All Forum Posts by: Anthony Thompson

@Jennifer Cheu with a few exceptions, most properties you're going to run across in RI, especially in Providence, were built in the early 1900s, like 1920-1940.

So I wouldn't base your repair/upgrade decisions on the age of the property.

There are a lot of competing issues that go into deciding what to repair/upgrade when. One consideration is how "visible" the repair/upgrade will be to tenants, and, related, how desirable and worth more rent or less vacancy (because it will rent faster).

However other considerations are basic safety and liability. For example, if you had active knob & tube wiring you might decide to replace it, which would be very expensive and not visible to the tenants at all, but you might decide is worth it for safety/liability reasons.

Related, sometimes your insurance company will request/require certain repairs to be made - they seem to be doing that with increasing (annoying) frequency over the last few years actually.

There's also the issue of what's competitive in your market/area. For example if most of the buildings in your area have on-site laundry then maybe it's something you consider adding just to stay competitive.

If you think of selling it, down the road, you might designate one unit as the "owner's unit" and make it a notch nicer than the rest.

On the other hand, depending on your tenant pool, you may find that sometimes it's better to go with more durable than more visibly "nice" to tenants, just for wear and tear (and eventual replacement) purposes. Sometimes with rentals there's "good enough" where springing for the really nice option just doesn't get you the return on higher rent you think it might, and if the item is going to get worn out or damaged by tenants in a few years anyway, it might be better to go with "good and durable" instead of "really nice".

As you can see there are a lot of considerations, and none of them really have to do with the age of the property. There are some issues related to the age of the property (like knob and tube, use of asbestos pipe coverings, etc.) but those are more major things your inspector would have pointed out and you'd be aware of before getting into the property (and in some cases your insurance may have required addressing, such as removing an old/unused oil tank).

I hope this helps in some way, and congratulations on your purchase!

@Aneita Williams My signature line # is a Google voice # that sometimes goes to me or my business partner depending on who is available / answers first.

I just PM-ed you with my direct contact info, let me know if you have any further difficulties :)

Aneita, it's possible he may not be upside down, values have risen a good amount over the last few years... but not paying the mortgage for a year could certainly have eaten up a lot of any equity he has/had.

Without knowing the specifics and as you describe the situation, a short sale is certainly one option and maybe the best, especially if he has a hardship he can document.

Another alternative might be a deed in lieu of foreclosure - i.e., giving the property back to the bank instead of making them take it back by foreclosure. My understanding is that still doesn't look great on a credit report, but it looks better than a foreclosure, and his year of missed payments probably isn't helping his credit at this point either.

I've been active in North Providence over the years and am actually working on a deal there now. I'd be happy to speak with your client generally (not in the capacity of giving legal advice since I'm not an attorney), about the situation and what I might do in his situation.

@Account Closed Yes, I have a few units in Woonsocket. Interesting place, definitely a "city on the move" (as one of the city slogans said at one point:).

You will learn a lot about landlording in Woonsocket, that's for sure. Also if you're not aware, RIREIG has an upcoming introduction to landlording 3-hour class on November 18th you might find extremely helpful. (I would provide a link, but it seems like every time I do, a moderator edits it out, so you'll have to google it.)

Congratulations on your purchase! 

@Richard Galdieri Yes, absolutely - unless you stop at one of the several Dunkin’ Donuts you’ll pass along the way :-)

@Calvin Matthes There are no special Rhode Island specific rules that I'm aware of - all of the rules you mentioned, and others, work just as well in RI as anywhere else.

They're all rules of thumb that you can use to determine if it's worth spending a lot of time investigating a potential deal, or just pass on it and move on to something else.

Actually as I think about it, maybe there is one Rhode Island specific rule: Generally, no one in RI (unless they're a recent transplant from another state) wants to drive more than 15 minutes in any one direction ;)

@Debbie Camara Since it sounds like they already foreclosed and it's now bank-owned, usually they're going to list it with an REO agent so it will hit the MLS eventually.

If you're really interested in that specific property, then ask a real estate agent who you're willing to make the offer through, to set up a "saved search" for that specific property so you'll get an email as soon as it hits the market.

Even if they sell it through an auction process, I believe they usually put it in the MLS anyway, just with a description pointing people to the site/terms of the auction.

As far as finding owners of vacant properties, you can look up the owner name and (usually) address on the tax assessor's page (which I find via ripropinfo.com since it has links to all the assessors) and send mail that way.

Even if it's vacant and the owner is listing as living there, it's worth sending something there, as there may be a mail forwarding in place (long shot I admit).

