All Forum Posts by: Adam Gollatz

If I were your clients I’d probably just stay past the move out deadline. What’s the worst that happens? Landlord tries to evict? I bet he’ll be much more willing to listen when looking at those fees. Besides the eviction process can go to mediation and they’ll likely end up getting that extra time

bottom line is this isn’t a landlord problem, it’s a money problem. Rent to own transition is never smooth and lease end dates never line up with closing dates. Buyers should budget for that. If you had them go back to renting, they would likely have this problem in the future.

@Ray A Delfi - I obviously only know what you have told me so I have to make some assumptions. Im not sure how you are going to get the value up to 400k+ with the A frame being 711sf - thats over 500$/sf. Im assuming 400k+ arv's are similar sized lots with much larger homes, so you either tear it down or do a major addition. As soon as you start tearing it down to rebuild to its highest and best use, you are looking at ~200/sf construction costs (maybe more depending on how rural it is). So if you add 1000sf thats 200K to the end buyer. Add in the 154k mortgage, 8k for the seller, and the 20-30k wholesale fee you want to make, thats 192k+200k =392k. Factor in holding costs for the end buyer, closing costs, and selling costs and its easily into the mid 400's. 

So when you say 400k+ I hope you are talking 500k+ for a ~1700sf home. I dont know the market and Im not going to investigate it to debate on an internet forum, but I would hone my numbers more or modify my expectations of what you would hope to achieve from this deal.

Hi Charlene,

Welcome to the Milwaukee market. If you are purchasing with leverage 20-25% down, you should have no issue generating high cash on cash returns like that. I myself am an investor and a licensed agent here in the area, Id be happy to have a conversation about the market, trends, and see if you would like to work together. I self manage my rentals, so I dont have much first hand experience with PM's but through local REI meetups and talking with others I can definitely recommend some and tell you a few you might want to avoid. Matt from welcome home milwaukee and Dennis from nimius will both reply to this and I have heard good things from both of them. As for lending, there are so many to choose from 1st bank financial, peoples bank, tri city, and landmark credit union.

Good luck and let me know if I can help.

Dont purchase a house because you think its slightly below market. 1 - chances are its not undervalued or it would already have an offer. 2 - 40k sounds like a lot of money, but when you factor in the costs to acquire it, hold it, and sell it, you will see a good chunk of that equity gone. Not all flips work as rentals and not all rentals work as flips. 

If you are paying 120k I would hope that it would rent for between 1200-1400 which should give you some cash flow. You rent it for 2-3 years, market is hopefully appreciating 2-3% a year, and then you put in your 5-7k (or more) and sell it for 175k. Check market rents with rentometer or zillow/craigslist and comps. You can message me if you want to discuss more.

Best way to buy would be a conventional 20-25% down non owner occupied mortgage unless your dad wants to turn his current residence into a rental to move into it, you are looking at relocating into it, or you want to commit mortgage fraud. Stay away from hard money and any short term high interest loan products. You will absolutely lose money on the deal.

154k mortgage +8k to seller +5-10k cosmetic rehab +5k holding/closing + 15k (8%) in selling/closing costs = 187k. You say it will sell for 189-199k? You could likely wholesale it, but I think 20-30k is a pip dream. Id say 5-10k depending on your buyers list. Someone might want it as an airbnb or rental if those numbers work.

Hi @Nick Holty - thanks for the offer. I dont think Im ready to spread my resources any thinner and tackle this myself. I was looking for developers or someone to partner with that had experience in this market developing. Rehabbing an existing structure is one thing. Dealing with a blank slate and zoning, excavating, architects, etc is a whole different ball game. Thankfully a few people reached out.

Hi Eric,

To answer your second question, it is very easy to rent out single families. They appeal to people because you’re not sharing yards or common areas or dealing with common walls and noise. With that being said, it can be harder to rent and turn a profit. You only have 1 tenant covering all your expenses (maintenance, cap ex, etc)

Your first question I’m not exactly sure what your asking. i generally look at rent as a function of the purchase price to initially weed things out. I’m sure you’ve heard of the 2% rule.  Nicer areas like bayview I try to hit 1.25 rent to purchase or so. That gives some stable cash flow but those areas are generally appreciation investments unless you bought at a really good price long ago or are doing heavy rehab. In other areas I try to hit 2 all the way up to 4+%. And how high or low in that range is determined by area and purchase price. Rougher areas and lower purchase prices I need a higher percentage to make the numbers work. I like total rent to be over 1000.

Was that what you were looking for? Feel free to reach out directly if you got any specifics you want to discuss.

@Bruce Runn congratulations! I assume you built it for your own portfolio, now that you are finished, do you still plan on keeping it or selling it? Would you mind sharing some info about what area and what your land costs were? Message me if you want to keep it private.

Hi @Brooks Johnson. Thanks for the reply. Ive seen a lot of new construction being done in the northern and eastern areas in Washington and Chisago counties. Unfortunately a lot of these look like old hobby farms or homesteads that are being converted to whole new subdivisions with 40+ homes and I dont have any deals that would have that sort of economy of scale. Most of the lots Ive come across are in anoka, hennepin, and ramsey counties, so they are 3-4 lots if subdivided for max use or 1-2 homes if you wanted higher end homes with more privacy. Id basically have to either buy it outright or option the entire thing. I usually stay out of the high end/luxury markets all together so my goal would be to subdivide as much as possible and build for the mid range market like you said.

Im curious how you would try to value this land? Ive been looking at ARV, and backing out build costs, profit, etc, or is land selling easily enough that you can do a more simple calculation based on lot size or recent sales?

Hi Everyone - Im newer to the Minneapolis/ St Paul market and looking at moving to the area in the next few months. I was wondering if anyone out there is developing new builds from the ground up in this market? In the other markets Ive worked in (Chicago and Milwaukee), land is either way too expensive or home prices are too low to warrant new builds. I have some leads on some prime (or at least in my opinion prime) lots in the area and Im wondering if I should move forward with the contracts. I'll be in town over the next few days if anyone would be open to meeting.