What shape do you like your properties to be in?

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What shape do you like your properties to be in?

Carloz Gil
Pittsburgh, PA · Member since 2017 · 36 posts · 12 votes

If you are looking to buy and hold and primarily looking for cash flow, what conditions do you like your the properties to be in?

I've heard: property should need some work that way there could be some value added. If that is the case, what work do you like to do to it? And what do you want to avoid? Besides the roof and foundation.

I've also heard: Little to no work. Fast cash in and out. If this is the case, do you look for deals on the MLS or elsewhere?

What do you all prefer?

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Brendon Woirhaye
Rental Property Investor · Whittier, CA · Member since 2014 · 324 posts · 268 votes
8y

I mostly invest in buy and hold for cash flow.  I prefer to find properties with some work to do, because something that is in great shape likely wouldn't meet my investment criteria (the numbers wouldn't work).

Also, if I do (or have done) the work, I know what I have.  Sometimes work done by a seller perfuming the pig for a quick sale is shoddy or very surface level, and they'll be gone by the time the problems surface.  

Roof and foundation problems are OK with me.  I just need to include the costs (time and money) for the remediation in my modeling.

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  • Brendon Woirhaye
    Rental Property Investor · Whittier, CA · Member since 2014 · 324 posts · 268 votes
    8y

    I mostly invest in buy and hold for cash flow.  I prefer to find properties with some work to do, because something that is in great shape likely wouldn't meet my investment criteria (the numbers wouldn't work).

    Also, if I do (or have done) the work, I know what I have.  Sometimes work done by a seller perfuming the pig for a quick sale is shoddy or very surface level, and they'll be gone by the time the problems surface.  

    Roof and foundation problems are OK with me.  I just need to include the costs (time and money) for the remediation in my modeling.

    1Reply
  • Dawn P.
    Rental Property Investor · Sumter, SC · Member since 2015 · 334 posts · 531 votes
    8y

    I prefer SFH in dire need of repair and updating, but in a good neighborhood. The more trashed they are, the better. Bad roofs, sketchy floor joists, it doesn't matter if the price is right. Most of my rentals were foreclosures...all were found on the MLS.

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  • Jeremy TaggartBusiness Member
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 646 votes
    8y

    @Carloz Gil I like stuff that mainly just needs cosmetic improvements to add value and gain some equity afterwards. Even for rentals I like to make them real nice to attract the cream of the crop tenants and separate my units from the rest. I've found that houses with little to no work are usually priced at market value so there isn't really an opportunity to gain equity.

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  • Christopher Giannino
    Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
    8y

    I know many investors out there are using the BRRRR strategy in order to acquire properties with little to no expenses out of pocket. From what I understand, its how many investors are able to scale up. With that being said in most cases for the BRRRR strategy to work properly, you would need to buy a property that needs work in order to force the appreciation to get your initial outlay of cash back.

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  • Carloz Gil
    OP
    Pittsburgh, PA · Member since 2017 · 36 posts · 12 votes
    8y

    Thanks @Brendon Woirhaye

    @Dawn P.

    @Brendon Woirhaye@Dawn P.I've heard similar statements about "if the price is right". Are there any items in the property that would cause you to walk away? I imagine you would need plenty of repair guys in your contact list if most of your rentals are in dire need of repair.

    Thanks @Jeremy Taggart. What are some key items you think add value to the property and gain some equity? Especially in PA! 

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  • Jeremy TaggartBusiness Member
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 646 votes
    8y

    @Carloz Gil Kitchens and bathrooms for sure. I like to spend a little extra on those to really make the place pop. People tend to fall in love with nice hardwoods as well if you can find a place where there's hardwoods underneath the carpet waiting to be refinished that's a nice bonus. Lots of properties in the area that are like that.

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  • Carloz Gil
    OP
    Pittsburgh, PA · Member since 2017 · 36 posts · 12 votes
    8y

    Great tips @Jeremy Taggart! Much Appreciated!

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  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Carloz Gil:

    If you are looking to buy and hold and primarily looking for cash flow, what conditions do you like your the properties to be in?


