All Forum Posts by: Pete Harper

@David Schmiediche

My comments are more about diminishing returns. I feel it is entirely possible to over renovate. The ROI on granite countertops and stainless steel appliances is pretty slim in C class properties.

My model is to renovate and increase rents. For $700 target rent you need to make $2100/month or $13/hr. Most of my tenants are working class folks; Waitress at local diner, on social security, guard at jail, and truck stop worker. The bottom of the market is usually set by HUD at $650. If I stay in this range I feel I will be OK. My last two rentals I had over twenty applicants. Only a couple were qualified. If I raised my tents to $800 I'm afraid nobody would be able to afford it in my local markets.

What would I do with the cash otherwise? Buy more properties. I’m targeting over 15% cash on cash minimum so I’m better off buying more properties rather than renovate existing.

@Gregory Schwartz

I own two properties in BCS, duplex and 4-plex. All the units are 2BR 1BA. What do you think is the top end of rental market for a 2BR unit?

I’ve done the light reno; paint, flooring, updated lighting, ceiling fans and painted cabinets. Rents are $700-$750. I’m not sure if it is worth doing much more.

@Gregory Schwartz congratulations on investment.

I'm interested in your thinking on the ROI for improvements. I have similar properties and always have an internal debate on how much money to put back into renovations. Are you looking for increased cash flow or property appreciation?

Earlier this year I renovated a 2 BR unit for $5k. Removed dated paneling, new kitchen cabinets, dishwasher, microwave, paint and flooring. Rents went from $475 to $675. Payback is 25 months which I felt was a good investment.

My current project is another 2BR that rents for $600. The kitchen cabinets were heavily water damaged and the shower was in bad shape. My budget again is $5k. After renovations I expect to get $650 in rent. Payback is now 100 months, not great. This building has eleven more units that could use $3k-5k each. Would you invest the money into renovations to force appreciation? Or optimize for cash flow?

@Eric Loredo

PM your email and I will send you an invite to our next meeting in Palestine. We had five people for our first meeting. I plan to organize another meeting after the holidays in January.

@Tyler Kortz

I bet she doesn’t have a bank account. If you maintain a small balance the bank charges you up to $30/month in fees. It is cheaper to pay western Union for a money order. The ACH fee is not the issue.

@Karl B.

I know it’s hard to believe in this day but many people do not have bank accounts. If you have a low balance the bank fees eat you alive. The majority of my tenants pay by money order.

@Andrew Zannotti

For Killeen search Bell County Tax Auction. There is a law firm that manages the auction. They publish a list of properties a month before the auction. You will need to cross check names and addresses off the county CAD website. It takes a little digging. You will also want to search the county clerks office to see if there are liens. All this can be done from home from your computer.

@Andrew Zannotti

I’ve been thinking along the same lines with Tax Foreclosures. I’ve noticed that the better properties on the Sheriffs Auction list come off the list at the 11th hour. I’ve do all my due diligence only to find the property has been taken off the auction list the morning of the auction. Asking around I found that people make a small payment against the tax bill to be taken off the list. Frequently they show up on the next auction list.

If eventually they do go to auction and the property is sold the owner gets nothing. I was thinking if I reach out and work with them before the auction I could buy the property for the back tax bill plus couple grand to the owner. This is a win win. I get a good property without having to compete against other bidders and the owner gets a couple grand in their pocket.

I’ve started targeting these properties on my yellow letter list. So far I received one call back. Unfortunately the property was too far gone. Upon inspection the roof had fallen in over the kitchen. It was her parent home, they were both deceased and she couldn’t keep up with the taxes.

@Lesley Resnick

I don’t see cash going away any time soon. The majority of my tenants don’t have bank accounts. When I ask them why they say the bank fees are too expensive. It is cheaper to deal with all cash and buy money orders to pay rent and other bills.

@Kyle Moore

As others have said, call around, you can find better terms.

Private money lenders will do investor cash flow loans where the property income is used to qualify for a loan. You will pay more in interest and fees but this is certainly an option while you build up a credit rating.

The other option is to seek portfolio lenders. I made a list of small to medium sized local banks and credit unions and started calling them. Ask to speak with the loan officer. This will frequently be the underwriter. Avoid the big national banks like BoA or WF. I talked to twenty before I found two willing to lend; Texas Commerce Bank and Vera Bank. I ended up going with Texas Commerce.

Good luck