All Forum Posts by: Jim Goebel

@James Wise

Not sure I follow your line of reasoning.  Every company is out to make profit.  You, and your agency/brokerage is out to make a profit.  Does that mean I shouldn't work with you or that there can't be a win win?

How about insurance companies?  Same question - does it not make sense for people to use insurance given the same question and realization that those companies need to be profitable to be in business?

Anyways I'll keep following up with our experiences here over time and people can judge for themselves. 

@Alicia N Ragonese

Consider some different paths:

Buy an investment property with leverage if you can find a bank/banker that would back you. As an example, you'd maybe spend half your HELOC and cash on hand as down payment and then have the rest of your HELOC as money for rehab. Not sure if you can swing this from a couple angles. Some banks might think there's too much risk.

With where you are, calculate holding costs.  Consider using cash flow (job, from other rental) to fund the rehab.  Means you'd have to be lean and mean! - And, you'd also have to be doing much yourself which is better at this point for you.

In general, at least in my market I'm in a bit of 'hunker down' type of conservative mode.  Prices are inflated and there's less opportunity.  There's still opportunity but make sure you're diligent about running your numbers.  Too many first timers getting in and many of them won't make it past the valley of death in terms of scaling.  That said, what are fixer houses going for in your market?  What are they renting for?

@Alex Bekeza

@Russell Brazil

I've only read the first two posts here.

Russell I typically find your posts to be very thoughtful and informed by lots of experience.  I would want to know what informs your opinion that this should be a choice.  Should all energy efficiency measures be a choice?  At what point does simple common sense energy efficiency measures cross over into where it just.. Makes sense.

What is your opinion on insulation, for instance?  Shouldn't we as consumers be assured through regulation and building codes, etc - that builders will build houses with insulation in them nowadays?  My opinion is that at some point (cost, payback, reliability, etc) - we have to honestly look at this stuff being mandated....

@Keith Owens

Hm, I would stay away from contractors for that.

We use an INVESTOR that also happens to be a friend, a real estate agent, and operates the home warranty division of the large brokerage that is packaged with that agency's sales when the buyer wants it.

Contractors have dogs in the fight and although sometimes know more in depth on certain subjects... You want an investor. 

We pay him I think $200 if my memory serves.  Especially when getting started it has been worth every penny and more.  You want a candid assessment - not some fancy report that is 50 pages.  A one page summary will typically do fine/much better.

@Joseph Norton

Regarding rental research.....  

#1 - look at existing listings before purchase and best you can come up with a range

#2 - post ads of your property at various rent amounts as you are working on it and get market feedback.

That's about all you can do, there.  When buying, be conservative and don't assume things.

@Grant Griffiths

I'd keep looking into that lease option (contract sell) type of stuff.

On the feedback: the possible correctable ones I see there are:

Plant a cheap row of young plants that way at least when the concern of backing to an apartment comes up, you can play up the long term that there will be a privacy hedgerow.

The other two concerns I doubt you can do much about at this point.

Good luck.  

@Skyler Harris

Another professional engineer here in the mix, although admittedly I haven't practiced pure structural (picked up a few projects and clients over the last 2 years).  But, we've done quite a bit of rehabs and tackled some structural projects.  Nothing specifically like what you've described (I'm trying to process what a good course of action might be and will think out loud).  This probably goes without saying but I'm not practicing engineering in communicating here - just helping you brainstorm, perhaps.....

So firstly, I had a candid conversation with another residential structural engineer here and he indicated that most of his work is on the buyer side, and he felt he often provided more value on that side of the transaction.  If you really like the house, you might think about paying the money for that engineer after feeling out the seller's openness to remedy.  The engineers' opinion initially should speak to the severity of the issue.

I'd break down an engineering engagement into 2 parts:

First would be an initial visit and rendering an opinion on the severity and possible approaches in design to remedy.

2nd would be the actual design and cost opinion(s) to remedy.

