All Forum Posts by: Leo R.

@Randall Re II I agree, and I'd add:  the ability/skill to see value (or potential value) in a property that others do not see.

For instance, being able to see that a house with a weird floorplan (that's turning off buyers) can be altered in a way that increases the value of the property, and increases its rent income. Or, finding a property on a moderately busy street (that's turning off buyers), but knowing that the busy street won't affect tenant demand--allowing you to get the property at a discount, thereby unlocking cashflow.

These days, it's very uncommon (almost impossible) to find a perfect, quirk-free, A-grade property that works as an investment (I wish it were that easy!). Instead, successful REI requires spotting hidden potential, and knowing how to turn a property that others don't want into a property that others do want. 

@Mariah Porter I've lived through some pretty serious basement flooding issues on one of my own rentals, so I definitely feel your pain--it's not a fun situation.

My natural reaction was also to wonder about the seller's disclosures, and whether I could bring a lawsuit against the sellers, but I pretty quickly realized this wasn't feasible or advisable (in my situation, it would have been almost impossible to prove the sellers were negligent or withholding a disclosure, and the legal fees would have been steep). ...but, I'm not a lawyer, so it may be worth asking a lawyer anyway...

I think your first priority here is to figure out what's causing the flooding, and fix that issue as soon as possible.

Most houses have a drain at the lowest part of the slab that's intended to collect water in event of a flood (for instance, if a broken pipe caused a flood)--I assume that that's what this pipe is?  If you pour water into this pipe, does the water disappear, or does it immediately back up? (it should disappear--and if it doesn't, you may need to call a plumber).

Regardless, you'll want to start investigating what caused the flooding, and try to zero in on the cause BEFORE you start trying to make any fixes (such as digging a sump). When I experienced flooding problems, it was natural to want to try to jump right into fixing the issue, but I soon realized I was just shooting in the dark until I knew the cause of the flooding (for me, it turned out to be a ground water issue)

There are lots of questions you can ask to try to determine the cause of the flooding--for instance, was the entire carpet soaked evenly, or was it only soaked in a particular spot? (either can be a clue for where the water's coming from). You said the ground is very frozen now, but was there any rain or snow melt in the last week or two?  (if so, then it could be ground water coming up from under the house--in which case, a sump (or multiple sumps) can fix the issue. Is there a water supply line, or a sewer main in the area of the flooding? (either could be a source of water). Are there any large culverts, drainage ditches, street drains etc. near the house? (all are sources of water). What is the age of the property, what is the foundation made from, and what's the condition of the foundation? (water could possibly seep through cracks in a foundation wall).  Are the foundation walls exposed, and if so, can you see any cracks or signs of water dripping down a foundation wall? etc., etc., etc.

If the issue does seem to be ground water, don't be afraid to call in a hydrologist, who can help you better understand how to fix the problem. (I called in a hydrologist when I had flooding issues, and for a couple hundred bucks, he gave me info I used to fix the problem myself for about $3k--when it would have cost about $30-60k if I had relied on pros! So, he was definitely worth the fee).

And most importantly, try to stay positive--I found my flooding issues to be one of the more stressful things I've experienced as a real estate investor, but they usually CAN be fixed (once you discover the cause), and it is possible to bounce back (believe it or not--I was able to completely fix the flooding issue at my property, and it's now the highest-performing property in my portfolio, so it was worth the headache).

Let us know if you have questions--getting input from a lot of people can be useful as you try to figure out the source of the problem, and potential solutions.

Good luck out there!

Interesting, and agreed....though, I wonder if the higher levels might be partly fulfilled by certain RE investments. For instance, maybe owning a property with world-class architecture inspires creativity, or succeeding at some really incredible investment contributes to an investor's self-actualization...

@John Peter trying to time the market is notoriously difficult--and even the biggest "experts" in the world tend to get it wrong.

