Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
Hello to all my BiggerPockets fam.
So I think I’ve come across a pretty good deal. I was hoping to get some insight from my BiggerPockets family.
This property is a duplex in Portsmouth, VA. Asking price is $90,000 BUT it's been on the market since 2018. Red flag I know. I've analyzed using the BiggerPockets rental calculator and it's showing fantastic numbers. The comps around the area are showing anywhere from 150-170 and the rents are at the lowest 750 to a high of 1195 (for both units after its fixed would net nearly 1100 a month. I still have a good bit of due diligence to do & I need to actually see the property and what's going on on the inside. (They did not show any inside pictures) another red flag.
Hey Thomas! I actually bought a home for $40k several months ago and we are just finishing up rehab. Same deal with ours— long time on the market, no interior pictures, etc. I thought maybe I could offer a bit of advice.
It sounds like this property might need some significant repairs. The rental we bought was about an hour away from us, which turned out to be a huge PITA. There are so many barriers you have to consider, and I just want to point some of them out:
- how do you get on site to let contractors in to give estimates? (We used a lockbox, but a lot of contractors want to walk the property)
- how do you stop squatters/break ins? (We had a few during the first few months)
- what happens if there’s a water line burst and no one is around to check on things for a few days? (Also happened to us)
- how do you check on quality of work being done? You should be going down to check things out at LEAST every other week.
Now don’t get me wrong. We’re on the other side of this finishing up, but it has been just an awful ride to get here. We will cash flow >$1k/mo on this fourplex, but knowing what I do now and how much time commitment it takes (even when hiring things out), I would not have done it as my first investment property.
You might be willing to take it on, but I just wanted to give you some perspective from someone who has just gone through it. Happy to answer any questions you have.
I think you are approaching it correctly. Analyze it first then decide whether it warrants further investigation. No pictures generally represents significant rehab, but not always. Make an appointment to view it and gather all of the facts you can. Are tenants paying rent (economic rent v only physical occupancy). Ask for copies of lease. If no lease exists they are on mtm. You might be stuck with low rents if there under a lease for the term of the lease or if under section 8. Take a look and let us know.
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@Kenneth Garrett these are all very good points, thank you.
This property is about 3 and a half hours from where I live so I want to make sure the trip is worth it. My next question is how can I get an appraisal if I do not own the home yet? Same for a contractor to do estimates. I am not yet established for them to think I am serious. I would like to get all of the facts and numbers when I go down there. Therefore I would like an appraisal and estimates for a rehab on the same day if possible. Any recommendations for that?
I’m just wondering why it’s been sitting on the market for so long. Makes me think something else is wrong or either the seller is not willing to go any lower on the price. Thank you!
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@Joe Villeneuve So I just went through the realtor that I have been using in this area. She has sent me rental history for the past two years in this area with the same beds/baths/around the same square feet.
I’m just wondering why it’s been sitting on the market for this long. Maybe the seller is unwilling to budge on the price.
Since your working with a realtor down there have them shoot a video, FaceTime or other electronic means so you can see what it looks like. I would not hire an appraiser. Appraisals are very subjective and I do not think it’s worth the money unless your paying cash for the property. If your getting a loan from the bank they will only use their appraisal. I prefer to run my own comps. Have your agent run comps, but you will need to analyze them to determine which are good comps. Don’t just take the recommended value.
@Joe Villeneuve So I just went through the realtor that I have been using in this area. She has sent me rental history for the past two years in this area with the same beds/baths/around the same square feet.
I’m just wondering why it’s been sitting on the market for this long. Maybe the seller is unwilling to budge on the price.
How close to this house are the comps, and how close are the comps used to the sq ftg of this huse.
Hey Thomas! I actually bought a home for $40k several months ago and we are just finishing up rehab. Same deal with ours— long time on the market, no interior pictures, etc. I thought maybe I could offer a bit of advice.
It sounds like this property might need some significant repairs. The rental we bought was about an hour away from us, which turned out to be a huge PITA. There are so many barriers you have to consider, and I just want to point some of them out:
- how do you get on site to let contractors in to give estimates? (We used a lockbox, but a lot of contractors want to walk the property)
- how do you stop squatters/break ins? (We had a few during the first few months)
- what happens if there’s a water line burst and no one is around to check on things for a few days? (Also happened to us)
- how do you check on quality of work being done? You should be going down to check things out at LEAST every other week.
Now don’t get me wrong. We’re on the other side of this finishing up, but it has been just an awful ride to get here. We will cash flow >$1k/mo on this fourplex, but knowing what I do now and how much time commitment it takes (even when hiring things out), I would not have done it as my first investment property.
You might be willing to take it on, but I just wanted to give you some perspective from someone who has just gone through it. Happy to answer any questions you have.
@Joe Villeneuve So I just went through the realtor that I have been using in this area. She has sent me rental history for the past two years in this area with the same beds/baths/around the same square feet.
I’m just wondering why it’s been sitting on the market for this long. Maybe the seller is unwilling to budge on the price.
There can be any number of reasons why this property, whose AP is far less than the supposed PV, has been on the market so long...and many of them are good reasons for the REI.
One reason, not one of the good ones, is that 90k is the correct price for this property.
Another, again no so good, is 90k (of so) is the balance of the existing lien(s) on the property.
My favorite good one is a lack of offers to begin with...because many, many REI looked at this property, also asked "why so long", assumed the worst, and never made any offer at all.
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@William Taylor I appreciate your genuine reply and advice.
