All Forum Posts by: Joe Splitrock

@Lamon Woodstake this as constructive criticism. Your post is one gigantic run-on sentence. As you are interacting with people, your grammar and punctuation portrays an image of you. As you are investing at a young age, it is especially important for you to act as professional as possible. You could meet someone on BP that could help and I would hate to see them discount you based on a first impression. 

As far as the deal, I am not a fan of mobile homes. You are typically renting land and the buildings lose value over time. I prefer investing in an asset that appreciates. That being said, you will get your $15,000 investment back rather quickly. Financially it looks like it will make you money. Is there a chance the home you live in now could be a rental later? Lots of people use house hacking to get ahead.

I am looking at a VA foreclosure that had been winterized, so they put antifreeze in the pipes. They put stickers on everything with the winterization date and it was dated December of 2014. The property was just listed for sale. Is it possible that it took over a year to get the property on the market?

Any advice dealing with the VA when making an offer?

I insure for replacement value. My properties are all in the same side of town, so here in the mid-west, I am afraid one twister could come through and take it all out. My insurance rates are less than half what you pay for property worth twice as much. My situation may not be applicable, but still it seems you should shop around.

Just remember if you insure for cash value, you will get a check and will be stuck with an empty lot. 

@Katherine T. you mentioned signs, but have you blanketed the neighborhood? I get arrow signs that cost $5 at the hardware store. I use the computer and print out the address, my phone number and the number of beds and baths. I tape it on to both sides of the sign. Then I place those signs at every intersection surrounding the area pointing towards my property. I will do 5-7 signs per property, but you could do more. It generates traffic for me. It is especially important to place the signs on busy roads.

Another idea is to go to bulletin boards at local grocery stores and post a flyer.

You can also offer a referral bonus if someone helps you get it rented. Try $100 or $200 dollars referral fee. Print out a flyer that is titled, "Help Us Find You a Great Neighbor and Get $200". Just explain in the flier that you are looking for a qualified renter for your home that will take good care of the property and be a good neighbor. Offer them $200 referral fee for an approved applicant. Pass the flyer out to every house in the neighborhood. Who better to find a renter than people who already live in the neighborhood! This will cost you near nothing. If you have extra time, you could even knock on the door and personally hand it to the neighbors. They will get chatting with you, so be friendly and make it clear you care about the neighborhood and finding a great tenant.

You need to hustle and try everything. Someone may tell you one of my suggestions is silly, but at this point just try everything until you get it rented. 

I never provide a washer and dryer in my homes for this reason. If I purchase a home that has a washer and dryer, I sell them on craigslist. I have also learned the same is true for ice makers in fridges and water softeners. They are all problems waiting to happen. the tenant can bring their own washer and dryer and deal with repair issues. 

@Max T. as far as how you dealt with this situation billing them, it seems reasonable. My only concern would be that they could argue it is a faulty washer and not their abuse that caused the problem. It is hard for you to prove otherwise. If they contest the invoice and say it is not their fault, I would agree to waive the charge and pay the bill. You don't want to turn this into a legal matter or worse yet have a situation where they use it as a reason to not pay rent or something silly like that.

@Mason Snyder I will be honest and tell you I have never done a flip. All my deals are buy and hold. I always get firm quotes from contractors on work being performed. It seems after doing 20 flips that he should be able to estimate the rehab cost and selling price fairly accurately. The risk is that he tells you one thing and then something unexpected comes up. Only what you have in writing will protect you. Hopefully someone experienced in flipping will respond on this post to offer better advice! Good luck.

@Kimberly H. after many years in this business, I still have trouble declining people sometimes. There is nothing wrong with being a good person who cares about others, which it all your emotions reveal. Just remember if you let your emotions make the decision, then it becomes a charity and not a business. Two things I remind myself of when I have to deny someone:

1. Denying them now is easier than having to evict them later.

2. The faster I deny them, the sooner they can move on and find a home that is a better fit.

The worst thing you can do when denying someone is to leave the door open. Sometimes people beg or try to come up with some way to make it work. They will try to explain away the negative points. You are better to just tell them the decision is final and get off the call quickly. 

The first thing that jumped out at me when reading this was to make sure you do your due diligence on who you are dealing with. You can most likely check local property records to verify the rental houses he owns. With his consent you could get a credit report pulled to do a full check on him. That will show you how he manages his money and you should see outstanding mortgages that tie to some of the rental properties. You may be thinking you know the guy and it is all legitimate, which it probably is. I have just heard a lot of bad stories, so be careful. Anyone who is legitimate will have no issues if you ask questions and verify. It just shows you are smart and cautious.

The second thing is to make sure that since him and his crew get paid first, that they are taking reasonable payment. You don't want a situation where the flip breaks even and he made his money through his rehab payment. 

Third though is when the home is purchased are you an owner on the title or will you have a lien on the property? That is just to make sure it doesn't sell without you getting paid. The question is how is your $20,000 secured against a physical asset?

Don't take my message wrong. I don't know anything about the guy. This is just advice to make sure you protect yourself. Lots of people have made money funding other peoples flips, so it is not a bad concept.

I think your numbers look reasonable. We have homes that are a similar profile although a different part of the country. The 50% rule is pretty good for a quick estimate. Of course repairs and expenses will vary depending on the property type and age. For example in a single family home you are most likely having the tenants pay all utilities and take care of lawn/snow. That would not be the case in multifamily. Also age of the property and repair condition play into this. In my houses the repairs are generally very low dollar and uncommon. That being said when something does happen, such as a furnace or water heater, the expense will be large. 

Your situation would be better if you had a down payment on the house. Typically on a rental you would have 20% or more down payment, so your numbers would then change drastically. That being said, it is great you have no money into the house. My first rental was purchased with no money down, so I always joked when people asked about my ROI that it was infinite. In your situation, I would make sure you have money set aside for repairs. I would have $6000 cash in the bank to cover major repairs. The money would also cover rehab if someone trashed it and it needed paint and carpet. It would also cover 2-3 months vacancy in the winter time (unlikely but you never know).

The other factor here is if you plan to self-manage, which I always recommend for a first rental. It will save you money and help you learn the business. If you are hiring a management company, don't expect any cash flow. That will eat up your 10% projected profit. 

The good news is if you are in a good area, over time rents will raise. Ten years from now this investment will cash flow better as rents increase. In my area rents have raised 20% from where they were ten years ago. In the mean time your tenants are paying for the house. You will have depreciation tax benefits, which saves you money in addition to your calculations. This seems like an opportunity for you to get started.  Good luck!

@Patrick L. thanks for pointing out the other costs. That is a good point that their all-in number ends up being more than just the loan amount. 

@Account Closed I had thought about offering no inspection contingency and I have a good track record of closing on deals, so I could make it trouble free for the bank. I would be willing to offer a good chunk of money for earnest money, but my wife sees too much risk. Her thought is just in case we need to back out for some reason. My feeling is that I am putting the money down anyway. 

If anyone knows which podcast it was, I would love to have a listen to it.