Another good strategy is to talk to neighbors and see if they might know where the owner went - sometimes even a state can be helpful. Another one is to look at past documents in the land evidence records (again, linked from ripropinfo.com) and see if any other states/addresses are listed.

The topic of tracking down owners is a big one and chances are there are a number of good threads on the topic here on BP. For example I've heard people recommend "skip tracers" or private investigators. While I've never used either personally, it's good to know they exist in case you're especially interested in one particular property and willing to put out a little $ to track down the owner.

Hope this helps!

@Derek Hebert as far as waiting for better rates, predicting interest rate movements is a notoriously tricky business and even the pros (who have a lot more money on the line) get it wrong. I would only look at "today" interest rates and see if the #s make sense for you with those rates.

As far as when to refi, I guess it depends on what you think the value is now (what you think you can get out of the property from the refi) vs. your cost to refi.

Remember that the rate on a cash-out refi is going to be a little higher than your initial purchase loan so be sure to take that into account when you're figuring out your new payment amount. It may also be tougher to refi if your purchase loan isn't very "seasoned" (hasn't had a year of on time payments for example).

It is possible to refi with no/lower closing costs than usual, but just like good real estate deals, you have to hunt around for those. Sometimes you can get a good deal if you approach a bank or credit union you already have a relationship with. You can also ask multiple mortgage brokers too of course, about their loan programs.

Be careful with the #s though. The first time home buyer loan is pretty attractive, so you may not get as good of a deal on your cash-out refi and you don't want your 500-600 cash flow to turn into 100 cash flow. You want to pay particular attention to your new debt service coverage ratio - i.e., how much of a margin you'll have between your net income and your mortgage payment.

Generally, I recommend people hold a property at least a year before refinancing, so they get really familiar with all the ins and outs (and upcoming expenses) of the property. You also want to turn your "plan to be making" cash flow into "actually making" to be sure it's what you're expecting.

I don't have personal experience with a 203(k) so I'll have to defer to others on that. I know you'll have to get written estimates from contractors for the repairs and that those repairs will be paid for in draws as each phase of the project is completed (a little at a time, not all at once). My general thought is, it's more leverage, so just make sure that the higher loan amount isn't going to make your loan payment so high that you're skating on thin ice (again, debt service coverage ratio).

Also AFAIK the 203(k) is for owner-occupants, so my guess is you'll have had to refi out your first-time homeowner loan on your current 2-family, before getting a 203(k) on another property. Otherwise the loan officer / underwriter is likely to say, wait, this other loan was for an owner occupied property, but this 203(k) is for owner occupied - which one are you really living in? You may also have agreed to live in the 2-family for a certain # of years before moving out for example (check your loan terms). And if you refi the first time homeowner loan with an investor loan (not owner occupied) which is also cash-out, that'll be an even higher rate.

I know this may be heresy in a rising market, and particularly regarding the BRRRR strategy, but be careful about leveraging yourself (your properties) too much. Years ago in a seminar the guru-at-the-time called that a "house of cards" and the phrase stuck with me. Remember, leverage is a powerful sword but it cuts both ways too.

Jerrel, if you used a real estate agent to buy the house, s/he may be able to let you use the RI Association of Realtors lease which is probably OK and fair enough to all parties, and will definitely comply with RI law.

You might also consider attending an upcoming "introduction to landlording" event being held by the RI Real Estate Investors Group on November 18th. I know each of the 3 presenters and they are all active property managers who know their stuff.

If you aren't able to attend that event or don't want to / can't use the RIAR lease for some reason, I honestly think your next best bet is to pay an attorney who actively does evictions for a lease that s/he recommends. If this is the route you want to take, and you don't know any such attorneys, PM me and I can give you a couple of names.

I hope this helps, and congratulations on your purchase and getting starting on your journey!

@Ricardo M. I've wholesaled properties in RI for a number of years and unfortunately, it's much more common to find deals in "D" areas than good areas. The ones in good areas are relatively few and far between, and half of those I end up keeping for myself anyway.

I would recommend that you begin to learn to deal with owners/sellers directly, and research the various ways of marketing to them, for example "farming" an area, driving for dollars, calling For Rent signs, etc.

It's always been true that the best deals are the ones you make yourself, but it's especially true in this market.

Every phase of the market cycle has its pros and cons. We're now in the phase where it's relatively easy to sell a property (either wholesale or retail), but comparatively difficult to find one at an acquisition price that makes sense. 7 years ago it was the exact opposite - cheap properties were all over the place but it was very hard to find buyers, especially in tough areas.

You can also try networking with other investors here in RI such as ones you might meet at a local REIA. Apart from dealing with owners directly, networking is another excellent source of deals, though sometimes you'll have to be willing to partner with people.

I hope this helps!