If you don't mind me asking, where did you find this deal? MLS? How do you go about getting a reliable contractor to even take you serious and give you an estimate? These are all very legitimate points that you've made. I am a bit weary of doing a rehab for my first project but at the same time I do want to learn and take something of this nature head on. I feel it is about doing as much due diligence as possible which I am trying to do before I even make a trip there. So should I not worry that it's been on the market for this long?
I know ultimately I will have to make the decision myself. It would just be nice if I could have some insight from experienced investors on whether or not they would even touch this property. I guess it will be trial and error for me.
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@Joe Villeneuve very good points Joe. I know I have a good bit of analyzing still left to do. Thank you for the information it is much appreciated.
It is showing the zestimate is around 87-90k which I don’t know exactly how accurate that is. If so, this would not be a good investment I don’t think.
I am hoping the seller may be motivated and ready to dump this property off, unless like you said that is what is owed. Otherwise I will have to move on.
Real Estate Consultant · Philadelphia, PA · Member since 2020 · 12 posts · 10 votes
6y
@Thomas Baylor Hi Thomas. Your first step is to analyze the deal - do the numbers make sense, which it sounds like you did. If the property has ben sitting that long it could be a red flag of something to be aware of with the property itself. I would recommend finding a good GC in the area, interview them and ask for references. Then have the GC meet you at the property to evaluate the rehab with you. They should be able to identify what needs to be done to bring the property up to a rental grade rehab, any major issues you need to be aware of, and a budget for the rehab. Based on your numbers you should walk in knowing what the max rehab budget should be before the deal doesn't make sense anymore. I hope this is helpful and would love to hear the end result. Best of luck to you.
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@Joe Freeman
Hi Joe, the biggest dilemma I am having right now is with a contractor. How can I get them to take a newbie investor serious? I am going to contact several in the area this week and see what it is going to take to get them out to the property and give me an estimate. Even if it takes me paying by the hour. I believe this property has potential. At the same time, I do not want to take on a great big rehab for my first property although it would be a great learning experience. I know I would be very hands on as far as making sure things are getting done. Even so, I have zero experience of knowing if things are being done right. Do you have any recommendations on how to approach a contractor without actually having the property under contract?
One more question, how can I find investors in the Norfolk area? I would like to reach out.
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@Joe Freeman
Hi Joe, the biggest dilemma I am having right now is with a contractor. How can I get them to take a newbie investor serious? I am going to contact several in the area this week and see what it is going to take to get them out to the property and give me an estimate. Even if it takes me paying by the hour. I believe this property has potential. At the same time, I do not want to take on a great big rehab for my first property although it would be a great learning experience. I know I would be very hands on as far as making sure things are getting done. Even so, I have zero experience of knowing if things are being done right. Do you have any recommendations on how to approach a contractor without actually having the property under contract?
One more question, how can I find investors in the Norfolk area? I would like to reach out.
I mean for us, we saw obvious issues when we visited the home. We naïvely thought that we knew about all the issues. We even had a great home inspector who pointed out a ton of things. It’s a whole ‘nother beast when you actually own the home and start opening up walls.
For us that entailed running entirely new electrical, plumbing, and the furnace is crapped out mid winter. Since we couldn’t be over there to check on things every day, that led to pipes bursting.
We also had thoroughly vetted, or so we thought, several contractors before we even closed on the home. We had a game plan, estimates, and gave our contractors their start date.
What ended up happening was that some contractors stopped responding, others started but we’re doing awful work. I feel like as investors, if we are trying to play general contractor, we need to be over there every day. That was just my experience though, your mileage may vary.
As far as finding the right contractor, we never did. We spent way too much money jumping from one Contractor to the next, thinking that we had the right person. like I said we are almost done, but it certainly took some heartache to get there.
Real Estate Consultant · Philadelphia, PA · Member since 2020 · 12 posts · 10 votes
6y
@Thomas Baylor You should not have to pay for them for an estimate of rehab. Their motivation would be the potential of a big job, with possibly more to follow. To be taken seriously you could let them know that this is the first flip, but you have plans to do xx more in the next year etc - whatever your plan is. That being said a large project with a full gut could be a bit much for a first flip. I don't know the parameters of the deal you are evaluating but in general the first flip you are looking to hit a single not a home run.
Investor · Mesa, AZ · Member since 2018 · 28 posts · 17 votes
6y
@Thomas Baylor It sounds like you are on the right track with the thought processes you have shared. Every property that has been sitting on the market for a long time has a reason why. Your goal should be to figure out the why which is what your due diligence is for. So keep it up and don’t be afraid to ask the question, it’s amazing what people are willing to share when you are willing to ask. Sometimes as investors we get so focused on figuring out the numbers that we forget to take advantage of this no cost easy step. And don’t rely on your realtor to know what questions to ask. Feed them the information so they can ask for you or see if you can talk to the seller’s agent or even the seller themselves. They may not come right out and tell you all the issues but it might give you a better feel for the place.
Rental Property Investor · Winchester, VA · Member since 2019 · 50 posts · 16 votes
6y
@Jimmy Hodges
Definitely agree with everything you have said here. It’s all about doing the dirty work (due diligence/vetting etc).
This platform is amazing. The information that is shared on here to me is by far greater than a college education.
Turns out, the realtor I was speaking with just said the house is looking like it’s going to be a tear down. Even so, analyzing the numbers and pursuing gave me confidence to go for the next one.
@Thomas Baylor hey Thomas I’m in the va beach area and I have a family member that’s a real estate agent. She’ll be able too help with everything you need.
Real Estate Agent · Boston Ma · Member since 2020 · 82 posts · 23 votes
6y
@Thomas Baylor
Ideally a multi family - at least two units. So I have some money saved up, but not working so cant get a Loan at the moment. But , it’s a matter of when not if I’m gonna purchase a rental.