All Forum Posts by: Scott Steffek

If you truly feel like pursuing it, take them to small claims court. It won't cost much to file, but that's a tough case to win. Good Luck.

Posting a sign that says: "no guns allowed", is like posting a sign to criminals that says: "Hey, come on in and rob us and rape us, we don't have any protection. Only one robbery per day....PLEASE".

Jay,

I'm glad you touched on quality control. I never mentioned that in my post. How could there possibly be quality involved at those numbers? The quality in the rehabs and the also the quality of the homes being purchased would almost have to be compromised. 

I refuse to believe Morris is doing 80 properties a month. Are you serious? Do you have any idea what type of manpower that would take? Let's break it down.....just a little bit, so this post isn't 5 miles long.  This is based on my experience. Ok. Someone has to find the houses for sale. So there's a ton of marketing involved. Someone putting up bandit signs, someone sending out post cards and/or letters each month, someone searching the internet for properties. Someone taking phone calls. Someone evaluating the properties on paper and then on the internet. That's called Due Diligence. Appointments have to be set up. Someone has to schedule all of this. Then someone has to physically go look at the properties.  Someone looks at the properties. Then more D.D. has to be done. Someone has to make the decision if it's a good buy. Someone has to estimate the rehab costs. Someone has to do a scope of work (if they're going to buy it).  Someone has to write up a purchase contract. Someone has to get it signed and submit a deposit.  They're doing this 80 times a month, every month. Seriously? Here's the kicker. We probably look at 9-11 properties before we find something that's worth purchasing for one reason or another. So let's say Morris is much better than us. Ok, they look at only 8 properties for every one they buy. Folks, that means they look at 640 houses a month, every month! Let's say they blow my company away and for every 3 properties they look at, they buy one. That's still 240 properties to go see every month, or 8 houses a day, every single day of the month, including weekends. That's 2880 properties a year. My contractor would need 4 or 5 full time employees, just to do the costs estimates and nothing else. Selling 80 properties a month would literally require an army of people times 2! This was a very short version of everything that would need to be accomplished each month. I'll let you decide. 

Huninder,

Jeff mentioned Indianapolis. Northwest Indiana is also a great place that easily meets the 2%. NW Indiana is on the border of Illinois. We're about 40 minutes from Chicago. You might want to check it out. Best of luck to you.

Adam,

Welcome to BP!  I'm in Crown Point, so we're practically neighbors. Best of luck in your endeavor and look me up if I can be of any assistance. 

Nathan,

I have two really good contractors that do my properties. PM me for their names.

BB Liu,

The property management fee was taken into consideration. It really doesn't matter what it is. If you take the cash flow per month, you can "reverse" the rest of the expenses. So, the cash on cash return still comes out to the numbers I quoted.  It may sound complicated, but it's actually easy to figure out. My property manager charges 75% of one months rent, to place a tenant. I'm very concerned that Morris doesn't charge an upfront fee. Here's why. Charging 75% of a months rent may sound steep, but you get what you pay for. My property manager runs criminal background checks, credit reports, reference checks and makes a substantial amount of calls to past landlords etc. They obviously incur costs doing this.  So in order to place a "quality" tenant, we feel all of the above must be done. If it's not done, you're taking a massive risk with the tenant that's being placed in your property. I could be wrong, but I doubt that the property management company is going to run all of these background checks and spend all of that time, for free. It just doesn't make sense. Anyone can place a tenant. But to place a responsible tenant that will pay on time and keep your property in good condition, takes all kinds of checks and phone calls.  Even though in these examples the cash on cash return is extremely low, remember this: You can have the best cash on cash return known to man, but what good is it if the tenant doesn't pay, trashes your property and leaves in the middle of the night? Just some food for thought. Best of luck to you. 

BB Liu,

I find it extremely difficult to believe that anyone in Indianapolis is finding "decent" properties between $44-$48k AND not charging a dime for rehabs or property management. That's insane!  Well, ok, if you're buying in the deepest part of the hood maybe it's not. I'm by no means an expert on the Indy market, but I live close enough. I apologize if I sound like I'm upset with you, because I'm not. I'm upset that people are out there pushing this stuff. If there's no charge for rehabbing or management, what are you getting for that ridiculously low price? An area that most likely has high crime and tenants that don't pay their rent. But let's just say I'm completely wrong. Let's say this is a good deal in a good neighborhood. Ok, let's do the numbers. I calculated a $200 monthly cash flow and at a purchase price of $45k, and a rent of $600. The rest of the numbers don't matter. If you're getting $200 a month cash flow, that's only a 5.33% cash on cash return. In my book, that's a major gamble and I wouldn't touch it with a 10 foot pole. 

Let's look at the second example. If you buy at $80k and get $300 a month cash flow, that comes out to a 4.5% cash on cash return. That 4.5% doesn't even include the costs of the mortgage. Add in just an additional $100 a month for a mortgage and you're CCR is now a whopping 2.5%! I don't know why anyone would even think about buying into something like that. I also calculated a 30 year, $45k loan at only 3% interest. The monthly payment is $189.72. So if you add in the mortgage, your cash on cash return is .26%. Yes, it's only .26%.

I can't tell you what we do or I'll get flagged for soliciting. But we can get out of state investors far better deals and we do everything for you. PM me for more information. Best of luck to all of you. 

I agree with Alex. Zillow "Zestimates" are garbage. I put a contract on a property a while back and the Zestimate was $29k. Wow. The appraisal came in at $51k. So much for accuracy Zillow.