All Forum Posts by: Jon S.

@Patrick L. This is a great discussion, a lot of information here to learn from. My first property was a tax deed sale on a property that was also lost to foreclosure. I purchased it from a wholesaler, went to closing at the title agency, they did a search for liens etc before closing, so there were no federal liens, etc. I paid an additional $1500 for Quiet Title Action. It has been over 120 days, and the QTA is still in process. I began renovation immediately after purchase, and renovation was not cheap. This was my first purchase, how could I even know that it might be smart to wait 120 days? But in reality, since the title office did a search, I don't think I was taking any risks. Was I taking risks? The problem with having a QTA take this long, and it will probably be another 60 days according to the attorney, is that I can't get refinanced, so my capital is tied up in this property until I get a clean title. Other than that, the property was cheap, and I completed the rehab, which came out beautiful, and I now have a buy and hold with total costs of 86% of ARV, which yields 2%/mo gross rental income. I would definitely do another tax deed sale. However, I would probably want to be the direct bidder at the auction, rather than buying it from a wholesaler, and maybe be able to keep my total costs to 70% of ARV, if I bought it directly at the tax deed auction. Thanks for all the great discussion here on this subject, it is very enlightening, and perhaps tax deed sales should be a separate board.

 I tried looking up your attorney Henry Hicks and if you don't already know it I'm sorry to tell you of this unfortunate news: http://www.tampabay.com/news/humaninterest/tampa-lawyer-liked-helping-others-facing-challenges/2177326

I purchased a property in July, which was resold to me from a wholesaler. At time of closing at the Title office, I paid an additional $1500 for an attorney to handle the Quiet Title Action. It is now 4 months later, and the QTA is not complete. Just two weeks ago, they exhausted efforts on finding the former owner and decided to publish, and told me to plan on another 60-90 days. Is this normal time frame? How much longer will it probably be, after publishing, before the QTA is completed and I have a clean title? Is this a normal amount of time before deciding to publish? For future reference, if this isn't a normal time frame, are there any attorneys in Tampa, who are faster with QTA service? Thanks

Has anyone ever been in this situation? I'm renovating a triplex I just acquired, in a neighborhood which is currently going through transition from low income to high income.  The problem is it has been a low income neighborhood for a long time, and the transition has started but it will take a few years for the neighborhood to look nicer. I'm not sure how nicely to renovate. I have to renovate completely either way, as the place was a complete gut. I have to renovate the kitchens, but I have options, like to salvage the existing cabinets, which are older. The kitchens have to be renovated either way. Do I spend on new cabinets? Not very far away, about 6 blocks away, a traditionally trendy high income neighborhood delineated by a main street, has become overpriced, so many buyers and investors have decided to start buying in this neighborhood, which is equally close to everything.  While high priced homes have already started being built and purchased in the neighborhood, at the same time, there are several drunks who walk past my triplex several times a day, and usually ask anyone they can for money. While I have sort of gotten used to it, I doubt prospective higher income tenants are going to like this aspect of the neighborhood, drunks walking up to them and asking for money for a meal. I want to attract professionals who wants to live near downtown, and this place is literally under 5 minutes to anywhere downtown, and also about 10-15 minutes to the university. There is also a medical school moving to downtown. I see a lot of opportunity to rent to young professional renters. These are all 2/1 units, between 650-875 SF each. I can put in privacy fence to make it nicer and also to give some relief from the random inquiring local drunk brigade.  However, I'm still not sure if that is enough, and I'm worried if I renovate with nicer materials with that professional as my target market, which is my current plan, that I might find the neighborhood in transition will keep higher end tenants from renting. What can I do to make this situation better? And is it still smarter to use the nicer materials and go ahead and make the kitchens a bit nicer with new cabinets rather than salvaging the existing cabinets? Any suggestions appreciated.  

 I've been reading What Every Real Estate Investor Needs to Know About Cash Flow, so now I understand what you are talking about. Learning to put it to use is another story, but I think I am getting the hang of it. Yes, I love numbers and spreadsheets. Thank you :) 

 Thank you Warren. To reduce operating expenses I decided against property management, as I am local, and without property management the property will be at 29% Operating Expenses. There are two other variables that could improve cash flow. I'm hoping to reduce my debt service by pursuing conventional financing, but that may take some time, as I don't have any rental income on any tax returns, and I am told it takes two years of tax returns before they will count it towards a conventional loan application. Assuming in a couple years I can either lower the load interest rate, or I can get higher rent, or both, the cash flow should improve. 

 Thank you Michael. I bought it! 

You have a lot of good feedback here. You are correct, the cash flow is not so great. I'm hoping the newly renovated apartments will bring $3300/month rather than $3000/month, which would increase the cash flow considerably, but even at $3000/month it will cash flow positive. I hired an architect, and the 1/1 became a 2/1, so now it has three 2/1 units which should increase rent a bit. 

It's been a month and the hardest part of the renovation is done.  I estimate I'm about half way through, and hope to be ready to rent by Feb 1. 

I am hoping there will be considerable appreciation in both the equity and the rents. Some high end homes are already being built nearby and a new 2200 SF home just sold for $370K.  

My new calculations are as follows: 

Purchase and Renovation: $240K

Project interest and fees for 5 months (until refinance): $9K

Total Cost: $249K

Annual Rent: $39.6K

Operating Expenses: (Vacancy 9%, Maint 5%, Reserves 5%, Tax 5.35%, Ins 4.68%) total 29% = $11.5K

Net Operating Income: $28.1K

Total Debt Service: $23K

Annual Cash Flow: 28.1K - 23K = 5.1K

If rent is only $36K/yr, the annual cash flow will be $1.5K 

Hoping for an ARV of 151/sf x 2550 sf = $385K

 I like this idea, of letting tenants in the main unit find tenants for the in law suite. Thanks for this idea. 

If this doesn't work out as a rental, I might use the ADU to increase the property's market value and sell it. However, if it does work out as a rental, my calculations indicate that I will earn significantly more by renting and holding the property for a few years before selling.

I could call it unit B if the property were zoned as a duplex or zoned to have two units for rent, but it is zoned as SFR. It doesn't look like I can change the zoning.