All Forum Posts by: Kyle M.

Kyle, 

Have you had a chance to compare to properties in Pittsburgh?

those seem like pretty tight numbers and I am not loving the 2 bedroom idea. 

In my market, Cleveland, I can get into a nice place for less than 25k that throws 800 per month. That is not in a war zone either. 

I like to look at houses like that to finance like a car note. Use IRA money at 12% and a 5 year amortization. This way you own it free and clear in a hurry!

Just my 2 cents. 

:-)

Its a fun scenario to look at it. I would say that I think the biggest factor here would be how much do your contractors make?   Ultimately, its only a 3/1, 1,300 sq ft. You only have one bathroom, one kitchen, and 1,300 sq ft.

One key fact you didn't include is how much would the house be worth once the rehab was completed? There's a huge difference in taking on this kind of deal if you can buy it for 50k and put in 40k and have it worth 160k. Versus buying it at 50k, putting in 40k and having it end up worth 110k.  

At 90k, your payments will only be 550/month. If taxes and insurance another 400/month, and rents for 1,400, you're in business. Thats a solid deal. Even at 100k, lets say you put in 10k and have a 90k mortgage, thats still the same 550/month only your out of pocket is now bumped by 10k.

Do not buy unless you do the following:

1) Get actual MLS comps for recent rents and what this sells for when completed as an alternate exit strategy. No rentometer etc.. See how many similar places are up for rent which is your competition and the current rents.

2) Get the inspection report and do an oil tank sweep and get (3) General Contractors to give you written bids once you write your own clear scope of work for them.

3) Then crunch your numbers and your conservative timeline to complete to see if the deal will work based on the Bigger Pocket rules

Anything less; you are gambling and hoping and praying this deal may work and since this Iis your first deal it doesn't usually turn out good. Be prepared and do your due diligence and if the numbers are not real good then walk away and look for a better deal.

There's a step between #1 and #2:  Putting together the scope of work.

You can't just hand the GC the inspection report and expect the property will come out the way you expect.  For example, all the light fixtures may work in the property (so they won't show up as an issue on the report), but you still may want to change them all so that they are new and updated.  As another example, if the carpet is destroyed in one room, it won't be clear from the inspection report if you want to replace it with new carpet or something else (tile, hardwood).  

There will be a lot of stuff in the SOW that doesn't come from the inspection report, though everything in the inspection report will likely be in the SOW.

Can you appeal those taxes? The assessed value must be way off. I bought a fire damaged house and appealed the taxes which will greatly (by about a 1/3) reduce them for a couple of yrs. It all depends on the timing.

My concern is for the price of the property and the price of the rehab...could you just get into a better property that doesn't need as much work?