All Forum Posts by: Rick Albert

More time on your hands is an interesting answer. I say this because time is your most valuable asset. Is there something you can be doing that is a higher income producing activity? Analyzing new properties, working at a higher dollar per hour, etc.? You will be surprised how much time sucking PM really is. Especially in LA when you need to keep up with all the changing laws.

With that said, I've heard good things about VenderRoo. I haven't used them.

The problem though is you still likely need to manage, so you can't really get out of it.

There's a lot you can do but I have a few questions (I have beaten out cash offers multiple times):

1. Are these houses major fixers? Have you considered something more move in ready to not have to compete with other investors?

2. I work with a lender that can close in 17 days. You just have to give him everything up front (which is better anyways). Are you working with a mortgage broker or a direct lender? Direct lender is always better. Especially over the last 12-24 months, I've been seeing mortgage brokers dropping the ball 100% of the time (which has resulted in either expensive delays or cancellations).

3. Are you looking at homes that just hit the market or have been sitting?  Aged listings are low hanging fruit.

4. The biggest question: Are you willing to pay more than a cash investor? If so, how much more? Keep in mind if you are offering the same, or even slightly higher, the risk for the Seller is dramatically lowered when they go with a cash buyer.

5. Why do you need the bigger lot? What areas are you looking? Have you considered other areas? For example Thousand Oaks has plenty of large lot homes. But it also depends on your budget.

I don't tend to look at the age of a property but rather the overall condition. A renovated 100 year hold home could be in better shape than an original 1970s.

With that said, you don't know what you don't know. You need to do inspections and get bids. The listing agent may not be knowledgeable in this space and could be doing the Seller a disservice. 

In terms of taking on a project, that comes down to your time, expertise, and commitment to the project. Keep in mind for every project you take on, that's time taken away from other activities. So many times I meet house hackers who want fixers and then I explain that yes, there is value (both of my house hacks were fixers), but there is down time without tenants and you could be doing higher income producing activities. For example, as an architect could you take on more clients that make you money versus time spent managing this?

There is so much advice to give, I recommend asking specific questions to each stage.

I would also look at your short term and long term goals. Where are you based out of?

Generally speaking, using the VA loan to buy multifamily is likely the way to go. You gain more doors (which allows you to spread risk, generate bigger cash flow, etc.) I would also get roommates on top of that. Keep in mind putting 0 down on a property isn't likely to cash flow. Otherwise general investors putting 20%-30% down would outbid you.

Real estate is a long term game and a lot has changed in the market. Be patient and go for the base hits, don't wait for the home run.

Hey Heather,

I did the extensive FHA 203(k) loan for my second house hack. Here are a few answers to your questions:

1. You can start talking to an agent now just to get the lay of the land. The market may change but this way you can ask questions. I've had clients talk to me for two years before buying. You can also have the agent set you up on automated listing alerts so you can study the market yourself.

2. If there is a tenant in place, then why do any renovations other than health and safety? It's not like they will pay you more for the space. Wait until they move out and then do the renovations. Otherwise you are putting in new finishes that are getting used for no additional income.

3. You can outside of health and safety. So if there is a failing roof, the lender will likely want you to replace it. If there are unpermitted structures, then the lender may want you to prioritize it. It's generally the cosmetic work that they are more flexible on.

@Matthew Porcaro is an expert in the FHA 203(k) space and knows his stuff.

I would say it depends. As James mentioned, it isn't a big deal if it is in good shape.

If you are thinking resale, then you have to compare the home to others that sold with a septic tank. For some potential buyers it is a non starter as long as they have options.

For example, I was looking at some horse property for myself here near LA. It was on septic. But I knew that all the homes in this community were on septic so it wasn't going to be a problem going forward. Conversely, in the Hollywood Hills, it is a hit and miss. So some buyers may prefer one option over another. 

So far, 99% of time I see people who have difficult times with tenants, it could have been prevented during the screening process. Never make an exception because frankly, you don't know if they are lying about their situation to cover up a past eviction, etc. I'm not trying to mean, but it's a reality. 

Typically when I have college students as potential tenants, I just have their parents as guarantors. So far it has worked out really well. 

I could make an argument that if you give exceptions that IS discriminatory because you aren't giving exceptions to others.

The disability one is interesting if it is physical and obvious and they are not working. I would consult an attorney on that one but my hunch is they will say that you still vet but not necessarily deny them because of something related to it. 

Congrats on getting your first house hack! 

Yes, you need to have a lease in place. There are a variety of sources online that can provide them, including AAOA, etc. I would also add an addendum with rules for living there such as quiet hours, laundry use, etc. It is important that if everyone is living together, there should be ground rules. 

In terms of collecting payment, if this is your only property for now, just Zelle or Venmo is likely fine. As you build out your portfolio, that's where things like Tenant Cloud come in handy. Just make sure you track your income and expenses for tax time. 

Good luck!

Can you move in? That way you can refi into an owner occupied loan?

Also, the photos aren't great. Higher a professional photographer. When I took a look I couldn't tell that it was remodeled. My guess is that it looks better in person.

Unfortunately this is part of the risk with flipping condos. You mentioned you can't go any lower but at $602/month that eats profit pretty quick. You may want to sell at a loss and move on. 

 Absolutely. That's the law. It's not up for debate.

Plus you have to protect yourself. Everything needs to be in writing, including a lease. 

Also, in case you are wondering, yes you need to report all rental income on your tax return. I'm not a CPA but that is tax fraud to not report it.