All Forum Posts by: Joe Scaparra

A couple things to focus on regarding the smell.  What you have describe is possible mold.  Where is your inside AC Blower unit. Is it in a closet or is it possibly in the attic.  One of my rental units had it in the closet and one of the lines going to the unit was not insulated and was dropping condensing water on to the sheet rock slowly.  Just happened to be in a small closet.  Not enough to drip to the floor but enough to keep the closet ceiling damp.  Causing a mold smell.  

If you can't locate the source of the smell, then purchase an ozone machine on Amazon for between $100-150.  They work great and if you have rentals they are always good to have.    If your walls are not dirty, you probably don't need to paint the entire unit.  If one room is bad, maybe that room could use the paint.  The ozone machine will take care of your smell, especially if there is no direct smell source to keep it there.    

Did you past tenant have a cat.  Sometimes a cat will urinate in a corner of a room or closet and that smell is very difficult to get out.  You will have to locate the area using a black light and once located you can then deal with the issue, if it is cat urine related.

Absolutely charge them if they left the property smelling bad.  I don't worry about being taken to court.  Welcome it if it happens.  But do give them a full accounting of their deposit within 30 days of move out if they have supplied you with a forwarding address.  Required in Texas, if not complied with you could be liable for up to 3 times their deposit regardless of he condition they left your property.  Cheers.
 

A couple things to focus on regarding the smell.  What you have describe is possible mold.  Where is your inside AC Blower unit. Is it in a closet or is it possibly in the attic.  One of my rental units had it in the closet and one of the lines going to the unit was not insulated and was dropping condensing water on to the sheet rock slowly.  Just happened to be in a small closet.  Not enough to drip to the floor but enough to keep the closet ceiling damp.  Causing a mold smell.  

If you can't locate the source of the smell, then purchase an ozone machine on Amazon for between $100-150.  They work great and if you have rentals they are always good to have.    If your walls are not dirty, you probably don't need to paint the entire unit.  If one room is bad, maybe that room could use the paint.  The ozone machine will take care of your smell, especially if there is no direct smell source to keep it there.    

Did you past tenant have a cat.  Sometimes a cat will urinate in a corner of a room or closet and that smell is very difficult to get out.  You will have to locate the area using a black light and once located you can then deal with the issue, if it is cat urine related.

Absolutely charge them if they left the property smelling bad.  I don't worry about being taken to court.  Welcome it if it happens.  But do give them a full accounting of their deposit within 30 days of move out if they have supplied you with a forwarding address.  Required in Texas, if not complied with you could be liable for up to 3 times their deposit regardless of he condition they left your property.  Cheers.
 

@Andrew Fudge, yes indeed college towns are great places to invest.  Texas State would be fine.  I looked years ago at duplexes near that college but settled on College Station.  Look for locations that suit students best.  Go after the graduate students as they will take care of your property better.  Lease terms should be one year starting in July and ending in July (15 July -15 July) works best.  My students  generally help me rent it out when they graduate.  I offer them $100 to show their unit for me.  Here is the key to making it work GREAT.  You have to pre-lease your property.  Meaning:  In late January or early February start advertising for a July move in.  Students begin looking and want to secure housing before they leave in May.  Also, most students like the idea of having a place through the summer for which then can hang out.  Many of them will attend summer school.  I focus on post graduate, veterinary, and medical students. Students usually have many sources for rent.  Main sources will be student loans, parents and part time jobs.  Focus on smaller properties, like 2 bedroom duplexes.  Too many students promote parties and usually with 3 students one will feel left out and want to leave mid-term.  Once you get the hang of it, renting to college kids is easy peasy!

@James Hamilton, I like your thoughts and @Nate Sanow advice is spot on. The only caveat is I would look for a 2 bedroom 2 bath duplex or a 2 bedroom 1 bath duplex. Even if it cost a hair more get it over a SFH, POSITIVE CASH FLOW is KING! I am a big duplex fan, read my profile. Cheers!

