All Forum Posts by: Senthil N.

A few things to consider. 

• If the market in your area does not offer the price point for rental, try looking a few miles outside.
• Wait until you find a property that you might be able to get at a reasonable discount.  If you can get something 10 to 15% below market then it will help.  And yes there are deals out there that will come by.
• You can also get the seller to pay closing costs - allowed up to 2% in Texas for investment properties so you net down will be 18%.
• If you can do some of the work on a fixer upper that helps too.
• See if you can partner with someone
• If you don't have much money left for emergencies, spend the $500 on a good home warranty
• If you want to progress fast, partner, get a discounted house, do a flip, make some money and repeat.  Lot of work and planning to make everything happen without delays to get the maximum out of the flip.

It is interesting the seller does not want to disclose information.  It does make the deal a bit fishy.  To others who have told you that "you are making a big deal" ... it really boils down to why is the seller making a big deal of giving you information.  Especially the current renter's lease information.  It is not advisable to purchase property and inherit a lease you have not reviewed.  It is a big deal.  Perhaps the lease says the tenant's next 5 years of monthly rent is $1.53!

Bank to Bank ACH transfer. It's free.  It took a couple of tries to get it right for each of my tenant.  The bank confused one of my tenants to do bill pay!  Most banks have the option to schedule it.  I am thinking of making this a requirement in the lease as it saves a lot of time.

I am big fan of keeping the property, but in your case I would suggest sell.  Mainly this is because of taxation.  You have a small window left where you can get the Capital gains for tax free (as you lived at least 2 of the last 5 years).  If you don't sell now, you end up losing that advantage.  Sure you can defer the capital gains with a like exchange, but you can't beat eliminating tax.  As others have suggested you can reinvest this again in real estate or better yet, you now have the opportunity to diversify as well.

Have a few questions:

1. What is the life of manufactured houses?
2. Can it be converted from a non-real property to real property?
3. Can it be moved / sold easily and is there a used home market for them?
4. Is insurance more or less expensive and how much?

@Christopher Smith, that was a great idea.  However when I checked the listing it appears many of them are actual Bank Branch office locations!

I realize you are trying to save money by hiring a reasonably priced contractor.  However, you get what you pay for.  Usually the cheapest deal costs more in the end.  If you hire off Craigslist and for that matter someone who you don't have a reason to trust, then I would say stay with them while they are on the job.  If I have the time I would do this for any and all contractors.  A reliable and higher margin contractor works best in most cases.  The contractor charging higher fees has already taken into account things that can go wrong and have to be reworked on his dime.  He is banking on getting everything right so he does not have to lose his profit margin.  He also factors in warranty in the price.  A Craigslist contractor does not have to care about rework, guarantee, quality, references, etc. and his work will reflect that.  In the end, you can very easily end up paying a lot more.

Inspection gets you two things in my opinion.  One is finding large repairs that may not be obvious.  I found a potential termite infestation and was able to bring down the price by $1,000.  It cost me $250 to get treatment and $400 for inspection.  The second reason is that you get the full repair checklist.  It's much cheaper to call a plumber once and fix all your plubming issues than to call plubming several times, for example.  Also you can identify new defects vs. existing defects.  Less calls from tenants is successful renting.

My Key items to check for:

• Roof
• Foundation
• Septic
• Termites
• Water damages
• HVAC

Can someone expand on any other key items I may have missed which may not be obvious?

Question (possible suggestion): Can you do a like exchange towards a duplex, triplex or quadruplex?  Then you can rent the remaining units, while living in one unit and claim the entire property as Primary residence?  Two years later sell everything as primary?

Yep, I have done it.  It is quite straight forward.  You will have to get a sample template for your state/locality.  You can try talking to a local title company that you plan to use.  They want your business and will be happy to assist you with getting the contract out.  If they are not, find a different title company!  In all it should take you a couple of hours on the 1st go around.  I did it with just the internet and it worked out fine.  Was worth every penny of the 3% that I was able to negotiate down.  If the seller has an agent, put the onus on him for all future contract changes so he works for his commission.

One more thing when you are your own agent - I made the MISTAKE of ASKING for my 3%.  The seller agent got testy with that request.   So just let him/her know that you are not bringing in the agent and they can have the entire 6%.  However get the price to where you want and it will be up to the listing agent to take anywhere from 3-6%.  You stay out of it and just firm up your price.

In your particular case, if the seller is not willing to negotiate walk away unless you are confident of making money.  Start thinking about how/when and for how much you may be able to sell this property as you are buying it.  Don't speculate on growth.  Anticipate a market crash.

There are sellers out there who WILL thrown away their money.  Wait for one if not this one.