All Forum Posts by: Carl Millsap

@Ethan Field there is a lot of red flags on this:

1. A deed / title to a house isn't like a car title. If he has a mortgage on that house it's recorded somewhere and is easily retrievable.

2. I can't imagine a bank losing sight of this situation. 2007-2009 sure, there were so many homes in foreclosure it took them a long time to process them, foreclose etc. 

3. Did he buy the home before his bankruptcy? I'm not a bankruptcy expert but if he filed bankruptcy depending on the type he would have to set-up a payment plan to repay his debts. If he qualified for the bankruptcy that allows you to wipe out all your debt then I imagine the house would've been part of that process and he would've been forced to move.

4. Do your due diligence. Business is business, this situation sounds like a scam waiting to happen. 

  a. Consult with a bankruptcy attorney

  b. Call the County Clerk or whoever deeds / titles are filed with to see if you can find the deed / title history. Mortgages are usually recorded with the county the property is located in.

  c. Ask the seller to call the bank with you on the phone to inquire about a short sale. The bank has to agree in writing to a short sell. The seller can't short sell without the banks permission to accept whatever # you agree to.       

My recommendation.....walk away. There are too many legit deals out there. If it sounds too good to be true....it probably is. 

@Baha Acuner I would google the Run Tru to see what the reviews / experience is from homeowners / other investors. If Run Tru is a "less expensive" version of the Trane then I'd buy it. Save the $800 difference. 

@Matthew Curley here is a few things you can do:

1. Find comps to the property you want to purchase so you know what the market is. Know your numbers. What can you get financing for? You make money when you buy, so don't overpay.

2. Talk to the owner. Ask questions about the maintenance history. Specifically, when was the roof replaced, when was the HVAC (inside / outside) installed, when was the water heater installed? Are there any leaks, ongoing issues? Let them do 95% of the talking.

3. Walk the property, look for leaks, potential maintenance and foundation issues. Note: If you're just starting out I recommend you pay for an inspection. Money well spent if it prevents you from buying a house with structural issues.

4. Once you have an ideal of the house condition, ask the owner, what he / she would like to get out of the property?

Now here is the key....don't say anything until they give you a number. Even if they say "I don't know, what do you think?" Long story short....they may want less than what you thought you'd have to pay.

If they don't / won't give a number then throw out a # slightly less than market. So if market is $100, I'd offer $80. If they say well I was thinking $95, you can say if you listed the property with a realtor at $95 by the time you pay commission / closing cost you would be at $87. Then add in the cost to repair x, we will be at $80.

Have a reason for why / how you arrived at your number. Another negotiating tactic is to offer a specific number. Instead of offering $80,000 offer $80,298. It's a concrete specific #, round numbers encourage negotiation.

Hope that helps.

@Clark Coffey we do the following:

1. If a prospective tenant request a showing they have to call / text 30-45 minutes prior to confirm the appt. If they don't confirm we don't show it. 

2. If they ask for qualification criteria we ask for their email. We send them the link for the application/ background and credit check. The welcome message list our qualifications and clearly states they should only apply if they meet the list criteria. It also states we won't process an incomplete application. If they don't submit everything requested we won't process the application.

3. We only show during business hours. This sets the expectation that we aren't available anytime. 

@Annie Zambito Here are a couple things that stuck out to me:

1. Is there an HOA? If so what are the actual dues? $20 a month seems low for an HOA. If it is $20 then factor in a couple grand for an assessment when they need to fix something, unless they are collecting for grass cutting in common areas.

2. Did you get an actual insurance quote? $25 a month is $300 a year...seems low. 

3. The vacancy rate amount is low. At $988 a month for mortgage a 10% vacancy is $1185.60. If you have a tenant that doesn't pay rent you are 100% vacant that month and any month they don't pay. If you only put $115 back a month it'd take 8.5 months to cover 1 month of mortgage. 

My recommendation is to call around and get actual quotes so your numbers reflect accordingly. Hope that helps.

@Matthew Curley you can purchase the property w/o a realtor. Here is what I've done:

1. Type up a contract. I modified the language from the REALTOR association contract for our state. Ensure you put some money down as a good faith deposit - $100- $200 should do it. 

2. Find a title company / lawyer to close the deal. Hire the title company or whoever does title searches in your state to research the deal and ensure all taxes / liens etc. are released. 

3. Get your insurance binder. 

I can't think anything else that was needed. 

@Lina Bibikov I think it depends on the investor's criteria / experience.

The good: It's low maintenance because it's new construction. 

The not so good: The numbers don't pencil out (for us). 15% down w/ a 25 year AM is a $668 payment before taxes and insurance. With $1k rent that leaves let say $150-$200 profit once taxes and insurance escrows are added to the payment.

The potential: 

a. Sell it as a rent to own deal. Renter puts $4-$10 down, and is responsible for the maintenance / upkeep with a contract to buy in 3-5 years.  Of course consult a lawyer / local laws...rent to own has regulations after the housing crash of 2008 as I understand it. 

b. Sell it as a turnkey rental.

c. Sell it to a first time homebuyer. Sounds like you put thought into the quality of the build...granite and tankless water heater etc. aren't common upgrades in a rental.

@Jeff Power there are a couple things.

1. Refinance based on the new value. If you paid $100, and your current balance is $80, but it's actually worth $160 then 80% of $160 is $128 which means you can pull $48k out of it.

2. Get a home equity line of credit.

Just because one bank says no doesn't mean all of the banks will say no. Find a portfolio lender, develop a good relationship and you'll find it easier to get $ for purchases. 

@Daphne Gurel additional coverage is a small price to pay to protect your assets. A $1m - $2m umbrella liability policy will probably cost less than $500 per year.

I'm not one to spend someone else's money but the fact you're thinking / considering it would be enough to make me take action. 

Worst case scenario you need it and don't have it where does that leave you? Best case scenario you have it but never need it, you can still write the expense off on your taxes.  

@Scarlett Tao when you walk up to the unit does it appeal to you? Would you want to pull up to / walk up to it everyday?

Sure, when you get past the exterior you're in an updated / modern nice clean unit, but curb appeal and value differ from tenant to tenant.

If its maintained, and clear of trash etc. then leave it alone. 

If it's an A class neighborhood (multifamily criteria) then flowers etc. matter.

A downtown location implies to me (A city guy) brick buildings 5 floors or more. Curb appeal to me doesn't matter in that setting. 

Will investing in the curb appeal get you more rent? If the answer is yes and you can do it for a reasonable price (subjective), then I'd do it....but if your rent is already at the top of the market and you don't have a vacancy issue I'd leave it alone.