All Forum Posts by: John Woodrich

And also - I hope you aren't planning on conventional financing if it needs that much work....  It won't pass muster.

@Matt Mayotte watch out on the commercial zoning...  The city may not let you pull permits and put it back to a non-permitted use (residential).  I would definitely call the city and make sure you can improve the property to the use you want.  Where I live we have houses fall into the commercial designation after vacant for so long and they become very difficult to sell the prices drop VERY low.  For example my brother picked up a house for $17k and two others sold for in the $40k-$50k range when they otherwise would have sold for $120k+.

Sounds like an off MLS deal, even MLS deals have bad advertising which is why it says buyer to verify so I wouldn't get caught up in that.

The zoning would make me run away unless you are sure that you can fix it.  In my city it is not a fine but a Misdemeanor to use a property for an unpermitted use.

I don't have the time for a thorough answer by most of the investments I have and had in the past few years have all been rehabs of some sort.  Some were larger rehabs and the ones I kept I rented for cash flow or because I purchased them when the market was down and I thought the market was going to improve.  Others are cheaper rehabs which have only been renovated to the point of getting rent able.  I may want to swap out kitchens/baths/etc before selling to get a better top dollar but I am not there and they are just my cash cows.

The nicer, complete houses I have noticed prices pushing to the highest they have been in the last 7-8 years.  These houses were worth $125k-$130k when the market was down and were now worth $175k which was near the previous top.  I sold these houses because prices were high and I had a better use for the money.  For example if I search I can turn $170k in my area into 2 rentals.  Playing monopoly it made sense to double down.  The cheaper rentals I am keeping solely for operating cash flow.

Interest rates are low now but the fed just ticked rates up.  Although they say it won't impact consumer loans it ultimately does.  I am predicting the interest rates to rise further before they drop which will directly reduce the prices of houses.  I am also making sure I have cash available for when it is needed and have been working on moving to more of a leveraged structure because I am mostly investing equity.  I am looking to work with hard money lenders on projects I have the cash for just to stay flexible.  That should help lead to greater opportunity and sharing of the risk.

All real estate contracts have to be in writing.  This could be on the back of a notepad but obviously you won't have covered all the items to help a title company close the loan.  Agreeing on price is a start, after that you need to detail out who is going to pay the assessments, pro rations, etc.

If you agree to terms verbally, you will need to present an offer with your earnest money check.  If they accept you can setup closing at a title company or an attorney.

If you are not confident in preparing an offer with all required disclosures (wells, mold, lead, etc) you should pay someone to do this for you.  It will only save you money down the road.  

Going along with what others have mentioned, estimating by square foot will only get you in trouble.   Get your arms around the major repairs/upgrades (kitchen, bath, windows, roofing, etc) and leave yourself room for the stuff you may have forgotten.  As Suzanne mentioned if you can walk the property with a contractor great but if it is your first property and you plan to put in some sweat equity it may be hard to get a contractor to walk the place and give you a bid.

In the beginning I would create spreadsheets detailing out costs for each room needing work including the price of materials, labor (if any) and an overage.  That really helped me get my arms around estimating, some things that don't seem like a big deal can throw you off.  If you are off in every room it can create quite an overage!

Oh - it wasn't your question but in my experience most utility companies like to have you on the account as the landlord however they will bill tenants directly.  They like to have you on file to facilitate the utilities back into your name when a tenant moves out.  

I believe it is public information if you called the utility company and asked them how much gas/heat/electric were for the year.  If not you can always ask the seller for that information in completing your due diligence.

The real answer to your question is that it depends on the circumstances who pays.  Each area has a different demand and the higher the demand the more people are willing to pay for that area.  If all the other duplexes are renting at $1,200 + Utilities (say $300) the expected expense for a similar unit will be the same $1,500.  If the numbers are accurate, no renter is going to pay more than $1,500 for this unit whether you pay the utilities or they do.

In completing your research on rent prices in an areas you have to consider units that the tenant pays utilities and the landlord pays.  Above is a prime example of how this is treated differently across the board.  Focus on total cost of living in an area and you should be fine.

@Alan Grobmeier I am not saying you can't pick the 5th person, I am saying you better not let 1-4 know that they met your rental criteria and were not picked.  As mentioned before, I totally understand the business side of it for you company and outside employers however it only takes one bad apple to send you into a lawsuit.  

I think this site has the term "professional tenant" which you can look into if you can't sleep at night.  I am just stating best practices, I spend enough time and money in real estate where I will bury potential problems when I can.  I am not concerned about everyday Joe looking for a place, I am concerned about the person who knows the system and is looking to abuse it.

@Alan Grobmeier I used to operate in a similar fashion, I would actually conduct an "open house" the final weekend I was working on the house.  After hearing more on this issue I have abandoned this practice although it was good for business.

I completely understand how you are doing it but the competition is easy to open for discrimination.  You can say renters must have X credit score, X debt to income, no evictions, etc but the moment you leave it up to judgement you start taking on risk.  It is recommended that you have and publish "minimum" standards.  First person to meet the standards should be considered.  In a court room it would be hard to prove your side if someone came in and said something along the lines of "he didn't like my (insert racial description here) girlfriend and is discriminating on race".

Just looking out for you.  MN is a pretty tenant friendly state, I am not sure about your location.

I don't have time to read all of this but you may qualify for a prorated amount due to "unforeseen circumstances".  From the information provided in your first post (I didn't read all of these) you definitely do not qualify for the full $250k exclusion if you did not occupy the house for 2 years. 

If you rented it you should have reported rental income and may have taken depreciation on the house.  This would also recapture before any capital gain was excluded.