All Forum Posts by: Doug Shapiro

Hi Peter,

It sounds like a good deal if you are willing to fix up the property within the first 18 months and live there for 5 years.  It seems like a big commitment.  

I would say definitely go for it if you plan on living in the property for several years and if you have the cash to remodel it/fix it up (and you know how much it will cost).  Just be careful to buy in a good neighborhood.  Speak with some local realtors to see what they think of the properties.  

Jay

Hi Alex,

I agree with Lumi.  If you just look at the purchase price and repair costs, it isn't a good deal at all.  

Purchase price: $326k

Comps: $430k

Repair work needed: $27k + $16k + $18k +$61k + $13k + $8k + $4k + $9k + $5k = $161k...

Do you really want to end up paying $487k for a property when the comps are $430k?

Jay

I use MySmartMove and really like it.  Btw - I am not affiliated with MySmartMove at all.  

It is easy to use and provides a great service - you can specify whether applicant pays fee and will be notified immediately when the credit/criminal background checks are completed.  

I'm sure there are other similar companies out there that do the same thing, but I don't have a compelling reason to switch at the moment.

Jay

Hi Randy,

In my opinion, better properties tend to attract more renters you would want to have.  If your place looks crappy, then don't expect your renters to maintain the property.  

This loosely relates to the broken windows theory, which can be applied to many different domains, including real estate.  Imagine if you were showing your property to potential tenants and there was trash scattered all about the place.  This is an exaggerated example, but these potential tenants would probably think you, the landlord, just don't care how they maintain it.  

By doing some remodeling work, you are going to attract more tenants who actually care about certain higher-end items in a home including granite countertops, soft-close cabinet drawers, new appliances, new fixtures, etc.  If the tenants care about these types of upgrades, then they will maintain it.  

Jay

Hi Joe,

It may be in your best interest to just hire a new contractor (fire the current one) and to move on with your remodel.  

You may very well win in a small claims court, but how much money and time are you going to waste either trying to get the contractor to finish the job or reimburse you for work that was never completed?   My advice is to put your pride aside and to move on.  

I was in a similar situation where it took one of my contractors over a month to do some relatively simple remodeling work.  They were extremely unresponsive to calls and emails, and rarely showed up.  What should have taken 1 week ended up taking 5 weeks with only 80% complete.  I finally just had a talk with the contractor and showed them exactly what hadn't been completed and asked for a partial refund on what I'd paid.  Be sure to just state facts.  They were okay with it, and the very next day a new contractor I hired started work.  

Just don't waste your time, money, and energy on contractors who don't perform.  As noted, you probably paid them too much too soon, but now is the time to hire someone else to finish the remodel.  

Jay

Agree with Jeremy.

Also, what types of loans are those?  30 year, 15 year?  

Are you going to use the entire multifamily unit as a primary residence?  Because if you plan on renting part of it out, the lender will take this into consideration and you may qualify for a much larger loan. 

Jay

Thanks for sharing Marci.  I was also just recently looking on auction.com and was intrigued by the types of deals they had on there.  I still need to do a lot of research before comfortably submitting bids on that site - still haven't figured out all of the 'gotchas' that come along with it.  

Hi Le,

When you sell a property - you typically pay the listing agent 3% of the sale price and you pay the buyer's agent 3% - a total of 6% of the sale price goes to the real estate agents/companies.  You also have to pay closing costs which is several thousand dollars. 

While you own the property, you need to calculate the costs associated with owning a property such as taxes, insurance, utilities, and possibly HOA fees. If you are interested in buying and flipping a property, then you'll definitely want to calculate these 'holding costs' - basically from the time you buy the property to the time you sell it. If things fall behind and remodeling either takes a lot longer or costs a lot more, or even if it takes a while to sell the flipped property, then this will significantly impact your profit.

For the property you referenced above, the 6% agent commissions will leave you with $134,420, or a profit of $24,420 - not including closing costs for both buying and selling the property, and not including the costs I mentioned above.  I personally don't think it sounds like a great deal, since you may only make $10,000-$15,000 in the best case scenario and it will probably involve several months of your time and effort.  

Hope this helps.

-Jay

Hi Kris,

I personally prefer rentals over flips because you have the potential to generate cash flow every month.  

How do the numbers look if you decide to rent?  Even if you invest 30k in remodeling the place, you may be able to charge premium rent.   It may turn out that renting the place out would be best.  Also, after you purchase with all cash, you can always do a cash out refinance.

Jay

I would definitely avoid buying an investment property with an in-ground swimming pool.  You probably have a good point about liability, but my main concern would be the costs to maintain it.  Its a huge hassle.  And I wouldn't expect your tenants to maintain it. 

-Jay