     I prefer value add opportunities.  When I started, I was okay with adding new electrical/plumbing/systems, but I was afraid of foundation issues and new roofs.  Today, I'll take the worst piece of house you've ever seen ... if the price is right and the location fits my needs.

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  • Dawn P.
    Rental Property Investor · Sumter, SC · Member since 2015 · 334 posts · 531 votes
    8y

    @Carloz Gil I haven't run across anything that scared me away from a house I liked - yet. One I bought last year was so nasty, my agent walked in, looked around, and walked out, telling me that he'd wait for me outside while I took a look, lol. It was full of filth, dead roaches, and fleas (stray cats had gotten in through broken windows). The neighbors were so happy I fixed up the place, they used to bring me stuff from their gardens when I was over there working. My renter loves the place.

    My husband and I do a lot of the work ourselves - I enjoy it - but I do have a list of dependable guys for roofing, windows, HVAC, major landscaping, heavy plumbing, concrete...stuff I don't care to do. 

    I agree with @Jeremy Taggart, pretty kitchens and baths are a big draw. I tile all bathtub surrounds, put a nice tile backsplash in the kitchen, get stainless steel appliances on sale...anything to make my house stand out.

    I suppose a house with fire damage might give me pause, only because I've never rehabbed one. But if the price was right....

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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    I like a mix of needing cosmetic updates and basically turnkey. I get that there won’t be a lot of equity upside but investing out of state I don’t want to do large rehabs
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  • Maya Torres
    Rental Property Investor · Norfolk, VA · Member since 2017 · 142 posts · 76 votes
    8y
    I think it just depends on the neighborhood and what the rents go for. My husband and I bought our first duplex a few months ago and although it needed some work (new toilets, bathtub resurface, new receptacles, ceiling fans, etc) we definitely weren’t gonna buy stainless steal appliances. Rents vary from $700-$900. We weren’t getting any more rent for stainless steal appliances in this neighborhood so we put in all white. If it’s a high end neighborhood, then maybe the rental itself could be high end. But I think as long as it’s clean and livable, it’s a go.
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  • Jorge De Jesus
    Katy, TX · Member since 2017 · 372 posts · 140 votes
    8y
    I’d say it depends on the strike price: A- basically turnkey, pay out the nose, appreciation play, break even or negative cashflow B- “cosmetic “, still low equity, some or no cashflow C- “needs work”, some equity but if it’s SFR not that sexy, .8-1.3% cashflow D- distressed, equity gets eaten up in repair but might get 1.3-1.5% You have to take into account any financial motivators, liens, concessions, the neighborhood, schools, taxes.... Find the best value in an emerging market. I’m not a fan of SFR unless I’m flipping the contract
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  • Anthony R.
    Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
    8y

    I like;

    • Broken windows, 
    • chipped paint, 
    • old carpet, 
    • dated bathrooms and kitchens, 
    • really low rent,  
    • lots of trash,
    • back taxes

    I don't like;

    • Bowing basement walls, 
    • a roof that looks like a shaggy carpet, 
    • tilting houses, 
    • single pane windows, 
    • missing copper, 
    • missing wires, 
    • weird layouts, 
    • houses next to railroad tracks 
    1Reply
  • Rachel H.
    San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
    8y

    @Carloz Gil Mostly cosmetics such as paint, flooring and some handyman type work. If roof issues aren't that major, I may take it on. Since I work a very specific niche (mobile homes), there are things I can do to help make things more cost effective. :) 

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  • Carloz Gil
    OP
    Pittsburgh, PA · Member since 2017 · 36 posts · 12 votes
    8y

    @Randy E. That makes sense. But as a "first timer", would you still look for properties with electrical/plumbing issues?

    Wow @Dawn P.! Good for yall. So I take it you rented the place and not flipped it?

    Thanks @Caleb Heimsoth. I have questions regarding out of state investing but that is for another forum :)

    @Maya Torres, I agree. I would not buy stainless appliances. Although in pittsburgh they are a hott commodity.

    @Jorge De Jesus thanks for the advice. Do you primarily do multi?

    Perfect @Anthony R. Bullet points are much appreciated.

