1st time rental, couple q's

Rehabbing, Fix and Flip, Rental Properties
1

Hi all, I am looking to get my first property in feb, I have been scanning the forums for some time now, and keep checking and Favoriting properties on realty sites that I may be interested in, if they happen to be around still when it’s time to buy.

I am looking at houses in the 1k-2k range as i’ll be using college funds to purchase the home and do the renovation myself & with ocassional help from buddies, I can do everything but major plumbing & electrical but I know ppl that’ll do it for cheap(couple 12 packs of beer lol).

My plan is to stay in the home for 6mths or so, until I get my next college installment and finish the rehab with that and then put it up for rent.

My goal is to start with cheaper homes and work my up to 5-10k homes, then, 20k, then 30k, etc, etc. until I am on some remote island with an ocean view, sipping on a nice strong drink :smile

Ok, back to reality lol…I am trying figure out what everything should cost in total(closing costs & all)

I have seen anywhere from 3-5% of the home price. is this correct?

Also does the title insurance get included with closing?

Do I have to get homeowner insurance before I can get the keys to the house also? Or can I wait until I am finished working on the house?

I am sure that’s a crazy/stupid question to ask, but I am trying to be as frugal as possible for this 1st property as I have extremely limited funds, I am not trying to gut and rebuild, but put the least amount of money into it to make it liveable & start renting. I would like to put off ins(if possible) just for extra funds towards paint, stain, and other items and ramp it up and get good ins with the summer time funding I get.

anyway, any ballpark figures would be greatly appreciated, I live in Michigan btw, so I am looking in the SE Michigan area to start and expand from there.

Thanks in Advance & love the site! :bigthumbup

EDIT: ok found out I don’t need i don’t need home owner insurance, if I am buying outright :dance

I will get it eventually, but I am trying to do this on the cheap.

Also foreclosed homes from banks afaik also clear the title of past debt(back taxes) this is correct?

if so, I can’t wait to get started doing this!, it’ll be headaches, but I love doing remodeling & construction. so I am going to have so much fun also! :beer

2

Two books you need to get your hands on.

Landlording, by leigh robinson

One minute rental property riches, by mike rossi

Good luck!

3

I forgot to ask about books too doh! Thanks for recommendations, I’ll definitely pick those up, any other books would be welcome too.

kinda OT from my original post, but am I getting into this too late. or will I still be able to wheel & deal over the next few years?

I don’t wish bad fortune on anyone losing their homes, but on the other hand I am enjoying the prices I am seeing and being able to hopefully pick up a few properties over the next year or two.

When I was younger in the 90’s during clinton, I couldn’t find a house under 50k, so I hope the economy doesn’t recover too fast on me, I wanna be able to get my foot in the door(no pun intended lol) before the prices shoot back up.

4

You can buy a house for $1000 to $2,000 in SE Michigan? A house that wouldn’t cost at least $10,000 to make habitable?

Furnishedowner

5

If there are several houses listed for 1-2k and they’re not all sold, you have to ask yourself what type of place is this to live? In some areas you might come across an occasional great deal at 5k or 10k, but if there is a glut of houses for just a couple grand I’d be careful.
If it’s a war zone, there’s probably no value there at all. Who would want to live there? Unless there’s a mass clean-up and area re-vitalization, it wouldn’t be worth it.

6

furnishedowner: the ones i’ve looked at the past few days in person didn’t need much, the electrical worked, the plumbing we couldn’t test(winterized and boy is it winter lol), i checked for drafts and there were some bad spots but nothing a little elbow grease can’t solve. I have a buddy in Nebraska doing this also and it seems to be a nationwide thing. I don’t think the banks know what they actually have, some they sell at crack house prices but they’re actually in good areas with safe communities and the houses are a bit neglected but the mechanicals are in great shape…it’s mostly bad drywall with holes punched in it, nasty carpet, and other petty matters.

7

That is insanely cheap. But if you can get them that cheap, get them. I would forget the $10k houses and stick with the $1k-$2k houses. Get dozens of them. Heck, hundreds.

But that is so cheap it almost sounds too good to be true. However - I know for a fact $10k houses are on the MLS on the time in Dallas, and with some negotiating you can get them for $5k if you work hard enough at negotiating, but those houses are in a seriously dangerous part of town where it is NOT safe to walk around during the middle of the day. And they need TONS of work, in most cases. So I would recommend getting your first few houses inspected prior to purchasing them, just so you CYA. You might find that $1k house needs $20k in work!

8

well I don’t think I could buy up that many at once, the property taxes combined would kill me lol

But I do want to get 1-2 and see how it goes.

I will for sure get them officially inspected though, cause I don’t wanna buy a 1k house that needs a billion dollars worth of work like you said.

although I am looking at really small homes(well under 1000sqft) because the bigger the house, the more it’s gonna cost for everything, so i am going to stick with 800-900sqft homes at first.

