First and foremost, thanks to Bigger Pockets and all it’s wonderful members.
A little about my background….I’m active duty military, left home at the ripe age of 18.I have little real estate investing experience.I purchased a double wide 16 years ago.I lived in it for 2 years, rented it out for 5 yrs, then sold it to the neighbor.I didn’t know what I was doing.Several years later, I bought a foreclosure settled on about 7 acres that needed some work.I improved the property while living there.I sold it to a friend for a modest profit 3 years later.Three years ago I purchased the home we currently reside in.Another foreclosure that I got for 15% below market value. If sales pick up in the area, I'll sell. If not it will be a good rental.
I did some reading over the years and never lost interest in real estate.About 6 months ago, I picked up the pace when I realized I wanted to eventually become a full time real estate investor.That was when I decided I would be retiring from the military in 3 yrs (at the time).
So the search began.I was residing in TX.Figured it made since to start searching in KY since I would relocate there in a few years.
I found some friends/family willing to help in Ky.They looked at probably 20 houses.I made an offer on 7.Finally got an offer accepted on a HUD house. To complicate things a bit more, I'm currently deployed to S. Korea.My wife closed on the property on my behalf Tuesday!
This is a low income property.Acquired at $18,500.Rehab should be 5-6k.Arv 35k.It’s an older home with good bones.Updated electrical, plumbing, hvac.Not the norm for this area.Paid cash.
My wife is headed back to TX, so coordinating everything will become much more complex from this point forward.
A great friend of mine is handling 90% of the repairs.Most are cosmetic, floors, paint, appliances, doors, etc.Hopefully that works out.I told him if at any point things are interfering with our personal relationship, let me know because our friendship is more important.We’ll see how this turns out.I’ve heard it 1000 times, don’t mix friends/family and business.I guess I need to see for myself.
Plan A is to rent to section 8, as a 3 BR.This is the tricky part.It’s technically a 1 BR, 2 BA.However, the attic has been converted to living space (2 large rooms).The rooms are adequate size for BR’s however I’m hearing that they won’t meet conforming standards for a BR.The rooms have the sloped ceiling and no closets.Plan B is to find a conventional renter.Plan C is lease option.Plan D is conventional sale.Regardless, I’m comfortable it will cash flow.If I can get a section 8 renter, as a 3 BR is will cash flow nicely!
Struggles I’ve had up to this point:
1.HUD is slow and meticulous.Example, my wife didn't have the final amount due until 15 minutes after the closing apt. That was a challenge since we were wiring the money
2.I’m still seeking a property manager for this property.Several won’t accept new clients if they have less than 4 or 8 properties.
3.I would have never thought that I could pull this off from another country.I’m very excited to be taking action, but it won’t come without friction.Coordinating the repairs, locating property management, placing tenants will be a bit more challenging because of the distance.We’ll make it work.
4. My wife went to schedule to have the water turned on. They require the deed, drivers license and.......social security card? My wifes if 1000 miles away. We'll resolve that next week, just unexpected. My agent said she had never heard of this requirement.
I’ll continue to update as we make progress.
Thanks again BP!
I'd also like to point out I was concerned on the property condition report from HUD. The report stated there was a plumbing issue (stated: DO NOT TURN WATER ON) and the hvac didn't work. If they were major issues that was a deal breaker for me.
During my inspection period, I had a plumber come out to inspect even though the water was off. All the pipes he could see appeared to be new, pex replacement pipes. This home has a basement so most pipes were visible. He said he wouldn't hesitate to turn the water on, right then. We still need to test with the water on, but I feel pretty confident there are no major issues.
After having the power turned on, we revealed the issue with the hvac was a faulty thermostat. After closing a new thermostat went in and ac/heat are rockin!
So far so good.
That is awesome man! Keep us updated on this ....love to read the updates. Glad things are working out...what do you think it will rent for?
I am active duty military myself. Currently doing deals in Cincinnati/Dayton OH area from England. Its crazy & I have to be careful but it is def. doable!
Congrats, impressive taking that on from a distance. Glad to hear your wife is on board with your investing, mine gets on board every time we close but she doesn't like it much during the projects. I think that is because all the profits go back into the business. I'm hoping that will change over time... Good luck and keep us updated on how the house turns out.
Thank you so much for your service to our country! Your story is amazing and proving that real estate can be done from anywhere. You can probably find a good property manager by speaking to other investors in KY. Check on the local REI clubs, Meetups, etc.
It's a great feeling to be moving forward and to post in this forum category, "success stories!" Looks like you're getting it done also. Thanks for your service!
As far as rents, if I can get a section 8 tenant I think I can easily get $800/month.
Thanks. So I'm talking to my wife a few weeks ago and she's considering a career change. Mentions becoming a licensed real estate agent. She's hasn't committed yet, but that would be wonderful for my investing adventures. She seems excited about it, although she isn't interested in investing. I'm very happy that she more than willing to help while I'm away, even in the not so great neighborhoods. :) She also loves when I tell her to go to the big box hardware store and pick out paint, tile, etc. Shopping.......keeps her interested, even if it's only at the hardware store.
