All Forum Posts by: Dojo Kempin

Daniel,

"My strategy I'm employing is buy and hold rentals purchased with all cash. I've got my entity set up and have already begun contributing cash to accumulate to buy my first property (should be able to pay for my first $50-75k property in the next 2 years). "

Very similar to my model. This is a sideline that I wish to use to build cash flow for retirement.

Question: Are you planning to do any rehab work, or do you wish to by properties that are ready to go . . . more or less? I am looking at small, distressed, foreclosures that need some work. Pay a smaller amount to buy the property, and use your cash flow to renovate it. Because you have no payment, you have the flexibility to keep it vacant. In the meantime your money is working for you, and you can gain the equity of any work you do yourself. You can then rent it and move to the next one or sell it for the cash to move up to your targeted price range. (You can also learn the painful lessons you must learn on a smaller scale before you start with bigger numbers.)

Of course, that only works if you have the time, skill, and inclination, but it is the route I am taking.You might be surprised at the deals that are available on the low end right now.

I am not opposed to debt used wisely and competently, but I support your idea to go without it. Start getting rich slowly at your age, and you are wiser than most.

(I mean all those NOT on this forum, of course.) =)

So . . . if I DID change my approach, I presume I'd start by finding a contractor that fits my approach? I'd actually have much less experience if I go this route. Your advice on where to start? (Again.)

I'm in the "valley" of central Michigan, off the Saginaw bay. I'm in one of the few cities in Michigan that is not in an economic tailspin.

I have to say that after considering the advice on this post and the experience behind it, I am considering changing my whole approach and contracting the work I need done. I'm sure that the operation of the property as a rental will provide more than enough DIY opportunities to keep me happy.

Again, thanks.

Thanks, Jon.

I will bear in mind that my estimates might be low if everything converges.

In response to your question, no, the house was not scheduled for demo. It was occupied up to the point of foreclosure. I just used demo as the basis for my offer. (Frankly, I didn't expect them to accept it.)

Boy, you all are great to talk to. You have very comprehensive vision for what could easily be overlooked. Thank you for helping me to be circumspect. I appreciate your time!

Jeffrey,

1) $5-600. There is less than 5% vacancy in the current rental market here. The house has property and a nice block garage.

2) I'm estimating 8-15k to get it rental ready. That's a pretty big range, but I can probably salvage quite a bit of the interior if it just for rental. (My initial "dream" was to gut it and make it nice. I'm thinking of starting with functional.) I have a 22k budget and a positive cash flow if I need to call in the marines to get it done.

My estimate is based on the following:
It needs a roof and a new electrical service. It will need some new doors and insulation. I will re-do the kitchen, and of course it will need the cosmetics within and without: Paint, carpeting, drywall repair, etc. I will probably re-side it for aesthetic reasons, as the old metal siding is pretty dingy, but maybe I can get it to clean up. The wild card is the septic. I never trust that an old septic will function properly when in full use, but I have a friend in the excavation business who can put in a drain field on off peak time if I need it. 3k or less, by his verbal estimate.

3) The same friend in excavation does demolition.

Thanks, everyone, for your frank advice and feedback. I truly value your comments, since I know that you are the real deal and speak from experience.

Linda and Jeffrey, I may have overstated my "evaluation for surprises." In my experience, there is always SOMETHING missed in the inspection or discovered after demo. I just want to account for the possibility of the unforeseen.

As far as the numbers, it is a township parcel with 1.5 acres, city water and NG. I bought on the premise that I could demo the house and sell the property. Purchase price, 13k, (REO) comparable vacant lots are selling for 20k+

The thing is, I think the house is worth rehabbing and I want to give it a shot. I like the idea of doing what I can myself. I just need to figure out where those boundaries lie.

Above all, I guess, I am considering this property an education. There comes a point where the talk doesn't make sense unless you've tried it. I'm quite sure my perspective will be different on the other side of this project, (I will be hearing your voice, Just Don), but I'm also quite sure the experience will be worth it.

Besides, this is probably as low as the risk gets for a first time REI. (Uh, oh. I hope those aren't "famous last words.")

Jon,

Great advice. "Overwhelmed" is precisely what I want to deal with.

Since I haven't taken possession yet, I am still formulating my work plan. The way I see it, the first step is evaluation. Evaluate foundation, septic, and structure thoroughly to find any hidden surprises.

For the work itself, I am thinking, as you suggest, of focused projects: Roof, electrical service, plumbing, hvac, and then framing/finish work.

Good advice on the permits and inspections. That's something else I can get a head start on.

Wow. Thanks for the quick replies.

In answer to your questions, my plan is essentially to do it myself as a side project and change of pace. I am looking forward to it. (And yes, I think I have a handle on the concept that some things are foolish to tackle.)

Bear in mind that this is not a financed property that I need to get up and running. I am planning to cash flow the renovation rather than borrow. I would rather forego a few extra months rent than invoke the pressure of debt and deadline.

Your point is well taken, though, Jeffrey. There is value in getting the project done. Perhaps it is my novice perspective that draws me to do this for "fun." Live and learn. In any case, thanks for the feedback.

J Scott, just what I was looking for.

Since you both mentioned it, what, exactly (or typically) were the "demo" projects you have started with?

So I'm new here and stepping out on a (relatively) small scale.

I've been looking at the distressed properties around me, thinking of my retirement, and basically said, "hey, why not build some sweat equity on one of these wrecks." I bought a small REO for cash that will need fairly extensive work. (Closing soon.) I'm planning to work on it part time this summer, and for however long I need to get it ready. (Not sure yet whether to go resale or rental.)

The question, for those of you who have more experience, is simply this: Where do you start? I don't mean on my specific property, but for those who do extensive rehabs--particularly when you do much of the work for yourself--do you usually have a plan of attack? Are there certain things that experience has taught you to do first, or to avoid?

Bear in mind that this is my first investment property and I am excited. I need to find what is worth doing and what will not pay off. My initial thought is to get it rent-worthy and put a tenant in it--the rental market is very good here--but it is a small house a few miles from town with a large wooded lot. Maybe it would be better to renovate for resale.

Anyway, I love this forum and value the wisdom of the experienced. What have you done?