All Forum Posts by: Daniel Kramer

@Chris Mason

Thanks for the reply. Eric and I are actually working on this together. He can attest to the headache this has been 😁

Dan

I had a purchase agreement written up on a condo. Before anyone comes down on condos, let's assume I ran the numbers and am confident it is a good investment. 

Original Loan Info: Conventional Residential designated as investment property, 30-year fixed, 25% down. 

My loan officer only asked the condo association for a "limited" condo questionnaire since I was putting significant amount down. Everything was smooth sailing until the underwriters rejected it due to some issues with the appraisal. The appraiser contacted the HOA himself and included in the report that the complex had a less than 50% owner occupancy ratio and that the zoning was "legal-nonconforming." My understanding of the zoning issue is that the zoning definitions were different in 1981 when the complex was built. Since the nomenclature has changed, it couldn't be rebuilt exactly as it is zoned without a rebuild letter. These two items pretty much killed it with the underwriters and now we are stuck trying to figure out how to get this thing financed.

What other options could be out there as far as portfolio or unsecured loans? This is my first "deal," so I'm not super savvy on all the loan options out there and I also don't want to let this speed bump derail the train. 

Thanks in advance! 

Looks good! Looking at the 17k invested, did you do most/all of the work yourself while also working full time? I would guess that was the cost of just materials based on the description and pictures. If so, awesome job! 

@Andrea Tavake

I live in Toledo and I'm a wimp that won't go near 43608, 43609, 43605. Some that have decent value that many look at are 43613, 43612, 43614. But I'd say even then, the zip codes aren't perfect indicators as one block could be good and the next not so great. If you can find anything with Washington Local Schools, that's a little better than Toledo Public but has similarly low taxes, so good value. There are other good school districts all around the suburbs but also have correlating higher taxes.

Toledo seems to be popular with California investors but I don't know if it's all that special - affordable Midwest mid-size metropolitan area with some industry surrounding it. Some people have success everywhere including 43609 but it requires being able to 100% take your hands off and have superstar property management with thick skin capable of following through with evictions. All around, be very conservative with your estimates. Calculate with higher vacancy than you'd think (I'd guess 12%+). High PM fees (12%+). If that's what you're good at, go for it. I always say stick with your "why" and properties that you'll enjoy even if it means smaller margins but that's just me.

I'm new to investing, not new to Toledo. I'm just tagging along to see if you get more responses :) 

@Nina Sachdev We kept it in Toledo. Most in the world wouldn't consider living in Toledo a luxury but those wanting to get into real estate do, apparently. It didn't make sense to go outside of our hometown where a decent market already exists.

It's a condo, which made it cheaper, but it is in a decent neighborhood. It also was in major need of updating but nothing was drastically wrong with it. After being hesitant about the fact it was a condo, which is poo-pooed a lot in the real estate investor community, everything made sense on paper and it checked a lot of other boxes for us.

Dan

@Nina Sachdev I am not a veteran long-time investor, but my suggestion might be a little different than others. If you've analyzed 100 deals and are confident that 30 are winners (100+ cashflow, 10%+ cocr), I would go for a winner that is the best situation for you and one that speaks to your favorite aspect of this business. You want to make money but also have the energy and drive to continue on to #2, #3, and #4. That might mean Pittsburgh where you can check in on the place or be semi involved without making it a whole weekend road trip.

I say that because I think it is difficult to not be involved in the first one. It is tough to have a single profitable 100% hands-off property because your economies of scale aren't ramped up yet. On a single unit cash flowing 100/mo, it's hard to justify an added expense if you can do it yourself. If you do want to work from a distance, which is totally ok too, I suggest overestimating your costs such as maintenance and PM because you'll be paying someone to do it and you'll want it done well or you'll be paying the property a weekend visit to fix what someone else messed up. If you're looking at Detroit or Toledo for the cheaper opportunities, definitely overestimate PM and work to find the best ones that aren't afraid to enforce rules or start an eviction process if needed. Those D- properties do not come with A+ tenants.

Also, I wouldn't suggest this later on once you ramped up, but do one that sticks to your original "why" or gets you involved in your favorite aspect of real estate even if it's not the best (but still a winner) on paper. My wife and I are closing on our first deal and we had a choice between a cheaper unoccupied fixer upper and a more expensive solid occupied place. We went with the cheaper fixer upper because that's what we wanted to do and left some cash in the bank for mistakes. It wouldn't have been any fun for my wife if we just had to jump into being landlords without getting to pick out backsplashes and cabinet hardware. After the first one, I'd advise to be more analytical than emotional, but do what you love, leave yourself some cash cushion, and jump!

Dan

@Stephen Masek

Point place (43611) and 43613 are not bad areas, maybe C+ working class neighborhoods, especially if they're Washington Local schools. I can walk around these areas with no hesitation. There are many worse zipcodes in Toledo, my guess is you didn't have the best property management. Sorry it didn't work out.

Dan

Hey Evan,

Happy to introduce myself. I'm not a PM, contractor, or real estate agent but still wanted to say hello. I was born & raised in Toledo and also know a handful of people from Money-Row. 

Dan

@Natalie Rose I agree with you 100% that giving them respect right away will go a long way. I certainly don't want to rub them the wrong way right off the bat but also want to collect what I think is fair for me.

The rates are currently under market and the current owner knows that but that's also his fault for not raising rates before selling it. It should be sold at current valuation based on current rates, not what it should rent at. In addition, the tax bill increased over 13% from the prior year. So while I want to go in easy and with respect for the current tenants, I don't want to be losing money.

My current plan is to make an offer where I think it should be valued based on current rent rates and expenses. If I don't get it, it's not a good deal, and move on. I would then sit down to discuss current leases and areas for improvement with current tenants, give them some ample and fair warning that rates will increase X amount in several months as they need to based on X Y and Z reasons. I want to give them the clear communication and also time to adjust or mentally prepare. If they wish to move out, I can use the vacancy to renovate and fetch even higher rates where I think the potential is.