All Forum Posts by: Patricia Steiner

Two thoughts:

1.  The best way to "reinvent" the reputation of the property is to cosmetically alter the exterior so it goes from "murder house" to "cool vibe" house.

2.  Neighbors will talk.  They will tell everyone who stops to look at it.  Mitigants:  make sure the house doesn't look dreary/dark/creepy - with good exterior lighting.  Otherwise, prospective tenants will bolt.  And, have your story ready...year the house was built, that you renovated the house, it's close to (whatever).  If asked about "a murder," confirm it but assure them "the house killed no one"/was never implicated and that the guilty party is forever gone.

3.  Neighbors.  Go meet them. Tell them what you're going to do to the house and that you're seeking only solid tenants who will make for good neighbors.  Assure them that those changes will have a positive affect on their property values as well and the perception of the neighborhood.  Make it all about them - and they'll advocate for you.

4.  The appraiser will do research on the property and if the news account is located, you can count on some type of "human reaction" to be noted in the valuation.  Again, the way around that is to make the place as light and clean as possible.

Entertaining business we're in...

The tenant does not have the legal right to "alter" your property for any reason - and a mold inspector may drill holes, remove back cabinet panels under sinks, and a whole host of invasive procedures.  My recommendation:

1.  Tell the tenant that you take his/her health and that of your property very seriously. As a result, you immediately sent a trusted/licensed contractor to the property to inspect it. No mold was found.  Advise that not only did you take the claim seriously, you paid to have it investigated.  You are now considering the matter closed and no further action will be taken.

2.  Suggest that they buy a dehumidifier, use exhaust fans and keep air circulating, avoid hot showers, boiling water, change the air filters - and the like that produce moisture.  (I offer this to tenants who feel the need to "control time and space" - so they have something they can do without me...).

3.  And, finally, remind them again that there is no mold present and that the items you recommended will ensure a healthier air quality.  

Fun, huh?

Who do you want for a tenant(s)?  If you buy a house, please know that you'll have couch surfing in the undergrad community and your property will take a beating.  Inexpensive condos draw more serious students who don't want roommates - and 2/2 units are attractive with medical students who are on "weird" schedules and sleep, study, repeat is the way of life. I like renting to college students but I never invest in houses due to the upkeep and liability that comes from the partying side of college life.  

50/50 is the split in my market. The last thing you want is a disgruntled contractor who feels he's being taken advantage of.  I recommend making all the design and improvement decisions together rather than leave it to the contractor.  The biggest mistake I see over and over again is over-improving properties.  You're not going to live there so don't make it yours; do what you have to do to get quality tenants/buyers and nothing more.   My recommendations:

1.  Set a renovation budget that is not flexible.  Contractors like to bring in subs to do the work while they "manage" the project.  That's a fast way to kiss your profits goodbye. 

2.   Set a drop dead deadline.  I throw a tantrum that would put a 2-year old to shame if we exceed 6 weeks.  Keep the timeline short so the pressure is on and no one gets complacent.

3.  Visit the site; do some of the work yourself (demo, painting, etc.). Show your commitment and over-sight. A silent investor loses control quickly.

4.  Have your exit strategy ready to implement prior to completion.  You can start seeking tenants before it's completed - and/or have a brokers' open house (or even better - a Neighbor Open House) before the renovations are done.

Protect your split and keep everyone invested in the success of the project.  

Suzanne, I don't recommend either route. Neither course trains you to actually do the job or provides a lot of practical real estate knowledge...join a local Meetup Group on Real Estate Investing (the educational kind - not the "I know everything so come and drink my kool-aid").  Seek out a mentor...there are some absolutely great investors and trusted advisers here on BiggerPockets.  You would be surprised just how much you can learn from a 10 minute coaching session each day or so.  Here's some first steps:

1. Get an LLC set-up.

2.  Develop a niche...and stick with it.  Are you interested in flipping, rental properties, ?  

3.  Determine a budget.  How will you finance your first acquisition?  You'll need to put 25% down to finance a property as an investment.

4.  Interview a few realtors who have investment experience...there aren't many so you may have to kiss some frogs to find them but you'll need their process guidance.

5.  Find a few handymen who specialize in flips/rehabs.  You need a less expensive resource to help you rehab properties. The goal is to NOT over-improve.  Rookies tend to invest too much in "HGTV-ing" properties - and that's money you won't recoup.

6.  Only look at properties that have 3 to 5 years of life left on the AC and roof. That makes the property insurable and finance eligible. Those are also expensive items to replace so cross those off the list.

7.  No home runs...consider inexpensive - really inexpensive properties to get started.  Affordable housing is in demand.  And, stay in your backyard where you can inspect your properties and more.

It's important to know that we are 350,000 properties short of meeting current buyer demand in the US.  Finding the right property won't be easy because of low inventory.  Be patient. Do the homework. And, practice buy.  Take a potential property...do the analysis to determine if it would be a good buy...determine an exit strategy...determine market rent in that area. The more you practice investing makes pulling the trigger on the right property so much easier and successful.

The bad news:  you'll always be in a learning mode as an investor.  Real estate investing isn't for wimps - and it is constantly in flux.  But there is no faster way to build wealth.  And, you won't be bored...ever!  

Sean, you've proven yourself to be the real deal. Absolutely no reason to fill ashamed about having options in moving forward in building your investment portfolio.  You have a lot to be proud of...rock on!  And, keep me posted. I look forward to hearing of your continued success.  

I recommend meeting the tenants whenever possible.  I personally would not paper lease to anyone.  As the owner, you have the greater risk. Being able to reiterate your expectations and walk the property with tenants are solid mitigants.  

I represent a lot of cash buyers and, after a painful learning cycle, they have come to realize that cash does not equate to a price discount.  In highly-sought after markets, inventory is extremely low and buyer demand is high.  Sellers don't have to sell at a discount - and many can't since their next home will cost more than they expected.  

But here's when cash will get you a discounted buy provided you close fast:  

1.  Foreclosures

2.  Probated properties

3.  Divorce situations

4.  Challenged properties (no life remaining on AC and/or roof, renovations "gone wrong")

5.  Investor properties for sale (usually anxious to move on to the next deal)

6.  Some relocation company properties that have exceeded 120 days on market.

My recommendation is to find a broker who works with investors who will specifically target these opportunities.  Ask what relationships they have with attorneys and trust departments. Are they relocation certified?  I think you'll find that your hard earned cash will get you what you want with a more targeted approach.  

Vivian, congratulations on becoming a real estate investor but even  more so on becoming a mother!  While I prefer that my clients invest in "their own backyards" (so they can inspect their rental, know resources/contractors), I know the California market can be cost prohibited. I would recommend investing in a city that you actually enjoy visiting from time to time - or where recent corporate/development activity has just started. For example, Amazon opens distribution centers in good cities but generally in remote/distressed areas because of the amount of land needed for the facility.  The demand for rental housing goes off the chart as they staff and then remains strong as other businesses surround the facility.  A new medical or law school opening provides an opportunity for more long-term tenants who sleep, study, repeat - and pay on time.  (My clients love this population).  Your process skills as an engineer will serve you well as you go through the "is it worth it" analysis process of real estate investing.  Again, congratulations.  

I don't see equity use as the issue here. The rental might be. If you can get out of it and then take your time finding the right rental, you'll be ahead of the game. I also like to see my clients have equity in their personal residence to boost their net worth - while using non-recourse financing for their investment properties that are titled in an LLC. Sounds like your "issues" are the ones that a lot of investors would like to have!