Rental Property Investor · Indianapolis, IN · Member since 2014 · 554 posts · 153 votes
Hi Everyone, I am looking for obstacles that are holding investors back from accomplishing their first deal. Leave some comments below and I will do my best to offer insight. -Thanks for your input Sterling.
Other experienced investors are more than welcome to chime in as well.
Thanks you guys for the input. How is your wife stopping you, @Rob McGahen?
Are you looking to own the multi-family outright yourself, @Neil Browne? You may be able to structure the deal to where you do not have to come out of pocket to fund the deal.
My biggest struggles are locating deals in the neighborhoods near where I live for my price point. (Greater Boston Area). By finding deals I mean finding and understanding how to analyze them appropriately. Currently I'm reading many books but the targets in my price point don't seem to be available.
Fear. I am struggling to find private money lenders, and the rehab I've identified has great profit margins, but will take longer than the time allowed with the hard money lender I'm approved with to complete the rehab and sell the house.
I have $10 k saved but I have no idea where to start. I am in the military so I am constantly moving. I wish I could passively invest with someone as a partner.
@Sterling White Yes I believe the entry price points are too high. From what I can tell after viewing 25 properties in person, and also looking for hundreds on sites like Zillow, redfin etc. Bedrooms rents for about 750-1200. While this is high in my opinion the cost of obtaining duplexs for example are around 500-750k.
My goals are Fix /Flip and rentals. I need more knowledge, what's a great source to study from? There's a lot of junk out there mainly high pitches/sales pitches.
Not trying to one out of pocket. The rental rates here are great. My credit is less than stellar? And hard money will loan 60-70 percent need to find the rest.
I'm part way thru my first deal right now - 3 building 14 units. Accepted offer of $450,000; financing in place; appraised value at $420,000 due in part to excessively low tax assessment (20 years since the last tax assessment raise). On the surface it appeared to need only minor repairs and one roof. I could drop up to $15,000 in repairs and it would still cash flow $6,000 a year assuming an expense rate of 55%.
During the inspection it was discovered that the roof I thought needed to be replaced has 4 layers of shingles, a crappy repair job around the chimney flashing, and we're pretty sure most (if not all) of the sheathing is damaged. That building has individual gas space heaters in each unit and they are all venting into the same (unlined) chimney along with the gas hot water heaters, there is a second chimney that will need to be seriously rebuilt or removed. The second building needs a new roof, it's hvac exhaust is missing a two foot section in the attic, and the gutters are draining wrong so the foundation is being washed out. The third building has 4 jack stands in a 10 square foot area supporting a crushed pole (and some wood rot on the outside staircases but that's an easy fix).
Rough math says between $30-40,000 in repairs once you add in all the minor stuff. Even at $30,000 in repairs the deal no longer makes sense with a $450,000 purchase price. Even if I thought it would still work my lender almost had kittens when he saw the inspection report. Seller thinks he's giving me the deal of a lifetime right now and doesn't want to negotiate.
This is what's been stopping me from completing my first deal. I have no desire to fix and flip/hold as my schedule doesn't really allow for dealing with the rehab so I need properties that are in decent shape. Most of the properties that fall into that category in my area are way over priced for multi-family (duplexes and up) or in need of too much rehab (and still overpriced)
Uncertainty of how to get to the funds to make a down payment (HELOC vs IRA LLC vs solo-401k. Still doing lots of reading and listening to podcasts, etc. also trying to decide what market. I'm leaning towards a turn-key property.
My credit and no money for down payment. I want to buy a 2 or 3 family house for less than 100k in Trenton, NJ.. Everything seem so overwhelming right now. I don't know where to start.
Not sure if this applies to the info your compiling but what the heck....
We are searching in the 1-1.5mm price range. What is stopping us from making our first MULTI-FAMILY deal? (We own several other single unit investment properties and prepared to scale up)
First it took some time for us to get to a point where we knew we had earned the experience necessary to acquire such an investment. Entirely different ball game.
Here is the issue we face. Inventory and yield. Currently in our target market, Tampa, there is a lack of inventory in this price range that supports such a low yield. Cap rates are in the 6-8 range for the buildings that fit our criteria.
Our model will only allow us to buy in C areas. A few we've looked at are D- areas and asking C+ prices. So what we are doing is studying different strategy's to add value but haven't found any that we can. In a few the value has already been added and is priced in by the seller. Although there is always the "potential upside in rents" broker statement. We know enough to to know that it's a red flag if any owner adds value and doesn't capitalize on it.
At these percentages we just have to be more patient and stick to our plan. So now we are looking to add a small multi family 4-10 units to our portfolio as there seems to be more opportunities in that space.
Deciding on the right direction. And Location, Location, Location.
My interests include fix/flip, buy & hold, as HMLer or a note buyer.
I noticed that other ppl from the NY metro area are having similar issues as they all probably know, it costs a mint to break into the NY metro markets in the areas I listed above unless you have a fairly large bank or access to a bank. Finding an alternative location within 1 hour is proving elusive too.
Still looking though. And hopeful that something will pop.
Sterling White Starting out I don't have much of a marketing budget. So I've been using Craigslist, Redfin and Zillow. And I am working with a couple of Agents. But I'm still working on making my first deal.
Are you able to pay more for a more reputable crew to get the job done quicker, @Account Closed. Out of those 4 you suggested above if you could only choose one model to start out with which one would it be?
Sounds like you're stretching yourself in various directions @Karen O.. Out of those 4 you suggested above if you could only choose one model to start out with which one would it be?
I'm sure you're right Sterling. There's something to be said for each. HML and Note buying are probably the least appealing because they are passive and I'd probably want to pursue those with a SDIRA which I don't have at this time. So F/F and B&H are running neck and neck. But if pressed, I'd say F/F would be my first wish. And the goal would be to use the net profits to buy B&H rental properties.