If you're pretty serious about the house, I think if you pay the $250-500 that I think you'd likely need to do the first, that would be a GREAT investment more than likely from what you're describing.  If nothing else you would have improved your negotiation position substantially.  The 2nd step I'm not sure if you'd want to do before purchasing...  And of course as Sam mentioned you can walk.  Play up the uncertainty and be ready to walk, too.

HOWEVER - what you do have working for you as the seller is that say you do hire an engineer and they render an opinion that the item is serious AND Costly... And that's new information to the seller, you can improve your negotiation position because they are then required to disclose to future buyers is my understanding.

On to the technical and again I'm brainstorming out loud here....

I have ZERO experience with mud jacking as a permanent solution to slab heaving issues - however I would wonder about the feasibility of this as a 'roll the dice' kind of solution (good money vs value trade off) ...if you buy.

One possible solution may be to jack the house and repour which I don't know much about how the bottom plates/wood structural would be tied into the slab - but jacking the house and re pouring sections or all of slab would be an incredibly costly endeavor.  However, (and this is only if it's possible) that may improve your negotiation position to close on the house.

I know you mentioned that you want the seller to handle.  What I would do and recommend is that you use the 2nd scenario to improve your negotiation position, get a massive concession from the seller (hopefully) and then take a more resourceful and nuanced approach with a mudjacking type of solution if it is feasible, etc.  You'll learn something along the way and be happy you did it after.

The other variable here is the financing situation.  Sometimes issues like this can make banks very nervous...  Can you weigh in on how that part is going?

@Sam Shueh

@Robert Gilstrap
@Joni Chin

@Cara Lonsdale
@Mike McCarthy
@Fred Heller

OK sorry for the many tags if any of you are NOT interested in following this, please let me know.  I for one have gotten a great deal of value on threads that follow up and provide info over time.  So here goes....

About 3 months ago we converted our ENTIRE portfolio (we're at 9 units, with 10 doors - one is a duplex and the rest are SFHs) to a complete Home Warranty - and went with American Home Shield, with supplemental coverage for the main sewer and main water lines offered through Des Moines Water Works (they work through a company called HomeServe).  Our 'typical' or 'model' affords some nice cash flow and for the most part we are VERY happy with our tenant mix so I think this may be relevant for our decision justification.  I have some friends where they are operating a 'different' rental business where their margins are a lot thinner so that roughly $60/mo added cost per property would not be tenable.  Note: the duplex they hit us for the premium on a per unit basis.

So, it's not an insubstantial cost going out the window every month - roughly $500 let's call it.  We're 3 months in and have initiated 4 calls (work orders etc) to date.

Here have been our data points, with both financials and some more 'color' on how they've gone:

Early April 2018: First Call in was a Stop Box failure where it failed in the open position and tenant had not been paying Water Bill for entire tenacy.  I was disappointed in the responsiveness of DMWW with regards to providing us notice of the situation.  It wasn't until 5 months after this all started (and they tried to shut off the tenants' water) that we got a letter letting us know the situation.  (by the way, this is our last BAD tenant and he's out now).  Anyways, this was a HomeServe call and they initially indicated that they were unsure/doubtful they needed to respond to the situation because it was non-emergency.  We had some back and forth about what constitutes an emergency, and she did relent and agree to dispatch someone.  The company they dispatched it also mentioned the word emergency and I again had to push back and state our case that it WAS in fact an emergency.  They did do it, however, and they did a great and quick job.  I don't know how much stop box replacement projects cost and we typically don't pay retail prices for anything.  However, there was NO deductible on this and they did a great job.  I'm guessing we would have been out $500 and 2 days of my time to manage this project, or average (just got that from an article from Des Moines Register) labor cost of $1183 if we were to do it more 'turnkey'.  In either case especially given the timing of this item I'm thrilled with how it went.