9

There is nothing wrong with getting smaller homes like that. We’ve got several 2/1’s that size and a couple 3/1’s just a bit bigger than that. They’ll rent just fine as long as you can provide a good value to the tenants.
The smaller houses are cheaper to rehab and the rent should still make it worth doing.

10

Yeah, I would love to start with 5bed, 3 bath though lol but i don’t have that kind of scratch haha

I am not even sure what the residents will want for features, but I am going to offer the basics(nice but not luxury), I am figuring by the time I get it back it will be trashed anyway. I know some family that’s getting ready to move and I see how bad their house has got over the years(and they’re not rowdy or destructive at all), just the wear & tear gets to it, so I am not going to be buying $30 door handles and putting in a whirpool like i was thinking about doing at first(for a selling point), i’ll save that kinda stuff for my own pad :biggrin

I wish it was summer to be honest though, that’s when I really can see what neighborhoods are like that I am not familiar with. All the punks are scared of the cold and come out in flocks during spring, so a area might look good in the winter but end up being really bad.

do you guys try talking to neighbors of the homes to get input on the area, or is it best to not hassle them?

11

Are you sure these aren’t Round Robin auctions or properties with back taxes or other liens owing? I know a few people who’ve tried buying this stuff. One saw this nice house in Boston-Edision Detroit listed for $1,000. It was just the opening bid and ended up being a round robin auction with other bidders that ended the price at $68,000. And, if they didn’t get a bid high enough, they’d cancel the listing because the unknown reserve bid wasn’t met.

Another property was a quit claim and you had to buy it with liens still against it. I doubt you’re gonna find something with working electrical and copper still in the building for $1-2K free and clear in SE Michigan, esp. outside of Detroit. But, I’ve met guys who’ve still made good money flipping boarded up properties because of the location of the property, so there’s still hope…

12

A couple of the ones I was looking at were corp owned, do those usually have liens against them too? or should I look more towards foreclosed bank owned properties?

13

If they’re occupiable with working electrical and copper plumbing in them for $1-2K, I’m willing to bet they do. You’ll have to search the title to find out.

14

CitySlicker,
Your post is seriously very interesting! If you are in a middle class area with crack-house area prices you need to jump on that bus now.

Get the house checked out first by a contractor or official house inspector. That’s going to cost you half of the cost of the house. Maybe check out several on the same day, and pick the best one.

Are there electric and gas meters or have they been pulled? Is there a water heater and heat in the house? Are back taxes owed, and can you get clear title?

You need to get educated on houses real fast, this sounds like a once-in -a-lifetime opportunity. I would keep quiet and not spread that info. around in your town. I would consider partnering with a contractor in order to do more houses. I would check out the rental market for college students as a ready source of tenants. Yes, if it were me I would probably cut back on my studies a bit to do those deals.

Please keep us informed and go milk that cow while it is still in the barn. Also your cold, nasty weather can be your ally–the wanna-bees are home on the couch.

Furnishedowner

15

For basic rental properties, I usually go one step up from the cheap stuff for most things. I’ve found that the Gate House brand door locks sold at Lowe’s are complete junk, but I can pay just a bit more for basic Kwikset locks. Same goes with plumbing fixtures. If you go with the absolute cheapest vinyl flooring you can find, you can pretty much see thru it because it’s so thin. Better to step up to the better stuff. On one of the houses we just did, I tried the glueless vinyl flooring. It looked really nice installed and laid down well.
Just don’t over do for the area. New formica countertops are decent looking and only $60-80 depending on how big you need. That’s a lot better than having the only house in the neighborhood that has granite, but cost you a couple grand to do it.

16

HELLO! You are right about those Gate House locks. They S-U-C-K. The Home Depot “Defiant” brand is priced the same though, and 3x the quality - that is what I usually use.

17

The closest HD to me is 100 miles away. I do 95% of my home improvement shopping at Lowe’s. We have another little place that’s closer to most of our houses, but they’re lucky if they have screws in stock. I’m amazed they’re still in business. Their lumber prices aren’t bad, but otherwise they suck.

18

I just heard on the news that’s there’s going to be even more foreclosures this year and around an 8% drop in home values :shocked

I am going to find me something real nice this year!

Happy New Year everyone, may all of our pockets get fatter this year :beer

19

what city is this? (for 2k homes)? if i may ask?

20

wow, I’m doing something wrong, I figure a 'no major repairs needed" rehab normally ends up cost me at least $5-6k,between paint, flooring,just changing out the electrical outlets and light switches to the new decorator ones cost a couple of hundred dollars, and I buy in bulk

I sometimes see a listing that looks decent for a very low price, but normally its a condo/townhouse with $300 month HOA fees