All Forum Posts by: Mark Manship

@Dylan Tettemer; also from Florida - what part of the state are you focusing on? Property types?

@Ryan Russell, welcome! I just recently moved from Clovis, NM back to Florida, but have frequented the ABQ area many a time; my wife and I were actually married on the north side of town. Best of luck to you as you start out - if you ever need any advice on the Clovis market, or want to bounce any ideas, let me know! Are you focusing near Kirtland or in other residential areas?

Welcome @Jeremy McVicar ! What part of Florida will you be moving to? I spend a good part of my high school years in Ogden, UT, and am always looking for an opportunity to make my way back for the ski season! Great to have you!

Welcome @Marc Romero ! I just recently moved from Clovis, NM to Florida. It's not very often I get to hear from individuals located on the east side of NM. What kinds of property are you looking to focus on in Roswell? Any plans to expand to some of the more "touristy" areas such as Carlsbad or White Sands? Again, welcome to BP!

@Account Closed, thank you for sticking with this post, and I appreciate all that you've provided in ways of creative solutions. I think what we will end up doing is a longer term lease like you've mentioned to lock in the "tenant" in case the purchase agreement falls through. At least we'll assured in either case that we will have someone living there (and either making our capital back or generating cash flow).

@Lynn McGeein and @Account Closed, again, thank you for the replies and insight. Interestingly enough, we have an offer incoming, but it is a little "different" than what I would consider a normal deal. 

We've basically conceded to losing our sweat equity and in the interest of regaining our capital, met the buyer at the lowest price we could go without losing our investment (we'll get $0 in profit, but will gain back the capital from our down-paid principal). The realtor helped us out in this regard by lowering her commission to 4.5% (she is working for both the buyer and seller). 

This would all be great, with the exception that the deal is contingent upon the buyer selling their current home, for which they are scheduled to go under contract in October (their buyer can't attain financing until that time). Additionally, our buyer would like to rent our property until we can close in October/November; in essence, renting until we can perform back to back closures.

So, the waters get a little trickier to navigate now...

Do we accept the LOW offer, contingent upon their house selling, while also renting it to the potential buyer...OR are we better off finding a long term lease from another customer and attempting the sale at a later date.

One thing my wife and I are SUPER concerned about is renting the property before closing, especially given that the property is older. We would obviously have a home inspection performed before signing any kind of lease, but we could put ourselves in a spot where the potential buyer gets a "trial" period of our home, finds additional things they don't like (or worse, something major breaks), and they walk from the sale. We might get our earnest money back...we might not.

We both feel like we're assuming a good bit of risk (even more so then solely renting it out for a few years).

Thoughts? Experience with renting to buyers prior to closing? 

Mark

Michael Short thanks for the reply! I'm still educating myself on owner financing, but from what I can tell, not owning our property in New Mexico will cause conflicts with our current lender (e.g. Owner financing a home that we already have a mortgage on). This may cause issues if the original lender gave us a "Due on Sale" clause, which I'm pretty sure is standard now-a-days. Lease to own is an option, but provides us almost the same benefit as renting, the difference being that we will most likely lose out on cash flow for the time the "tenant/buyer" is in the home. We're continuing to explore out options and hope we pick the least risky of the bunch.

I'll try to keep this as specific as possible as to prevent the "...it depends" responses. I understand this is a lengthy post, but it is all in the interest of garnering the most pointed advice.

BLUF: Wife and I own a previous-dwelling single family home (House A); we moved to a new area, purchased a new single family home (House B). Looking for advice on holding out for a sale of House B to regain capital, or listing the House B for rent.

-------

In 2013, my wife and I purchased a 1974 2-story "fixer" in Clovis, NM via a no-money down VA loan, which we poured our blood, sweat, and tears into for 3 years: refinishing the exterior, installing hardwood floors, upgrading countertops, repainting all the walls and trim, retiling showers, blowing out walls, replacing light fixtures, etc.. While we never drained our bank accounts into the home, we spent approximately $20,000 in our own capital over those 3 years (materials, tools, hired help) to improve the property from its original $185k purchase price to our max renovation budget at its original appraisal value of $205,000; this does not include the many, MANY hours of DIY that we put into the home to help save our dollars, but in hindsight, we realize we may have lost that investiture. Our hopes were to sell at $109/sqft, which was right below the going average of homes in July of this year, putting us right around the $275,000 mark.

