All Forum Posts by: Scott Swanson

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!

Hi Allison,

Just some food for thought. We almost never install carpeting in rentals, unless they're high end. Carpets get dirty very quickly and in the long run, can cost a lot of money and headaches. We install laminate flooring. It's more expensive than carpeting, but you can get very nice laminate for about $2 to $3 a square foot that will last for many years. It's basically install it and forget it. We've found that the extra cost is well worth it, over the long run. As far as the countertop goes, I would replace it because people put food on it and want a nice countertop. You can find some nice tops out there and get them for a very reasonable cost. Home Depot and other places, have started carrying some very nice "looking" formica tops and they'll last a long time. My suggestion is to put in a darker color. The lighter the color, the more the "flaws" stand out. Another trick for maybe bedrooms or a living room is, you buy some throw rugs and put them down. It absorbs some of the sound and on a cold day, feels much better than laminate, on your feet. I hope this helps. Best of luck. 

Sam,

What is your reason for wanting to invest in Oklahoma and not where you live? Have you considered other markets besides Oklahoma? I can't answer all of your questions, because I don't know the Oklahoma market, but I can answer a few:

2. Is it risky/or safe for someone out of state to invest in Oklahoma ? Investing out of state is always risky. That doesn't mean it can't be done. You need solid "boots on the ground" to invest out of state. Without them, you're toast. You need a quality handyman crew and/or a quality contractor for rehabbing and/or fixing issues that come up. Someone has to live in the area to maintain the property or fix problems that arise. You also need a quality property manager as well. I tell investors that you can buy the best deal on Earth, but if you don't have solid property management, you have NOTHING. A bad tenant can take your profits down in a heartbeat! So make sure you have a solid team. It took me over a year to find a quality, honest and fair priced contractor. Having a solid and competent realtor that deals with investors, is also a very good idea. They know the market and can help guide you on where to buy. 

5. Do i need to own an LLC ? No, not for the initial purchase. I'm NOT an attorney, but my suggestion is, that you put the property into an LLC; sooner than later. This will protect your personal assets, should something major arise. You can put the property into an LLC at any time.

6. Do i need to hire a PM to handle the property ? I strongly suggest you get a PM, (property manager). It's difficult to manage from a distance. PM's typically have handymen that can fix small problems that might come up. But be sure to ask them about how much they charge and what their procedures are, when something comes up. I don't know what fee they charge in Oklahoma, but in the Illinois market, we're between 8 and 10% of the rent. 

We have investors from all over the country, only because we provide them with the boots on the ground they need, to invest out of their state. See if you can find a solid company that does that, in the area you're looking to buy. I would also suggest that you stay under maybe $100k for your first purchase. Get your feet wet and learn the business and how it actually works. Then once you have experience, you might want to "step up." I don't know the prices of duplexes out there. But in our area, we can get them for $110k or less.The rents are typically higher than an sfr, but so is the maintenance and in particular, the rehab costs. You need to take those costs into consideration before buying. Also with a duplex, you may need to hire someone for lawn maintenance, snow removal and garbage pick up. Those costs all add up. However, some investors give one of the tenants a break on their rent, in return for snow removal and lawn maintenance. A PM company may be able to provide those services as well. Unless it's different in Oklahoma, typically, the landlord pays for the water on a duplex, so keep that in mind.

I hope this helps and good luck.

Daniel, 

Congrats on saving that much money at your age. You should be very proud of yourself!

Where do you live in Illinois? The market there is all over the place. @Daniel Botvynko suggestion about house hacking is a good idea, IF you can find a reasonably priced duplex or three plex. It all depends upon where you want to live. You asked if house hacking can cover your mortgage payment. It all depends upon the property. Keep in mind too, that you'll most likely have rehab costs with whatever you purchase. ALWAYS leave yourself with an emergency fund for emergencies that might sprout up. 

If you have good credit, you can also finance a rental property. Typically they ask for 20 to 25% down. That might be an option for you as well. If your brother can do the rehab, that will save you money and be a great learning experience for you too. Self managing is also a good idea, because it saves you money and gives you experience in that area. If you purchase something, after a year or so, you can refinance. Prices are going up, so you might be able to refi and put a good chunk of money in your pocket. But, you don't put the money in the bank. You buy another rental property with the refi funds. It's called the BRRRR method. If you're not familiar with it, you can look it up here on BP. I hope this helps and best of luck to you.

