All Forum Posts by: James Pearson

Ken, 

Thats a really rough area of town.  When you run the numbers, make sure to check insurance, and you will need quality not cut-rate in that area.  The crime rate in that area is by far the highest in the metro.  This area is risk, but could turn to be profitable.   I would highly recommend having someone manage your properties there, so figure that into the numbers as well.   Most charge 10%, but there could be high turnover which costs more so assume 15% of rent for the management.  This area could turn into be an investors paradise.  The city has been making strides in cleaning up the bad areas, but Fair Park is really, really bad.  I do sub-contracting and refuse to work there, but I'm sure plenty of others will.  Good luck.

Sherman and Denison are very hot.  Stay away, I want it for myself. 

Sending you a pm.  I would love to help.

Paying 110K for the property now won't happen.  Max is down to 95K

The plumbing estimate came out over what I anticipated.  I went to 85K on my offer.  Total reno is now 90K.  About 12k is profit on the work I will do.  I am doing my estimates as I'm the GC, and some of the sub contracting work will go to my constructing company.  I also believe I can cut some numbers down a bit on the foundation and plumbing repairs.  I have a tractor and can do much of the digging for the new lines and cut the slab and refil myself.  So those numbers not only go down, some of it goes in my pocket.  I will start cutting slab as soon as we close to get to plumbing.  Then as foundation work starts, will do the digging for new lines as well as repairing the french drain.  The numbers are inflated to show worse case scenario for the most part.  I always over budget these even for customers so I am always covered.  Waiting on seller to see what my offer does.

Hi gurus!!!

Have a property Im making an offer on today, wanted to start a discussion and overview my plan for this property.  

The Good:

Home is a 4/3 with detached garage.  Very very nice neighborhood.  2840 sq feet and the home is quite nice from the outside.  Good curb appeal, landscaping is there, just needs some tlc.  It has an in-op pool/hot tub, that likely just needs some tlc as well.  Has not been ran in some time, but is covered and appears at first glance to be in decent condition for not being ran in a while.  Much of the home has quality features such as tile in kitchen/den, tiled fireplace, huge wooded lot with a ton of mature trees without being overgrown.  It is a fairly open floorplan, 2 living areas, great back porch, privacy fence in fair condition.

The Bad:

As with about 50% of the properties in the area, and 80% of homes I have viewed in the past month, the home has foundation issues.  I have a quote for repairs for $21K.  Flooring is needed in 2nd living room, hallways, and at least 2 of the bedrooms.  There is also "bio growth" (mold) in about 25% of the home.  of the 3 bathrooms, 2 have definitive leaks to the drains, and likely all of the plumbing.  The cabinetry in the kitchen is small, and leaves little room for storage compared to the total size of the home.  The cabinets in the rest of the home are ok, but could use some paint.  No stone (countertops) are in any rooms, and the appliances are out of date.  

The Approach:

The home is listed at 125K. ARV with full updating would be around 230-250K. Full rehab would cost 65-80K. Good thing is my specialty is Cabinetry and Finish work. I also am somewhat of a pool expert, and have rehabed several pools on the side during summertimes, but needs electrical testing that I don't think about doing. I have scheduled for an electrician and plumber to look over the property with me during an option period. Most of the work other than the plumbing and foundation I can do myself. I also have some great foundation repair pros that I know can beat the previous estimate, probably by 30% by cutting out some of the unnecessary repairs, as I fully expect the home to settle back somewhat as the season changes now. So I will be doing the cabinetry and countertops myself, woodflooring, trim, pool work, and the landscaping. This has all been part of the work my business does for the past 3 years. This will be my first investment property and seems perfect.

I will have the home rentable within 3-4 weeks.  Comps are from 1450-2150, and I plan to list it for 1950 long term lease, and 2050 for short term.  I actually hope for a short term lease so that I can put the reno in phases.  The second phase of the reno would be done 18-24 months later and I will actually live in the home and rent out my current home.  This will then be flipped after the tax from profit time of 36 months has passed.  

Final Details:

Purchase Price:  95K initial offer - 110K top dollar.

Reno Estimate including foundation and plumbing:  80k (high end)

ARV: 230K (low end)

Lowest Estimated Profit:  40K, but probably closer to 65K.  

Rental Review

PMT:  $1300

Rent: $2000

Profit after expenses (insurance and fees) $500.

I do appologize if this is not in a format some of you are use to.  I don't do that bottom line number crunching.  Not for me.  I look at all the numbers and see if it's logical.  

This seems very logical and too good to pass up.  Worst case scenario is the place gets rented which nets 30% profit.   Best case scenario:  I have very little money tied up in the place, 300 hours of work, recieve rental income of 500 profit for 2 years, live in the home while final reno is done and profit 65K from flip minus expenses.  

I sure wish someone would give you advice as well instead of just welcoming you.  I would love to hear info on this subject as well.  The banks around me are not open to making business loans on mortgages I have approached them with either.  Welcome, by the way.

Depends on what the lease says.  Most make these things tenant responsibilities.  If you want to provide for that, then do so.  But it's not generally considered repair or really landlord maintenance.  

Separate LLC are overkill. While they do provide a certain level of protection, theyre not bullettproof. A trust would provide more protection, but it's not even needed until you have accumulated a certain net worth. But creating an LLC for each property wont protect against damages a tenant could sue over for something you did personally. So it's not worth the extra leg work. Just follow the rules and you should be fine.

That or charge them now in  advance to repaint.