All Forum Posts by: David Hale

The initial appraisal usually comes in right around purchase price. Usually after a year you can get it reappraised at closer to its actual value. I would not recommend simply writing off the previous owner as not marketing properly, the property might be difficult to rent (tons of things that factor into this: location, oversaturation, demographics, psychographics, etc). This is what I was referencing previously. As soon as I saw that it was vacant I wonder immediately, why is it vacant? They should have at least one, preferably both sides rented out unless you were wanting to live in one side. Maybe they bought it vacant and it's a flip? If so, how good a job did they do on the "renovations"? If it's not a flip, would they be selling if it was providing a good ROI? I don't know, these are things I would personally need answered before buying. Going back to rentability, see if your agent has knowledge of rent's in the area, or talk to an agent that does property management in the area and ask them what they think. Remember, if you can't rent it, or if you can't get the amount of rent you're using when you crunch the numbers (most tend to overestimate what they can get in rent starting out, I know I did) then it may not be worth it.

@Devin Bettorf

@Tim Vallee @Devin Bettorf

Thank you! I gave both a call.

Has the seller explained why it's vacant? That would be my first concern. Might be difficult to get rented, or some underlying issues with the property. Make sure you're having your agent recommend an inspector, rather than going with whomever the seller may try to recommend. Additionally I would recommend being there for the inspection to make sure they're thorough and can explain things to you. $42k seems low but perhaps that's normal market value where the property is located. I would take advantage of the inspection to ask for additional amounts off for serious issues if applicable, so for example not for a chip in a window, a scratch on some drywall, or a stain in the carpet, but if the roof needs to be patched or replaced, the HVAC is dated or needs to be replaced, water damage, termites, pests, radon, structural, mold, foundation, anything serious that might pop up as a result of an inspection. Additionally if the appraisal comes in low you can request the purchase price be reduced to match the appraised price. Keep in mind that if it is your primary residence you get a better rate when financing. You may have a hard time finding financing or take a hit to your rate from having a low loan amount. Remember, never be afraid to walk away if it ceases to be a good deal. There will be other properties.

I made a purchase on a SFH in St. Charles, MO at the beginning of Dec and was hoping for a few roofer recommendations.

My anecdotal input: you may have trouble securing financing on modular homes, additionally people I know that have gotten modular homes have said they require lots of maintenance/experienced many issues. If you can pay cash or get financing, secure land in a good area, do your research, and can make the numbers work then let us know how it goes! More info

Personally I would opt out of home warranties and just factor costs into your RRA/CapEx.

Run the numbers and see if it still meets your financial requirements. If you're not getting the return you want at anything less than $10k off, for example, counter with that as your final offer. If the numbers only made sense at $13k off then walk away. Also do not be fooled into thinking the $20k is the only repairs it will need. I would add at least $10-15K on top of that $20k estimate for other things that might pop up, just to be safe. But everyone has their own way of analyzing properties and what kind of return they are willing to accept. Don't be afraid to walk away, there will be other properties. Good luck!

On a SFH I would recommend conventional. Once you get to the cap of 10 conventional loans you can move to portfolio or other options.

@Bryan Grissum

Would like to preface this by saying I'm an amateur myself (bought my first triplex in Aug '15 and a single family home recently), but since you didn't get a whole lot of responses I figured I would weigh in. Anyone please feel free to correct me.

Could be numerous reasons as to why they've been on the market that long, could be that the owner is trying to sell them at or above market value, could be some issues with the properties, could be not much interest for properties of that type in the area, could be the area is over-saturated with housing and they're hard to get rented, any number of things.

To answer your question obviously you're going to want to look inside before you even put an offer, the general rule is the landlord gives 24 hour notice to tenants. I would not buy something I could not inspect before making an offer.

Also make sure to get copies of the leases before you even make an offer (they can black out SSN's or whatever if they need to), learned that the hard way.

It helps to have a realtor that actually works with investors. I know its tempting to go with your cousin or your friend, but don't settle for someone that isn't an expert. Ask them how many multi-family deals they've done lately, if they own any themselves, etc. A realtor that does a lot of homes may try to push you to buy the first or second place you look at, not know what you're looking for as an investor, etc.

Once you've had a chance to look at the places, and have all the paperwork in front of you run the numbers. I would personally not buy something I couldn't get at least 10% below market value on (not including immediate repairs it will need), that has a COC (cash on cash) return of 20% (for a fourplex). Make sure you're accounting for all expenses when you calculate COC return: debt services, taxes, ins, management, maintenance (overestimate this one to be safe), and more.

Also you need to consider how much in repairs you're going to need to do as soon as you purchase the property. Do not assume this number is zero, I would assume $10k on a place like those and adjust based off of the inspection. Do they need a new roof now or in the near future? AC? Furnace? Water heater? Pest problems? Mold? Foundation? Houses built before '78 may have lead paint, and may have asbestos. This is where a good home inspector will come into play. They should be going up on the roof, in every crawl space, radon and termite, the works.

I looked at a lot of places before buying my first property. Don't settle on the first one you look at unless it truly meets all your requirements.

Hope this was useful (and accurate).