If a deal is a deal right now, then I'm going for it--regardless of what people think the market *might* do in the future...even if I think prices will drop in 6-12 months, if I find a deal today, I'm buying it today. Plus, I buy property to hold for 10-30+ years--in 20 years, I guarantee you I won't be worrying about whether I bought property A at 15% below the prices of 12 months before the purchase, or whether I bought property B at a five-year market peak, or whether property C was bought at 6.5% versus 6% interest. All I'll care about is the fact that the properties cashflowed, the tenants paid them off, they were (relatively) easy to manage, and they appreciated at a decent clip.

That's why I'm always looking for deals, and I'm always going after deals--regardless of speculations about the market.

Now, having said that--I do agree that there's a good chance prices will come down in the relatively near future (and already are coming down in some areas)...but, I just won't let that deter me from buying a deal today.  I bought a property recently, and I knew very well that I was probably buying at the peak of the market, but the property was a deal, it fit my needs, it's in a recession-resistant A-class area, and it's producing great returns--and my net worth and cashflow are better with the property than without it, so I don't really care what the short term market dynamics were when I bought it. 

If you're still concerned about timing, you could spread out your $ over multiple purchases over time--basically DCA. Buy a deal now, then another in 12 months, then another in 12 months, etc.

...and I agree with what others have said--condo HOAs introduce too much risk and uncertainty into the mix for my taste. I rarely if ever hear investors who have had condos long-term who say "Oh, my HOA has been GREAT!", but I've heard countless stories from investors complaining about how their HOA is incompetent/doesn't fulfill their obligations/acts erratically/passes no-rent regulations that blow up the deal/does other stuff to make their investment not perform, etc., etc.

If there ARE any investors out there who have held condo investments for more than a few years, who have been happy with their HOAs and their investment returns, I'd be interested to hear those stories...

@Pafoua Vang Xiong there's not enough info to go on here, because it depends on factors such as: how much debt is on the credit cards, what's the rate on that debt, how much cash do you have, what else can you do with that cash (and what types of returns could you get), what's your overall DTI look like and does the CC debt prevent you from qualifying for financing to invest in RE, what's the ratio between your debt and net worth, what's your income and cashflow, what other debts do you have, etc., etc., etc.

Depending on these types of factors, what makes sense for one person might not make sense for another person...for instance, a person who has a net worth of $10k, and who has $10k of credit card debt is probably over-leveraged...but a person with a net worth of $1 mil who has $10k of credit card debt is probably in OK shape (I say "probably" because there could be other factors in these peoples' finances that could change our assumptions--for instance, if the millionaire had $5 million in auto loans for exotic sports cars, they might be in trouble).

Context is everything.

@Svend W. your lease should have clauses that describe what happens when there are unpreventable situations that prevent occupation (like a tree falling on the house, or pipes bursting)--this clause should be designed to limit your liability in such situations.  If you don't have that type of clause in your current lease, you'll want to add one for the future...in the meantime, consider telling the tenant that the space is not habitable until the problem is fixed, and that they are not required to pay rent for the period that the space is not habitable--during which time, they can stay in a hotel/air bnb etc. ...but, it also depends on your local laws/regulations on the issue--some areas might require you to provide a hotel; at the end of the day, you have to follow whatever the law says....

Good luck!  

@Gemma Sanchez one of the most important ways to "renter proof" your investment property isn't a thing, it's a process: careful tenant screening.  If the tenants are bad, it doesn't matter what you do to "renter proof" the property--they can still ruin the place and cause you massive headaches and financial losses  ...conversely, good tenants will cause minimal wear/damage, even on a property that hasn't been "renter proofed" at all.

...And yes--things like felts on the bottom of furniture, LVP or tile floors, removing the in-sink garbage disposal, etc. can help prevent problems and slow down wear.  Also, it's a good idea to show tenants where the water main is, and show them how to turn off the water quickly in the event that a pipe bursts or springs a leak--this can potentially save you a lot of money by preventing flood damage.

Good luck out there!

@David Coughlin age of the building--in and of itself--is one of my LAST concerns. I buy properties based on factors like the local tenant pool, the grade of the property, the grade of the neighborhood, the possibility of value add techniques, etc., etc., etc., but I've never bought (or not bought) a property simply because of its age. I own properties from the early 1900s, 1940s, 1960s, and early 2000s--and frankly, the older properties are often my favorites, and are often my best performers.

