All Forum Posts by: Mike Sedlacek

Sure it is. I purchased a four plex for $35,000, owner financed with $3,000 down. The rehab cost me $10,000 because I did the work myself. I used my free and clear home and borrowed $20,000 from my commercial bank banker. I then sold the poverty as an investment property with 12% cap rate to an investor, business man for $75,000. Paid off the borrowed fund and paid the seller the owner financed note. 

How about a car title loan, or call the banks that have your credit card and ask for a higher limit with cash advance. Ask a family member to go in with you as a money partner you do the work and split the profits. Join a local REI Club and seek out members to create a Joint Venture project. Partner with the property owner for a short term project and cash when sold. Get more credit cards to use to buy material. Start with a property that won't cost you an arm and leg to rehab. Something that you can quickly paint and clean and rent out with the understanding of the tenant that you are continually working on the property for thier benefit using thier rent money to do the work.. Volunteer the house as a project for a local high school shop class to come and work on the house, you supply the material they supply the students to do the work.

I found a great source to find off market deals.  I started calling handyman businesses first to get quotes for work I needed to get done. Then it dawned on me to start asking them for possible people that may be ready to sell thier homes. Guess what? I found a good deal in Portsmouth , Virginia where I have recently moved. I just bought a house that was going to be in probate from a family member that lived out of town. They had called this handyman to get some work down. I went to the house with him one morning and he introduced me to the family member. I looked over the house and made them an offer that got accepted.

The house was way out of date with old appliances, old bathroom with the 5 gallon toilet, broken garage door, bad smelly carpeting, interior with dark color paint, 1400 square foot house, 3 bedrooms, one bath, etc.. I paid $44,000 and the tax assessment is $156,000. The house next door, a 2 story, recently renovated, sold for $145,000. The house 7 doors in the opposite direction, also a 2 story and rehabbed, sold in April for $148,000. 

I expect to put in $20,000 in renovations plus another $3,000 clearing the lot and landscaping. The property hasn't been mowed in over a year with lots of overgrowth. Basically the house needs painting, flooring and simple updated of the bath and kitchen.

To remove the pet urine stains, I poured hydrogen peroxide directly on the stain, covered it with a hydrogen peroxide-soaked rag, and then covered that with plastic wrap and let everything sit overnight. In the morning, the black stains and odor were gone, and I was able to sand and refinish my floors.

I have bought 5 year old appliances from large apartment complexes. They seem to purchase them in bulk on a bid bases from vendors and they remove the old ones, you can buy for $50 each, refrigerators, gas stoves, electric stoves. I get another 5 years or so out of them. You can pick thru the best ones if you get there early enough. The used appliance dealers buy them often from this complexes. You have to make contact with thier maintenance group hopefully before they start the change out and to get thier next change out schedule

I also buy scratch and dent from retailers and I get a 30 day warrantee with it. I usually save about $100 to $200 off brand new ones, sometimes 50% off show room models that are discontinued. 

If you are buying 10 or more, as an example,15 cu. ft. refrigerator, at once, try going to a vendor and ask for a discount for multiple purchases.

Absolutely. It is definitely about the area. In my town of 40,000 people prices are low compared to other area across the country. I did a simple rehab on a house of 1400 Sq. ft. with complete interior painting, new flooring, upgrade kitchen with new counter tops and appliances which I purchased scratch and dent from a retailer, including dumpster for construction debris and clean out debris. The project cost me $10,500 plus change. I had the project done and ready for sale within 2 months. Drywall is under $10, paint is under $30. Carpeting is under $4.00 a square foot. Post form counter tops under $200 for a 10 feet piece. Plus other items as you can get an idea of prices here in my town.

I'll tell you as a contractor that has done work for Lowes and Home Depot, expect a 40% mark up on contractor install prices and material. 

Do you want a quick way to figure rehab costs? If you can measure the size of the house from outside when you can't get inside simply figure the square footage. If you can peek inside from a windows determine if it will be a simple fix and flip, a middle of the road or a total rehab, use this simple formula that I use for a quick estimate. For a simple fix and flip such as painting, flooring and simple repairs - $10/Sq. Ft.; for a middle of the road rehab such as upgrade kitchens and baths with the simple fix route - $20/ sq. ft. ;  And a total rehab with roofing, kitchen, baths, flooring, painting, windows, etc. $30/ sq. ft. .

As an example, say you have a house with 1000 square feet on a simple rehab the quick estimate would be $10,000. The same house on a middle of the road rehab is $20,000.

And the total rehab cost estimate would be $30,000

So try that and you will find that you will be close to the actual numbers.

Don't purchase, go the wholesale route. Bad neighborhoods will cause a long time period to rent out to better class of people. You may be stuck with same type of people in the neighborhood. Fix and flip will cause you a long time period to find a buyer willing to invest in a poor neighborhood. 

I'm not all to sure about some of this advice above here. When I graduated college I went hunting for a multi-family and I came across a 6 family building. I ran the numbers and it worked out that I could buy the property and live there rent free as well. I didn't read any books. What is the big deal. You find a property, get the numbers, determine your investment criteria to make money, find funding or ask the seller for Owner Financing, and buy the building. 

If you are worried about tenant rights, google it. If you worry about eviction process, go to the local court and ask for an eviction process package, read up on it, contact a lawyer for help, pay the fee, and go thru the process.

If you are not going to manage the property, then interview several management companies and determine which will be the best fit for you and hire them on a trail bases, 6 months or so. 

Get an accountant for help with tax planning. Determine whether you are going to keep the building for 10 years +, and or sell it or do a 1031 exchange when your tax right off  is used up. Move on to a larger project and become well off and financially secure in 10 to 15 years or sooner. 

As a beginner don't buy a run down property, very costly, lots of headaches, seems to take for ever to upgrade. Stay into a B neighborhood so that you can rent to a better class of people. Don't buy properties over 30 years old, they usually are way out of date, unless the owner kept things up. 

After you own the property put together a team that will help you, accountant, lawyer, handyman, plumber, electrician, insurance agent, your family, answering service, discount material suppliers such as appliances, paint, building materials, carpeting wholesaler, etc.

I guess you have to start by deciding on a hands on or hands off operation. Plan your strategy for holding and expanding to more purchases.

I started with a 6 family, then a 5 family, onto a 8 family, three 4 family buildings,two 12 families, a 16 family, 5 single families and a 50 unit mobile home park, all with in 20 years.

And I sold them all. Now I'm moving to a new state and starting over but more with fix and flip single families. So there you are. Oh and join a Landlord Association, they have been a great help for me.