@DeAndre Mason, Wow, you are now Starting to realize the power of House Hacking at it's finest! Yes indeed your plan is SPOT ON! By your numbers it sounds like a GREAT plan!!! I have built my wealth on duplex investing (read my profile). I think investing in duplexes (especially your first investment property) is a NO BRAINER. Most investors/first time home owners DON"T consider a duplex........big mistake. Your risk in owning a duplex vs buying a SFH is a LOT LESS.

You have an opportunity to get in the investment real estate game with little to no down payment (could be good thing but also a bad thing too, carefully evaluate all options). If you do this your next big decision in a couple years might be "Damm, another duplex is up for sale, instead of purchasing a SFH next might it be more prudent to buy another duplex?"

DeAndre, just considering this option is putting you light years ahead of your peers..........you are thinking in the right direction and soon will be building wealth!!!!  Cheers and good luck!

Consulting an attorney is always the easiest and many times the most prudent thing to do.  However, in this situation, I am not sure I would let her problem become my problem,  I would tell her that she needs to secure his release from the husband so that you can write a new lease with only her on it, IF THAT IS PRUDENT for you as well.  Yes, there may be some avenues SHE can take to void your lease sighting Domestic Violence but I don't know she can do that with the intent to stay at the same location.  

Bottom line, she has a problem and it is nice that you are a ware of it, but let her jump through the hoops to solver her problem.  Yes, you can spend money for an attorney.......it might be the prudent and easy solution to this problem but it also might not be needed at the moment.  I would let her try and solve HER problem first.  

@David Ivy, you posted the below chart a few days ago.  Let's play a math game and based on the numbers presented in the chart what is your best guess the YOY numbers for OCT, NOV and DEC will look like.   I would guess they are going to less that the previous numbers, but since we still hold on to YOY numbers as positive, I will go on record today that with in the next three months, if not next month the YOY number is going to be NEGATIVE.  If you believe that and if your are an investor thinking of buying why would you not wait to buy.  However, if you are a seller and feel the need to sell your property in the next six months, why would you delay as your best chance of getting your best price is NOW as the TREND line shows a decline!  

Now can we back up the trend line with a little logic.  Yes, I believe we can.  Let's see, interest rates increasing, stock market in a correction and heading if not already in a BEAR market, major companies freezing or decreasing employment and we are in the slow months of a typical housing cycle.   I have always said if a market can go up 100% in a short time it is also capable of going down 50% in a short time.  Might it be that Austin became overvalued and now as things begin to turn that it is set up to over correct as well.  If so there are going to be great buying opportunities but they are months away if not over a year away.  Your chart says a lot but you get two different feels depending if you focus on the long term data (YOY) or the short term data (MOM).  Am I wrong, if so why?

In times like this you have to examine the data with a very discerning eye.   The trend is MORE IMPORTANT than the Year Over Year data.  We have had such a robust sellers market that year over year numbers camouflage what is really happening TODAY!  Give me the month over month stats or the two months over two months stats and that will give you a great indication the DIRECTION of the market.  

The old saying "Don't try too catch a falling knife or you might get cut" applies in this market.  Unless you are pressed to buy, you might want to hold  for a while.  Inventory is going up, year over year sale/price numbers are falling, why not wait and let them fall more.  I think month over month data will show prices declining (like negative from the previous month).  Why don't we tell or highlight these numbers.  

Since we are in the baseball playoffs think of our housing market like this.  Los Angeles Dodgers (housing market) had the best winning percentage this year and the favorite to get to the World Series.  Their first series (best of 5 games) they won the first game and lost the next three.  No cause to be alarmed win it was tied up 1-1 but then lost the next two games and are out of the playoffs.  Their trend line stunk!  Housing market can't go wrong over last ten year right!  Year over year numbers still look GREAT!  Hey what does the trend line tell you.  It is starting to stink if you're a seller and if you're a buyer let it stink up some more as the knife is still falling.  Cheers!  (lets revisit this post 12 months from now.)

