All Forum Posts by: Larry Turowski

@John Tarricone I agree with @Mark W. To add my own 2 cents, 1) tenants are not going to rent or not rent because of the trim, 2) if the finish is in good shape aesthetically, you’re just adding work and it’ll be more work to maintain going forward, and 3) trends change and it is not easy to go back to exposed wood.

Don’t do it. 

@Heather U. it's a simple ROI and cash flow question. You don't go into great detail but you day that your $24k down (20%) on your singles yields $2,400 cash flow annually (1% of invested cash) and your $50k down on the multi would yield $15k annual cash flow (3% of invested cash).

If that is true cash flow and not considering anything else the multi is by far the better investment. 

I think this thread might be a little self selecting.  Most seem to have plenty of reserves.  I could last well over a year if nobody paid.  That is partly because of my conservativeness and business model--I flip as well as buy-and-hold exactly because flip money is more liquid and I like being liquid, and because of timing.  I'm not in the middle of a flip right now.

But according to this JP Morgan Chase article, real estate businesses on average have 47 days worth of reserves.

Of course, the government is making no-income look more likely with rumblings of rent "forgiveness."  Don't get me wrong, I'm all for the government helping out, just not singly at the expense as landlords.  How about paying people's rent, thus spreading the cost onto society as a whole, rather than confiscating landlord gross income (85% of which goes to expenses)?

We really need everyone to oppose this bill. I also contacted my banker for deferments, not because I need it, but I need them to step up and oppose this too. 

Here was my personal message when opposing:

This is terribly thought out. About 15% of my rents are my earnings. About 30% goes to mortgages and 55% goes to maintenance, taxes, utilities (several of my units come with utils which I pay), water, seasonal maintenance, And insurance.

As a full time landlord, this bill would not only take away ALL my income, but would leave 55% of my bills remaining.

This will be economically devastating to me and many like me.

It unconscionable that government would foist responsibility for social services on landlords. We hardly have the pockets to take over for the government and many could be bankrupted by this.

This is the problem with a moratorium on evictions. It results in the perverse outcome of tenants prioritizing less or non-essentials like phone, cable, internet, even credit cards over the essential of rent because these less-essentials will be shut down if they don’t pay.

I totally understand the moratorium on evictions but it should be coupled with rental assistance. It is patently unfair to essentially make landlords subsidize non-essential purchases or to make them the social safety net. We don’t have the resources for that.

Food is more essential even than housing but they haven’t passed a law letting people walk out with a cart full of groceries handing the cashier an IOU.

This is a problem and is not being addressed at all. 

Nobody responding?  There is just too much uncertainty right now.  Business hates uncertainty.  And I do too.  I had a flip that I'll be backing out of (or at least postponing) because it is a major project. 

I've got a bunch of rentals and we'll see if people maybe in April.  Whether they pay will inform me whether to move forward on other deals or circle the wagons.

I do. For a few reasons. I go through the house quickly when I look. I’m looking to make a deal based on a quick look. I don’t want to spend 2hrs looking. Also, I miss things. Even if I look hard. It’s worth it to me to hire an inspector. And not just for big expensive things that I might have missed but for little things I’ll want to fix before I sell. 

@Kellie Harden He may be a big time wholesaler. There are plenty of buyers out there who are willing to pay more. Some pay too much more. You have to do what is right for you.  You’ll find fewer deals the better the deal you need is, and more as you approach market value.  So it depends on how many deals you need, cost of funds, economics of repairs (whether you do them yourself or hire someone), etc.  But he is right that, generally speaking, the bigger the deal, the looser investors will be on that 70% figure, climbing up to 80% or even more if they overpay. 

Generally speaking, the lower the ARV, the greater the discount will need to be. My general formula is 75% ARV minus repairs for houses in the $100 to $150K range. But there are plenty of houses here that go for under $50K. I need a bigger discount because the "gotchas" can be just as expensive but the margins in the deal are smaller. So I'll need the price to be 70% ARV minus repairs or even less.

Let's say, for instance, there are two houses. one with an ARV of $100K and one with an ARV of $50K. Both need $15K of work. For the $100K house my calculation would be 75% or $75K - $15K = $60K purchase price. After repairs I will be into it for $75K (purchase price and rehab costs only), but then there will be the unexpected $2,500 expense, so it'll be $77.5K. Assuming 10% ARV or $10K of other costs (buying, selling, holding), that would leave me with a $12.5K profit. Not great but I can live with it.

For the $40K house, if I stuck with the 75%, my calculation would 75% or $30K - $15K = $15K purchase price. After repairs I will be into it for $30K but then there will be the unexpected $2,500 expense, so it'll be $32.5K. Assuming 10% or $4K other costs, that would leave me with a $3.5K profit. Not worth it. And a worse gotcha would wipe that out. I'd need my calculation to maybe be 60% ARV minus repairs, maybe even 55%.

Now, for a $500K house maybe I could go to 80% ARV minus repairs.

@Hedi B. Really the most important information is your exit strategy.  And that is a group of questions.  What is it worth?  What are you going to do with it?   And what is it going to cost to do that?  These questions will inform your offer.