All Forum Posts by: Jeff Schemmel

Hey Eddie, my first property was a condo.  Here are some things that may help you!

1.) talk to a few insurance agents/brokers to get a real local answer to this.  It's the only way :)  Try to work from referrals from investor agents and/or lenders.
2.) I do this the same way I do on any non-hoa property with one additional step.  see below:

When I walk through the property, I use a list of capex items (roof, flooring, paint, plumbing, electrical, doors/windows, garage door, siding HVAC, etc.)  I have the cost to replace said item there and during the walkthrough, I just try to estimate the remaining life on each item.  Now, you might be thinking...well what about the roof?  It's huge and covers 8 units.  Just focus on the remaining life and less on the replacement cost.  I then take the total cost over the remaining life and get a monthly amount needed to save for each item.  In my condo, it was turnkey except for the air conditioner and I was responsible for everything studs-in.  The association replaced some lights and siding and did a back deck repair on them while I owned it, but I ended-up replacing a bad garage door and air conditioning condenser because those items were not covered.

With an HOA, your fee is supposed to go to ongoing maintenance and some larger replacement items, BUT.... if the HOA is bad at managing their money and/or they have a bad balance sheet you could and likely will get stuck with the bill as a special assessment for your portion of that capex item. These can run in the thousands of dollars, so you don't want to pretend like you never have to pay for the roof - you could end up doing that. Also, each association will have its documents that lay out the latest financials and the rules and regulations, and bylaws for that community. That set of documents will answer your questions on what is your responsibility and it's important to check it for each community you explore.

Having an idea of the remaining life on the big ticket items is useful for you, and between that and the current financial standing of the HOA, you should be able to get somewhat of an idea what the risk/likelihood of getting stuck with one-time flat assessments on top of the monthly HOA fee looks like.

good luck

First, you'll need to coordinate non-renewal of the tenants.  Check your local laws to be sure you're doing it correctly and as you approach the required/appropriate non-renewal period just send them notice that you will not renew their lease at expiration and they will need to move.  If you have a more urgent reason, you can always consider cash for keys - but I tend to think with rehab cost/risk, and vacancy cost you probably shouldn't do this.

I do maintenance walkthroughs a few times a year and I give my tenants notice that i'm doing this regardless of whether they plan to stay or go.  I recommend giving proper notice to enter and doing this so that you can take the measurements and photos you need for the renovation.  This will help your planning process.

Once you have the info you need, Create a basic list of things you want to do to "renovate".  Separate the list into "things that increase rent" and "things that do not increase rent, but will lower maintenance or utility expenses".  If it's not in one of those two lists, you can still do it just don't spend money on it or at the very least do it yourself if you can.  I think it's important to consider things that may be considered "deferred maintenance" and do them while you have a vacancy to avoid another future vacancy or longer turnover.

Once you have these two lists, start to get quotes and material estimates.  Call other investors and ask for contractor recommendations for anything that requires a permit or that you don't have the experience/skills necessary to do to market standard - never call a randomly googled contractor.  BP did a rookie podcast episode (two parts) with James Daynard (I think his last name is spelled right) and he talked some good shop on how to find and develop relationships with contractors.  If you are doing something for the first time, do extensive research on the job (youtube) and just be sure you have a plan B if you mess it up bad so you don't drag out your timeline.

Once you have a grip on costs, start sending your budget and timeline to other investors and flippers you know - 3-5 is probably enough and get their opinion on what you missed and where you fell short.  Personally, I really neglected my budget for disposal cost and that nailed me.  I also ran into unforseen issues with poorly planned electrical that I ended-up paying more for and I had to stay up a few nights pretty late making up lost time.

The sequence of the renovations matters, A LOT.  try your best to get feedback on this and try to clarify the sequence you plan to do these things in your budget so your friends can comment on that.  You wouldn't put in new flooring and THEN paint, for example :)... you could just tear out old flooring and paint, and then put in new floor and trim, for example.

Lastly, when it comes to increasing rent. Before you do any of this, you really need to make sure you know your ROI on your rehab investment. IT's two-fold. Your property should appreciate in value, and you should be able to raise the rent. Look at rental comps on multiple websites to get an idea of what the lowest 25% (quality) properties rent for in a half mile of your property with the same size, bed, and baths. Then 50% and 75%. Also, the quality of finishings should match your neighborhood rating to some degree. You probably wouldn't get the ROI investing in high-quality quartz countertops and stainless steel appliances in a C- neighborhood. That's not a hill i'm willing to die on, I could be convinced otherwise by a savvy c-neighborhood investor but my point still stands. You'll want to know what your current market max rent is and future market max rent is by repeating this same process looking at comparable rentals and seeing what's in demand. If all the rest of the rental comps in your neighborhood have central Air conditioning and yours doesn't...well, you should probably budget for that :)

Hope this helps!