The pleasure is all mine. The distance is a challenge, but we'll overcome it one way or another. I believe we have made some progress on identifying a few property manager. Thanks for the networking idea's.
@Jeremy Jackson - If the place is put together well and you're going section 8, ask for $850. You'll get it. The trick with section 8 is being patient and providing a nice enough place to really motivate the good tenants to come out and see it. Get great photos and market it on GoSection8.com ($50 for a month), Postlets and Craigslist and make sure you say "Sec 8 OK" to catch their eye.
Yell if I can help!
Great advice, as usual. That's the plan.
I viewed all other section 8 3br/2ba listings in this area. There aren't many. Highest was $900/m, lowest was $825. I'm running a test ad at $820 per month so see how much interest it draws. I chose this rate because I'd like to get a tenant in soon after repairs are complete.
Something else that stood out among other listings.....some were poor listings with no pictures, poor pictures, no description or a poorly written description. I believe this will give me an edge over other comparable listings.
@Jeremy Jackson - RE: Poor ads - Yep! It always amazes me how many landlords will do the absolute minimum with their listings.
I was surprised, but don't mind. :)
Update: Progress on the rehab is going slower than expected and the distance continues to hinder progress.
The water company drug their feet for 1.5 weeks before cutting the water on. It is on now and we have confirmation of no major plumbing issues, finally!
Interior is being prepped for paint. Paint crew will be starting Saturday morning.
I've identified a property manager, but still need to finalize. She came recommended from other property managers.
Progress is going well. It's going slower than I'd like, but so far no surprises and I'm still on budget.
@Chuck B. What is your opinion on flooring for the second floor? Cheap carpet or something like this?
This is the theme throughout the lower level. I have a friend that handled the hardwood in three rooms. A portion of this floor was painted very dark brown when I acquired the property. Trim will need to be touched up again since it was painted before refinishing the floors.
We used cheap colorplace paint from wally world. Coverage wasn't great, but it looks nice. I couldn't beat the price.
The natural wood finish was worth keeping in the living room and hallway. Cleaned up nice.
@Jeremy Jackson For a more middle or low income property, I almost never replace carpet, though I will clean it and leave it if it's still in good shape.
My preference would be to refinish the hardwood if it's up there. I have never used laminate flooring as I've been told repeatedly from other landlords that it does not hold up for the long run, especially if anything is spilled on it and left that way. I have been using Shaw click-together vinyl plank (looks like wood and has a hand scraped texture) from Lowes but it's much more expensive, usually $2+ a foot. It looks fantastic though and the folks that now have it universally love it.
On first floors, kitchens and baths I'm using a lot of the wood-look plank ceramic tile too. It looks amazing as well and is a lot more durable than even hardwood.
I think I spend more than most folks on this stuff but my goal is the least amount of replacement and repair over the long run. Hopefully. :). We'll see...
Ps. I don't think you should cut the rent to $820. Especially with section 8,because it's more of a timing issue than it is a funds issue. They tend to come in waves as the local housing authority releases paperwork or whatever. You just have to market regularly and be patient. And I'm getting $850 market rent in Shawnee as well now.
Let me know if I can help with anything.
@Chuck B. The lower level floors are complete, only upper level remains. Plywood subfloor up there. I've gotten a lot of mixed opinions so it's looking like I'm going to pick something and learn from experience. :) I'm really leaning towards carpet. It's a low traffic area so hopefully I can get a few yrs before having to replace.
I'll definitely take the most rent I can get. I'm still a bit concerned about the upstairs not meeting "conforming sq ft" rules. Personally, I don't think the tenants will care but not sure if that is something that the section 8 inspector will look for.
Jeremy, if you are going to allow pets, the carpet won't last a few years. We have replaced so much carpet, try to move to laminate whenever we can.
As far as the bedrooms go, you shouldn't have troubles finding conventional renters. People are looking for space, not if it is technically a bedroom. If the closet is the only issue you might be able to bolt in some wardrobes to qualify, and that would be something the tenant would appreciate. Not much to do about sloping ceilings.
@Michele Fischer Good point about the pets. I haven't decided if I will allow. I want to say no but I'm a dog lover and I will significantly decrease my potential tenants by not allowing pets. Something else I'm going to talk to the property manager about for additional feedback.
The upstairs is very spacious so no worries there.
Carpet can be cheap, that's the plus. And it can be professionally cleaned and come out looking pretty fine. (I use Maxcare here locally).
If doing pets, I require a $200 non refundable deposit and $25 more per month, per small breed dog. No large breeds and no cats allowed under any circumstances. Remember that in KY any large breed that bites someone... The landlord can be held liable. Just not worth the possible liability. The KREIA has been trying to fix this for the past two years but so far the trial lawyers have an allowed it to get through Frankfort.
@Chuck B. Great info! I didn't know that.
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