All Forum Posts by: Sharon Rosendahl

Be aware that if occupied you may have an eviction battle on your hands. Make sure you include that in your calculations. The amount of time depends on how things work in your area. Some places it is longer to evict than others.

I am awaiting an answer from the seller of an auction property and purchasing with hard money.

1) Identify one or more hard money lenders you want to work with.

2) If you can pre-qualify do so. This means you don't have a specific deal but you are having a dialog and application to ensure they will lend to you and what terms. This would include what kind of deals they cover.

3) The house I might be buying was listed for a week or so before the auction so I was able to walk it. I wasn't aware they were sending it to auction since it was originally listed without saying so.

4) Since I had a relationship established with my HML and I knew they did auctions I just requested a proof of funds letter.

5) I bid, I was top bidder but the auction didn't make reserve hence why I'm waiting to see if the seller will accept my offer.

Some caveats about auctions:

Do your due diligence. We had to work hard to complete things before the auction closed. We are talking we were satisfied a few hours before the auction ended. We researched not just the title history but also building permit history. Since this is a rural property we also checked well and septic records to ensure they supported what we were planning. There were still some questions so we spoke to both the sanitarian and the building permit office.

Not doing your due diligence can be disastrous. Not only is there consideration of inheriting debt of some sort but also building issues. We looked at a house that was listed on the MLS. This house had been purchased at auction and obviously needed a lot of work. We were told the buyer was overwhelmed and just couldn't get it wrapped up. The house was obviously in the flood plain. We were also told it needed a well. Upon further checking we found that it was actually in a floodway and no new permits could be issued, including well and septic. This is checking the seller should have done before bidding on it. It is likely that this was a huge amount of his savings and he will never get back what he paid. It is sad.

The house we are waiting on has some permitting issues. After our conversations with the county, they are all surmountable and we already have a plan coming together to remediate. That doesn't mean all problems in all cases can be remediated. It is better to know what you are walking into and have those conversations with the appropriate departments.

I have always avoided auctions because of their terms and the fact that not all deals are really deals. It was an incredibly busy couple days trying to cover all of our bases in time to bid. Hopefully, this will be a successful venture for us.

I have no legal background but shouldn't they be after their home inspector? If the home was inspected and there was no indication there was a problem when the inspector checked how can someone expect you, the non-inspector to know. 

Water can do strange things. I once owned a house that wasn't in the flood plain. The basement flooded the first winter we owned it. When I spoke to the neighbors, many of which had lived there their whole lives and they were in their 60s, they told me that had never happened in their lifetime. Many of these same people had to rip out finished basements due to water damage. Sometimes stuff happens and it has nothing to do with anyone being negligent.

Good luck.

So they left the window open and it leaked but that is your fault? If the latch is broken and the window won't properly close then it might be your problem. My lease actually reads that it is the tenants responsibility to notify me of problems like a leaky pipe or broken window in a timely manner otherwise they are responsible for damages. I feel that if they failed to notify you of the defective window and you had no way to know it was defective or if they just failed to close it properly then it is their fault and they should file an insurance claim or pay for it themselves. If they told you the window was broken and you refused to take care of it in a timely manner then it is your fault.

@Andrew Ashby You did great! You didn't lose money. Think about college. You go for 2 or 4 or more years paying people a ton of money to earn your degree. So you got paid a couple grand and learned a lot. That is a plus.

Take your lesson and apply it to the next one. I hope we manage to make money. We are about to purchase our first flip. We should know in a day or two whether our offer is accepted. We have done a lot of rehab on our rentals and our personal homes. Hopefully those projects will serve us well for our first flip.

At this point, we have decided that combining flipping and rentals will allow me to contemplate leaving my day job sooner than retirement and to work for us instead.

Good luck with your next one.

@John Underwood Ugh, then he would really think he owns it. We actually offered to mow a strange corner near the road that he can't get to but we can. We have stopped since he is so pissy and now it looks like crap and likely will some day cause the county to send him a notice. 

Flood plains can be difficult. A block can make a difference as to whether it is in the flood plain or floodway which can make a difference in what you can do. Realize that the house will sell for much less than similar non-flood plain houses. Flooded houses can have mold or other contamination due to flood waters carrying raw sewage and chemicals. Probably not a good first project so proceed with caution.

@Mila Posternak have you considered having a vacancy reserve, current repair reserve and also your insurance costs (or is that in your mortgage cost?).

Ask for an occupancy history, have them show it on a monthly basis for the last couple of years so you know whether those rents are at full capacity or how many months something was unoccupied. It sounds like you are in a good market so maybe there really isn't any vacancies?

Old houses can have issues even if maintained, did your inspections come out ok?

We purchased our lot and have a sellers contract. We used a heloc to place a manufactured home. This was a used home. While many places will finance a manufactured home on its own lot (Mfg title has been eliminated and house and property are one now) most don't seem to want to finance a twice moved one. Anyone out there in BP land know of a lender who will do this? Credit and everything is fine, just looking for a little better interest rate (6% on the land and a $30k heloc at variable rate of about 10%). 

TIA

Sharon

My quick and dirty calculation is 1% of purchase. There is so much more that goes into figuring out whether you ought to buy something that one shouldn't base it on a single metric. I have found that if I don't get at least 1% I might as well not own it right now. I know some people buy for appreciation and worry less about rent but I can't afford a bunch of non-cashflowing properties so I don't do that.That doesn't mean I don't consider something that is lower % but around me right now a typical family 3/2 1500 sf is pretty much starting at $400k and is renting for $2000. I have no way to make this work. So .95% may be workable or maybe you can offer less or whatever but .5% is unlikely to work and even if you have cash, your cash on cash return would be low. I'd rather throw it into index funds, get about 8% and not deal with tenants.

Study up on the different calculations you can use to analyze your business. Play with the BP calculators. Do dry runs using stuff you find listed in your area and find rent for a similar house (Zillow can be helpful with their rent estimate, I don't blindly accept those in real life but they would be fine for practicing). Plug things into a calculator and see what happens. Also try scenarios like, your tenant calls in the middle of the night with a broken water heater etc to see if you will have enough reserves to afford repairs.