All Forum Posts by: Paul G.

@Account Closed I disagree.  Real estate investing SHOULD be easy.  The hard part is finding the deal.  Once you find the deal, the dream is to have it on autopilot from then on.  Most people go into real estate to be passive investors.

My condo I cash flow $300 a month from, and my second one I'll be at about $190 (once I close and update it). My first condo appreciated 85% in 4 years and I was able to cash out refinance it to pay for my second condo. (and have funds for a 3rd when I can find one I like) I've had decent tenants so far and my HOA has been amazing. They're responsive, easily accessible and are on top of maintenance issues in a proactive way instead of being reactive. To each their own I guess.

I'd rather have 2 condos that cash flow $500 where I don't have to worry about the roof, and when the AC dies, I can replace for 4K instead of 8-10K, over a $500 cashflowing house any day.  But that's just me

You will get varying responses on this.  People who are against Condos usually say this:

The HOA will eat up a lot of your profit. And finding a condo that satisfies the 1% rule can be pretty tough.

It can also cause problems when trying to sell depending on if they are FHA approved, or even lendable. Some are not due to HOA reserves and restrictions.

There have been cases where an HOA has decided they no longer want to allow rentals in the unit, which if passed, can really cause problems.

HOA's can demand a special assessment if their reserves aren't in order, which could be thousands of dollars.

If you've noticed a theme in everything I've written above, you're right. Buying a condo, in my opinion, requires just as much sleuthing of the HOA as the condo itself. If you can find a condo with an active HOA and one that has a healthy reserve and is run well, condos are amazing investments. But they can easily turn on you if they are run poorly.

I personally love condos, because I don't want to worry about a 20K roof repair, or exterior structure / lawn care.  I like knowing that someone is taking care of the exterior of the unit, so when I go to sell, I won't have to worry about a unit being painted teal and bright pink with boarded windows ( exxageration for effect :) ).  They also offer a much better price point for entry. (at least where I am).

Edit: One other big thing I forgot to mention. Condos are usually much harder to get a mortgage on as an investor. Lots of hoops to jump through that you don't have to with a townhome or SFR. Just something to keep in mind. I don't mind the extra work, but it can be a pain at times.

@Michael Boyer Yeah, I'm definitely going to scrutinize the HOA pretty heavily. That's a good call to get the HOA minutes from the last meeting. I was planning on just sifting through the CC&R. I may bring my big ladder to the inspection tomorrow and see if I can get up on the roof to see what the roof looks like.

I can compare them to another property I own who has a pretty active and well managed HOA and see how they compare.

I didn't notice any major capital repairs when I drove through the past couple times I was in the neighborhood, but I will definitely do more due diligence now that I'm on the clock.

@Cortney Jones I believe I am ok with it.  While I'm in this to make money, I also still like helping out where I can.  She's been there for 3 years and has a perfect payment history.  I won't go into the details, but I believe she could afford the $850 increase.  She's been very forthright with us in our dealings with her so far, and I have no reason to believe she wont be in the future.

I understand the concept of squeezing every penny out of a rental, and I don't see a problem with that, but I personally like to put a little good karma into the world.  :)  Hopefully one day it will come back around to me.

@Kuba F.

@Kuba F. Yeah, I agree with you.  I would be doing a lot of work myself to squeeze money out of it.  But with the connections I have for plumbing / paint / Electrical / HVAC I can cut my custs down pretty significantly.  And to be honest, doing the work myself is fun for me.  Now, in 5 years it may no longer be fun.  At that point I'll probably sell it and move on to something bigger.  But right now, with the amount of cash on hand I have, it's not feasible.

I probably should have prefaced my statement outright with the fact that it's kind of a loaded question :).  

Also, if I had it professionally painted, it's $1/sqft.  I play hockey with a painter :).  If I want to do it, it's $100 of paint and a day with my paintsprayer.

Yeah, I saw that at the bottom of your report after I posted.

We still like doing everything ourselves, so a lot of that is quite a bit cheaper.  

What we've found in our current rental is our floors will probably last 8-10 years minimum.  We lay our own flooring and it's holding up extremely well at this point.  

Water heaters in Az Run about $400-$500 (12  year warranty, 40Gal, $499 at Home Depot) , and I can install it myself.  $1500 for a water heater seems high.  Is that for a house with a family of 4+? 

Appliances also seem high.  We go to either the Outlet for scratch and dent, or buy used for super discounts, depends on our timeframe for replacement.

I don't use PM and wont for this property.  I still enjoy being the PM. 

How did you come up with 75K in expenses?  In 27 years that's 2 AC units, 4 water heaters, and maybe 2-3 sets of appliances?

so 4K (x2), 400 (x4) 1K (x3) = 12K + little things here and there IE 3 flooring redos at 2K a pop, so 18K total over 27 years.

That's assuming I hold it for 27 years, at which point now it's free and clear so my cash flow turns into $600 a month.

Your property analysis adds $213 for utilities I'm assuming that's HOA/Insurance?

And $250 for CapEx for a condo is waayyyyyy to high.

bump

So,

I'm (finally) under contract and the seller has accepted my offer.  Here are the details

2bed / 2bath 1000 sqft 

Purchase Price: 98K, Seller paying 2K towards closing costs

HOA: $175

Vacancy: 1/12 (8.33%)

Taxes: $400/year

Insurance: $450/year

Debt Service: $390 (25% down)

Maintenance / CapEx: 5% of Rent: $495/Year

All Expenses: $675

Comparable rents in the area: $900 (same complex), with some upgrades could get to 950-1000.  But for this analysis I'll use $900 because I know I can get it.

CoC: 6.6%

Cash Flow: $150

DSCR: 1.38

GRM: 9.07

So, I know, not GREAT numbers.  But things have been flying off the market for my properties that I'm interested in.  I've lost about 8 properties so far, and while this isn't great, it's definitely in a good location with plenty of upside.  Here's the rub.

There is a renter already in the unit.  She's paying $740 a month, on month to month with no current contract and would like to stay if possible.  She knows that rent will be increasing, but she can't afford too much more. (This is probably the main reason why it hasn't gone off the market).

As I see it, since she's currently there, I was going to keep her at $740 until Dec 1. During that time, I would let her know that the rent on Dec 1 will be increasing to $850 a month. If she stays, then I technically have a 0 vacancy rate with Cash Flow of $170 starting in December (and CoC of 7.4%). For the first 2-3 months, I would only see a Cash Flow of $50ish (which sucks). But, I don't have to do any of the major upgrades that I was planning (floors, electrical, counters, paint) immediately and can get positive cash flow immediately.

If she decides to move on, then I make the improvements and put it back on the market at $900-$950 within 2-3 weeks. and get what I talked about above.

So.  I guess my question is.

1. Knowing the market is extremely hard right now (for those not investing full time, and not coming in all cash) is this a decent enough deal?

2. Would you keep the renter in there using my information provided above.

Nothing to see here.  This is @Diane G. 's weekly "the sky is falling" post to get everyone stirred up.