One of the biggest misconceptions by inexperienced RE investors is that new houses are inherently "better" and less costly/less headache to maintain than older houses. This is true some times, but in some scenarios, brand new properties end up producing significantly MORE maintenance/repair headaches than older properties.

The reasons are:

1) Some building techniques/materials are far superior to those used in the past, but some are not, and some are unproven. For instance, I'm very doubtful that pex will have a longer service life than copper plumbing. The trend toward flat roofs is just silly in most areas (bc it causes water diversion problems, which then cause a myriad of other problems). Lumber quality today is mostly trash. Etc., etc.

2) A new house hasn't gone through its "growing pains" phase. All sorts of problems can emerge in the first few years. For instance, inadequate/improperly designed water diversion systems can cause major problems (e.g.; rot, masonry degradation, foundation settling) that won't emerge for several years. I personally know people who bought brand new, multi-million dollar, beautiful luxury homes, only to have serious foundation settling over the first 5-10 years of ownership (and the repair bill was in the hundreds of thousands!).

On the other hand, an older house has been around so long that these types of problems have either occurred and been addressed by previous owners, or they're often plainly visible. For instance, if there's an unresolved settling issue, you can probably see cracks in the foundation, buckling, un-level floors, un-plumb doors, etc. ...but, if everything is solid now on an old house, it'll probably remain pretty solid for the foreseeable future. As my GC says: "if it's stood straight and true for the last 100 years, it'll probably make it at least another 25".

Don't get me wrong; there are plenty of issues/problems/quirks that old houses have that new houses don't, and an old house can obviously have hidden problems and big repair/maintenance bills too--which is why thorough due diligence is fundamental to REI...but, the point is: a new house is not a foolproof solution to repairs/maintenance headaches (and in some cases, a brand new house can be a much bigger gamble than an older house).

Good luck out there!

@Dyami Pike I first analyzed my existing budget to determine what I was spending my money on...unsurprisingly, the three biggest expenses were my housing, my vehicle, and eating out....so, I moved into a much cheaper rental with housemates, I sold my car, and I stopped eating out, and I saved. I also consulted with a mortgage broker who helped me understand my DTI, and helped me understand what I needed to do to qualify for a mortgage...and then, I did those things....

Then, once I had saved enough, I put 5% down on a house, which I house hacked (I lived in the smallest, least valuable room in the house, and rented out the other rooms). I repeated that process over and over for years, buying another property approximately every 12 months, and taking advantage of the excellent terms of owner-occupant mortgages. Most of the houses I bought were 4-5 br, 3-4 ba, and most had at least one very large master suite that rented at a premium. My general rule of thumb was that, if I was living in the house, I wanted the rest of the rooms to net $400/mo cashflow, and if I wasn't living in the house, I wanted the place to cashflow $800-1000/mo. I was also buying mostly B grade properties in B grade areas that had good appreciation, and a good tenant pool...eventually, I had enough wealth built up that I could gradually begin improving my lifestyle (e.g.; occupying the nicest room in the place I was house hacking, then buying my own house, then buying a nicer house, etc.)...but, I was careful to avoid excess "lifestyle creep" --I didn't allow my increasing expenditures to out-pace my increasing income.

Good luck out there!

Asbestos, old electric (esp. knob & tube), and old plumbing (like galvanized steel) are the other main issues...but, I wouldn't not buy a property simply because it had old electric, old plumbing, asbestos or LBP  (I've bought many properties with these issues). The key is to educate yourself on these issues, understand how to spot them, understand why some of these issues might (or might not) need to be remediated, and understand how they can be remediated--and the costs associated with remediation.

The only issue that is a total deal-breaker for me, personally, is major structural issues (e.g.; major settling, serious foundation problems)...but even then, there are investors who specialize in buying and fixing those types of properties --again, the key is educating yourself so you know what you're getting into. 

...it sounds as if maybe you're looking for a hard-and-fast rule like "DON'T buy a property with X", or "DO buy a property with Y" --the reality is, REI is rarely, if ever, that cut-and-dry--it has many shades of grey, and it requires flexibility and creative thinking.

Good luck!