All Forum Posts by: Tracy R.

Hi @Bobby Valcin, sorry for the late reply, I've been crazy busy trying to get my rental ready!  

I also called Cobb County about the rental possibility, and they did tell me about the square footage requirement (sorry I can't remember what it was per person, but mine is 1,200 SF so I'm way over what they said it had to be per person).  

I was also told that the basement apartment could only have 1 person in it (1 person unrelated to the owners living upstairs).  I wasn't told anything about them having to have access to the upstairs, but perhaps that's because mine has a separate downstairs entry for the apartment, and I might have said that upfront.  I suspect that you might have been told that (about not walling-off the door between up and down) because if they don't have a way out from downstairs, in the event of a fire, they have to be able to get out.  Or, it's possible that the tenant has to have TWO ways to get out, one from their downstairs entrance, and another from the upstairs door.  Now that I'm thinking about this, I need to call them back myself and get a full understanding for my own situation!

In general, when I've called Cobb County, I've found it really depends on who you talk to, some of the people there are knowledgeable and helpful and some really don't have a clue and are not very customer-service-oriented.  To give them credit, there are so many rules and regs for any county, it's impossible for the one person you happen to get on the phone to know everything.

So just to be on the safe side, you probably should give them a call again to get some clarity on ALL of the requirements for renting out a basement apartment.  And if you feel like the person is not fully answering your question, just keep going up the chain, asking nicely for their supervisor, etc.  

On why there aren't more of these types of apartments listed for rent, I suspect that it just happens more under the radar, vs being listed on the MLS. No surprise that the Cobb County employee didn't have a clue about that.

I'll keep you posted on what I find out too, after I call them back.  Good luck!

Hi @Bobby Valcin, what you're describing is exactly what I'm currently in the middle of doing!  I bought a house in Marietta that had a full finished basement, but no kitchen.  So I've put a kitchen in and am hoping to rent it out as my first house hack.  I've not looked at what I could get for rent ahead of time, like you have, but it's a large apartment with 1 bedroom, 2 other rooms (office plus bonus room, etc) plus a brand new open concept kitchen, with its own separate entrance and garage access.  So I'm going to just see what the top dollar rents are for that and go from there.  I am hoping that it will basically pay for my mortgage on it.

 I'm hoping to have it rented in the next couple of months. I'll let you know how it goes, but if you don't hear from me, feel free to reach back out!

Hey @Alan Matthews, you need to check this group out, it's organized by Vincent Crane, there is no selling, just a great presentation every time, followed by plenty of time to network.  There are people from all areas of real estate investing there, including contractors.

We meet the last Wed of every month at The Ivy in Buckhead (upstairs).  This month's meeting is Wednesday the 31st of July @ 7pm.

@Vincent crane  

Thanks very much, @Taylor L.  It's really hard to find comps for these since it's not a hot real estate market in general.  

And you're totally right on sellers wanting the tax assessment amount!  Since it's not a hot market, they really don't have anything more to go on, so they think tax assessment is market value in this area!  I will work on educating her that tax assessment doesn't take into account the condition, the town wants to get as much tax money as it can, so just because a place needs a new roof, that doesn't mean they're going to lower the tax assessment to account for that.  

She did mention on our first meeting that she didn't think she was doing a good job managing them because she just had to spend $7k on 2 HVAC units that died, soon after her husband passed away.  She doesn't understand the upkeep part and her husband just let things go as long as he could.

So I'm going to do as you suggest:  go at it from what these properties will bring in when more stabilized in rent and condition, and also request to have a good inspection done to figure out what needs repairing.  I might even offer to pay for the inspections myself as a show of good faith, as long as she will get them scheduled.

It's not going to be easy for this seller to coordinate with all the tenants, but she will just have to do it, whether it's me who buys them, or someone else.  I can't imagine that any other potential buyer wouldn't do the same thing, since this husband was known as somewhat of a "slumlord".    I am certain it's as you say, the husband just did his own repair work, cutting corners, probably not doing the upkeep right at all, just whatever he could get away with.

Thanks again Taylor.  Really appreciate your quick reply.

A man in my hometown passed away and had rental property that he owned outright. Some of them are now owned solely by the widow, and some are owned jointly by the widow and 2 of her adult children.  This would be my first investment property purchase, but after I made my desire known to purchase them once she was ready, she has come to me first.

The widow wrote down what each of them pays each month, so that’s all I have to go on to try to value them and come up with an offer price.  

Supposedly the tenants pay on time, but there are no written lease w any of them (and never have been!).  They are also paying significantly under market rents, since the husband never raised any of their rents for decades.

