Norwalk, CA · Member since 2015 · 19 posts · 2 votes
Hello,
I am currently under contract in a 2 bedroom 1 bath house for $44,000. This property is going to be a rental property, however, I just completed the home inspection and it seems like everything is wrong. The property is going to need a lot of electrical and plumbing work, in addition, some walls are bubbly so I will have to check for any leaks. Should I just call off this deal? I appreciate any advise or personal experience. Thanks
Investor · Amarillo, TX · Member since 2013 · 139 posts · 51 votes
11y
I replied a few days ago. Washington and 46th is an area I regularly invest in. Which side of Washington is it on. The Southlawn side is nicer than the Gables side. If its on the Southdown side, you can prob get more then 650 for a clean 2 bed.
As for the osseous. What electrical and plumbing work does it need? Bubbly walls... you might explain more. Could be termites, or it could be a leak. Being an out of towner, thats a challenging situation for you to be in. Who are your boots on the ground?
Investor · Amarillo, TX · Member since 2013 · 139 posts · 51 votes
11y
My thoughts is that if you look hard enough in this area, you can be all in in Southlawn for 50k for a very clean 2 bedroom with central heat and air. Those deals usually require doing the rehab to get it to that point, but that price includes the rehab. If it has CHA, it will rent for 750. If its across Washington in Gables, lower those numbers a little... say 45k or less and 650-700 in rent. CHA is not as important here, but I really hate floor furnaces for the human danger factor.
Real Estate Investor · Amarillo, TX · Member since 2008 · 547 posts · 214 votes
11y
pm me the address and I'll go check it out for you if its vacant.. As mentioned above that jump across Washington st generally means a $10k plus price difference for the exact same house. One side is "retail able" while gables is mostly investor based.
yes the property is on Monroe. Am I paying over price? 44k? Should I have offered less? The house is currently vacant but my realtor and property manager have been checking out. Property has new windows and carpet. Thanks
Thanks for your time, im currently on the Gables side, on Monroe St. Ive been talking to a property manager that I was recommended to in that area and he will be checking out the property tomorrow. He told me that his properties in that area usually rent out for 650. If I rent out at 650 a month I will be having a cash flow of 250 a month and I will be more than happy with that to start off.. Thank you
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
11y
I have TOTALLY walked away from deal before! The key is to figure out if it is "still" a good deal even with the issues. With big non-noticable they usually aren't unfortunately. Its better to walk away and fight another day than to have a bad, investment.
Investor · Amarillo, TX · Member since 2013 · 139 posts · 51 votes
11y
Based off where it is and it not being move in ready, I really don't like the deal. @Scott R. is giving you solid numbers as well. Third, this property does NOT have a true cashflow of $250 once you factor in repairs and vacancy over time. I have a feeling with a few strikes of bad luck, you will be break even or worse.
To put it in prospective, just two years ago, I bought a 3/2/ no garage with wall heaters and window AC. Solid Roof, brick, clean for 49k. Rents for $850. That was a great deal, but I say it cash flows $250, but I am factoring in the harder to see expenses (long term repairs & vacancy estimates).
My two cents, don't do it. You can do better in Amarillo. Also, I would really weigh your desires to invest here. I invest here because I live here, but I wouldn't exactly choose it if I didn't.
Norwalk, CA · Member since 2015 · 19 posts · 2 votes
11y
@Blake C. Blake thanks for the advice, what would you consider a better deal Because I really don't think I'll find something under 44k. The only reason I'm trying to invest there is because I have the people that I've been referred to in that area. What other areas would you recommend to invest in? Thanks for your time.
Real Estate Investor · Amarillo, TX · Member since 2008 · 547 posts · 214 votes
11y
I typed out a huge reply last night then lost it when I hit post due to site Maintance :-/
not to be rude, but please answer my questions if you want me to answer yours.
Have you ever been to Amarillo?
Why invest in Amarillo?
Have you seen this house?
New carpet and windows are nice, but electrical and plumbing problems are real issues, and costly ones at that. The house "looks nice from outside" and better then most investment properties do, yes, but have you walked through it? I haven't (might tomorrow cause I need to see these bubbly walls) but I doubt the agent will allow me to schedule a showing since its under contract.
There's one a bit smaller a few blocks over, but it has a 1 car attached garage. While it does need some cosmetic issues addressed, I looked at it and (don't take this as advise get an inspection) don't believe that property has any major plumbing or electrical issues, it's $5000 less, and its a hud property that has been on the market 45+ days, could prob be had for $35k, and I promise you carpet and paint estimates are a lot easier to get and cheaper then electrical and plumbing issues.
My second concern, correct me if I'm wrong, but I'm assuming your Property manager is also your realtor (or atleast the same company if not same person) and they are also the listing agent for this property. I personally hate when realtors "double dip" because they should be getting you the best price and getting their seller the best price possible, and they often don't seem to suggest negioating in these situations as it just reduces their paycheck.
