All Forum Posts by: Chuck B.

I twice purchased duplexes in hot neighborhoods because I wanted to live in that neighborhood, not because they were cash cows just rented out on their own.  Both worked out beautifully due to appreciation and I got to live where I wanted (subsidized, but not free) for 15 years.  I live in yet another duplex today that is more modest, but will be a solid rental when I leave it (and I'm not counting on any appreciation).

With that said, I'd make sure you can cover the entire mortgage should things go south for a few months.  If you don't have savings or an emergency fund you can tap you will most likely be hurting at some point.   

Good luck!

 - C

I'll second a lot of the advice here...

Sign in yard. 

I checked rental comps on Craigslist and you look priced well.  Your place also looks nicer than a lot of the competition!

It's a bit far from the city so there's probably less folks looking there, may take some extra time due to area?

Postlets as well as craigslist.  

Weather does play a role.  

Be patient, no matter how much it hurts.  Better to get a great tenant two months from now than a rotten tenant today.  It's a fact!

I'd reconsider section 8 if I were you.  I have three great section 8 tenants, two of them have full rent subsidies and one is at 90%.  Direct deposit each month is wonderful.  You just have to vet them well (as in, in-home inspections before you let them lease your place).  

I allow a small breed dog now, no cats and no dogs above 20lbs.  An extra, non-refundable pet fee of $50 and an extra $25 in rent gets you access.  I have two tenants on that plan right now.  

Good luck, it'll happen!

Best,

 - Chuck

I love my 45k (all in) houses that rent for $850.  Not pigs I suppose as they're worth 15 to 20K more as soon as they're rent ready.  They probably won't be 145K houses in my lifetime but I can certainly see them being 100k houses someday.  

I agree with so many of the folks saying these costs are way too high for capex as well.  If you're paying retail for any of this work you're paying way too much.  I had an entire house re-plumbed for $1000. New roof for a 3/2 and the standalone 1 car garage is 4k.  Etc etc. if you spend the time developing relationships with quality contractors it's easy to do.    

Anyway... This thread reminds me of something I read on BP many years ago that I think is very true.  It's hard to make landlording work with one house.  Things will come up that eat an entire years rent.   However, once you have a handful, it's easy cheesy.   I stay proactive and basically plan on doing a big chunk of work to one of the rentals each year, typically during make ready.   New roof?  Needs new flooring? No big shakes...  I'll spend the money without complaint and the other rents will keep building cash for more acquisitions.   

Also, because HVAC was mentioned a few times as well as the issue with filters.... I'd encourage you all to get on a twice yearly service plan.  I get discounts on all labor and parts and my actual emergency calls have nearly disappeared.  The filters are changed at least twice a year this way too.   

Best,

 - Chuck

@Brie Schmidt - wow, congratulations!

Could you talk a bit about the financials on the duplexes you're buying?   E.g. Price paid, amt of Reno needed, amt financed (80%?) and rents?   I love that sort of nitty gritty detail as it gives me something to think about when contemplating my own deals. 

Best,

 - Chuck

@Adam E.  - One more bit of advice... you really need to know these areas too before slinging offers.  There's tons of cheap houses available in areas you DO NOT want to be in.  (e.g. Don't buy anything south of Broadway around 26th street but you might quite like the area south of Broadway on the far west side.)  I'd plan to spend a good 20 hours in the car getting familiar with the neighborhoods first.  You can have a realtor/zillow/whatever app on your phone open at the same time and periodically look at the current listings and recently sold and it will all start to click after a while.  

@Adam E.  - Welcome aboard, fellow Louis'villian!  

I have a handful of the properties you're describing... lower income area homes that cost 40K-50K all in after repairs and are rented out sec 8 for $850 a month.  A few of them are brick too, which I prefer.  (Fun fact... you can get as much as $900 monthly for a 3/1 in the west end rented Sec. 8.  I know a guy who is getting that.)

You can find these houses on MLS, HudHomestore (have to wait for "first look" period to expire) and via the local REIA listings as well. There's a lot of garbage out there, so it takes time to get a nice place with good bones on a nice block and at the right place but it can be done and consistently if you're patient and steady.

I'd put 20% down on the house and I would use River City Bank to finance it. Some locals here on BP have directed me to some options that have much better terms but I haven't worked with them yet, so I'll just describe what I know. They will charge you 6.4% on an ARM, fixed for five and amortized over ten years.

So, let's say you found a promising looking place (or negotiated one down) to $35K.  You'd put 7K down and have some closing costs on top of that and be left with a mortgage for 28K.   You then put 10K into the house shoring up the plumbing, maybe some new flooring, probably paint, maybe a new water heater, new security/storm doors, etc.  Whatever is needed to make it solid and attractive.  

You'll have a monthly payment of $305 or so, plus insurance at $70 and taxes at $35 for a total of $410 or so. If you rent it at $850 you'll have $440 monthly after PITI. Then it just depends on how well you manage it (I self manage the handful I have) and what your capex and vacancies look like. In my experience, nicely fixed up houses with properly vetted tenants will have quite low turnover, maybe averaging once every 3 years or so.

Be sure you keep an open mind about what needs to be done to the property to "bring it up".  If you find one that is perfect, you could pay $50K for it and be done, but in my experience, they all need something.   Likewise, you could buy a house for 20K that is in really bad shape but plan to put 30K into it to bring it up.   

Good luck and let me know if I can help with anything!

Best,
 - Chuck

I'll second @Erik Hitzelberger I think you have to have different expectations and plans for different areas.  The best zip for me so far has been 40212 but I know a lot of folks don't like the west end.  The low cost reeled me in and I've had a very positive experience over the past four years.  

Can we hijack this thread and turn it into a rant on the Old Louisville power-mad preservationists?   No?  Ok.  :)

in Louisville, KY it's more of a neighborhood-to-neighborhood thing.   I tend to buy in areas that generate 1.3% to 2%+ on my ARC (after repair cost: acquisition plus repairs).   It's harder to find nice properties in livable areas at 2% but we all put out own bias on that.  That is, just because I don't want to live in that neighborhood doesn't mean there's not a few thousand folks that do... And for all sorts of reasons.  E.g. Proximity to work, habit, family, etc.  

I can also find properties easily in nice neighborhoods that are more along the lines of a 3/4% test/rule but I can't make them make sense for me financially.

@Account Closed - I think I understand your point about nothing selling under market value but doesn't that deny that there are wholesalers that have been doing exactly this (buying and selling same day for more) successfully and repeatedly?

Best,

 - Chuck

My quote was from "RLI Insurance", but my agent sells a lot of Safeco and it's priced the same as the Safeco quote above, so I'm guessing it's the same product.  

It's a 1M policy covering my spouse and me and the rentals that are in my name personally (but not the LLC rentals) at $352 a year.

Thanks for sharing, folks!

Best,
 - C