All Forum Posts by: Michael Ablan

@Charlsi Kelley -   I don't see how you can get away w/ leaving rotted subfloor unless it's not actually rotting

A lot of times you can just sister floor joists instead of replacing.

Unfortunately none of these repairs will significantly affect your ARV unless there's a very obvious and significant issue

@Mark Berge - My HVAC contractors don't like using Home depot systems because they don't stock the parts needed to fix it if something happens.   We use a place like R.E Michels instead

@Justin Hroch  - Your time would be better spent consulting with an attorney on this one

@Randy Dulac  -   Responding in order

1 Windows look original, should I assume that I need to replace all of them due to the risk of lead paint?

Lead paint wouldn't be my concern (just have them sign a disclosure).   The single pane window is why we replace them.  There's a crazy amount of heat loss on these older windows.

2 Should I assume the home needs all new plumbing and none of the original plumbing is salvageable?  

 Why?   If it's old lead water lines, then yes, I'd replace to pex.   

If it's cast iron drains then I'd check for leaks.  If it's in great condition then just scope it to make sure there's no tree roots underground and just leave it.

3 The electric panels are fuse boxes, and I don't see much wiring that looks new even though there appears to be some grounded outlets upstairs. Should I assume all wiring needs to be replaced?

Definitely replace the fuse boxes.   I don't think I'd replace all the wiring though.   I'd just ground out all the circuits with arc faults or GFCI's at the start of the circuit

4 Since I have to get into the walls to do plumbing, electrical, heating, should I assume that the house has to be gutted to studs?

You'd be forced to bring the house up to new construction code if you did this.  This could completely blow this deal out of the water.  Tread carefully.  

@Mike Young  - I'd ask your property manager if they have any "New tenant check-in procedures" in place.   Basically, they should be doing the following with every new tenant who comes into your building

1.) Show them where the fire exits and fire extinguisher is

2.) Show them where the water shutoffs are in case of a water break

3.) Turn on all appliances and show them how to use the basic functions

4.) Show them how to turn off the gas in the event of an issue

5.) Give them a list of #'s to call in case of emergency (fire dept, police dept, gas shutoff dept).   These people are professionals and are trained to handle all emergency situations.   

6.) Show them how to reset a GFCI

7.) Show them where the circuit panel is and how to check if there's a tripped breaker (and how to reset it)

8.)  Show them where the furnace kill switch is (and to never touch it)

9.) Explain to them how freezers work, and explain that overloading them will create ice damming, which plugs the drain line and causes a bunch of different fridge issues

10.) Explain the lockout procedure

There's more, but that should get you going.  Basically assume they know nothing about how a house works.  Give them a 101 so that they can hopefully be self reliant enough to take care of the easy issues themselves

@John Brito -  I think the question is,....Can you spend that time performing a higher level task?    At the end of the day you'll be better off spending time finding a professional who you can rely on ANYTIME you need a floor done.   That will free you up so you can focus on finding more deals

@Nick Anderson -  Some areas will be affected worse than others

Rising interest rates directly impact mortgage payment affordability (thus pre-approval amounts).  

This could cause the balance of homes for sale vs buyers in the market to shift.  How it shifts the scales will depend on your market.

The scale being tipped too far in either direction causes prices to rise and fall.   Too drastic of a tip causes the scale to swing wildly in one direction or the other.

In our current environment, the scale is tipped strongly in favor of sellers. These interest rates allow anyone to buy a house if they have a stable job, credit score, and DTI. This is flooding the market with more buyers than quality inventory, which is causing housing prices to soar....supply and demand.

When they raise interest rates, some buyers will no longer be able to afford houses at their current market value **in some markets**.  This could cause a drastic decrease in buyers, which will allow the scale to tip back in the favor of qualified buyers (through increase quality inventory).

If ENOUGH buyers lose their buying power, then prices will eventually start falling as inventory sits stale on the market.

Now it gets dangerous based on the market you're in...

A smaller (non vacation destination) market with fewer high paying jobs will get crushed by a 2-3% interest rate increase.

Mostly all people need to move or sell at some point.  The market will have shifted from the 2.5% interest rate environment they purchase in and people will be under water if prices start dropping.  Especially if they purchased with low money down loans at the height of the market.  Their only options will be foreclosure or short sale....unless there's a way for an investor to make the numbers work.... 

In most markets, STR is the only saving grace. The numbers just don't work when your mortgage is $250k+ and your rent is only $1500.

At the end of the day,.... cash flow + a strong stash of reserves is king.   You'll only survive for as long as you can weather the storm.

@Nathan Gesner - My favorite!  

I try to bribe them out.   If that doesn't work, then I use the courts.    

Buy them a nice 2 month vacation in exchange for the keys.  

@Paulina Espinoza - I'd say its not a bad idea. Especially if it's an open ended HELOC that you can use as your checking account. You only pay interest on money spent in that loan type

@Ty Martell - I had them escrowed (added into the mortgage) any chance I could.   It made it easier to budget for.  I used to have a problem with buying too many deals.   I'd tap into my insurance/tax money funds if I found a deal that was too good to pass up.