All Forum Posts by: Ben Stout

Hello everyone,

I hope I'm posting this in the right forum. I have found a HUD home I'd like to purchase as a rental. It's a great price, great neighborhood, solid numbers (50/2) etc. Here's the problem:

The HUD disclosure states that the plumbing does not hold pressure. I have seen this on numerous HUD homes. They often don't do what I'd call "the best" inspections, if you know what I mean, but this is especially disconcerting because the home sits on a slab foundation. If I inspect and then back out, HUD wants $500. Having a diagnostic run will probably set me back an additional $300-400 to find out what the problem is (I'm guessing.) I could essentially be flushing $1000 if it turns bad.

Could be a toilet seal, could be a pipe busted under the slab. For this house they would have used PVC and it was built in '89 (Ranch style.) In my offer I've budgeted $2000 for a repair. It could be way high or way low. What would you do in this situation as an investor? Go for it, or look for the next one?

Thanks!
Ben

I have a huge stockpile of boxes of tile, fixtures, and other stuff I hope I'll use eventually. Lots of great ideas on this thread! I am noticing a lot of upscale, yet relatively cheap to do improvements like nice sinks, backsplashes, nice vanities.... great food for thought.

FHA is a nightmare. My mother recently tried to get a mortgage and they came back saying things needed to be done like.... installing tile in an unfinished attic/upstairs (this is a 1920s registered historic home). They wanted peeling paint that was very minor to be repainted, etc etc. The list was absurd. Some of the things they wanted done would either cost a fortune to do tastefully or take away the character of the house.

FHA requires very little money down so they want to be sure every toilet flushes and none of the doors stick it seems. I have a friend who is a mortgage broker that refuses to even waste time on FHA anymore because the system has become such a bureaucratic nightmare. He has had very little success getting the loans funded.

I also believe that banks are working even more closely with their appraisers. I tried to refinance a few months ago and for some shocking reason the appraisal came within $100 of the 75% LTV requirement, allowing me to pull no cash out.

Wow, that pretty much sums it up, doesn't it? I am sure there are many people on this board that are very successful with short sales, but I won't even waste time with them anymore. The last one I wanted I spent 3 months from the time I submitted an all cash bid until the time they requested the seller's financial statements.

This reminds me of one of those cases where the burglar falls through a roof and sues and wins a million bucks.

I also like this idea, but like Jon, was kind of put off by the price. I did see a few with much more reasonable pricing (and some with free shipping) on eBay. I like the retro feel and I think most people think of relaxation when they see a nice tub.

Great point on the brass doorknobs. I recently renovated an art deco style house where someone had stolen all of the glass doorknobs. Replacing them was not cheap, but when I did the math it made no sense to redo all the doors so I went to eBay. I also try to respect the house in terms of the unique features it might have and not just throw in whatever is cheap.

I once heard from someone that changing outlet faces to stainless in the kitchen can make a huge difference and they only cost a few bucks each. I've found I get the biggest bang for my buck when I buy good quality paint.

I read a post a while back where a gentleman highlighted the fact that he'd put one of those natural rainfall shower heads in a unit of his and potential tenants loved the house. Do you have a special item like this?

I recently put a really nice bathroom sink in a unit and it rented in less than a week on the market. It was expensive... originally, but I got it with the leg broken off at the depot for $90 and put it back on. I also usually get Benjamin Moore Manchester Tan paint in huge quantities from Sherwin Williams when it goes on sale for $22/gallon. People seem to really like it. I try to attract a higher quality tenant and usually I hear "This house is so much nicer than the other crap we looked at."

What's your secret weapon?

Kyle,
The point you bring up is a good one. Slumlords are most often the targets for lawsuits in my experience. If you do not provide what a "reasonable person" would consider a safe environment conducive to living.... what do you really expect? If a pipe was leaking in my house, I'd fix it. Likewise, you should treat your tenants as you'd wish to be treated.

A few years after I bought my very first rental we had a big storm and the sump overflowed. The tenant had a screaming fit about it and I spent a lot of money fixing it as quickly as possible. Of course she used the situation to her full advantage and skipped paying rent, yet I felt at the time I couldn't evict her due to the state of the house and I was paranoid about a lawsuit. There was many thousands of dollars in damage.

So, eventually she left, with a huge unpaid rent. Before leaving she said if I forgave the rent she wouldn't sue me for the mold damage that had caused her child to suffer asthma. I said I would split the balance with her. She ended up trashing the place and ghosting in December after the first major snow while I was waiting for half. I won a nice $5200 judgment that will hang on my wall for the next 20 years.

Funnily enough, after she moved out, the property manager said "Hey, they installed a work bench in the garage with a light overhead. I was wondering how they rigged it up, then I realized that they had disconnected the sump and wired it in there."