All Forum Posts by: Scott Seaman

Google for the county tax office, it should be available online. Look up an address for a property you know is a 4-plex - you should be able to find a use code that corresponds to that type of property and then you can usually do a search by that use code to give you a list of owners and mailing addresses VA normally requires you to occupy within 60 days but the lender can be a bit flexible if there is a good reason

@Sarah B. Tampa is one of the markets we work in and the one that scares me the most at this moment. That said, I'm heading down next week on a buying trip so I'm not totally turned off by it - like anywhere, there will be good and bad niches or strategies that work depending on the overall market. But for this city, you need to do due diligence on your due diligence more than anywhere. The biggest unknown at the moment is the huge buy the hedge funds did a few months ago. Over 1,000 properties in weeks that haven't all come back up for rent yet. But enough since March to push 3-4 bedroom SFR rents up almost $200/month since while apartments have remained fairly flat

Digging through the records to find that the only 3-4 sales in that neighborhood in the past 6 months were hedge fund deals at prices nothing before or since justifies. Or that a dozen houses on one street are owned by Wall St. Do I want to be a neighbor when they figure out that property management is a bit more complicated than collecting mortgage payments for their tranche investors?

Good for the construction trade; jobs are back but for how long? All the news reports hyping the recent unemployment numbers (but claiming the last month increase isn't indicative of a shifting market, of course). No discussion that the jobs growing were hospitality and retail - while the ones being lost were banking as Chase draws down a mortgage help center (or moves jobs to Dallas) or the cutbacks at McDill through RIF or outright pay cuts due to the sequester.

8X growth in leases signed from 2006 until now. HUD and the other big holders dumping a dozen or two houses back into the market weekly because it's taken them so long to get through the FL court system - while there's ongoing reporting of still record high new foreclosures. And cost to buy that same house is right at 50% of what the rent is.

It all just seems very frothy to me. Not "hot". Hot is DC where anything that goes on the market is gone in 12 days, all cash buyers and incredible amounts over list price when the dust settles. Standard 4 plexes in one of the worse neighborhoods for under $250K in November now going for $400K plus - with no increase in the rents because of DC's incredible rent control laws. Tampa got 'hot' in one section 3-4 bedroom SFH for a limited, predictable time (with some others rushing in on the "there's gold in them thar hills" mentality) - but I don't think we find out the true situation before the end of the year.

Interactive map where the hedge funds bought

Single Family Rent rates over the past 12 months

TL;DR - Hedge funds cherry pick on market niche over a few short months, usual cheerleaders scream "we're back, baby" when reality says many niches are still sitting still or declining. Make sure you're buying steak, not the sizzle.

You've gotten great advice but there is probably one thing you need to check out before you need to bother with any of the rest. Is this property on sewer or septic system? If septic, with an old house/system already in place - there probably isn't enough room left over to put in 4 houses much less 7 and that's if you have the best possible soil conditions in the world. Usually this info would come from your local health department (if not, whoever in your town that does the permitting can tell you what office to get in touch with) Only after you know what these limits might be should you spend money with a civil engineer

As long as the rents are covering the rehabber's carrying costs, most aren't going to be terribly turned off by it being rented. Normal 50% rule may not work, but rehabber isnt' going to be setting aside money to replace the roof 12-15 years down the line either. Plus it can offset his carrying costs while getting permits and other red tape taken care of before they can actually begin working.

Would any of the tenants be interested in buying them? If they do but can't get financed right now, maybe you can set up a deal where they can a year or two down the road and cash you out.

You can find a wealth of information from your student population about your competitors (and yourself) by looking in the sub-reddit for your university on Reddit.com. One of the most frequent questions you'll see is asking where people can find good rentals close to campus/transport, etc where the landlord isn't screwing folks over. Others are quite willing to share their experiences and make good recommendations or tell someone to run from someone else because of their practices.

If you aren't familiar with Reddit, it's mainly just sub forums created by any user about any topic you can think of (and many you never would). The target demographic is right in line with student housing. Last estimate I saw was one out of 7 people on the internet world wide spends some time there. Just go to
www.reddit.com and do a search for your local college or university in the search box on the top right.

