All Forum Posts by: Andrew Johnson

David Sweeney Sounds like you're on the right track with rents to gauge potential. Maybe I'm just way too conservative. I assume the owner knows about the property than me (you know...because they own it) and if they could get $600 in rent but are taking $400 it likely has more to do with the property that incompetence or an overly developed sense of charity. I assume rent potential is maximized and maintenance is underestimated when I do my pro-formas. I'm managing my expectations so that any rent increase is a bonus to my ROI and I don't cry over a broken hot water heater.

Lex Green Don't overthink it, cruise Trulia, Zillow, Redfin (huge overlaps) for properties that appeal to you and ask listing agents for a T12. Use that to build your pro-forma and who knows, you might stumble across something that pencils out for you. A little bit of a different story if the property looks "value-add" (i.e. needs rehab) as I never trust that pictures show most/all of the issues. But before you start that at least get a general budget in mind, a plan, etc. because all of that (downpayment, loan terms, etc.) factors into cash-flow calculations.

Lucas Procopio Since we have established it's depressed (ouch...but your term) I'd want to know if it's "depressed by stable". Is the population increasing or decreasing? Are there a lot of vacant properties? Is anyone building new properties? If the town/area is depressed because jobs/people have left I wouldn't be so keen. But if it's just a town of hard working people that happen to earn $8/hour that's growing in population I'd at least start vetting some deals.

David Sweeney Side note: It looks like (according to Zillow) units have been advertised for rent at $400 back in 2013. I don't know your market but a reasonable question to ask is if rents in your market have gone up 60%+ in the past 3 years. If they haven't, I would guess your rent estimates are high. Or it's just been mismanaged :)

David Sweeney A couple of things: 1.) Always ask for a T12 to learn about occupancy, collected rents, etc. as well as real numbers for repairs. Also ask when the current tenants of the units moved in. 2.) Assume the "real numbers" or repairs will be low. Seldom will you be pleasantly surprised by repair numbers on an older property. 3.) Ask when the roof was last replaced as well as the HVAC systems. If the roof has issues the "real" purchase price isn't $127,000. 4.) The free market has spoken, more than once, and said this property isn't worth $127,000. My advice: First step is a T12. Second step is touring the property with a contractor (pay him/her for their time). A home inspection will reveal issues but a contractor can likely spot major issues immediately that could materially impact an offer price.

Timothy Metra Most of the time when I listen to anything around taxes/IRS I just use it to create a list of questions to ask the accountant that we go to. 9/10 times whatever idea is spouted doesn't apply to us or "skirts the edge" of what's permissible. Personally, I don't like to play on the edges. If I'm entitled, I take whatever deduction and can and do aim to maximize it. But making business decisions based on tax implications is far different from creating an LLC purely to enable a fictional home office for a tax deduction.

Edouard Pierre If you'll have to go out of pocket for a new boiler I'd definitely opt for the HVAC systems for each unit individually metered. If you buy-and-hold for the long term it will pay off. If you have to unexpectedly sell sooner it's going to be more attractive to an investor to have tenant paid utilities. Either way there's a potential upside (assuming you have the capital).

Steve S. If you go through the same bank you basically align the refinance with the balloon payment. Essentially you end up "resetting" at a new interest rate for the new balance.

Tim Kaminski I'm guessing it's because they've had bad experiences in the past. You're right, either way they get paid but if a couple of offers fall through (even if it's the buyers issue with financing) you have an old listing, a stale property, buyers assuming something is wrong, etc. As others have also mentioned if your offer is cash it's likely a quick close, you're not a first time buyer, it's just plain less hassle.

David West One thing that keeps popping up on local news is potentially increasing the hotel taxes to fund a new/expanded convention center downtown (think: Comic-Con). Not to mention the city might be eager to capture/recapture more revenues with the Chargers bolting (get it?) to Los Angeles. Nothing will happen overnight but I can't imagine hotel groups not going lobbying for better enforcement/regulation/etc. of vacation rentals as a way to keep their demand up and occupancy high.