Out of state investor...

19 Replies

Go or no go. I live in California, the investment property I am looking to buy is in indiana. Currently, the distressed property is listed for $25k. I have one bid for $40k to do a complete gut job. Arv is $75k per the contractor in the area. I want to partner up with someone in the area but no luck so far. I am not a seasoned investor but I have the capital to proceed with this purchase. I am hesitant to move forward since I don't have a team in indiana I count rely on at this time. I will have 2 more bids soon. I would like to know what you all think.

@Glenn Jubildo I would be hesitant to rely heavily on the contractor's estimate of ARV. I'd recommend running comps yourself, and/or contacting some local Realtors to get their advice on ARV as well. Having a good team is important as well. Try contacting a local property management company to see if they could offer the services you need for a successful BRRR.

At a minimum, you'll need a Realtor, a closing agent, a property manager with leasing dept, and a contractor. If the property manager can oversee the renovation, then that would be very beneficial to you. As a rule of thumb, the bigger the renovation, the bigger the risk, and a full gut sounds like a big renovation. Make sure you do your homework on the front end. BRRR is a great strategy, but it requires a good team to complete successfully.

You want to spend $65K and do tons of work, headache, hassle and sleepless nights to end up with $10K in equity? Why not buy a rent ready home for 75K that rents for $850 per month? Much less headache and effort and you make up th 10K in profit in a couple of years anyway!

The home is near a university and It will be a 4 to 5 bedroom that will rent $1100. I am more focused on cashflow vs equity. Since it is a total gut, then cap ex and repairs should be minimal. I know I can get a home rent ready at $75k but cap ex and repairs might be higher as time passes by. This is my first post and i know the equity is not much. Thanks for your suggestions @ jack inman

@h w beckley, I don't understand the brrrr calc at this time. I guess I need to watch more videos. @migeul, I sense u like this deal. If u lived in the area, I can count u in to partner up?

@anish tulia, where do u invest to get those kinds of returns? I have one rental in the central valley, ca. I bought in it 2015 for 62k through Fannie mae and currently rents for $845. I lived there briefly then rented it out after I purchased a sfr. I currently have no mortgage on both properties. I do have a heloc as 1st lien on my primary home for $200k. I am in process of doing an eloc 1st lien on my investment property for $70k. I have zero balance on my loc. Just trying to staying liquid for the upcoming clearance sale when the economy tanks. In the last recession, did any of you guys have a 1st lien equity line of credit that was frozen due to the credit tightening from the banks? I ve heard of 2nd lien loc that the banks froze. I m just curious. Thanks all

The roof and sidings are in good shape.  Here is a detailed bid. It s a little long...thanks for taking the time to read it 

Payments

½ down is required of which plan you choose

2nd draw is half of what is left when Heating is installed

3rd draw is after project is 80%

4th draw is due after completion

Pictures will be sent to ... as progress is moving along. This job can be started next week and completed within 8 to 12 weeks. Depending on weather

The following is the repair bid and information on the said above address. We are a licensed general contractor working in the County of...Permits will need to be pulled.

In order to make this house rentable or saleable some things need to be addressed. Too utilize the maximum value I would make this in to a single 4-5 bedroom house. You would get maximum price for a retail sale and you would get maximum rent as well. Which you could do a section 8 or SSI rental and get a check every month the the Government.

I will be giving you a couple senarios on pricing which the main focus is the heating cost and how you want the heating and AC installed. If you do want AC. Then we will have to go with the Gas forced unit with the trunking or you could have 2 window units

Bid for remodeling

Demo

upstairs kitchen and tub and bathroom

remove all debris from in the crawl space

kitchen down stairs

remove tub shower down stairs

remove old wall furnace

remove old carpet

haul away all trash

Windows and doors

all windows need replaced 14 total, the upstairs windows need to be special glass because of the coding from the building depart for height restrictions

