All Forum Posts by: Marcus Auerbach

I don't know what to tell you. You have very good imagination?

If you need a DW depends on your property type and target audience. Tenants certainly expect one if you are renting nicer single family homes to families with kids. Very different if you rent affordable studio apartments.

Appliances are always a pain in the neck, but dishwashers don't stand out. We never had one cause water damage, as there is never more water in it than can fit in the tub. A leak in the plumbing is just as likely with your sink.

Forclosures are at a historic low. Reporting an increase on a very small number is like saying cash flow on a break-even property has increased by 50%.. congratulations, now you are making $15 instead of 10.

93,000 filings are not much when you know that the size of the US housing market is about 5 million and we have a chronic housing shortage of 3 to 6 million units (depending which banks estimate you trust more), so 93,000 units is basically a drop of water on a hot rock.

TX and FL are outliers right now, they have some of the highest inventory of the US and price appreciation is softening, so it may look a little different locally.

Emotions and money don't mix well, ask any stock broker. Better ask your agent to prepare a CMA so you know where fair market value is then having feelings about it.

You are likely putting too much weight on the inspection and I don't say that because I want you to buy the house, but because I have seen too many first-timers self-sabotage over peanuts.

The real question is, in 10 years from now, will you be happy you bought this property given the location, size and style? Odds are you won't even remember the inspection details.

Ideally, your agent can walk you through the report, because he has seen the property. The issues sound familiar, we have a lot of 100 year old homes in Milwaukee (and I have been rehabbing many of them for over 15 years).

Basement:
Very typical for a house of that vintage. 90% of all dampness in basement walls comes from poor surface water management. Overflowing clogged gutters, downspouts, negative grading. People don't understand the purpose and importance of a gutter system, just drive around and look. Most old basements look like this (BTW you are looking at the basement wall, you can't see the foundation, that is what the basement wall is sitting on top of.) The house was built before sump pumps where a thing, but it certainly does not hurt to have one. A quality sump pump is $250, a check valve $10, sump pump cover $30... The municipality does not want you dumping rain water into their sewer system, so you really should discharge into the yard (far enough from the house). And get a dehumidifier.

Plumbing
Par for the course, it's an old house. The lines have been unsecured since forever... that is really not an issue. Budget for a day of labor and $500 in materials. I assume it's galvanized pipeing. We typically replace it all with pex and be done with it for the next 50 years. Cast iron pipes can fail, sometimes they crack like a saussage you cooked too hot or a slow leak due to corrosion, either way, replace a section with PVC as needed. Pretty standard for an old house.

HVAC:
If that is the biggest issue, congrats! Would not hurt to replace the condensate line, they tend to fill with algae. Budget $10 for materials ;-)

Plaster:
Sounds about right with the old roof. Congrats on the newer roof, that is money in the bank.

Garage roof:
In my area I'd budget about $3,000 for a new garage roof. If the garage does not have proper gutters, not a bad idea to install.

If this is all there is on a 90 year old house you found a really good one! Regardless I would try to negotiate and hit them up for a closing cost credit. I would not trust a seller with repairs, better you take the time and have it done the right way after closing without a rush-job premium.

I typically send the inspection report to the seller and tell the other agent that my buyer is VERY concerned. Then wait for 2 days before sending a list of 5 or 6 bullet points of issues with estimated repair cost (maybe a little on the high side) and ask for a closing cost credit (check with your lender how much max you can receive, you are probably limited to actuals). If they don't go for it, ask for half. If they call your bluff, don't take it personally and close the deal. This is pretty minimal for a 90 year old house!

A pattern we see is that the increased confidence leads to buying a tier higher. They understand now better that turning bigger wheels is financially beneficial. Higher rents, more equity etc - same work. 

And condition matters. Once you have paid for windows on a duplex, or a roof, or plumbing etc you realize that it makes sense to pay a little more for a property where these big ticket items have already been done. 

We had a nice listing on the lower east side on Maryland this weekend, large 3/3 duplex in great condition. The best offer ended up being from an investor, but would have been perfect for a house hack.

A friend of mine runs a small machinery business. Their machines come from China. He invested his life savings 10 years ago and worked his butt off for the last decade to build it to the point where it started breaking even and finally making some money 3 years ago. 

He now employs 19 people to provide technical support, spare parts etc. They have 5 containers on the water and don't know how to pay for the tariffs. He did not tell me the exact numbers, but it sounds like the tariff bill will take the cash out of the biz he needed to make payroll. Anyone who employs people knows that is your worst nightmare. Basically, if nothing changes he will have to let everyone go. Machinery does not have the same margins as plastic trinkets or Nike shoes. The worst part is that Europe has now been exempt; this is where some of his competitors manufacture, so he won't be able to raise prices.

I just looked it up: there are 221,000 registered importers in the US. Most of them are small businesses. Apple had enough swing with Trump to get an exception for their phones, but the little guys are all screwed. And they employ a lot of people, some of them may be my tenants..

Every gas leak I ever had to deal with was a loose fitting. 

The process involves the following steps:

1.) Identify the leaking fitting and then turn off gas

2.) unscrew the fitting, clean it, apply pite thread sealant, tighten

3.) turn on gas

4.) write invoice for $4,800 - (this step is optional ;-)

You can google historic home prices (for example case schiller index) if you want to know. The reason home prices go up, because the value of the dollar goes down with inflation. You could have bought a brand new house in 1960 for $15,000. Back then they financed that over 30 years.

Most first time home buyers are stuck in that holding pattern. The irony is, if the housing market would go soft, they would be to scared to buy, because "prices are falling"

But there is that thing called supply and demand and the US has a chronic housing shortage, especially in the Midwest, and it will probably take a decade to catch up. The issue is so big, that it became a topic in the last presidential election 

The fact that you are worried about how much you will owe tells me you need to learn a bit about taxes. This is the part of REI that nobody wants to talk about: as an investor, you need a working understanding about how the tax system works.

You don't need to become an expert in all the details, just like you don't need to be a contractor. But it is very helpful to know what a handyman can do vs a plumber and what it takes to replace some pipes. But you don't need to become a plumber!

Understaning the main tax principles will allow you to ballpark your tax liability. And it allows you to chart a course for yourself that also considers taxes.

Pros work work with 3 different services:

1.) an accounting service to manage and record income and expenses monthly

2.) a CPA to prepare your taxes based on your accounting records

3.) a tax planner to help you project your tax liabilities for the future

A CPA can only report what already happened to the IRS, you can't change the past. A tax planner can help you design your future taxes. Until you hire a tax planner, you need to learn to be your own

Here are two books you should read from the BP book store