I don't think your $44k price is a bad price, and I don't think your $650/mo is a bad expected rent, my issue is the unknown which can be huge in plumbing and electrical.
I sold a house a few blocks north on Monroe a few months ago. Outside and roof were nice, needed some paint and flooring and a furnace. Was 3/1.5 with 1 car detached garage I sold for $42, not sure how much he put into it but said he rented it for $850.
These are 1950s and 1960s pier and beam houaes, they not going to be perfect. Do you even know what a pier and beam house is? (Not to be rude but I didn't when I lived in Arizona)
This town is old school, most my deals are done with a handshake, it's just a different market. If your just investing here for cash flow and because you were recommended this area look into cheaper markets imo. Buffalo ny and lots of Ohio come to mind.
If I get a chance I'll go by the house today and check it out
Norwalk, CA · Member since 2015 · 19 posts · 2 votes
11y
Scott R.
Hello, to answer your questions, no I haven't been down there to check out the property personally, however, I am planning to go before closing. The reason I'm investing there is because I have several Co workers investing in that area and they highly recommended the real estate agent and Property Manager (which they are not the same people And don't work for the same company ).
As far as the pier and beam house yes I have done research in these type of houses. I'm not just going to focus in my investments in Amarillo but to start off I think this is a decent city due to having all the connections of who to contact as far as agent and PM.
I spoke to my realtor and i am going to request to have most of the problems repaired prior to closing, hopefully this will save me a headache but we shall see. Thanks.
Investor · Amarillo, TX · Member since 2013 · 139 posts · 51 votes
11y
@Pedro Preciado Everything Scott told you is true. He knows what he's talking about on this area. If you get these major things done as a part of your contract without adding much to your price you'll be okay. What I was concerned about was that you were spending 44k and have some major issues.
As for markets, I am a BIG believer in investing near home. I know there are advantages of investing in markets not near you (notably: diversification, and trying to capture a good market. My thought it that Amarillo is good, but if i have anywhere in the USA to pick, it wouldn't be in my top 5. On the other hand, if you have a proven system you can model, thats a major upside. A big reason why I am investing in the area you are looking at is that it is 10 minutes from my house, and I have a few people that have been doing this for 15+ years that I can copy their model. Its proven. The shaky part is, I don't feel amazing about this area in the 15-20 year range. With that said, I don't hate it much, because I have 3 houses within a mile of this one and would buy another if the deal is right.
Investor · Amarillo, TX · Member since 2013 · 139 posts · 51 votes
11y
@Pedro Preciado Everything Scott told you is true. He knows what he's talking about on this area. If you get these major things done as a part of your contract without adding much to your price you'll be okay. What I was concerned about was that you were spending 44k and have some major issues.
As for markets, I am a BIG believer in investing near home. I know there are advantages of investing in markets not near you (notably: diversification, and trying to capture a good market. My thought it that Amarillo is good, but if i have anywhere in the USA to pick, it wouldn't be in my top 5. On the other hand, if you have a proven system you can model, thats a major upside. A big reason why I am investing in the area you are looking at is that it is 10 minutes from my house, and I have a few people that have been doing this for 15+ years that I can copy their model. Its proven. The shaky part is, I don't feel amazing about this area in the 15-20 year range. With that said, I don't hate it much, because I have 3 houses within a mile of this one and would buy another if the deal is right.
Real Estate Investor · Amarillo, TX · Member since 2008 · 547 posts · 214 votes
11y
just went by.,
Didn't notice any major issues with the walls looking through the windows.
Electrical and plumbing don't appear to have any major issues for the area, atleast not in my 5 minute inspection. Electric gas and water were all on, gas and water meters were not spinning so Id assume no major leaks.
The grass around the water spicket was 4x as high as other areas, so id assume it leaks or they left it on hooked up to a hose or something.
I did not go in the house, but the electrical was breakers not fuses, wasn't a federal pacific box, those are the big issues with this area and its free of those.
Yes the wiring is prob 60 years old, yes it could be upgraded, yes it prob won't pass current code, but then again that could be said for 90% of the houses in the area.
Drain lines you'd have to pull a hydrostatic test to tell you much..
THERE IS NO CARPET in this house, no tack strips, and the hardwoods are terrible
Norwalk, CA · Member since 2015 · 19 posts · 2 votes
11y
@Scott Thanks for taking the time to go check out the property for me and doing the visual inspection. I have requested to have the major problems repaired prior to closing and regarding the carpet it is in the contract that it will be installed prior to closing. Hopefully everything goes well. Thanks for all your help.
Thanks for the help, I understand where you are coming and im not planning to place all my eggs in one basket by buying only in Amarillo, but I thought this was the easiest place to start and get my feet wet just because I would be working with recommended people. Hopefully this deal goes through with all the repairs and I could start my real estate investments in the right track. Have you thought about investing in Las Vegas, NV that is another market ive been looking into.