All Forum Posts by: Cassi Justiz

A great way to look at this is figuring out how many years it would take to break even on the additional closing cost funds and 5% down. If it's more than 2-3 years, I probably wouldn't mess with it.  On a loan that small, and the uncertainty of whether you plan to hold the property I don't know that I would worry about trying to refinance it. 

If you guys don't have a written agreement, then I'd tread carefully. People get a little protective of their tenants. If it's month to month then you can put in your contract that you'd like the home to be delivered vacant OR request that they do not make lease changes during escrow period. Most owners will not want you to sign a new lease until after closing since leases generally transfer with the ownership. 

If it were me, I would close on the property with the month to month lease agreement in place. Give the tenant a few months to make sure you guys are a good fit and then offer them a longer term lease with the proposed rental increase. I'd time it to where you the increased rents will hit around peak rental season. I know some areas have significant rental slow downs in the fall/winter, so you want to keep the tenant if possible until after that time. 

@Eric Carlstrom, Thank you! It's leased out and going well!
You don't want my contractor's info. ;) That contractor was a disaster and I ended up having to cut him from the job and coordinate project myself because wasn't getting things done. 

Hey @Carlos Florez, 

The market will definitely depend on your goals. I'm based in OKC and we've definitely seen our market get hotter over the last 18 months. You can still get cashflow deals, but the numbers are a little more tight than they were a few years ago when OKC was still "undiscovered." 

I generally tell people that if you are looking for nicer turn-key properties on the MLS, plan for about .8-.9% deals for your C class rentals and .6-.8% deals for B class. They will still cashflow well, but it's not 1% rule deals. We used to be able to hit 1% rule deals all day on the MLS, but the prices for those types of homes has gone up significantly over the last 18 months. 1% rule deals now are generally going to need some work. If you are willing to do your own marketing and work directly with sellers, the sky is the limit for the deals.

I think the platforms can be great, but the hard part of property management is leasing and knowing who to call for service issues.  

If you are self-managing now and comfortable with the process of taking service calls, it won't be much different when you are out of state. If you are diy'ing your service calls and going over to the properties to fix things, then you might want to consider a PM as you transition into living out of state. This will definitely help it become more passive. You can always take over management if you decide that's something you feel comfortable with in the future. My first rental was out of state and then I transitioned into buying properties local to my area. I had a PM for 3 years on my out of state property while self-managing locally. Once I got really comfortable with the process, I decided to take over the management piece for the out of state property.  

One thing to keep in mind is that you'll need about 2 years of steady income for a lender to "count" it for loan purposes. They are even more hesitant to count 1099 income as "steady" income. They will also take the annual average of your 1099 earnings. So even if you crush it this year it will still need to average out with the income from the previous tax returns. 

I would recommend trying to find a co-signer if that's an option for you. If you could get a co-signer that would help with some of the down payment, it would make things a lot cleaner. Banks generally will not allow you to borrow down payment funds. 
You can make a plan to refinance in a year or two once you are able to get your income a little higher for lending purposes.  

You might look into some of the BP Money podcasts or Choose FI. They have a lot of really useful information about finances. 

@Eric Carlstrom, 

You've already got great recommendations in this thread but I will add in a little info on one we just bought. We had a similar 1940s house with original cast iron and galvanized steel. It was still "functional" but not in great shape. The nice thing about these older houses on crawl spaces is that it's fairly easy to change out plumbing. We spent under $3500 to replace all of the cast iron and steel with pex and PVC. This included the main water supply line to the house (the sewer main had already been replaced). I always budget an extra $5k for "unknowns" when I get something under contract. I don't always spend that much, but it definitely helps your mindset when you go in with an "uh-oh" budget. It NEVER fails that something is going to come up after you close and get a contractor in there.  

Hey @Joe Mathew, 

There are a lot of people successfully executing the BRRR strategy here, but I would say almost all of them that I have come across are doing their own marketing or working directly with sellers to find off market deals. Even most of the wholesale deals we see now are sitting between 85-90% ARV once you factor in obvious repairs.

We require a tenant to be present for all maintenance calls if someone is accessing the interior of the home. There are too many things that could go wrong with someone unsupervised in an occupied home. I don't want something to get broken, theft accusation, a door left unlocked, pet got out, pet isn't secured, etc. have a he said/she said argument on who is responsible.  I think having a tenant home to "supervise" contractors just takes a lot of liability off everyone involved.

In an apartment complex, usually the maintenance crew is employed and insured by the apartment owners. With independent contractors, they are independently licensed and insured. If something were to go wrong, it would be on the contractor to file the insurance claim. If they don't feel like they were responsible, that's going to be really tricky. 

If it were a big enough issue and the tenant was not able to meet the contractor at the home, I'd offer to have someone (myself or a team member) there with the contractor.  However, I've yet to have a tenant not be able to make arrangements to be available for a service call. 

@Lara White, that sounds perfect! I'd love to get together with the follow OKC crew in NOLA. I've been following the storm updates, so hopefully as they start clean up it's not too bad!