Not sure if I bit off more than I can chew this time?

Question

I may have bit off more than I could chew? I'm in the process of buying two properties at the same time. I though I could consider flipping a single family 3b/1b@ $35,000 in a good neighborhood with good comps . While in contract, I saw a foreclosure property in a neighborhood I want to live, great price, (Under 30) great location next to a Golf Courses, casino and a race track but it needs work.. I have been planning to move from my two bed room apartment in my 3 family property. The investment property and my new home both needs work. I can't afford to to give both properties the attention they deserve and I'm not sure I can get top dollar if I cut corners. I would have to rent not flip. I believe an investment property should have the bells and whistles`; stainless steel , granite counter top, back plash , laminate or Bamboo floors, update kitchen and bath to get rents from $ 1,100 a to $ 1,300, or a 79,000 to 100,000 sale which is Top Dollar for the area.

I have to cut corners on the investment property. Is not being able to add the bells and whistles going to be a major mistake? I have a 5 year plan to quit my job and can't afford to make major misstates.

I have to cut corners on the investment property.  Is not being able to add the  bells and whistles going to be a major   mistake?  I have a 5 year plan to quit my job and can't afford to make major misstates.

Mehran K. · Answer

Not sure about your market, but the market I operate in doesn't command that I do a flip-quality rehab if I'm going to rent out to tenants. You may want to look at the rental competition and see how those units are fixed and what rent they are advertising at. Go on a few showings as if you were a potential renter to see up close, take notes!

If it ends up you do need a high-finish, flip-level rehab just to rent it out, maybe you can take on a partner for the deal so you don't end up being stuck?

Randy E. · Answer

HI @Bridget D., congratulations on moving forward in a big way.  This may not be what you want to hear but ... I would get the new rental property in great condition and live in my personal property in less than great condition until I could afford to spend money on it.

Personally, I would rather have my rentals in worry-free condition than my primary residence.  If something isn't quite perfect at home, I can live with that.  For instance, if a window sticks a bit, or a bathroom is outdated, or the floors need attention.  But I don't want any of those problems in a rental where they might end up costing me nuisance money or lost money in rent because the unit isn't up to par.

Keep up the good work, Bridget!

Linval T. · Answer

@Bridget D.- Since you are 5 years away from hanging up your W2 job, there is no rush to move from your place now, inspite of the fact that you see a bargain.....there will be more and/or better ones in the future.

Stay put in your 3plex.

Focus on the rental and as @Mehran K.said, take a look at the competition to weigh the level of upgrade to implement. You don't want to over do it and can't recoup the excess money spent.

We are proud of your achievements and it's good to get BP's view from a different vantage point.

Good luck.

Gilbert Dominguez · Answer

You are doing plenty good with 5 already and honestly it sounds like you know how to handle it. I would just recommend you also concentrate on building up your cash reserves. Give it a little more patience and position yourself with strength as you plan and take your next step.

You know your thing and all we can do is interpret what you say so we respond according to our imagination of the situation and maybe we miss the mark. Just hope you understand we have good intentions toward and wish you the best.

Gilbert Dominguez · Answer

Never over extend yourself. You want your investing not only to produce money for you but also quality of life. What good is over reaching for money if you are stressed out and worried all the time, You won't enjoy it. Take your time about building up your portfolio. Things will be what they are not what we want them to be. Over improving a rental property is one area investors turn a money maker into a money pit. Take care. If you are going to sell a house then it may make sense to install all the bells and whistles but rentals are something that are going to be used and unfortunately abused many times. You want to provide something safe and functional nothing more , nothing less. When and only if you can really afford it and you are dealing with a higher end unit where the rents will compensate you for the extra investment then it may make sense to put better quality into your units but at the price point you mentioned I do not see that.

If I had gotten myself in your position I would try to off load one of those units as financially you are not ready for it. I would do it as quickly as I can. Get yourself back into a position where you can invest comfortably and enjoy it. Do things step by step.

You are not the first one to make this mistake. I myself have made the same mistake. Maybe I am going too far to call it a mistake but certainly overextending yourself is not a good idea.

Bridget D. · Answer

Thanks for the advise Steve Vaughan,

You guy are right  but you are  scaring me and making me laugh all at the same time today!  Your comment about re-habbing with  attractive efficiency that is as bullet-proof as possible comment is so on point.  It remained me of a quote by some one else that Linval T listed today.  This job is so crazy it is unbelievable what people do to your property .

Bridget D. · Answer

Randy E,  Mehran K, and Elinval T

Thank you all ! So every one is saying stay focused on the investment property first. Thanks for the advise I will .  I do like the idea of checking out other peoples properties to see what the competition is doing. That will help because I do have a tendency to want all my properties to have the best and they may be a little over done$$$$.   I I have to move as I will need all the extra money to take care of the bells and whistles.  I'm locked in to both contracts.  Now I have a plan!  I wil stay focused on the money maker first. I also plan to rent a room in my personal home until I retire.

Steve Vaughan · Answer

In my area, I go for attractive efficiency that is as bullet-proof as possible.  Can't tell you how many fridge door handles & shelves have been broken/ ripped out, how many stove knobs, racks, scratches and dents I've tried to fix.  Stainless only means the repair will cost more.   Water dispensers mean floods.  I'm not in the 'hood', either.  I'd hate to see you install all this super nice stuff only to be abused by an apathetic tenant.  They have a different mindset than us, plain and simple.

I agree with @Linval T.to stay where you're at if at all possible.  I also agree with @Randy E. to fix/upgrade other places before your own.  Maybe there is an opportunity to wholesale or partner on that second property?  I know what you mean @Bridget D.that sometimes deals come in waves and you want to catch it all before it's gone.

Jessica Stiner · Answer

Hi Bridget,

I agree with Rumen. I would not go high end on a rental home because tenants do mess things up sometimes. You can still make the home look really nice and clean, which will help you get the maximum rental amount.

I am a full time property manager and investor, so contact me if you would like a second opinion on upgrades and/or rent amount.

Good luck!

-Jessica

Not sure if I bit off more than I can chew this time?

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