back tomorrow with a contractor to get a detailed list of repairs needed and the costs to complete them. Assuming the contractor doesn't find some deal breaker problem, we are likely to make an offer.

Of note, all three properties were significantly overpriced by the listing agent. I mean, I don't know who would buy any of these properties at full retail price. Certainly, I'd never do so.

I was pleasantly surprised how much I learned just doing those two walkthroughs. I felt comfortable assessing the properties for problems. Hopefully, the contractor won't point out obvious things that I missed.

I was also surprised that I don't feel anxious about the property or the potential deal. I feel strangely calm. Either it works or it doesn't. There are more properties out there. I'm willing to wait until the right situation develops.

@William Hochstedler yes, we can post our listing directly with the section 8 program.

Thanks everyone for your great advice and helpful insight!

We fully expect that there will be various hoops to jump through with section 8, including unwarranted repairs. We are entering into this with the idea that these things WILL happen and it's the cost of doing business. We are aware that damages can be charged to the tenant and we plan to do so for appropriate expenses.

Please, continue to share ideas!

We are working with Rob Karp and his new associate Kiersten Minnick at MJ PETERSON.

Thanks for verifying that we aren't wrong in our planning, Mike.

And yes, we are planning on either a 3/3 duplex or a 3/2 duplex to start.

Hello! My wife and I are preparing to buy our first rental property for investment purposes. I'll detail the ongoing process here in this thread so others can follow along and see what it's like for a fellow first time investor. You'll learn from us what goes well and what doesn't. Others on this website have been CRITICAL to helping us learn important information about real estate investing. We'd like to give back.

BACKGROUND: my wife and I are both health care professionals. We have no prior real estate experience other than owning our home. Neither of us is particularly handy. Her dad is a part time general contractor.

I've been planning to invest in real estate for over 5 years. When I met and married my wife, she became interested too. I've been reading and talking to investors for years, but the last one year has been very intense and had been the major "crunch time" to make this all come together. I'm 39 now and I had a life goal to have the business established with one rental up and going by the time I turn 40 in September. We are on track for that.

We read several books but the best was REAL ESTATE INVESTING FOR DUMMIES. It had the best overall information in one book. I recommend it. I also spent a ton of time here on BIGGER POCKETS reading everything I could about our target market and first time investing. In particukar , I'd like to thank Lisa Philips here on BP for her excellent advice on investing in urban areas for under 30k. we also talked to several landlords that we know personally and learned about what they're doing right and what could be improved on. Without a doubt, the number one piece of advice we get from those landlords is: CAREFULLY SCREEN TENANTS.

We have a very specific plan to buy a property in the metro Buffalo NY area and rent to Section 8 tenants. We expect to spend under 50k total for the property and any needed renovations. We have a team of people we are working with, including a Realtor, tax accountant and a real estate attorney. We will be funding the project through a loan from our retirement funds. We believe that we can create a passive income stream over the next 10 years that will outperform our stock investments. For those who worry about this, in our case we can handle a 100% loss of the invested funds. We don't expect that, but even in a worst case scenario, we would not be financially ruined. We are using money we can afford to lose.

We have contacted the section 8 program here in Buffalo and based on their literature and the experience of landlords we know, it seems like section 8 will pay 50-75% more than market rent in our areas. For example, most 3 BR units in the city here run about $500/month but section 8 pays $750-900/month. I cant argue with what the section 8 supervisor tells me personally, what their literature says, and what my Realtor and other landlords tell me is true. But those numbers seem unbelievable and likely may be optimistically overinflated. For our budgeting purposes we will assume the low end of $750/month.

We are also factoring in the following things into our anticipated annual profit numbers: two months lost rent due to tenant problems, two months rent lost to save for repairs, subtracting water,sewer, trash, & taxes. Even with all that, we anticipate about $10k profit a year.

I think that's most of the background information, feel free to post in the thread and discuss anything you want or ask questions. I'll be posing updates every few days as things develop.

We begin looking at properties on Tuesday May 27, 2014. There are only a few properties that meet our requirements on the market right now (in the neighborhoods we are looking at). We will go see them and decide if we will want to put in an offer or not. We are prepared to wait and not buy anything if we can't get a good deal. I'll keep you all posted.