Hey Josh, do you have some type of employment?  Preferably you do and you've been at it around 2 years or more.  if that's the case, you may have some small level of qualification that you combine with a co-signer to get yourself into a house hack using a low down payment option. You can receive gifts to accomplish this.  I'd say this is probably the most likely scenario, and I recommend talking to a lender who has worked with investors right away if you see a path toward this option.  If this isn't going to work for you, I recommend spending as much time with people who are house hacking (own a property and live in a part of it while renting part of it).  This will be the best thing you can do while you work towards a solid, consistent, income to start house hacking yourself.  

If you don't have employment - I'd work on that first :)  I worked my entire way through college while holding a 30hr/week internship and running a business and it was tough but 1000% worth it to kickstart my financial future and capability in the workforce.

1.) that they're investing themselves and can share their journey so far
2.) they have connections to lenders, contractors, title agents, insurance agents/brokers, etc they know, like, and trust
3.) they have a track record of demonstrating deals in some capacity either for themselves or clients (preferably both)
4.) they care more about the numbers than where the couch goes and are demonstrating they want you to be successful so they are too
5.) they NEVER, ever, talk you into something.  It's about data and providing information to you as a buyer to match you with a property that fits your investing goals as an investor, not about selling.

that is all :)

edit: they stick around after the sale and offer support!

 Good question.  I could go any number of ways with this, and I don't think there are any secrets here for the record... I think the former, and do not rely on an unfinished basement to make a deal work - those are longshots in many cases as a lot of the multi-family were built pre 1955 and finishing basements comes with some risk.  The best thing you could do is flip a kitchen, bathroom, or add a bath or bedroom above grade.  

The way you look for deals doesn't change too much, but I'd start with anything 14+ days on market and hit the streets looking for properties listed at market price that aren't market price condition.  That takes some practice, and one way to start is by analyzing the last 6 months of multi-family sales by neighborhood and getting a solid feel for what condition, style, age, etc goes for what price in each area.  Once you've got some muscle memory built and you've practiced some of that deal analysis you'll start to spot these - a good agent who knows multi-family and invests themselves can also help here.  The properties do not have to be off the market, and they do not need to be ON market - there are deals in either arena, but you just have to think a bit about what you can do and what you don't mess with as far as rehab.  If you are cool doing floor, cabinets, paint, etc that is pretty easy and manageable.  If you've got some experience here, you'll have more flexibility and confidence, but if you're not handy and you don't have contractor connections you'll need to start building that sphere so you have an idea of what you're getting into.  A good agent who knows investment properties, or a good lender who partners with a lot of investors can help you start that snowball as you navigate the market.  

@Tim Swierczek could give good advice on refi and timing from experience as an investor and lender.  If you can get something you can force appreciation in by doing some modest rehab it's probably easier to force that quicker rather than just waiting - some improvements are tax deductible...right @John Woodrich?  could be a good double play :)  maybe you buy a 350-400k duplex and make it worth 500+ through updates and get higher returns on both ends.

there are quite a few home renovations stores that will offer 6 month or 12 month zero interest credit cards.  I would exhaust these before I took a loan.   Maybe this could be an option for some of the items on your list that you can buy at the same store.  I did this, myself, to help keep some cash in my pocket in the short-term.  Home Depot is a good place to start.

I own a duplex in Saint Paul, built in 1905, so 117 yrs old.  Over the last year, my monthly maintenance was approximately 150/m (taking out a couple things I did because I live there that I may not otherwise have done).  It does have Window A/C, the floors creak, and the basement is kinda dank, but it's got the most curb appeal of any house on the street and a lot of the cap ex stuff has been done.  New roof, furnaces (no boilers in mine), new electric, pex plumbing, and i've rehabbed the kitchens and bathrooms in it to current market conditions.  I paid 310k and it will rent at between 2900/3000 per month on long term leases when I move out soon.  I have helped a good amount of people buy properties like this because they still offer great value and are expected to go strong for a long time - there are properties built in the mid 1800s in saint paul still going strong.

this is 100% a lawyer-up situation.  they'll help you define the right path.  I'm sorry this happened to you, and it's one of the reasons that I try to use an estoppel agreement to cover clients who are inheriting tenants when they buy a building; not that it would have prevented this but at least it would give both sides of the story before closing.  did your realtor recommend this?  I'm not sure where you are, but here in MSP the moratorium's lifted nearly a year ago so hopefully that's not still a headwind.  If the plan was for you to move-in, it's best that be arranged as part of the purchase agreement and there's written agreement from the tenants before closing.  

Good luck, wish you the best in a really hard situation.

@John Woodrich is a local, very qualified, CPA who may have time to give you guidance here.