All Forum Posts by: Dennis Cosgrave

"That said, I do intend to do a major rehab on this property in the next couple years. So, I'm more inclined to take the risk that I do end up with smoke smell, as long as I get compensated with higher rent."

If you are planning on doing a major rehab anyway, what difference does it make? Why should she pay extra security when you are going to spend money to rehab anyway? I do not understand why this is even an issue. 

If you are going to refinance, now is the time to do it since you are occupying the home. As such you will get a better rate. 

Check on Zillow.com for market rents in your area or contact a realtor. Get this information before you begin the refinance process. Make sure that after the refinance, it will at least be cash flow neutral with the rent you are going to charge. If not, adjust the refi accordingly. 

Not sure what you mean by charging rent on the new loan. 

Since you are new to this, I would strongly recommend that you do a month to month tenancy. If you did a poor job screening the tenant, it will be much easier to get rid of him or her. 

Having said all that, make sure you have somewhere to invest the equity that you are pulling out. Cash in the bank is a bad investment. 

I would check with the city to find out if and when the addition was permitted. If there is no record of any permit, invite the city inspector to look at it and see what the ruling is. I had a similar situation and the seller was forced to tear down the addition. Needless to say, the seller was very angry and filed a lawsuit against me. The judge ruled in my favor on the basis that when a seller offers his property for sale, he is inviting scrutiny and due diligence and must suffer the consequences. 

The Fed may very well try negative interest rates, but they will never trickle down to mortgage rates. There will always be a risk premium added to the rates. Mortgage rates may go as low as 2 - 2.5%. If they do go that low, lenders will tighten their loan requirements and only those with very high credit scores will qualify. 

The lesson from this experience is to voice your concerns over issues that are important to you. It seems that you have a very sensitive nose, so when shopping for your next house, make sure that you make it clear to the agent that you do not want a house with bad odors.  Every time I was in the market for a house, I provided a list of must-haves and like-to-haves, in writing, to my agent. Sometimes it took a while but she always found pretty well everything I was looking for and she never wasted my time viewing properties that did not meet the criteria. 

I once purchased a home that had been previously rented to a couple with 2 large german shepherds. The animal smell was pretty bad. I was planning to redecorate anyway, so it was not a big deal. I tore out all the carpets, bleached the floors, and repainted every wall in the house. Once completed, the smell was gone, and it never came back. Thankfully, I did not have to clean out the ducts. I can only assume that the previous tenants had not lived there that long. Btw, because of the smell, I negotiated a better deal for the house. 

"@Travis Watts that’s where I am. Analysis paralysis. I spent the entire night last night crunching numbers and even got an extension on the decision until noon today and I was STILL paralyzed. At that point without a clear plan I just balked and said no. Of course now, I am feeling regret. I keep hearing people say “when you know, you just know it’s a good deal.” Either I can’t find them or I still don’t know and feel awfully frustrated. There are so many variables and my mind always goes to the worst case scenario!"

I am struck by your phrase, "without a clear plan". It is no wonder that you are paralyzed. You first need to develop a clear investment strategy. Then you have to be patient to find a property that fits with the strategy. There is nothing wrong with planning for the worst case scenario. That is a very good thing. You should also plan for the best case scenario. Reality usually comes in somewhere in the middle. 

The hardest part is remaining objective. Do not let your emotions get the best of you. This is purely a numbers game. If the numbers don't work, move on. Eventually, you will get there. 

You have not specified the terms of the deal so hard to say if it is a good deal or not. I suggest you get a real estate attorney to draft the lease option agreement for you. There is an old saying, He who drafts has control. The lease option clause will be built into your rental agreement. Be sure it specifies all the terms of the option. For example, how much time do you have to exercise the option? What is the agreed-upon purchase price at the time you exercise your option? Are you paying additional rent which is being contributed to your down payment at the time you exercise your option, and if you do not exercise your option, will those excess rental payments be refunded? These are just a few of the factors you need to address. Remember, verbal agreements are not worth the paper they are written on. 

I suspect there is little that you can do at this point, other than finish the project and get out with the smallest loss possible. As other posters have pointed out, it is important to do thorough inspections before you close the deal. In my experience, it is usually pretty obvious if there has been work done recently and if that is the case, then you need to check with the municipality to confirm that permits were pulled for the work. If there is no history of any permits, that is a big red flag. This happened to me once, and I had an inspection clause built into the offer to purchase. I requested that the city come out and inspect the property. That opened a big can of worms and the city inspector discovered all kinds of things that were not permitted or even up to code. Needless to say, I walked away from the deal, but the seller sued me because of all the problems it created for him. He lost that case. The judge ruled that by putting up your property for sale, you invite inspection and investigation. He created his own problems. 

The good news is that this experience should teach you some valuable lessons. Be sure to do your own homework in the future and do not rely on any one person's opinion. 

You have not stated exactly what your objective is. Having said that, direct mail is old school. You can expect about a 4% response rate, which based on a mail list of 650, translates into about 26 responses. The question then becomes, how many of those 26 will convert? That depends on the objective. I think it would be more productive to formulate a digital campaign. You can rent email lists that are highly targeted. It costs nothing to email as opposed to all the printing and postage costs. Do you have a website? Do you have a Facebook page? Like them or not, digital is more powerful than snail mail. 

I agree with Marci Stein. I lived in South Florida prior to the crash and I rented a 3 bedroom 2 bath home for essentially the cost of the annual property tax bill. The owners had to pay for insurance and maintenance and repairs, not to mention the mortgage. If I had bought the house, it would have cost me at least 3 times as much. Rather than buy the house, I used my capital to buy a rental property that gave me positive cash flow as well as price appreciation.