Finding a good property manager is a very difficult thing to do.   Most will quote you a 8-10% management fee but it will cost you a lot more than that.  For example when aquiring  a new tenant most PMs charge additional 1/2 to 1 months rent fee.  On renewal of tenants, some PMs charge a fee.  If your tenant pays late, you might not collect the late fee the PM collects.  Maintenance/repair cost: if the PM manages 500 properties and give their repair business to select vendors do you thing they get preferred rates?  If they don't, then I question their management acumen.  The big question does it get passed on to you..........I doubt it very much.  Lastly, the more properties they manage the higher probability the management quality of tenants decrease.  I can't tell you the number of tenants that tell me their past PMs were lazy fixing issues.  I can believe it as some of the duplexes I have bought have been extremely run down and were managed by a retail PM.  If working with a PM you should expect longer vacancy times as they have a lot of properties to fill and you"re just a number.  

Now I bring up all these negatives so that if you the owner looking for a PM can ask questions and be more knowledgeable before you enter an agreement.  I can assure you if you were not aware of these negatives,  you would not ask and probably be disappointed in you selection later.  There are some good PMs, but it will be hard to find one better than yourself (even with little to no experience).  You too will do a better job, because you will be more motivated with your own property.  However, if you don't have the time or inclination you will need to find a needle in a haystack.  Good luck.

@James Sun, this is a good problem to tackle as there are a lot of lessons you will learn with either approach.  However, there is no clear cut answer to this problem because to feel good about a recommendation, I would need to know FIRST what is your goal when investing in INVESTMENT REAL ESATE.  

Is the bottom line, which path will make me the most money, as if I am flipping?  Which one has the most risk?  Which one provides more long term positive cash flow?  Is my goal short term or long term, does it matter?

Let me give you a real world problem I had 10 years ago.  I bought a run down duplex for 70k but it was so under priced that I could sell it the day I closed without doing any work for 120k.   A fifty thousand profit in one day.  A helluva return if you try and annualize that transaction, right!   However, selling it did not work to accomplishing my goal......which was: Build a real estate portfolio that would provide substantial, predictable,  and sustainable income that would allow me to live a very high standard of living for the rest of my life.  Rents at the time of buying was $600 per side $1200 each month.  Now in Austin TX, this same duplex kicks off $3000 a month income and the property value is 500k. Looking back, it would have been a MAJOR mistake to flip that property, not only because it did no help meet my goal but also from a pure monatarty evaluation it would not have been as good as holding it.

Now back to the choices you presented.  1st option: 400k initial buy plus 110k rehab total cost $510k.  Finished product sold $650 total profit $140k.  No time table mentioned but a rehab lets go max 6 months.  No talk about cash flow if kept long term.   How does this help you achieve your real estate goal?  I don't know.

2nd option:  400k initial buy, additional 400k construction cost for a total of 800k.  Finished product sold 1.1 million for profit of $300k.  May take a year to complete project.  No talk about cash flow if kept long term.  How does this achieve your real estate goal?  I don't know.

Now I am going to step out a little and tell you were I am leaning but it is just a stab in the dark as I don't know what your goal or objectives are.  You have to be CONFIDENT in either approach so for me I am a bit conservative (I am 67, have the game won) so I would lean toward rehab with the extra room or maybe two but I like a two bedroom over 3 bedrooms.  Easier rehab, less time to accomplish over option 2 and most investors undershoot rehab cost. The larger budget, the greater chance of overshooting and causing financial hardship.  Confidence comes from knowledge and EXPERIENCE.  Then, there is CASH FLOW.  IS that important?  To me it is extremely important, others maybe not.  No right or wrong here, it depends ON YOUR GOAL!  What did you say your goal was..............???????????????   

Get my drift!  Also, don't focus on how much money can I make without giving equal weight to how much risk can I take and is the trade off worth the risk.  It is easier to find a $2k renter than it is a $4k renter.  So one might be tempted to get a larger property but I am a duplex investor and for me the perfect duplex would be a 2 bedroom 2 bath unit over a 3 bedroom 2 bath duplex.  Why?  Because the difference in rent is minimal compared to the problems of having more tenants living in the property.........This knowledge comes from EXPERIENCE......get my drift.  Good luck and Cheers!