Investor · Holly, MI · Member since 2009 · 95 posts · 23 votes
I would like to get your feedback and ask a few questions about my first two deals..in metro Detroit.
Deal #1
2/2.5 townhouse with 1550'
1 car garage
Built in 2005
Sold new $140,000
Paid $50,000 cash
HOA $130
Painted, new appliances - $3000
Rented with 1 year lease at $1100/month
Deal #2
2/2 raised ranch townhouse with 1100'
1 car garage
Built in 2005
Sold new $118,000
Paid $20,000 cash
HOA $130
Painted, new appliances, floating floor - $3000
Rented with 1 year lease at $825/month
I do my own property management
Questions
- What are your thoughts?
- I would like to try to leverage these properties to purchase additional deals....but no luck with the banks...options?
- should I form a LLC? why?
Thanks for your help
2 things I know that I will never do with an investment property:
1. Buy a home that needs flood insurance (stupid mistake I def learned from)
2. Buy an inv prop with an HOA. As Jon has said on other posts, u never truly own the property. These fees eat up cashflow and for what? People to cut their lawn a certain height.
Agree with owning with HOA dues. They can foreclose on you if you do not pay and if they need to do any improvements they will add on a renovation fee for that year. I have owned about 10 condos and I got rid of all of them because I did not like what I saw.
I think you did an outstanding job with your purchasing power. Newer deals especially the second one. I would IMMEDIATELY LEAVE the condos or townhouses alone and start doing SFH. As you can see now you can not get any money to go to the next deal. I invest in Detroit, but I use CASH to purchase my properties from my wholesale deals.
Congratulations on getting started and good deals.
Condos - are they actually in the city or the burbs?
Douglas is right on - you did really really well with your first few deals - even if they are condos :)
I have never invested in them so I don't have a lot to say.
But If you are looking in the city I can promise you that as amazing as those deals are you can get even better ones in the single family homes - the cost of purhcaing will and the cost of rehab will be higher but you will end up at the same numbers or lower then your second deal.
In terms of doing a refi - all depends on when you bought them - normally need to wait 6-12 mnoths (may even be just 12 months now?) to do a cash out refi.
So CONGRATS - you did awesome on these and best of luck on your next round!
Thanks for all of the feedback. I never thought to look at HOA fees as a negative. I looked at them as a positive that I never had to worry about grass cutting, snow removal and other outside maintenance. But that's why I'm here to learn from other investors.
Scott..my properties are in the downriver area. As far as my next purchase..I'm looking for a multi-family or SFH..
William, I hope you hang on to these properties. HOA on new property isn't a "red flag" unless the HOA is grotesquely mismanaged. HOAs sometimes get services (trash, water, sewer, cable) at a fraction of retail cost. The cash flow looks good to me. Also, I hold property in LLCs (multi-manager) so I don't co-mingle member funds.
Douglas, you said about HOA "They can foreclose on you if you do not pay..." True of mortgages, too. With all due respect, why would you choose not pay HOA fees?