All Forum Posts by: Michael Garofalo

I 100% agree with everything JD said, as his approach is exactly how I handle clogged pipes for all of my rental properties. 

Welcome to BP David. I was in your boat and started my journey about 7 years ago! 

I would echo what others have said - 100% start locally because you need to gain an appreciation for what it means to be an investor, understand the lifecycle of a deal and be on the ground to observe what's going on with renovations etc. Personally, I think house-hacking is the best way to start. 

As far as investing out of state goes, I would pick something you can drive to in 4 hrs or less. I invest out of state in Pittsburgh from DC and self-manage everything, but it's taken me years to establish the right contacts, develop seamless processes etc. that allow me to handle everything remotely with confidence. I wouldn't recommend trying to do something like this right off the bat, I think you need to get into the game and really know what you are doing before taking on that level of risk.

Happy to chat more over a phone call or direct message if you want more insights or have more specific questions!

Everyone has different opinions on this and it really comes down to personal preference. For me personally, I would not take on a mortgage if it was going to cause the property to be cash flow negative. If it won't cash flow at 25% down or less, it's probably not worth your time. 

My strategy has been to grow aggressively (by using as little of my own money as possible) to secure good assets, and once stabilized, then work to pay down loans to own them free and clear sooner rather than later. 

A lot of people under-estimate how much work is involved with owning real estate, especially if you go the route of self-managing. For me, I'd rather have fewer doors owned outright that allow me to achieve my personal financial goals than having a large number of doors fully leveraged with less cash flow per door.

Mike, 

My recommendation would be during due diligence for a potential purchase, ask for past 12 months of all utility bills, property taxes, and any other municipal requirements like rental permits, occupancy inspections etc. 

Your insurance is going to be highly variable and I wouldn't use what an agent or the seller tells you as the cost of dwelling policies have increased substantially over the past few years due to rising new construction costs. 

Things like landscaping/snow removal and labor cost for repairs are going to be highly variable based on your market so you'd need to do your own research on the going rate by either talking to other local investors, running your own google search, or exploring basic services on thumbtack/angies list etc. 

I have several investment properties I've owned for 5+ years now. My total expense ratio on each property I own ranges anywhere from 40%-50% annually, but I also self-manage and am not a slumlord (I am pro-active with maintenance, not reactive). If there are any anomalies that occur which require more expensive repairs then that ratio can and will be higher, especially in your first year or 2 of owning a property as you work to get things stabilized. 

@Heather Rummel congrats on your new purchase! I would rent out by the room based on overall square footage of each room. You'll need to do some market analysis to see what things go for in your area, how you want to handle utilities etc. 

I would 100% NOT get a property manager involved. #1 because you will be living there yourself and can address issues as they come up. #2 because most property managers are too overwhelmed with the volume of units they manage to give you personalized, meaningful service. I've went through several over the years and last year just decided to self-manage everything because the fees were just not worth it for the low level of service I was receiving. People have mixed opinions on this, but in one market I invest in, I researched and interviewed dozens of companies and went through 3 before ultimately confirming that there really was nothing which would suit my needs. 

@Byram Heights I don't know your market but looking at your listing, I will provide some generic comments. 

If the house is priced properly, is in good condition, and is in a decent location, it should not take over a month to find someone qualified. For an upcoming turnover I have scheduled (current tenant moves out at end of June), I was able to identify, approve, and sign a new tenant within 1 week's time who will be taking over July 1st. 

I would suggest getting professional pictures taken, or at least using something a bit more high quality and ensuring there is sufficient light in all the rooms. For your listing, I would lead with the most desirable parts of the house first. I would also consider lowering the price. If you've been getting tons of applications and just rejecting everyone then that's one thing, but if you aren't receiving a healthy number leads, showings, and applications, you should really consider lowering it.

Iris, congrats on taking on this project. I would evaluate the decision to add a balcony based on economics and the ability to attract good tenants alone. Do most new builds contain balconies in the surrounding area? Will a balcony make it easier to rent and/or command a higher rent?

If the answer to any or all of these questions is no, or you are unsure, then I would avoid the hassle (and future maintenance) of adding them.

Another con to consider is added liability. Folks could fall off and injure themselves etc. 

I agree with @Bill B. 100%! If you've lived in your current home for at least a year, turn it into a full-scale rental and purchase a new home to house hack in. Ideally something up to 4 units if you can afford it, as this will enable you to still take advantage of conventional financing. 

Mariano,

You're most welcome! I've grown up and have been in the northern VA/DC area my entire life however I do not have any hands-on experience with Maryland specifically. If you are considering DC, east of the river is where you will find cash flow. It's more work but many of the neighborhoods are starting to gentrify and turnover. Looking at places 5 years ago vs re-visiting those same areas today, the differences are night and day. PM me if you want to discuss more specifics on this front.

That being said, I just purchased a new primary residence in Bloomingdale, am living in the top unit and am renting out the bottom via AirBnB. I'm a big fan Bloomingdale/Eckington/Brookland neighborhoods as these are quite safe and boarder very gentrified areas with lots of amenities. 

First off, just a rule of thumb, but I budget more like 20% for overages in terms of unexpected costs. If you have real bids and numbers from contractors then 10% may be reasonable but in my experience, things always come up and they always end up costing more than you would hope or expect. I can't tell you the number of times I had written estimates and everything was agreed on, then once we got into the project the contractor came back (on multiple occasions) to request change orders for things that would never have been known without opening up walls, ripping up flooring etc. 

As far as re-sale goes, 3 beds and 2 baths is much more desirable than a 2 bedroom 2 bath. You should quantify how much more in rent you can stand to make from adding the 3rd bedroom but if it was me, as long as your rent is at least $100 more per month, that's an extra $1,200 per year which is a 12% ROI if your estimate on the cost to convert the garage is actually 10k. To me, that's a no-brainer to add the 3rd bedroom, however that 10k number seems low to be honest. I assume you'd need to go through zoning/permitting process for the conversion, run new electrical and plumbing, add insulation and drywall before you could do flooring and paint. If all of that is required, it's most certainly going to be more than $10k unless you are going to do a lot of that work yourself.

Another option is to just fix it up as a 2BR, refinance to pull your money out, and in a few years when the first set of tenants leave, then convert the 3rd bedroom once you have some additional cash reserves built up.