Front door need replaced

All interior doors need replaces

Upstairs

Walls will need to be removed and replaced to convert to a 4-5 bedroom home

All new interior doors need replaced

Plumbing removed there will be no bathroom upstairs

Bathroom

A brand-new bathroom will be installed with a tub shower, vanity, toilet,an faucets. All plumbing will be brand new. The new bathroom will be made bigger with plenty of space off the old bathroom downstairs

The hot water heater will need to be removed as well with proper coding

Kitchen

A new kitchen will be installed downstairs. All new plumbing sink and faucets

Electrical

There are 2 old 60 amp services that need to be completely upgraded to a 200 amp service. Also new wiring will be need in the house as well for code

Lights and fixture where needed

Heating

Option 1

Replace with a completely new furnace, duct work

and gas lines (most expensive)

Option 2

Have wall units installed. 2 downstairs and 1 upstairs

Option 3

Have electric heat installed in entire house

Air conditioning

If you do option 1 heating a can install

If you do option 2 heating can have ac unit in the wall unit

If you do option 3 heating need Window units

Appliances

No appliances is in this bid

Plumbing

All new plumbing will be added to the house

Flooring

Carpet throughout home as well as vinyl in kitchen and bathroom

Trim

Trim installed where needed

Paint

Repair drywall and paint entire house

Notes:

The floor is a little un level this bid does not include leveling the floor. I would have to cut open the floor and see what it needs

This does not include any Air conditioning units

Materials and Labor

Option 1 heating and all the above$39845

Option 2 heating and all the above$37825

Option 3 heating and all the above$36450

If you want air conditioning Add $3500 to the first 2 bids

You need to buy Ac unit for the window on bid 3

Hi Glenn,  If you have the cash for multiple properties then you need to spend a tiny bit of it and go BP PRO.  The calculators are awesome tools and many videos are as well. You can plug all your numbers into the brrrr calculator and quickly see where your investment stands and how to adjust things to make the numbers work.  

Also,  many good points have been brought up by some experienced people.  Without knowing a remote location well or having a quality trusted team in place, I would be very hesitant to pull the trigger on a deal like this without having ALL of my facts straight and independently verified by multiple sources.

Not trying to talk you out of it.  Just trying to keep you safe :)

Originally posted by @Glenn Jubildo :

@anish tulia, where do u invest to get those kinds of returns? I have one rental in the central valley, ca. I bought in it 2015 for 62k through Fannie mae and currently rents for $845. I lived there briefly then rented it out after I purchased a sfr. I currently have no mortgage on both properties. I do have a heloc as 1st lien on my primary home for $200k. I am in process of doing an eloc 1st lien on my investment property for $70k. I have zero balance on my loc. Just trying to staying liquid for the upcoming clearance sale when the economy tanks. In the last recession, did any of you guys have a 1st lien equity line of credit that was frozen due to the credit tightening from the banks? I ve heard of 2nd lien loc that the banks froze. I m just curious. Thanks all

You can get those returns in Indianapolis. Rent ready in the mid 70s renting 800-850. I own a bunch of them although i bought earlier and cheaper.

@Glenn Jubildo - On top of everyone else’s concerns, that I feel are very valid,  before you purchase a 4-5 bedroom home that you plan to use as student housing, you may want to look into 1) whether or not it is legal to rent to 4 or more unrelated adults in your market (in mine it is not) and 2) if you will be able to find a property manager willing to take on student rentals. 

Originally posted by @Patti Robertson :

@Glenn Jubildo - On top of everyone else’s concerns, that I feel are very valid,  before you purchase a 4-5 bedroom home that you plan to use as student housing, you may want to look into 1) whether or not it is legal to rent to 4 or more unrelated adults in your market (in mine it is not) and 2) if you will be able to find a property manager willing to take on student rentals. 

Couldn't agree more with Patti's comment. The very first thing that you need to do is check with Zoning on their ordinances. Many college towns, including mine, do not allow more than 3 number of unrelated persons to live together. This can be disastrous to your investment if you don't look into it beforehand.