All Forum Posts by: Scott Swanson

Connor,

House hacking can be a great way to start, if you can find a place you'll be comfortable in. House hacking can allow you to basically live for free or close to it. But is that the best strategy for someone with $100k cash? I'm not real convinced! You may only get 1 property for your $100k. Here's another idea that can get you started on your way to having quite a few rental properties in a short time. Buy maybe a 3 bed for around $70k and put down 20% to 25%. That's around $15k. Rent it out and make payments, but make sure it cash flows nicely. Then purchase another property the same way. Then another. Make payments on the properties and in a year or two, refinance out. Then you take the refi funds and buy a few more properties. There's more to it than this, but if you do it properly, you could have a nice portfolio in a few years. Then you repeat the process again. It's a part of the BRRRR strategy. If you're not familiar with BRRRR, you can find how it works all over BP. But please don't forget that you need to set aside money for rehabs and other funds in case something needs replacing like a furnace, hot water heater etc. NEVER invest your last dime! This strategy will allow you to accumulate quite a few properties in a short period of time. Best of luck.

Hi Stephen,

I ran the numbers you presented. But I have a couple of questions. Why is the utility cost so high? You're almost at $2k a month. Do tenants pay for their own utilities?  Is the building electric heat? If not, how many furnaces are there? Does your maintenance costs cover lawn mowing and snow removal? 

I added a 5% vacancy cost of $942 per month. Vacancy will be an expense. Without any rehab costs, I came up with a 3.56% cash on cash return. That's extremely low. Some people use cap rate but it basically all comes out in the wash. So based on the numbers you gave, this is not a good deal. If you add rehab costs of $50k, it drops your return down to 3.42%. So IMHO, unless I put in the wrong numbers, I'd be careful with purchasing this property. I hope this helps.

Nathan,

Can you explain what you mean by underground outlets?  Are you talking about outdoor electrical outlets that are attached to the framework of the houses? 

You have what's called a grounding rod, that's located by the meter, on the outside of the house. Is that what you're talking about? 

Johnathan,

BP is a great source for learning and connecting with others. But I wanted to let you know a few things, before you invest. Fist off, most "credible" listings on the MLS all over the country right now, either go extremely fast or can, and are usually overpriced, compared to a year or two ago. So finding a good deal, may be difficult. I'm not saying there aren't any on the MLS, but everyone is struggling to find good deals. Most of the deals right now for investors, are found off market. If you're going to use a realtor, find one that works with investors and has experience in that arena. It might be difficult to hook up with one and here's why. If they work with investors, they're going to give the deals they do get, to investors they've worked with in the past. Why? Because they know for fact they're buyers. My point is, being the new kid on the block isn't always easy! They want you to prove to them you're a buyer.

Secondly, you said you weren't sure where to start investing in Tennessee. You're out of state and you need boots on the ground. You need a reliable contractor and/or handyman crew. You need a reliable person to take pictures of the inside of the properties, so that you can accurately calculate the rehab costs. You also need a "solid" property management company as well. IMHO, without having all of that, you're taking a huge risk. A realtor may be able to find you a good contractor and a property manager. So that may very well be where they come back into the picture. Many times an experienced realtor will have connections and can possibly set up a solid team for you. But moving forward without a team or boots on the ground, can be suicide!

Some people might tell you that you can and should purchase turnkey properties. Those are houses that are supposedly "ready to go" and don't need any work. I won't get into that right now, but be careful with "turnkey."

I hope this helps. 

Rosario,

Does your company physically go into all of the properties and then estimate rehab costs or specifically how does that work?

BTW, Illinois property taxes are going up AGAIN, shortly. So brace yourself. 

Trevor,

Quite a few states taxes are in arrears. It's a long story, but goes back to the 1930's. Why did you say that that's unattractive?  When you close, the taxes that are due, are paid by the seller and then you take over. Actually, paying in arrears can be a huge plus, when you sell. If a properties taxes go way up and you happen to be selling, you're not responsible for the huge increase that is coming up. So that can be a big plus for you. You're really not "putting off" any debt, because the state would have an extremely hard time telling homeowners they have to bring taxes up to date, because that would be double taxation.  So even though you're paying the year prior, it all comes out in the wash. I hope this helps. 

Hi Jessa,

A couple of questions. What is your "all in" price range for rentals and also for flips? 

Right now, the market is very tight and prices are way up. I'm not saying it can't happen, but finding a high profit flip right now, will most likely be difficult. We're having issues finding them for our investors, because of the market. 

I think using your equity is a good position to take, but it can depend upon what price range you're looking at for th rentals and the flips. 

John,

Exactly what kind of cleaning do you need done? 

Allison,

What state is the property in? 

When it comes to students renting, they can sometimes be a little "sloppy." LOL. I would recommend at least an LVP (vinyl), in the kitchen. It's water resistant and will last longer than a standard laminate that isn't water resistant. Now there's an EVP as well. That's waterproof. An EVP is best for a kitchen, but we've had LVP flooring in kitchens for years, with no issues. However, if you already have ceramic in the kitchen, you'd be far better off leaving it. The same with the bathroom. 

Your budget will be a factor in how much you spend and what kind you buy. Keep in mind that material prices have gone through the roof this past year. On vinyl, you're probably looking at $4 to $6 a square foot, plus labor. Putting down any laminate is labor intensive. But if it's done properly, will last for years to come. 
One last point. Do you have a reliable contractor to do the job? If there are low or high spots when putting down laminate, it won't last. The floor needs to be level.
Here's a link that tells you about the different kinds of laminate and planking. I hope this helps.   https://theflooringgirl.com/bl...
Best of luck!