Driving for Dollars Worked...

16 Replies

Hey all. I recently decided to drive for dollars on 20 properties I wrote down that were distressed, as I’m looking for my next deal. I called an elderly couple who said my timing couldn’t have been better. They had, just two days prior, talked about selling the property, before my ohone call. They just recently completely renovated one side of their A House Duplex and added another bathroom. The other side has renters who have been there for 10+ years. They would like to give me first crack at purchasing the property because of my phone call. I believe to be emotionally invested in this because I found this property myself. However, the numbers are as follows and any input would be greatly appreciated: Asking price-$270,000 Unit A Rent-1400 Unit B Rent-900 (10+ year renters) PROPERTY APPRAISAL-$260,000 THIS DOESNT MEET THE 1% RULE, BUT WOULD WITH UNIT B AT MARKET. THANKS GUYS!
@David Bardwell thank you for the reply. I first go by the 1%, but am conversing with the Seller today about what expenses the tenants are responsible for, Cap expenditures done recently, etc. would you mind sharing what ratios you target?

@Dayne Winters $270k for an A house is up there. Not too bad in todays local market if it's well taken care of and somewhat updated, but like @David Bardwell said, forget the purchase price until you're finished analyzing. How is the HVAC system? Those old govt homes are big and not very well insulated. The old "octopus" style systems are all garbage, and they have a ton of windows, so energy efficient they are not. Is the basement finished? Egress windows? You need to do some research on these and see exactly what it is you may be getting yourself into. I have seen guys buy these and end up way over their heads due to unforeseen expenses. I have a hard time getting $1,400/month on that type of place. Most I have seen is around $1,250-1,300 if its newly updated/remodeled. If it were me, I would calculate PITI + any other costs you as the landlord would pay, then see how much that leaves you cash flowing at the end of the month.

You're wise to use the 1% rule, but in this area it is harder and harder to hit, so be patient until you can. I have seen a ton of new (hate to say it) "wannabe" investors overspend in our area over the last few years. They are under-analyzing and overpaying for properties (which has also made the market stay overpriced), so just keep in mind that you don't HAVE to buy. You keep beating the streets and knocking on doors and you'll find one that works for you.

On a personal note, $270k blows me away. 5 years ago you could pick these up all day long for $180k. Just shows how fast the prices around here can rise OR fall. Hell, I walked away from one last spring at $210k. But, I am a cheap ***, so...lol.  And  use the BP analyzing tools, they are amazing. Good luck!

@Account Closed it’s funny, I caught myself being emotional with this decision. My parents have had duplexes in this area, including an A House, since the 90’s and the $270k is extremely steep. People are paying over $300k for A Houses on occasion. I was fascinated by my interaction with this absentee owner and I think the connection we had excited me about being the first person he wanted to sell to at a “discount” because of my timing on the phone call. I told myself when starting this journey that I wouldn’t overpay and I finally caught myself. It’s hard because each week when duplexes, triplexes, and fourplexes hit the market in my area they are under contract within a day. I’m feeling left out! I did purchase an H house through foreclosure that has a mother in law unit attached. I’m BRRRRing and House Hacking that unit as we speak. 

Nice. Yeah I am in Kennewick, been doing this for over 15 years, so I see the same ones. I actually have to laugh sometimes when I see what multi family units are going for around here. With the prices people are paying, there is NO way they will make money. It's sad but true. ROI is dismal. The worst part is that's why those prices are staying up there, screwing the rest of us with any brains, Lol... Sounds like we're in the same boat. Just be patient. This market is going to readjust within the next year, maybe 2. For now I am just saving my money (unless an actual good deal is to be had) because ALLLLLL those duplexs, fourplexes, etc., will be back on the market at a way lower price.

@Cody Stewart I completely agree. I’ve been looking at a lot of fourplexes and duplexes, but I’ll stick with being patient until I find an off market deal that the numbers work on.

Hi guys, wanted to introduce myself. I am in Wenatchee but I own two rentals in Kennewick and would like to add more. Having trouble as you pointed out the prices have been ripping higher. However, Tricities is better priced compared to Wenatchee even today. Having said that the rents are better in Wenatchee. 

Let me know if you guys want to grab a beer or a coffee one weekend. I'm down that way plenty. I have a couple good stories to share and who knows we might be able to add value to each others approaches. 

