All Forum Posts by: Edward Liu

You can still find them under $140k. I just closed a deal 2 weeks ago (3/16/19) in Greenwood for 3/2.5 SFH built in 2007 about 1700 sqft for $126k. You need to be lucky and be proactive. I lost at least 5 deals due to high competition in Greenwood.

To get this deal, within 3 hours of the property being listed, I asked my agent to contact the listing agent and see what I can offer to remove the listing from the market. In the end, I agreed to pay cash to speed up the purchase and rent back the SFH to seller for up to 3 months (most home buyers won't do that, but I don't care as a remote investor).

Obviously same strategy won't work most of times, but I was lucky this time.

If all newly renovated, then I would not call this a house hack.  You should treat this as any deal, whether you live in it or not.

For 1% rule, assumption is house is already in good shape.  If issues, then price would be lower based on inspections.  If house is really in bad shape and needs major rehab, then use 70% rule.

You can not justify higher price if you live in one of them.  You have to sell the house sooner or later on the market.  If you paid top dollars today (using justification that is not market related), then likely your only hope is market appreciated a lot.  

Close to major university could mean higher price. But it has to be based on Comps in the area(not based on CAP for 4 plex).

Based on your numbers provided, I would not call this a good deal for 4 plex.  When take into consideration of maintenance cost, property tax, insurance, vacancy, etc, your return is extremely low, maybe even negative cash flow.

I suggest you double check the after market value.  It is very rare for find a deal where you complete $9k of repair ONLY and immediately value of property increase by over $200k.  Why doesn't seller do such and sell it at much higher cost?  

If this is indeed the case, then do the deal, spend the $9k repair, and immediately sell.  With $105k cash put in, profit of $200k in less than 3 months, why not? 

No need to hold long term.

I had the same issue with my 1st purchase of a 12 unit building during first 2 years - not as good cash flow as advertised and barely making a profit after mortgage.  I don't think you missed anything, just part of learning experience.  If there are no alternatives in Property Manager, then likely you will be stuck.  Try to sell it and likely it has appreciated within last 2 years. 

Aggressively push for rent increase likely will cause high turn over. You need to plan for 50-75% turn over with existing tenants, which includes turn over cost. It will suck up a lot more cash than normal % of maintenance/CAPEX.

Don't assume you can turn basement into units. Check for city regulations first. Many cities requires 2 exits for basement units and many times ROI for basement units is not good. You want rents to cover CAPEX of basement change within 3 years. Your rents likely will be lower for basement units. Assume $500 per month per unit with 3 units, do you think you can complete build of 3 basement units with $20k?

For Ohio, you can try US Bank or Wells Fargo, not sure if they do loans this small for remote investors.  They have done larger deals for me (out of state) in Ohio.

It might be easier to refinance for less than $100k deals (purchase in cash and then refinance once you have all units rehabbed and rented).  You have to check with bank first before taking this route.  

Many local banks won't lend to investors out of state.

Rent for $3500 with mortgage of $3200, you will not have a cash flow property.  It would not be a good investment long term.

I assume you mean you can deduct property tax from your income (you mean $20k gift).  Is your property tax $20k?  If so, it is not $20k gift - you might get 30-40% of $20k (depend on your tax bracket).  There is no such thing as $20k gift from the state - at least none of us have received it.

If you use this as rental, highly unlikely to get 3.99 rate no matter credit score.  For primary residence, yes.  Banks give different rates if house is primary residence vs. rental.

For most of us, we lose some in some deals, we win some in others.  Hope is we win more than we lose.  So don't stop selling this property for mere $5k difference ($430k vs. $425k), even if you lose a little.  

This is not legal 4 unit.  You will have issue getting insurance if rent out as 4 units - insurance will only cover it as duplex.  You could be criminally liable if there is a fire and building is used as unlawful 4 unit rental (similar to Ghost Ship fire). 

This deal is due to combination of luck, timing, negotiations, etc. to get to current shape.  

Below is link to sample purchase contract (same one as I used) commonly used in NC

https://www.falcononeclt.com/wp-content/uploads/sites/4889/2018/02/Offer_to_Purchase_and_Contract__72017_ts67604.pdf

I will push hard to get this deal done.  Will consult local lawyer.

Below is the language in the contract

Seller's Failure to Comply or Breach: 

If Seller fails to materially comply with any of Seller's obligations under this Paragraph
8 or Seller materially breaches this Contract, and Buyer elects to terminate this Contract as a result of such failure or breach, then the Earnest Money Deposit and the Due Diligence Fee shall be refunded to Buyer and Seller shall reimburse to Buyer the reasonable
costs actually incurred by Buyer in connection with Buyer's Due Diligence without affecting any other remedies. If legal proceedings are brought by Buyer against Seller to recover the Earnest Money Deposit, the Due Diligence Fee and/or the reasonable costs actually incurred by Buyer in connection with Buyer's Due Diligence, the prevailing party in the proceeding shall be entitled to recover from the non-prevailing party reasonable attorney fees and court costs incurred in connection with the proceeding.