All Forum Posts by: Scott Sewell

Hi Jason,

I'm thinking about your question like this:

Let's say the house was in great condition (fully updated, hardened for rental, etc.,etc.) either for rent or sale, would your mom want to rent it or sell it? The answer to this question may determine how to proceed.

Otherwise, this sounds like a numbers game to me. How much would it sell for (ARV) versus how much net income it would generate over a specific period of time. In other words if it would sell for 200K (net after all expenses) or produce (net) rental income of 1000 a month, the rental income would only come out ahead after 200 months (16.67 yrs.).

As to a small loan ($30,000?) on a cash flowing rental, (with that much equity it should cash flow) I would think a banker would look at that as a positive. And that is the approach I would seek if that were the decision, a small mortgage not a heloc.

I have thoughts on your other questions as well but to my mind this one needs to be answered first.

Just my opinion.

Hi Barrington,

My wife and I are just small MF investors, but I'll bite. She's also from Newport News and we are interested in investing there in the future. Hence the interest in your post.

First, I have a couple of questions. The expenses for this property seem VERY light at 30.2%, (doesn't meet the 50% rule) are these from a disclosure? This property will absolutely need property management, is that in the 30%? Is the scheduled gross after vacancy? What are your exit strategies?

Assuming a full price offer, the scheduled gross is after vacancy, following the 50% rule for expenses, and a 30yr amortization @ 7.5% (as high as my little calculator goes) I'm showing about a 1.3% ROI on almost a 5 million dollar down payment (35%).

Doesn't look like much of a deal with the information given. Just my opinion. Hope you and yours are staying warm. Good luck, and Good investing to you!

Hi Jason,

An alternative (real life) scenario for you on the purpose of cash-out refi. I'll keep it in layman's terms, 'cause that works better for me.

5 years ago, my wife and I purchased an 8-plex nobody else wanted. We did a lot of rehab, improved the tenant base, got the rents up to market, and generally improved the value. In fact we doubled it. We just recently refied it at 80%LTV (whoops) and got all of our cash back (and paid ourselves for all the work) except $20,000. We took a 25% hit on our cash flow, but it's still positive to the tune of $16,000 per year. Now we have larger debt for sure. But, we also have a large chunk of cash to re-invest, we still own/control the property, and are getting an 80% ROI (there I go again).

So far, I like cash out refi.

Hey Jimmie,

Welcome to BP. Good to see you at REI AK. Hope to see you again.

Scott

Hi Heather,

We've done a few rehabs, and I've worked construction and for/with Architects for the last 30 years. All of the advise you got above is good, especially Jons.

Be careful with the 1978 timeline because both asbestos and lead based paint were phased out at that time, distributors were allowed to sell off existing inventory after that date. And knowing (at least in theory) the "best practices" for dealing with environmental issues can be invaluable.

I personally feel that as investors - the more we know about building, environmental, and land use codes - the more opportunities we have to see (and make) good deals that others miss. And the harder it is for unscrupulous contractors to take advantage of us. Not to say we should be experts, or try to be (when in doubt ALWAYS hire an expert) but, as in all other things - knowledge is power.

As mentioned above, we need to be familiar with local building and environmental codes, and IMO most of all - land use codes (zoning). Knowing how many units, how much parking is required, etc., etc., and what the government plans for a specific piece of property can be VERY lucrative. It can also save you from making MAJOR mistakes.

woops, spelled your name wrong Nate. sorry 'bout that.

Welcome to BP Nat and Sharon!

My wife Velma and I will be at the REI Alaska meeting Thursday (evening @ 6), hope to see you there. Looks like we might have similar interests/backgrounds.

Hi Jimmy,

Welcome to BP. This is an amazing resource for starting out. We've been members for a year now and learned as much here in that time as we did managing our rentals for the five years previous to that. Hope to see you around!

Scott

Hi Gary,

Aside from all the advise you've gotten so far, (all good IMO) have you ever watched any of Armando's old shows? They are very educational in exactly how NOT to treat people and/or this business. If you have seen them, and think this is someone you want to emulate, or learn from - please go. And take your credit cards, ALL OF THEM.

Not really, I wouldn't wish that on anyone.

Seriously, in my opinion people like Armando are the reason RE investors, flippers, and even contractors have to deal with a lot of negative stereotypes.

BTW - I like Aaron's advise.

Hi April,

We've operated a laundry in our 8 plex (1 BR units, so just singles & couples doing laundry) for 6 years now. I think Roy nailed it on the pricing for Anchorage. However, I would caution that as was mentioned earlier, if the price gets to high people will just go to the big laundries instead. We actually found (after 2 yrs) that we made more by lowering our prices. And I highly recommend self closing hinges and a keypad lock on the door. Schlage makes a couple very good locks that can store multiple opening codes and are easily re-programed, kinda spendy but well worth it.

Congrats on the 4plex!