All Forum Posts by: Philip Cutting

Yeah, that's how many of us got started.  C-D areas (C being the wise investments).  C areas have some crime, not a lot of jobs.  D being violent crime and most people don't have jobs that report to taxes.  Their job might be to rent your house, take out all the wire and copper and to move to the next home.  Ask me how I know :)

Rough areas have high turn over.  also, they have high turnover expense because you will be repairing broken flooring (yes, imagine holes in hardwood floors).  How do you feel about painting floors? Not staining, painting. 

So imagine/plan for 30% vacancy, and $1800  worth of restoration between tenants.  What is the eviction process for your county.  Franklin county is cool, 3 to 4 weeks(most of the time).  Cleveland can be 4 to 6 months and you have to show up.  It's a good idea to show up to any eviction in Ohio if you are the owner.  Yes, you can have one of your employees show up, but they have to be prepared.  

Talks soon

Phil

I would value it off of the 1bed/1bath.  If there are additions they are probably not to code and that can become an issue for you.  If it's a two bedroom, then it's a bonus! :)

There is a big difference in 1400 sqft vs 1100 sqft in terms of desirability.  21% larger house feels a lot more roomy.

I wish you could have gotten to the owner before the sale was locked in.  It sounds like it'll be a pretty serious rehab.  How long has it been vacant?  Has it frozen over, is there power on? I understand that N. CA can get pretty cold.  

My personal feeling is that if you are new to this, this is a huge gamble and if I were your coach/mentor/Guru(evil guy from what I understand on the forums), then I would not recommend it for you based on the info I have here. It might be a great deal, but it is a huge gamble.  Sometimes you win the bet!  I'm not afraid of risk, but i'm not sure you have mitigated the risk here.

I would calculate a ceiling by figuring out the costs for new plumbing, electrical, lead paint and asbestos remediation along with new walls, kitchen, appliances, bathroom remodel...

Have you looked in through the windows at all? Maybe the electric meter is spinning.  If someone is there I would knock on the door and introduce myself and ask if they know about the sale, if they are the owners...  

Sheriff/tax sales are a lot of work.  You want to see each house, even if you cannot get inside.  

N. CA is a long way from Kentucky.  How did you come across this deal? 

Watch out for banks, sometimes they have an interest to bit it way past it's market value. That darned PMI can make them do strange things.

Talk soon,

Phil

Hi @Account Closed ,

Yes. Technically HML can operate in all 50 states if they can qualify in each state. But why would you really want to pick a hard money lender just for that reason?

I work with a hard money lender that funds nationally.  There are pros and cons to that.  Local guys often require less information, credentials and are cheaper.  National guys allow you to build a relationship that can help you grow between many states.  That said, many local guys will give you the same benefit once you have a little reputational capital.  Just anticipate more costs because the risks are higher.  The national guys also charge more because the "risk" is higher, but they have to try to be competitive.  

To fund in all 50 states, you have to be a large company, many states require a brick and mortar building, lots of licensing and sometimes SEC issues apply to these guys.   That's why it's often easier and cheaper to go with a local guy.  

The risk of going with a local guy is that you don't know if they will put out at the last minute causing you loss of funds, opportunity and reputation.  If you go with a local guy, try to close early so that you have time.

Phil

PS: Closing early may or may not be a good idea.  There are often times when you want to extend out a closing because its' a bad time to purchase and extension costs are less than holding costs.  

I swap them out, sometimes buying new ones.  I used to use Kwikset, but found them defective and awkward for my teams.  Plus there is some risk when it comes to master key systems.  So I went back to the old fashioned way.  ALWAYS change between tenants (just common sense).  

as far as Kwikset, i love the concept, and if you are doing your own maintenance and aren't hiring it out, then it's ok.  Once you start hiring it out and passing around master keys, you can get in trouble if one of your maintenance guys gets on drugs or angry.  I haven't seen litigation issues with it yet, but I wouldn't be surprised if it has been a bases for lawsuit or if it will be in the near future.

Also, a little note on dead bolts, most states require the kind that have the nob on the inside.  I used to prefer the one that took a key for the inside and outside, but had to change them in some areas.  Also it's a fire risk for having your tenants or children burn up inside a unit.  

Phil 

I'm in Europe most of the time, but do my investing in the states because the returns are really high and it's pretty stable as far as knowing what to expect.  But I'm not sure how taxes and such would affect your rate of return when dealing with bringing returns back home. 

Otherwise, I've noticed that all the core principles are the same for investing in Europe (US and European laws are pretty similar most of the time when it comes to business, usually just a different label or a little different twist).  

I'll be following this post for a while to see what people say, great question!

Phil 

Hi @Darrin Carey ,

Thanks for answering all those questions.  That link you gave me was great! It answered so many questions and with that information I have ideas on how to handle most all my situations!  

Thanks

Phil

Hi AC,

The "5 Flips Start to Finish" is a good article! Thanks for pointing it out.  I hope you find lots more of these deals really soon! :)

Phil

Selling to you is the best option because no one can solve their problem like you can.  That is for sure.  

In general should get 3 options for offers, and any property you visit should get three offers and you should expect them to accept one of them (even though most will not accept your offers, and if they do, you are leaving way too much money on the table).  

(1) 50% of the as is market value cash and to close on the day of their picking, and as soon as 7 to 14 days to make sure you can get clear title and do an inspection for your partner  or even get a bpo (so you can wholesale it), 

(2) 25% percent cash up front and then payments for a 75% market value.  

(3) 100% finance with near to MLS value paid over 2 or some years.

These are all general except for the cash value.  sure, you can argue with me if you are in a market that is appreciating, but if it's a stable market, you want to leave room for them to negotiate.  

Even better, is to have them name their price, but this kind of negotiations take time to practice.  So work on it, but don't be hard on yourself.  

This advice is based on what I understand from you and that is that you are motivated, have time, and are willing to work really hard!  

The seller options are to sell you a property that is causing them distress.  If there is no distress then they need to find a realtor, or a hobby.  

Keep it up! You rock!

Phil

PS: Because i'm not local, my advice might be terrible!  But it's probably close to on target.  You have to know what cycle you are in.  And you are totally right, the more practice you have talking to sellers, seeing properties, evaluating scopes of work, the better you will be in the long run, so take your time and work on it.

PSS: Go to as many open houses as possible in your target market!  This will give you price comparisons and also let you know how much those areas demand for quality of home.  Remember that the buyers are going to see those houses and compare anything you have to that.  If you know the area, you can tell stories and make comparisons to sellers.

PSSS: Sellers make emotional choices, they operate off of what feels right for them.  It's not about how good you are, but how you solve their problem.  

When I come we will definitely talk about this @Steve Baldwin !!

@Peter Lohmann 

I understand.  I've had great experiences in working with other landlords and professionals in my field in other communities.  Perhaps Columbus is really competitive. I hope that you and I have so much business that we find ourselves competing with each other from time to time!  At that point we both should have multimillion dollar businesses!

Thanks and good luck!

Phil