Late April 2018: We initiated a call also to HomeServe when we had a severe (nasty) backup with a lateral floor drain on one of our rentals.  We aren't sure of the cause but suspect one possibility was a day laborer from Ghana (really nice young man) that just didn't know what was appropriate to go down the toilet.  This was during a turn period and we actually let a new tenant for another house stay in the house for a week while we completed updates on their permanent home, when this happened.  Again, HomeServe this time on the sewer side, dispatched (with no fighting this time) a Drain type plumber.  They came in, did a great job, and we haven't had any more issues.  No deductible there.  Guessing this would have been a $150-250 type call if going with a Roto Rooter (don't ever hire them by the way) and I can't trust them as far as I can spit so who knows it may have turned into a disastrous main sewer line replacement if my one experience with them was representative...  

Early May 2018: Got an AC call on a house owned under an IRA. Called AHS and they dispatched local company. Diagnosis was that the compressor was gone, in the condensing unit. After a couple frustrating conversations with AHS trying to explain the difference between a diagnosis and prognosis (I was frustrated they just wanted to replace the compressor or rather that's all they would pay for - when because this is an R22 unit and older unit, we felt it was about time to replace the coil and condensing unit). As a side note, the 'trump card' for the companies that work through AHS is their crazy markup on refrigerant. AHS only covers $10/lb of this stuff and that gets you like 5% of what these companies charge... At something like 400-500% markup, by the way... Anyways, we had to learn a bit more about AHS's process and we learned you can request what's called a cash in lieu amount. The catch is that they apparently want to 'kind of' stay involved in the project at least in terms of verifying something was done and they have communicated they want someone licensed and insured to do it. Largely because of all this we decided to go with the company they originally dispatched. They came in at $3700 less the cash in lieu amount of $775 so just under $3k for this project. Sucks paying retail and I feel.. Middle of the road when just looking at this project in terms of AHS. I feel confident I could get the project done for closer to $2000 total if I was managing it, however both because this house is under IRA and there's additional rules and possible scrutiny there, but because AHS was insisting on essentially verifying the licensed/insured part, we pulled the trigger on this one.

Yesterday: Initial call from tenant was AC not working.  We had it charged recently so that's peculiar.  Upon further examination, something weird is happening electrically on condenser unit circuit.  Like, something I've never seen before - it makes a violent rattling sound when the AC condenser is running, and that circuit breaker (a 30A/2P) is closed.  Sound is right above the panel.  This work order is in process and they dispatched a company that has experience/licenses on both the AC and the electrical side.  My suspicion is that the panel 'should' be replaced as it is a Federal Pacific and such... We will see on this one.

In total I feel with this pretty steady outflow of $500 / mo we are at roughly $1500 cost for these services.

My analysis on this decision goes something like this:

Let's sum our costs, and compare to our benefits.. Which consist both of money saved, and time saved (I have to put some assumption of what my opportunity cost of time is)

On the Cost side, we're at the $1500 total roughly.

On the benefit side, we'd be at $1183 + $200 + $0 (I think this outflow is pretty 'in line' with a turnkey AC replacement option given the above constaints...  + (not sure we'll see how the most recent electrical / AC one turns out) + my time saved which I'm estimating would be at maybe 2 days total to deal with these items one way or another (either actively manage or vet/bid stuff etc)...  Which I'd put my time at invaluable :)  Maybe $300/day, I don't know....  

So I'm getting something like a $1500 cost vs a $2000 benefit.  With HomeServe really being the star of the show mostly just because of the data points we've had so far.   Yes, I'd do it again, as of right now.  Will try to follow up every so often.

@Walnar Agenor

I don't know.  We are looking to locate an old tenant that never took water utilities in his name (utility here in Des Moines unfortunately kind of dropped the ball and didn't let us know until a month of his move out)

I'd be curious to hear how this goes.  Thanks for the idea though I'm going to call around to get some rates etc.

@Account Closed

Hi Mike

I'd recommend providing actual numbers for your 3 options.  I bet you'll find some interested and capable people that can dig into those a bit better.  I'm not familiar with your market but I like others can analyze stuff based on actual numbers.  Seems like you've got the intuition and a good process for presenting those options....   Just will be heavily dependent on where you're at as to appropriate thing to do next.