All Forum Posts by: David MacClintock

I purchased a duplex in the next college town over from the college I was at. It was only a month of overlap before both graduations and as soon as the students moved out I moved in. Attended college there and worked full time. It was an intense struggle for the first 3 years. Vacancy, tenants who trashed stuff. I found it difficult to rent to people older than me but still in the college lifestyle. I mismanaged funds and had my own revolving door of friends/roommates. Around 23 or 24 I started to figure it out but through everything, I still managed to pay the house off and completely renovate it. The house now brings in enough income on its own to pay my bills while I flip full time. I didn't ever mean to be in real estate, cars were my true love I thought but simply being that far ahead of the curve with some income stability allowed me to bounce jobs and learn skills that have translated very well.    

My target flip market is B grade homes in aging blue collar suburbs. Guess who is buying these homes? The same people who did 50 years ago. Young families (married a few years) with a young first child. It is an entirely under-served class of people in the RE market right now. Developers aren't building blue collar suburbs and the older homes coming on the market are severely outdated and incompatible with modern living standards. Things like outlets spaced too far apart, overloaded circuits that trip for seemingly no reason, tv cable run along baseboards, no overhead lighting, narrow doorways and maintenance intensive exteriors. As tech has become a staple of living, not things the lower middle class can not afford, those flaws conspire to make a home virtually unlivable. These types of things are correctable but very invasive if you are living in the home and many of my generation look at these houses and can never find anything reasonably priced that is move in ready. When one couple in a friend group buys a house, you can take it to the bank the others are going to start looking for a home as well. The trend of actually buying a house is really just starting to gain traction in the 25-35 age range. I know this is more of a splurge of thoughts on the issue than an answer but I think they are overlooked aspects of a question I hear repeatedly.

I'm on a fair few wholesalers lists and only ever get the same properties I can buy off the MLS that they are spamming me. I know most of them are small fish and trying to break in but after a few of the same emails from different wholesalers all but an arbitrary one found the "spam" button. The biggest wholesaler in my market is also the biggest flipper who are doing huge business on that side. I they are big enough they don't have to pass deals on because of funding so the easy assumption is they are staying out of it for a reason. If most markets are like mine, then yes, wholesaling is dead.

Cohoes and Watervaliet are great balancing of rent to price without all the riff raff of schenectady or south troy

I just finished my first complete rehab. I have experience in the trades and have rehabbed apartments that I own but this was my first single family. I specifically chose a total gut for two reasons. 1 experience in all phases. 2. Because the home was a true gut I had far more budget leeway than a lipstick. Yes every unexpected expense ate into my profit but this was meant to be a learning experience not necessarily a get rich quick ticket. In the end I will have made a reasonably good profit but have over 1000 hours invested. From my starting prospective, money was short but time had a large supply. obviously my goals are to reverse that and scalp profit from less in depth work. Individually you need to decide if you have more money than time or time than money. that should show you the scale of the project you can take on.

Welcome to BP Darwin, I do my investing in your area. Feel free to pm me with any questions you have. What type of RE and what location are you planning to invest in?

Also remember this is property preservation work. The Agents and banks won't care what your insurance policy states as long as you have 1/2 million coverage. Your insurance company however will certainly care about what work you are doing. My previous insurance company for instance would let me carry a 1/2 landscaper policy, which let me do a huge array of things associated with this. Obviously mowing, trimming and general exterior appearances were on the list. It made no difference on the client. I could do estate cleanouts and winterizations under this policy but could not even smell the inside of an REO. Even simple things like changing locks fell under PP and put me at serious risk of violating my policy. Actual PP policies are about 3x more expensive than a basic policy and very difficult to come by. I can't see much REO work in my area this year (Limited Lis pendens notices) so I will not renew my PP insurance and defer any contacts to an associate, but if I chose to renew, this would be my fourth year with the company without any form of insurance claim ever in personal or business. My cost is still around $1700 for 1/2. The real kicker is the Errors and Omissions that PP carries. Forget to drain a baseboard HW heater on a second floor and you will regret skirting the PP policy. The Nationals will back charge you for missing a paint chip in a $25 inspection of a condemned house. They will really rip you to pieces for a larger screw up.

I am under contract for a cash purchased HUD owned home in Schenectady, NY. I am having trouble finding an attorney who does HUD closings in the area. Has anyone in the Capital District closed on a HUD and if so do you mind sharing your attorney and about how much it cost you? Or if you are a RE attorney in the area lets get connected.

Good on you getting out there and looking at places. Love all of the pictures and glad to hear you are excited. Keep up the good effort and work!

Now for my debbie downer side.....

Would you want to live in those apartments? I can understand deferred maintenance to an extent but those look well neglected. Sloppy tenants with stained rugs. Drafty windows and poor heating (supplementary electric heaters!). What does it say about the tenant base and home maintenance when every unit has stained ceiling tiles that are $15 to replace? Electrical code violations, peeling paint(violation here), broken banisters. you are looking at $3-5k rehab per unit just to have something decent, before we get into the foundation. Bulging walls with out any signs of remediation, jacks that are threating to kick out. Unless you have a real working knowledge as a contractor you are setting yourself up for a world of headache. You will be VERY unlikely to find any traditional financing for this house and HML isn't going to solve that. Lets say you need to finance 30k of the purchase price, plus 25k for rehab. Thats going to be a 55k you need. If you went HML, generously you would get 10% and 3 points (if you used them all the time). Interest only on that is going to be $470/mo. Then, before your 1 year balloon comes due, you need to refi. That means you will need to have it completely rehabbed by the 1 year mark and have an income stream to prove you are making money/can make the payments. Once property taxes are taken out you have $11,000. insurance will be at least $1000/year. So now 10k. Now what ever your owner paid utilities are, say $25/mo= $300/year. Plus you don't live close so take another $55/mo to have someone mow the lawn/ clear the driveway. You are less then 9k now. 55k for a 30 year @4.5% mortgage is $278/month. So $750-$278=$472mo. That is without vacancy (80 something tenants don't stay for long and the population is declining) any capex ( you have foundation and roof issues already) or simple maintenance. Any other mandatory expenses like garbage and inspections are going to further eat into any profit you may have. On the surface this deal seems marginal at best, likely falling in the "not deal" territory and that is without considering how hard you would have to work to even make the deal happen. You can and WILL find better deals. Unless farmer Joe wants to drop the price and carry the note, I would waste my time finding a better deal.

I think the numbers must be off. That calculates out to an average $283 per month/unit. Rentometer estimates $580 for a studio. Can you imagine trying to justify a new refrigerator? Without any other costs it would take 5mo to pay off. I would ask if he is willing to disclose leases and expense books before you even offer. If those numbers are close, you have a real chance to force appreciation