All Forum Posts by: Daniel O.

Don't really have enough information to get a sense of whether this is a good deal or not. What are your goals? Timeframe? Potential to raise rent or otherwise increase revenue?  Potential for appreciation?  Will you manage it yourself?  What class of property and what sort of tenants? Who pays utilities? Landscaping? Etc.

Building in some assumptions about repair and cap ex and 10% for management, this does not look like a good deal. You will have to sink 40K+ into it and it will generate less than $1000 / year before taxes.

Hi Brett,

Welcome to BP. Troy is a tricky place to invest. A lot of the area is within the FEMA flood zones, meaning lenders will require flood insurance where it didn't used to be required, and that insurance can run you a few thousand dollars on a house that is less than 100K. I've looked at a few places in Troy and quickly learned that the first thing I need to do in screening is check the flood maps. The tools online for using them are a little clunky, but they work once you figure out how to use them. My sense is that some sellers don't understand that the cost of flood insurance makes their property much less attractive to a buyer. They look at what their neighbor just up the hill got for their house and expect something similar. Rents on these two neighboring houses will not be appreciably different, but the potential cash flow certainly will be. Eventually, I think this will sort itself out and the flood zone houses will drop in price accordingly.

The other thing about Troy is that some parts of it seem to be revitalizing, but others seems stuck in the 1970s. My advice would be to interview some agents and tell them what you are interested in, then really spend some time looking at neighborhoods. Some you may write off pretty quickly depending on your criteria, but don't settle on any without checking them out on a warm Spring evening. Some places that seem OK when the weather is cold seem less so when people start hanging out outside. There are decent multi-family units (duplexes and quads) to be had in decent areas, but you will pay more for them.  Those are the ones I would recommend. The ideal cash flow on them may not be as good as some of the lower-end properties, but those low-end places rarely turn out to be idea.  Best of luck.

Every couple of weeks, I get a direct mail attempt to buy a property I purchased from a bank a few years back at a very very good price. It has roughly tripled or quadrupled in value in the eight or so years I have held it.  These offers use terms such as "final notice", "urgent", "offer will be terminated" etc. You get the idea. If you are reading this, you have probably either sent or received these notices yourself. Some weeks I get two or three of these for the same property. I received another one this morning, and this has prompted me to offer some advice to folks using direct marketing. Here are some of the strategies I've seen marketers use to make their efforts less effective:

1: Ask me to call as soon as possible, but don't include a phone number anywhere on the mailing.

2: Don't include any sort of contact info -- company name, address, etc. -- so that I have no way to check to see whether this is a scam. 

3: Send me offers to buy for cash properties I have never had any sort of interest in, ownership or otherwise. 

I could go on, but you get the idea. Do direct marketers who don't include a way for their target audience to reach them have much success?  Might want to fine-tune something!  And can you deduct direct marketing expenses  as a business expense if you don't include your contact info?  Just wondering. My accountant was laughing too hard to give me a straight answer.

If you are going to occupy it, then you need homeowners insurance with a rental addendum. If you are not going to occupy it, then you just need rental property insurance (not renters insurance!). If you are financing it, the bank will tell you what their underwriters will require.

Hi Joe,

I don't know a thing about USREEB, so I can't speak to their reputation or what others say about them. Have you checked on BBB and other relevant sources? The primary problem here is that the things an inspector might clue you in on that matter are likely no longer visible behind the rehab. Unless your research on the company turns up something to be concerned about, I'm not sure an independent inspection is really going to be able to tell you much. Will the company stand behind the work they did?

In the greater scheme of things, this isn't costing you a thing beyond a couple of bucks for water and electricity each month. I'm not saying what she is doing is right, but if you take action like cutting the cord or removing the washer and dryer, she might just up and move on out. And that really would cost you in terms of the headache of finding another tenant and possibly even a vacancy.  I would just make it clear to her that when the washer / dryer break, you have no plans to fix or replace them.

Anyone (with the means) can buy an 8-12 unit building in the time frame you suggest. It is a great goal. But you might consider refining your goal slightly. Those types of buildings are not cheap these days, and it would be easy to buy the wrong building or pay too much. You are competing against a lot of foreign money now that is looking for a safe place to park and may be less concerned with IRR and CoC than you, as an investor, should be. Also set some parameters for your IRR and CoC goals. Really drill down on your market area so that you can be as realistic as possible when you begin trying to calculate IRR for a particular deal. And make sure you have a great team lined up to help you evaluate the property and do the due diligence needed to make sure you have a deal you really want to close on.

So, to bring the discussion back to the topic of price craziness in MFR, How do people see this playing out over time? It seems like MFR has been bid up to crazy levels, in part by folks chasing yield in a low interest environment. I'm not going to jump on the bandwagon of prognosticators saying we are in a bubble and set for a crash, but the difficulty in finding a good deal in MFR suggests now is not the time. What are the drivers that will cause a price correction? Are these deals typically financed with adjustable rate mortgages that will reset at some point to a (presumably) higher rate? If so, will the returns on other uses of money prompt some to divest themselves of their MFR? I guess what I am asking is, if I don't think now is a good time to be investing in MFR because prices are unreasonably high, what might trigger a pull-back to more attractive purchase prices? Are we better off parking money in other RE that will appreciate and cash flow so that we can pull equity out in a few years to invest in MFR when prices decline?

It depends on how badly you want the place. You signed the documents without the money in hand, so you must have wanted it badly enough to risk not getting your money. Why does the seller send the money to you and not send it via the title company?  Aren't they paid to make sure this sort of thing doesn't happen?  I've been to closings that didn't happen because the seller failed to bring the $ to the closing that they had agreed to bring. I suppose I could have said "that's OK, let's close anyway", which is essentially what you did.  But ordinarily, the title company says we can't close because both parties have not met the terms of the agreement.

That said, you are out of pocket ~$3000. And the seller probably figures it isn't going to be worth your while to chase him. Have you talked to the title company about recourse? What does your agent say?  You file in the jurisdiction where the transaction occurred, not where the seller may or may not be living.