Andrew Gingerich
East Wenatchee, WA

Hi guys, I'm new on here, and new to the area. I live up in Lake Chelan working at an orchard and I have free housing. Otherwise Chelan would be way too expensive for me to live here. I'm not seeing hardly any deals that looks like decent units and meet the 1% rule let alone the 2% rule. Not sure how any of these landlords make money in Wenatchee. The HOA fees on the reasonably priced units make the numbers not pencil as far as I've seen and I'm not crazy about HOA's in general. It seems to me the closest to 1% it gets around here is 0.8% on an apartment or duplex. I've seen multifamilies over 1% but I don't want to get into properties of that size to start out. Is this a niche market with low enough landlording expenses that this works for most people or is the market just over valued like you guys were all saying? Thanks everyone and I'd love to meet up for coffee one of these days when we aren't harvesting honeycrisp.

-Tyler

Originally posted by @Tyler J Sabin :

Hi guys, I'm new on here, and new to the area. I live up in Lake Chelan working at an orchard and I have free housing. Otherwise Chelan would be way too expensive for me to live here. I'm not seeing hardly any deals that looks like decent units and meet the 1% rule let alone the 2% rule. Not sure how any of these landlords make money in Wenatchee. The HOA fees on the reasonably priced units make the numbers not pencil as far as I've seen and I'm not crazy about HOA's in general. It seems to me the closest to 1% it gets around here is 0.8% on an apartment or duplex. I've seen multifamilies over 1% but I don't want to get into properties of that size to start out. Is this a niche market with low enough landlording expenses that this works for most people or is the market just over valued like you guys were all saying? Thanks everyone and I'd love to meet up for coffee one of these days when we aren't harvesting honeycrisp.

-Tyler

 Those fresh honeycrisps are awesome! Just had one, sliced.  Will work for fresh honeycrisps! LOL

I have some Wenatchee area and north up the east side of the river rentals.  All of mine bought over the last 14 years (except 1) were purchased off-market.   I will trade you a 1% multi lead for a couple smaller fixer-upper leads. Done messing with those.

Glad you are thinking of REI, Tyler. Can you listen to podcasts and books while you're working? Do you live in Chelan full-time, or just during harvest? I could show you some stuff in the Orondo area if you get that way.

@Steve Vaughan fortunately I can listen to BP podcasts and have been for a few hours a day for about 3 weeks. I've read Rich Dad Poor Dad and listen to stuff from Graham Stefan and others on YouTube. I live in Chelan full time now, since I co-manage the orchard. It'd be great to meetup and look into what Orondo has to offer, it sounds like you have some solid experience. What is your availability? 

-Tyler

P.S. I'll bring the Honeycrisp 

Hi Tyler, I think Steve more or less hit the nail on the head. Note though he's bought over the last 14 years. Jumping in right now, especially in Chelan, where the market is driven by westside Seattler's vacationing seasonally should at least give you pause and it seems like you are a at least aware of the high prices. I think Chelan is a good indicator of where the market is...7th 8th inning??? Can't know for sure but it's hard to find value. 

If you can take anything away from Steve's post take this, "Were purchased off market..." If you want to find value in this kind of market I would find the owner of a run down multi and start sending letters. Tell them you're looking to buy, you're local, and you can help. If you can solve a problem for owner you might be able to get a deal. There's lots of good info on this strategy on BP. Lots more to say but that's my recommendation. Take this with grain of salt. I'm by no means as seasoned as Steve. 

Best, 

Andrew

Originally posted by @Andrew Gingerich :. 

If you can take anything away from Steve's post take this, "Were purchased off market..." If you want to find value in this kind of market I would find the owner of a run down multi and start sending letters. Tell them you're looking to buy, you're local, and you can help. If you can solve a problem for owner you might be able to get a deal. There's lots of good info on this strategy on BP. Lots more to say but that's my recommendation. Take this with grain of salt. I'm by no means as seasoned as Steve. 

Best, 

Andrew

 Excellent post for anybody starting out Andrew.  Off market was my point exactly.

I've actualy been buying for 16 years, but the first 2 were on the MLS. My offers were being shopped so much by the LAs, I basically said 'forget all ya'll' and have been on my own every since. To this day I don't work with agents. Needed to find better value also as you pointed out.

The title of this thread is 'driving for dollars worked' so glad we are circling back to finding off market deals. Any new person only looking on the MLS will have a hard time. Take different routes and note opportunities In disguise!