All Forum Posts by: Brady Grubb

Good morning BP!

I have a tenant who has been in a property of mine for a little over a year now and they just proposed the idea to me to buy the home. I've always had the mindset of stacking instead of selling so I never actually thought of selling it. Below I will lay out what the property has to offer and some cons I have with it.

2 bed 1 bath cottage at a whopping 675 SQFT

Double lot in an excellent appreciating area (southern Maryland stones throw away to the Chesapeake Bay)

1 year old remodel, everything is new

Public septic, brand new well

Appraised for $335K last year at the completion of rehab. I have around $265K into the property and owe around $210K on a loan.

Rent is currently set at $2095 / month with tenant paying all utilities. Current mortgage is around $1900 a month, refinanced when rates were 7.75% 2 pts.

Pros - 

1. Fresh remodel and relatively low stress ownership 

2. Low cost to entry for my area (avg home sale is $400K+ here) 

3. Excellent renter and would probably stay for more time if I didn't sell it

4. High appreciating area

5. Double lot, option to build another house or a duplex in the future

Cons - 

1. House size, was hard finding a tenant that could accommodate the size

2. Value - due to the small house footprint I do not think this is appreciating at the rate of other homes in the area

3. Rent ceiling - I think ~$2100 will be the top of the mark for a house this size for a while

If I do decide to sell I don't have an active opportunity to throw the equity into but I will be able to find something. I would steer away from the micro houses aim for a 1000+ sqft home moving forward. It would be a relatively easy sale as the tenant knows everything about the house and is already approved. Alternatively, my goal is to keep stacking houses so this goes against the grain of my goal. What would you do?

It can be discouraging at times and sometimes you have to take it on the chin all at once. If you have owned the properties for a while, take a look at appreciation and loan pay down. Realize how far that you have come, and look at the projected next 10 years to see what you may have coming. This is usually what gets me excited again and ready to tackle the issues head first and get back on track. You cannot change tenants and unfortunately most will not treat your property like their own. At this point maybe it is time to seek a GOOD property manager or at least seek advice from one. A GOOD property manager can go a long way, and potentially save money/discouragement that you are enduring. As for going back to work, I had a very successful investor tell me that you need to have constant cash in the beginning of your REI career. Whether it be from flips, wholesaling, or even a W2 job. If the rentals aren't performing well, you'll have a steady income coming in. There will always be problems that arise with rental properties, but having a regular income to dip into if needed is important. As more properties are acquired and cash flow grows, this mindset may change. Stay focused and in 10 years you'll be glad that you kept up with it. Good luck with your endeavors.

REI definitely isn't for anyone and it can be a shock to someone who is not business oriented. There are times where I wonder if it is worth it. Following that I usually take a look at the numbers (sometimes just appreciation & loan paydown), get excited again, and am ready to buy another property. It's a fun roller coaster, stay in it - you'll be glad you did.

Thank you all very much for the replies! 

Hey BP! Going through a refi / delayed financing on a property I recently rehabbed and I am just comparing numbers as they seem a little elevated even in the current times. SFH investment property.
30 year fixed / 75% LTV / total loan 265K - great credit. Interest rate is at 6.65% which seems a little higher than current rates, but loan origination fees with points total $4,253. Loan officer is a friend and has been great in terms of creativity so if this isn't totally out of line I will continue on but just wanted to do due diligence. Also curious if origination fees are often negotiated or should I leave it alone. I am located in Maryland. Thanks

Hello BP,

Under contract on a SFH (1987) that is built atop a downward slope and it has visible foundation cracks along the rear of the foundation (see attached pictures). The major crack goes vertical top to bottom along the rear of the foundation (through a window frame). The crack can be seen from the inside as well and the concrete "beam" at the ceiling has shifted about .5". In addition to this crack there are two other visible cracks in similar orientation along the foundation near the top at other points in the home. I am going to schedule a structural engineer to assess the issues however I am curious if anyone has dealt with an issue like this or should I walk away. Luckily I did a 7 day inspection contingency so I have some time. Another question I had - I am paying cash for the home in efforts to BRRRR this property. How will these cracks affect a refinance if they are minor and are repaired with sealant only? Hoping to not run into trouble with financing because of this issue if properly fixed. The numbers make sense and I have a little bit of room to work with so if these cracks can be fixed reasonably and will not pose a future problem, I plan to continue on course. Thank you very much.

Quote from @Kimberlyn L Moultrie:

can anyone tell me if they've experienced this before.. or if this is common.. so I am getting a property under contract, great. I review and sign the agent's contract and it appeared to be signed by all other parties. I asked the agent if the property is now fully under contract so that I can prepare to submit EMD. She says no she's still waiting on the seller to accept the offer 🤔

I thought it was accepted.. his signature is on the contract (although it was backdated a month). I’ve gotten all my ducks in line and the property is still on market for anyone to continue making offers on.. is this unusual?? What do you think is going on?? It’s been 3.5 days (and counting) since I’ve signed. I think it’s suspicious but I’m also not a realtor and am new to wholesaling.

 In todays market, agents have been waiting a few days to collect any and comparing all offers as most houses are getting multiple offers within a short period of time. As far as the seller signing the contract, this is common practice and if the seller accepts your offer your agent will contact you. I would ask your realtor to reach out and see if your offer is still being considered. Be patient, those few days feel like forever!

Quote from @Trish Mccoy:

My new prop which I'm renting to pilots is $3750 per mo x 4 mo, which works out to be $125 per nt - I would prob rent this for $155 - 165 per night.

I have another 2bd 1ba which I rent to a guy who is getting a divorce fro $3100 per mo.  That rents for $155 per nit.  He's been there 6 mo now and keeps extending, which i don't mind.

Then I have a 1bd 1ba cottage next to my house which rents for $145-165 per night  i currently have this rented to a woman who sold her house and is moving to South Dakota for 43 nits at $140 per night.   After she checks out I have another woman moving in for 3 mo because a tree fell on her house and she is paying$150 per night (as her insurance is covering the tab) plus she has a dog and 2 cats.

I have rented my bigger properties mid term as well...one that rents for $599 per night I rent from $8500-10500 per mo - the other I rent for $499 per night I rent for $6500-9000.   These properties take a bigger hit on the rate when it's mid term - and my preference is NOT to do it on these properties because the longer they stay in most cases the more wear and tear.

As far as advertising goes, do you list a mid term rental on all of the STR sites or the MLS? Thanks for the info!

Ordering an inspection to get a baseline can be very helpful. It will provide you with things to look for in your next purchase as well as possibly mitigating potential problems down the road that you may have had with renters in the house. Finding and fixing problems while vacant is always the best course of action. Good luck!

Quote from @Trent Reeve:

In today's market in my area, i can find some sub-$300k houses, with mortgage payment about $1,000-1,100   (after 25% down payment) would profit around $350-500. but my down payment would be from a Heloc, so after interest on Heloc, would be a profit of $100-200.  does this sound right? does this range sound right?

With todays rates (depending how far sub 300K you are talking) the mortgage payment you are suggesting is a bit far fetched and will likely be much higher. There is a lot more to factor in this scenario as far as expenses (maintenance, cap ex, management etc.) I suggest using the BP rental tool, it is very helpful when analyzing a deal in your beginning stages.