All Forum Posts by: Andy Luick

@Marc S. - unfortunately, with prices where they are in your part of the country you are forced to look out-of-state. There are quite a few turn-key providers here on BP worth checking into. I'd be happy to chat with you about our program in Atlanta. Happy Investing!

@Zoran M. - what are the units....3bed/2bath, 1/1/?? Why not rent them and flip it based on the net cashflow. If the parking and the areas allows for it, I'd convert at least one of the units to shared housing for better rents and net income. The higher you can boost net rent...not just gross....the more you can get for the property. I keep very little of what I buy anymore because passive investors love the returns and line up to buy what we have to sell with a 10% net return. Different model but I'm sure it works in your market as well.

What are you planning to do with the rehab on the flip? I'm not understanding the difference in the rental rehab and the flip rehab as an investment property...or were you thinking you'd rehab one unit to retail for an owner occupier who would then have a rental unit to pay the mortgage with? Not a bad plan either. On the $500 annual repairs....even renovated properties have unexpected repairs so you will still need to budget for it!

@James Mudd - Austin is full of professional workers seeking affordable housing as it's in short supply and extended stays or apartments can run $1,500 a month and more. We have had quite a few inquiries to bring our MRR model to Austin and I'm sure we will get there. We have a number of couples like Chris and his young family where we have placed one or two fully screeened and vetted renters...and its worked out very well. What works for you might not be the solution for someone else....what we've found is that shared housing, with full background checks & personality matching....is an excellent way for someone in Chris's position to pay for the expenses of a home or save one from foreclosure. We've saved a good number of homes in metro atlanta and help some recent homebuyers afford their payments by placing a good roommate. Just something to consider. If you're just going to do something like this straight off of craigslist...then you are right....I would not consider it either. We are meeting with a single Mom today who needs to share a 5bed/5 bath home in order to keep it.

@Chris Frydenlund - the metrics you find some of us using on BP are just a quick test for whether a property is worth pursuing or not...you have to take what we might be using (and I don't use them actually) in our respective markets and adapt it for something that makes sense in your market. Austin is a hot, hot HOT real estate market and for a ton of good reasons...if I weren't so tied to atlanta, I'd be living there myself. I've been successfully...and sometime unsuccessfully...investing in real estate for about 26 years now and I'm happy to share my thoughts with you -

To me, by definition, every homeowner is an investor...and for most, the single greatest investment they will ever make is where they live. Here, you are blending want to live in a home that also produces income....I create shared housing and work with homeowners, investors & JV partners every day to accomplish the same thing. However, as a homeowner/investor alot of what we are talking about on BP doesn't apply to you and I would suggest you proceed differently.

If you haven't already, I would get pre-qualified for a 203k renovation loan. There are a number of lenders who offer this program and it is really the only way....outside of a pure cash offer which I am assuming you can't do....for someone like you to acquire most foreclosures. Austin is what we call a very tight rental market....lot's of people moving there and rents going up....not a ton of vacancies. Same on the buy side. Distressed sales of any kind will offer your best opportunity to buy and most distressed sale properties will require some type of repair/improvement or updating which usually also means that they won't qualify for conventional financing. That spells opportunity for you....or is should future real estate investor.

Once you are qualified for a 203..make sure that lender also uses the streamlined version of that loan. The major difference is that the 203k...which you can use for cosmetic AND structural repairs...will require you to use a consultant who will be their to review the scope of repairs and the contractor bid you select to make sure that they marry up. The consultant is there to make sure everything that was contracted to be done...is done but he or she is not there to hold your hand through the process. There is no up front money to the contractor and no self-help on your part....meaning you can't do the work yourself. This loan allows you to purchase a home needing repairs and have those funds included in your mortgage. The streamlined version of the 203 doesn't require a consultant and you can do all kinds of cosmetic things with the proceeds.....paint, cabinets, carpet, tile......but termite damage, water restoration or a new roof would be considered "structural" and you'd need the full 203k for that purchase. Realtors have always hated this loan....but for someone like you...and I teach people this all the time....it's the best way to buy investment real estate over time.

The 203 allows you to purchase a home with 3% down and sometimes as little as a $100....even in Austin. You can use the loan every 2 years as long as you keep you credit good....so you buy a property, live in it (probably rent a couple of rooms if you use my program) then rent it out fully in year two so that the rents cover expenses....and you can use the same loan program again to buy your next home to live in and repeat the cycle again.