She's not yet told me what she thinks they are worth, but I will ask that question in our next conversation.   I know I will also need to talk to the tenants to see if they are actually paying these amounts, plus do a lot of other due diligence too.

I believe this could be a good opportunity to buy them when they are not anywhere near market rent, and also not fully-rented out (3 vacancies out of 15 units), and then get them rented out and also move gradually to market rent.   The husband also had grass mowing included in their rent, plus had the 3 duplexes and 1 triplex all on one meter per building, so I'm looking into getting them submetered to be able to bill that back for what each unit actually uses.

But I’m having a hard time figuring out a “rule of thumb” on what the value is today based on the current income, to try to give her an offer, plus try to get a loan on them.

If anyone has any tips or feedback on how to do begin to value these properties, I would so appreciate hearing from you. I can give more details also, if this is not enough.  Thank you!

Hey thanks for giving us this sneak peek into the deal.  Sounds like you did it right, including getting rid of the lame people that were not adding value.

Thanks,

Yes, sorry I meant USDA!  I believe it is some sort of govt program where you put down a very low amount, and it's available for buyers in more remote/rural areas.

The sellers have now told me they talked to the USDA about it and all I know for now is that the USDA is now going to come and take a look at it to see its current condition.  I haven't yet learned how much the lien is for or the terms of the loan.  

Thanks also for your feedback about cash to the sellers, I certainly don't want to get into any trouble there!

Hi BP friends, I have some very motivated sellers who have an abandoned house that needs to be gutted.  It's in a great location for my buy and hold plans, and I think that in the end based on the bones of the house and what they said they'd take for it, I can get a good cash flow from it as a rental after even a full reno, so I would like to try to help them out while helping myself too.  I've also talked with a contractor I trust who has seen it and is willing to take it on, and has given me a budget that still allows me to have a good cash flow for what I can rent it for.

It's in a relatively rural small town area, and the sellers said they would take $7,500 - $10,000 for it.  But then at the very end of our meeting, they revealed that there is a lien on it that happened as part of the deal for them to purchase the current house they live it.  This lien-holder is the USRDA.  

I'm still pretty green at this so I'm not sure how this would work.  I've asked these sellers to check with the USRDA to see if there are any restrictions on what the USRDA would accept as a sales price for the house I want to buy, or what is the value of the lien on this house. 

I suspect there could be a problem here, since the USRDA probably put the lien on it (and maybe also a value for the lien) before they moved out when it was in better shape.  However, after they moved out, they let the husband's brother stay there with some large dogs and he let them poop all over the house, so it smells horrendous and that's a big part of the reason it now has to be gutted, they also did a ton of damage to all surfaces.    

The sellers seem resigned that they will likely not get any money out of this because of this lien, they just want it off their plate.   The wife is deaf and the husband has two prosthetic legs from an accident.  They did mention that they were hoping I could at least offer $15K, and the USRDA would take $10K, and let them have $5K.  But I told them I highly doubt the USRDA would let them do that, since they have an $80K plus mortgage on their current house.  I suspect that the USRDA will put everything toward their current mortgage, especially if they're not getting much due to the condition.  But I was wondering whether I could potentially offer to give them at least a bit of cash after all is done (maybe like $1,000?  That would be a lot to them).  Is this legal, though?  I don't want to get myself or them into any trouble, but I would like to help them a bit if I could, in the spirit of good karma and helping solve problems, since I'd be getting it for such a low price.  Maybe that's going too far, though?

Any advice or things to ask or watch out for here on these two topics:   1) dealing with the lienholder, and also 2) offering a bit of cash to the seller if all goes through.  Thanks very much.

I have a related question, would love to hear feedback:  (thanks @Ali Radhi for posting this)

From listening to various podcasts and reading posts, it sounds like it's possible to pull out equity in the BRRR strategy right after completing the rehab. Buying 1 or more houses per month has been mentioned several times. But my local bank (portfolio) says I have to wait 6-12 months before they will let me pull out any equity, after the rehab is done. So maybe that's just their policy, and I need to ask around to other portfolio lenders? Maybe after I build a track record w them they won't make me wait so long to do it again?

Thanks for any feedback on this. If I have to wait 6-12 months then it’s going to take me so long to make a few hundred dollars cash flow/month, it seems hopeless.

Thanks @Vick Galu.  No, I've not yet checked w the assessor's office to see who's paying it.  Just had so many other things I was trying to find out I'd not gotten to that.  But if that's public record too, and they are obliged to tell me, then I certainly will ask!  Thanks for reminding me that I can do that.