Daniel, the link that Jonathan Klemm gave you is for tax sales. These are different than foreclosures. I'm NOT knocking Jonathan, I just thought you should be aware of that. He was just trying to help! Here is the link to the Cook County foreclosures: https://www.cookcountysheriff.... Here's something you need to know. The prices of foreclosures have gone up dramatically. It use to be, for the most part,that they sold properties for what the homeowner owed on their mortgage. I think those days are long gone! The banks know that they can start the bidding out at much higher prices and they're definitely taking advantage of that. There are still deals to be had, but with the market through the roof right now, good deals won't be easy to find. Plus, you get bidders who let their emotions get in the way of their bidding. Then they end up paying way too much for the properties and it leaves everyone else out in the cold. It might even be worth tracking the winning bidders and contacting them a month or two down the road, to see if they're willing to sell and take a loss. Best of luck. 

Jon, I agree with @John Warren. I don't know how the units could rent for so little, anywhere in Illinois, unless they're studio's. Even then, the rents seem extremely low. 

You didn't specifically mention what needs to be rehabbed. I can tell you this, $5k can go very quickly! Based on your spreadsheet, it looks as though the tenants pay their own electric and gas. If there is a "common" area, you will have to pay that electric bill. What about snow removal and lawn maintenance? What about property management? That's typically 8% to 10% of the total rents. Have you had the property inspected? I'm assuming there's separate furnaces, since the tenants pay the gas. Is that correct? 

My concern is with the rents that low, if you have 1 mechanical failure, like a furnace go out, that could cost you anywhere from $2000 to $5000. Your entire profit for the year is gone! 

I would take a very hard look at the rents in the area, for the same square footage of your units. I think you'll find that you can raise them substantially. Best of luck. 

Josie,

Renting a house in Indiana that you're buying for $225k, may not work out. Your costs will be high and unless the property is renting for a very high dollar amount, the return could be poor. You didn't mention any other numbers. How much would it rent for? How much are the taxes? How much would your payments be? Once you know these numbers, you can easily figure out your return. Best of luck. 

Hi Nick,

I'm by no means an expert on South Bend, but I'm fairly familiar with it. It's about a 40 minute drive from me. You have to be careful where you buy. South Bend has been on a downward trend and has some very rough neighborhoods. There are still some "decent" areas left and I think that's because of Notre Dame and St. Mary's. But typically those properties go for high prices. 

You might want to consider Northwest Indiana. Cities like Merrillville, Hammond, Hobart and Griffith. You can still get in at a reasonable price and the rents are high and taxes low. Hope this helps. 

Simon,

I'm about to throw a wrench into this virtual wholesaling and LLC debate. Simon W. said you don't need an LLC. I agree and disagree.

If it were me, I wouldn't even think about an LLC for quite a while. I would be far more concerned about trying to wholesale in Florida from NY. Virtual wholesaling is difficult. Far more difficult than people think. First off, it's difficult to wholesale in New York and I give you that. But wholesaling in another state require boots on the ground. It requires solid boots on the ground. Someone who can take pictures of the properties, someone who can give you an honest evaluation of the property. How much work does it need? Is it in a good area? How much are the rents? What's the neighborhood like? Some people might tell you that you can lookup the neighborhood and that's true. You can also look up the rents. But having someone there, that knows the market, is invaluable. Having a solid realtor to assist you is also important. I could go on and on. My goal here, is to help you understand the difficulties in virtual wholesaling. Yeah, the "guru's" tell you anyone can wholesale virtually. The "guru's" will tell you anything and everything you want to hear. The reality of it, is that it's difficult. My suggestion would be that you don't worry about an LLC, until you have several deals under your belt. If you start selling 4 or 5 properties, then that's when I would start to worry about an LLC, but not until then. I hope this helps.

Mark, as long as you give them the legally required notice, you should be good to go. It sounds like the tenants are well aware of the deal they have. It also sounds like they're good tenants. Ten years is a long time. Those are the type of people you want to hold onto! Best of luck.