Once qualified, I suggest you find a HUD agent in the Austin market and chat them up to find someone you are comfortable with. You should also get recommendations for agents and investors in your area for suitable contractors who specialize in this loan program....not all do and you don't want to waste your time. Your lender will have pre-approved contractors that they work with....I was a HUD validated contractor using the 203 for many years here in atlanta. The program is awful for contractors....but perfect for homebuyers.

You can use the 203 to purchase multi-family...up to a quad I believe but you will have to check into that on your own. Start hunting HUD listings in your area with the HUD agent you have selected. HUD listings are great for you because they are often exclusively available to you as an owner/occupied for a certain period to bid on before investors can take a crack at them. HUD also offers some repair escrows which means, once you make those repairs, you will get the money reimbursed from escrow..not bad at all.

So here's one I found for you....a 5bed/2ba for $114k.....sounds like a steal in Austin: http://www.hudhomestore.com/Listing/PropertyDetails.aspx?caseNumber=495-844246&sLanguage=ENGLISH&zipCode=&city=austin&county=&sState=TX&fromPrice=0&toPrice=0&fCaseNumber=&bed=0&bath=0&street=&buyerType=0&specialProgram=&Status=0&OrderbyName=SCASENUMBER&OrderbyValue=ASC&sPageSize=10&pageId=1

Once you acquire the property, you can then land one or two housemates to share the home with you and provide cash income to pay the mortgage with. You could do the same this with a duplex if it was large enough and, if you do this with a SFH in your market, you have an asset that will appreciate in value...in that type of market. Many of us in our markets won't see any appreciation at all....and we don't care. In the model I use, we often have more in the property than its FMV but with shared housing we value the property on net cashflow not appraised values. My front and back end JV partners don't care about underlying values as much as they do about returns....and when they are seeing 20% to 40% or more on their capital (front-end) or 10% to 16% on the back-end...the FMV is meaningless. For you, it's important to purchase something with some equity and you'll do that using the 203 and leveraging the skills of a good lender and a good realtor....not all are create equal. You'll also find that a SFH will most likely sell faster than a duplex or mult-fam unit. Duplexes are often bought and lost by first-time investors who aren't cut out to be landlords in the first place. That's a whole different conversation.

Hope this helps! Happy Investing.

Tony - not sure what you are after here....but sounds like this belongs in marketplace...unless you are looking for this information from others?

I would definitely check CL and VRBO for good comps and marketing. If you've got money to burn and are ok 'enjoying" your cabin when it needs work, it might be a fun thing to do....just not likely to be a great return for you. I'd contact some of the owners through VRBO and get some feedback before I plunk down any dollars on a deal. LUCK!

Why would you want to get a pre-listing appraisal? There are a ton of sites you can look to get a range of asking prices in your market just to check what the listing agent is giving you. You should have some recent comps to go by. Drive the area around the property you are selling and call up any listings to compare to your own. Real market knowledge is always a good thing!

@Roy N. - don't want to get too far off topic here...we are not running rooming or boarding houses and fully comply with local zoning codes. Ours is a very unusual process where the first 2 housemates help select those remaining...it's all about creating a healthy, happy atmosphere in the house. We thoroughly vet everyone and match people based on lifestyles and personalities. We've been doing it for many years and, though it takes time to sort out the house, our revenues are 3x net what most investors would see.

Putting another house under contract this week as well!

Just remember - you can almost always turn a loser into a winner with shared housing! I do it all the time. I've got a house that would normally rent for $850 a month and I'm getting $2,000 for it with shared housing. Works for me and there a lot less risk with vacancy, repairs or vandalism. Happy Investing!

You have to love BP and all the great advice you can get here....from those experienced in the market. Chicago is a great city but like everyone is telling you, you aren't going to see any appreciation...which is true in most markets. You have to decide if the 9% potential return is worth the headache. There are better places for you to put $43k where you will see 20%+ returns on your funds. There are a number of turn-key marketers here where you can get the same rents and have paid cash for the property or others where you'l only be in the property for 12 months or less. Lot's of different options but you'll have to consider appreciation just a bonus if you get any.

There is good and bad to Section 8 - you can read tons about it here on BP. Is the existing management coming with the property? Have you chatted with them? Speak with a couple others who specialize in Section 8 - if they've been at it for a while, they can save you butt if the tenants tank....if they do, you're paltry 9% return will turn to a negative really fast. Once you spend you're $43k, how much more do you have in reserves? I'd proceed very carefully on this one and be looking for something that performs a bit better! Happy Investing.