All Forum Posts by: Michael Lauther

K. Marie Poe this is common practice in many cities that have low price housing. Dayton has a program administered through the building department that takes a Percentage of funds paid out on claims and will refund upon completion and inspection of repairs. The problem occurs when it is cheaper to buy existing inventory than repair damaged property. Many landlords just walk away with the insurance proceeds. In my case I can replace the property for $20K but the repair will cost $25k. When the market rebounds the property will be worth $35 K bu that may take some time. Since I am out of state I prefer not to take on major renovation so it would probably be worth to a local investor to make me an offer and take the property off my hands otherwise I will repair and rent to section 8 for 625 month the taxes are around 1100 and insurance will be 60 a month. The market in Dayton is still loaded with properties in need of repair but the economy seems to be improving. The Air-force Base is a major employer so the recent political turmoil will impact the area.

a percentage of the claim was sent directly to the city to hold. It amounted to approx $3300 on a total loss paid of $25k and this included loss of rent.

Jon Klaus, I have though about seller financing I am concerned that I may be trading a risk of eviction with the risk of foreclosure. your post however has me thinking.

Brittney Taylor, I own a fire damaged property in Dayton and while my experience may not be representative it may be helpful. Many municipalities are holding back a portion insurance proceeds from fire damage claims that are settled by insurance companies. the reason for this is that often the damage is substantially more expensive to repair than the proceeds allow for and the market and many properties are abandoned. The city holds money to pay for demolition if needed. I intend to fix the property I own but it will result in a break even proposition for me in that I can by another property without the risk of a rehab and the loss rents inherent in a long project with cost overruns. I am heavily invested in the neighborhood and will do this to do my part in maintaining the area but from a pure financial analysis I would be better served by bulldozing the property.

If you are going to make offers on fire damaged property you need to be aware of the likely rehab costs some of which will not be apparent. I my case the smoke damage has caused damage and mold to grow behind the walls which must be demolished and replaced. You need to become an expert at what needs to be done if you are going to concentrate on fire damaged properties.

If you have the energy and the expertise you may try contacting the city you want to invest in to find the owners who have money being held for this purpose. I know that if someone contacted me I would gladly entertain offers.

I can definitely attest to the fact that the 2% and 50% guides do work but you need to those markets that are suited to these parameters. They are not rules as has been stated but do reflect some basic realities. I invest in Dayton Ohio because these guides do not fit my local market and what I a seek is current income from cash investments. I can buy properties that rent for $600 a month for under $30,000 in non war zone neighborhoods in the city. Most properties that need rehab will be in the 2 to 3 bedroom 1000sq foot range with taxes and insurance under 1400 per year. Most cash prices are in the area of 15,000 with 6,000 in rehab. The problem is that there is no resale market at this time. Most sales are cash investors with little retail activity. Dayton is not unique in that there are markets similar to this across the rust belt and i am sure in many other parts of the country.

@shema I invest in Dayton and live in NY and would suggest looking close to home there is a great opportunity in Ohio for Buy and hold investors no need to look as far from home as NY.

Steve Babiak I took the insurance proceeds and purchased a property with it. The city is holding money until I rehab the property and if I spend some time in Dayton I can probably get it done for 15K to 20K . I do not want to start the project until my cash flow builds up my reserve account a bit more and I resolve some tenant issues. I think the property would be worth 25K and
possibly 30k when done but right now I am not confident in the ability to sell anything until the retail market comes back. Still plenty of cash buyers in the market and lots of vacant properties that can be put back in service and sell for 15k with under 10k in rehab needed. Good for buy and hold investors with cash.

Josh M. as you have already researched the 50% rule you know that it is only an average. The condition of the property and maintenance issues will probably be your biggest variable. Taxes, insurance, and property management are easily determined the age of the building and any deferred maintenance can make an enormous difference in profit. A new roof could take a large bite out of profit and vacancy can throw a wrench into your numbers. Part of your due diligence is to evaluate these variables realistically. so on the face of it it looks like a $12,000 net annual cash return on an $85,000 investment. IMO this would be a good return in an upscale stable neighborhood But would not be attractive in a lower income "C" area where you would expect more vacancy , difficult tenants, and higher maintenance.

My short term experience with section 8 in Dayton is that initial rehab cost is higher due to regulation, maintenance has been the same and utilities are paid by the tenant. The up side is rent is deposited electronically like clockwork. would take all the section 8 I can get but you must screen tenants just as car fully.

Rob K when it comes to buying a home retail buyers may want the best price but are driven by more emotional factors and they will pay more than an investor looking at the same property. Supply and demand are factors that drive price and when you "fall in love" with a property because it is to be your home you will pay more.

K. Marie Poe, I am just guessing here and would also like to see more knowledgeable answers but the appraisal is only one aspect for a lender to consider when making the loan. If the buyer has a large enough down payment a low appraisal may not kill the deal.