All Forum Posts by: Doug Shapiro

Hi Dawn,

I think the yard will definitely scare off some potential renters, but I would hope it wouldn't effect your bottom line.  But who knows...

I personally would try to clean it up as best as I could (so it at least is in par with your neighbors).  Not only will this presumably attract more renters (or turn off fewer renters), but it will also set a good expectation for what you expect the tenant should maintain.  

You should be a little worried about signing a lease during an off-season month.  Best months to rent are typically May-September because you can charge premium rent.  During off-season months you will probably have to rent for less.  

Jay

Hi Kyle,

If lack of cash is preventing you from buying your second rental, I'm sure you can find other means to increase your cash reserves.  Here are a few ideas: 

1)  Airbnb part of your current place, or the entire place when you are away.  

2) Tap into your IRA to use as a down payment.

3)  Get a second job. This may be a safer option than partnering with an investor who flips.

4)  Save more money.  Negotiate lower insurance rates, don't eat out as often, sell your stuff, etc.  Seriously - craigslist is awesome for getting rid of your stuff quickly and making some extra cash.  

5)  If you contribute to a 401k, consider contributing less.  Buying stocks/bonds and preparing for retirement is great, but you can also use real estate investment as your retirement portfolio - and can reap the benefits immediately. 

As for getting a loan - speak with smaller banks and credit unions.  They sometimes have less strict guidelines for real estate investors so you may be able to qualify for another loan much sooner than you may think.  

Hope that helps.

Jay

Hi Matt,

I don't have experience with converting open land to residential, but I do have a thought.  Unless you really need the money from selling the land, why not consider keeping it until you have enough money to build something on it?  It may turn out to be extremely lucrative.  

With nothing on a plot of land, you may be able to built a multifamily property or even a small building one day.  It will be a significant cost, but then again, you may be able to sell for much much more than you put into it, or you can rent the entire property out for a steady stream of cash flow for life.

Jay 

Hi Blake, 

I completely agree with you.  I am a big fan of remodeling a property with higher-end materials such as granite countertops, stainless steel appliances, nice shower heads, goose-neck kitchen faucets, etc.  

If I were you I would speak with several different realtors in your area and find out how much more you can charge for rent on a high-end remodel.  You will be able to charge premium rent but NOT necessarily have to spend on all the bells and whistles such as crown molding, 42" cabinets (vs. 36") cabinets, real hardwood flooring (vs. engineered hardwood), porcelain tile (vs. ceramic tile), etc.  Once you reach a certain standard, then spending more to improve the property further just won't matter in terms of charging more for rent.  For example, granite prices can vary greatly from the less desirable types of granite that may just look okay (that you find in some hotels), to slightly more expensive for good looking granite, and extremely expensive for those really unique cuts that look incredible.   

If and when you do your rehabs/remodels, definitely reach out to the BP community with questions as to what exactly will give you the biggest bang for your buck.  

Jay

Hi Blake,

I have some experience rehabbing aging properties and remodeling.  When you improve a property, each decision you make will typically involve cost, quality, and durability.   For rental properties, definitely put an emphasis on durability. Certain materials have predictive life-spans and maintenance costs, so choosing the most durable materials with the lowest maintenance costs is best.   

Choose appliances that don't break down because although they may cost more initially, you will save in the long run by not having to replace or fix them.  Another example is flooring - choose flooring that lasts and is durable.  Hardwood floors last a lifetime, but tenants may not care about maintaining it.  Hardwood also warps if exposed to water for too long.  I recommend ceramic tiles because it looks nice, is cheap, resistant to water, and durable.  

No need to get the best flooring, cabinets, bathtub, sink, etc. Just buy what is durable, looks decent, and is affordable.  It may sound simple now, but when you are actually shopping for materials and doing a rehab, your mindset will be much different and you may unintentionally overpay for items because they look nice or underpay because materials are cheap but won't last. 

Hope that helps.

Jay

Hi Sam,

I have a few ideas for you.  What if you bought the condo and then invested some more money in remodeling it to make it higher end?  Maybe that additional investment would turn the condo purchase into a profitable one.  Also, you may be able to remodel the condo and furnish it (basically turn it into a corporate apartment).  These rent for significantly more than non-furnished.  

When you buy a unit in a condominium building, you should also research the financial health of the building.  Find out how much money is in reserves, how often there have been special assessments historically, and if there will be special assessments in the future.  

Thanks,

Jay

Hi Sue,

Since your goal is to have enough cash flow in order to retire and start your own business, then my recommendation is to maximize your cash flow.  So how do you do this?

If you buy a rental property with cash, then you will maximize your cash flow for that property since you won't have a mortgage payment every month. The downside is that your ROI will be lower and you are tying up your cash in the property.

However, if you buy a rental property with 25% down payment and have a loan for the remaining 75%, then you will have much less cash flow. The upside is that your ROI will be higher and you aren't tying up a big chunk of your cash.

Basically, you don't want to tie up your money into a property, but at the same time you want to eliminate the mortgage payment because it will give you more cash flow each month. My recommendation is to finance because it will maximize your ROI and allow you to invest in more rental properties.

If you have a 30-yr mortgage that only has 10-15 years left on it, then you may want to consider paying off the mortgage. Again, look at the ROI. If you have $50,000 remaining on your mortgage and paying it off will save you $5,000/year, then that is a 10% return and a significant boost to your monthly cash flow. If you decided to use $50,000 to buy a new rental property instead that has a 15% return and would make you $2,000/year, then your decision is more difficult. On the one hand the 15% ROI looks very good compared to the 10% ROI, but on the other hand the 10% ROI results in significantly more cash flow each month. In the long run, of course the 15% ROI is the best option. However, your goal is to retire in a few years, so maximizing your cash flow is your priority, even if it means accepting a lower ROI. Crunch some numbers to see what scenarios would work best for you.

Hope that helps.

Jay

Welcome Tony!

I am familiar with the real estate market in VA so feel free to PM me if you have any questions.

Jay

Hi Russell,

Surprised no one answered your question yet.  I am actually interested in doing the same thing.  I am talking to my real estate attorney to see what is involved since there is very little information online on the specifics on how to do this.  Apparently all states besides Pennsylvania allow you to easily put properties in land trusts (just in case you have properties in PA). 

Jay

Hi Thomas, 

It is great that you are seriously considering real estate investment.  Buying a multifamily property is a fantastic route to take, especially if you will be living in it.  

I have experience remodeling/fixing up places and in my opinion it is totally worth it.  Just find a reliable and experienced contractor.  This is easier said than done, so spend time interviewing and speaking with different contractors and make sure to get quotes from several different contracting companies you've spoken with.  

If you do remodeling work, my advice is to spend money on stuff that won't break easily such as appliances.  You can be cheap with other materials and items for aesthetic purposes such as mirrors, baseboards, light fixtures, etc.  The combination of expensive and cheap will make the place(s) look great. 

I'm assuming you will be renting to college students, so keep that in mind when remodeling.  Use durable materials - no need to go high-end.  

Hope that helps.

Jay