    @Rachel H. I am very curious about mobile homes. I might reach out if its ok. I'd like to pick your brain.  

    1Reply
  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    8y

    I prefer rectangles. Easiest to work with. Then again, those curved plaster walls are really cool!

    0Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Carloz Gil:

    @Randy E. That makes sense. But as a "first timer", would you still look for properties with electrical/plumbing issues?

     I would not recommend it for a first-timer.  However, my first investment buy was such a house. 

    It needed all new electrical, all new plumbing, a new water heater, new flooring, fixtures in bath and kitchen, and a few other fixes.  But the price fit my budget, so off I went into the world of buy-and-fix.  For me, it wasn't so much a decision of "whether or not to buy cheap distressed houses", so much as it was an issue of "whether or not to begin investing in real estate."  If I was going in, that was the path I had to take.

    Looking back, I wouldn't change a thing.  

    I wouldn't suggest other rookies go the same route if they can afford not to.  Especially if they have no zero experience being a landlord.  And even moreso if the rookie is buying long-distance.  But if someone has a limited budget and true determination (or in my case, true desperation,) it is a path that can succeed.

    Good luck.

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    8y
    Originally posted by @Carloz Gil:

    If you are looking to buy and hold and primarily looking for cash flow, what conditions do you like your the properties to be in?

    I've heard: property should need some work that way there could be some value added. If that is the case, what work do you like to do to it? And what do you want to avoid? Besides the roof and foundation.

    I've also heard: Little to no work. Fast cash in and out. If this is the case, do you look for deals on the MLS or elsewhere?

    What do you all prefer?

     It's all relative. I'll take value whenever or wherever it pops up. Sometimes a total crap show is priced so well you gotta buy it. Other times something is all done & also priced well for an odd reason or another. That said I often find the most likely place to unlock value is little old lady houses. These are houses that have good bones, no major defects but need a cosmetic upgrade as they have the same decor as they did in the 60's when the little old lady who's selling it to you bought it.

    0Reply
  • Alex P.
    Investor · Longview, WA · Member since 2015 · 94 posts · 176 votes
    8y
    I like the foreclosed homes that are moldy, have drug needles in them, and the electrical ripped out through the sheetrock. The ones you have to sign something to get into them.
    0Reply
  • Jorge De Jesus
    Katy, TX · Member since 2017 · 372 posts · 140 votes
    8y

    I’m a wholesaler primarily, the property I do have is sfr through partnership with my end buyers.

    But multi just makes a world of sense to me. Only so much value you can force on sfr without adding a structure. I’m cashing out of my positions soon and jumping into multi

    0Reply
  • Anthony Angotti
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes
    8y

    @Carloz Gil if you are buying in Pittsburgh then pretty much every property is going to be old, out of square, mixed plumbing, potentially mixed electrical. So even if it "looks" like it doesn't need much work it probably still does......So I'd almost always rather buy something that needs updating since the mechanical systems are almost always old anyway. That way you get a better deal on the sale price. 

    My general rule is that I don't want 2 major things unless it's a really good deal, but that one major thing is fine as long I can still buy with terms. 

    Major things would be foundation, total rewire, major plumbing issues, structural issues, box gutters, utility line issues, large scale brick replacement/repointing, etc. Pretty much anythig that could cost more than 8k. 

    I actually don't worry too much about an aged roof as long as no evidence of serious wood rot because it's pretty straight forward to just reroof something. You just need to work it into the budget. If you have a long hold period you need to replace it at some point anyway. 

    Look for deals everywhere. MLS, off market, friends, networking, etc. Basically just tell everyone what you are doing.

    Also I agree with the weird layout guy. That's a deal killer as well as a really poor location compared to the neighborhood. 

    Last edit. I like deals with under market rents. Pretty simple value add with some cleanup. 

    1Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    8y

    @Carloz Gil

    I'm going to second my friend Anthony here.

    Pittsburgh experienced its main building heyday in its urban areas from 1890-1930. There was a second, smaller building craze at the end of WWII that ended shortly thereafter in the 1950s.

    You should be prepared for more work rather than less.

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