It's fine to advertise by answering someone's question specifically but understand that you will be flayed, torn and quartered if you simply go in and start posting ads and get all spammy.

You should start with your focus on what your end goal is and work backwards from there. It sounds like you're thinking to buy and rent long term vs a quicker flip - what return do you want to earn? How long do you want to hold them? Is this something you see keeping until it's paid off or do plan to 'trade up' your equity into a nicer/newer/bigger property down the road? All those have to be answered before you can really get to the right answer for you on the question you asked above. All of us have our own strategies that fit with our time/temperment/budget/level of risk. Any one of those answers could be the "right" one - but it depends on what your goals are. Once you clearly define that - it becomes fairly easy to run numbers on any property that comes up to see if it helps you reach that goal.

@Mark S. - Your aversion to maintenance headaches and willingness to accept a very low return on your money to avoid having to do any should make you re-evaluate if buy & hold rentals is a good investment strategy for you at all.

Brand new roofs leak. Tenants flush things they shouldn't and plumbers have to be called. Appliances die 32 days after they're first used (and the aggravation level for me to have to deal with the "warranty" issues is five times what it would be to run down to Lowes/HD and buy a new one to install).

If you put a deal together with enough spread, the money is there to pay someone to do all that stuff for you if you'd rather not deal with it. That's a property managers job if that's what you want. But buying this using either scenario locks you into a long term mortgage with no money to hire one - that's why everyone keeps saying you are not making an investment, you are buying a job here (and one that pays really poorly from those numbers presented as well) And your job will entail all that you are trying to avoid.

As for others buying these and how they are making money - the short answer is that they are not. They are parking cash and hoping for some inflation hedge. Maybe they put more money down and it cashflows better for them. Maybe they bought on their CPA's advice because they need it as a tax shelter in some way that makes more financial sense then what you are seeing.

How much could you buy an older, less nice duplex and have it fixed up to equal your "obsession"? Potentially tens of thousands less, which then gives you both the cashflow as well as postponing maintenance issues. Or what price would a builder charge you to build a new duplex on a cost plus basis? The ones you are looking at are built on spec it sounds like - that means the builder has built in a healthy margin to cover his profit, commissions and carrying costs until he gets it sold - building directly for you could cut that price by 20% possibly.

Or take a look at lending the money privately to someone who is willing to put up with the job of being a landlord. Your job then is to deposit the checks; leaky roofs and busted toilets are someone else's problem. And if you're willing to loan it out at 6-7% long term, you should find no shortage of takers. Good luck with it either way.

Why wouldn't PCS orders include moving expenses and 90 days temp storage costs? Another move shouldn't be out of pocket for you.

Nicolaas W. - VA will only count the units under the same roof as a 'plex' - and only do the financing on it if there are no other buildings with living units on the same lot

John A - have you talked with a lender yet to get pre-qual for a VA loan?

If you finance in the Funding Fee (2.15%) you're loan amount will be:
Price 379,000
VA Funding Fee: 8,148.5
Loan Amount: 387148.5

Payment 1848.51 30 years/4%
Taxes: 265
Insurance 100

PITI: 2213.51

To qualify without any experience landlording some lenders won't count the rental income while others will use 10 months rent vs 12 months PITI and count it as income or debt depending on how that breaks out. Some will require you to have 6 months PITI in savings to count the rents at all.

You have to have under 41% debt-to-income and they also include a $$ value for Family Support depending on how many in your family.

I understand what you're trying to do and it's not a bad way to start out even if it is a bit of a hybrid to most investors here on the board since it's living and renting combined. If you get the seller to pay all closing costs, you're buying a long term asset with zero out of pocket and giving yourself a place to live rent free. Current cash flow will cover your entire mortgage as well as the water/sewer/trash but there is nothing left to cover vacancy or repairs - if you don't set aside what you would normally be paying rent for yourself, you're going to take a nasty hit the first time something comes up (and it will).

If you move out in a year (VA owner occupied requirement) the numbers change and it may not make as much sense for you at that point but you should still be cash flowing a little over $10K a year with no cash invested.