The military recently sent us on to Florida for a short notice assignment and in our last 60 days in NM, we finished up all our remaining renovation projects prior to listing the house for sale with a local realtor (the same one we used to purchase the home).

We've since moved to our new location here in Florida, and while our property in NM has received numerous online viewings, open house walkthroughs, and private showings, all with positive reviews, we've yet to receive an offer (even after dropping the price by $25k to $249k after the first month...now extremely competitive at $99/sqft). The feedback we receives lends us to believe that buyers are venturing the way of small "cookie cutter new" rather than sprawling "renovated with character."

Our realtor has mentioned that this is the worst iteration of the seller's market in her many years of experience in the area, and while we want to be hopeful that it will regain steam, we are worried that we'll be left paying a mortgage for a home that holds a good bit of our capital. Additionally, we are set to close on a new construction build in Florida in the next two weeks (queue the financial stress...). We are financing this newer home under our current VA loan cap using almost all of our remaining capital from savings for the required down payment.

With the high probability of holding two mortgages, one of which will be on a home that sits vacant in a buyer's market, we are wondering which avenue to take: hold out for the market to cycle back in the seller's (our) favor and regain our investment capital, or list the house for rent and make the slow, laborious climb to our target savings using small return in cash flow (assuming we ARE able to cash flow).

In summary:

Originally purchased at: $184,900, $74/sqft (Principal Remaining $177,000)

Invested: $20,000

Currently Listed for Sale at: $249,000, $99/sqft

Break-even Renovation Price (including 6% realtor commission / Closing): ~$230,000, depending on closing cost arrangements.

Days on Market: 61

Net Rental Income to Positive Cash Flow $200.00 (including 10% property management, 10% for repairs): $1750.00, equates to Fair Market Rent for sqft, house specs, and location

---------

With our goals of purchasing our first investment property by September 2017, I am concerned by the opportunities lost in keeping all of our investment capital tied up in the NM home; I'm equally concerned that if we choose to leave it on the market, we will end up paying two mortgages until the market takes an upward turn, a duration of time of which I have no prediction.

By my rough calculations, it will take ~19 more months before the additional mortgage payments we pay into the home overtake the profit (aside from capital) we would have made from a sale on Day 1. It will take approximately ~36 months for those mortgage payments to eat up the capital we would have had from a sale on Day 1. Additionally, if we leave the house on the market, we will be netting a significantly lesser value per month based on sheer fixed income vs. 2x houses worth of outgoing expenses.  

If we choose to rent the property, I'm confident we can cash flow $150-$200 with long-term leases, but I'm worried about taking an older home and putting it through the "ringer" of potential tenants; especially knowing that we want to eventually sell.

*Pulls hair out*

With that being said, has anyone had experience with renting older (1970's-1980's era) homes? Do you ever worry about the risk of renting negatively affecting (destroying) your property to the point where it is no longer marketable for sale?

What about the first-time flippers in the room - any experience flipping an older house and then choosing to rent it out (with aspirations to eventually sell)?

Any and all advice is greatly appreciated as we are currently gathering information and resources on becoming landlords/renting. Thanks!

- Mark 

Terrica, I just arrived to the area and began looking at some of the posts related to Destin and Bluewater; are you still living nearby? Still interested in getting a group together? Mark

@Derek Hemerick:

Unfortunately, our house is STILL on the market in Clovis, but we've had quite a bit of traffic lately as the market picks up a bit. To be honest, we'd be pretty happy to make a couple thousand for our time and effort, but will take it as a life lesson since we want to focus on our current area moving forward.

If you're looking to buy, feel free to give me a shout. As far as specific areas, Clovis is "divided" into 4 sectors (north/south/east/west oriented). Try to stick close to the northeast side of town as it holds the better schooling, newer construction, and established neighborhoods (we followed this strategy and loved our location).