Has someone done no money down/low down deals? Can you share your techniques and how to figure out the numbers(CAP Rate etc.) that made sense?
On apartment manage issue, if you want to use PM company, how can you be on top of them and when issues arise, how to resolve them? I know bad PM companies can destroy your investment.
Dealing with tenants, have any landlord, particular in CA, used no-fault maintenance contract(where tenants pay/repair for items that break), charge t when they damage something with markup cost+labor, tenenats pay deductibles for repair. I got this good info. after reading Rogert Shimin book. Has anyone practiced some of these techniques?
I will share this deal with you that I closed in Dec. It is 31 units that I wrote a check for the earnest money of $1000 and then had to pay $900 for 50% of the appraisal upfront. The contract price was $154,000. I got a $250,000 loan which included $80,000 for rehab and the balance was for closing costs and carrying costs for a few months while I fix it up. The property appraised at $360,000 after repairs and using $225 rent for the 29 1br units and $325 for the 2 2br units. I raised the rents to $250 and $350 and may get even more depending on the market.I also had to borrow $10,000 from other investors to help close the deal. I actually got back most of my earnest money and appraisal costs at the closing and have about $500 total invested in the deal.
I am using a hard money lender with a one year term at 14% . My plan is to sell the building for a profit or try to refinance and keep it for the cash flow. The projected income is $8000 per month after the rehab at 100% collections. I have also considered a partner to help get a new loan and give 50% ownership to them if I can not sell or refinance myself.
I think it was a super deal and I hope I can do it again on another deal near Austin in the short term. Hopefully I will have some cash available to help with that purchase. I was on pins and needles all the time I had this deal under contract and I was uneasy because of the pressure from the seller.
I found it on Loopnet.com I was already searching the area for duplexes and small houses under $20,000 and came across it.
I did this on my own at very much risk. I have two months to get it rehabbed and rented so I can pay the first payment of $3500 to the lien holder. Also the risking of the borrowed $1000 earnest money was scary. I could sell some baseball cards and coins that I have collected but the loss would have set be back financially as well as mentally. I know it will work and my HML knows I can do it too or else they would have not loaned the money to me. The exciting part now is seeing how well I do and if I keep it or sell it or put together a partnership and keep half of it. It is truly exciting. I too am buying some of the houses and duplexes with other partners. One duplex just a few doors down is selling for $28,000 and another four-plex is asking $49,000. These are just good cash flow keepers and are not much below market.
I have read your posts often over the past couple of months. I guess I am only know starting to recognize the regualr posters and what type of investing they do.
I was wondering how long you have been investing in low income areas, or atleast that is what I think of when I hear $30k Duplexes and $50k Fourplexes. I have seen a few MLS listing come and go for 1br 8 and 12 unit buildings here in Dallas for like $150k-$200k. Being that these were in the tougher side of town and being 1br where tenants tend to come and go much more often, I just kinda watched them. How has your experience been?
I just evicted a drug dealer for not paying rent for Nov Dec Jan and Feb. I bought it in late Dec and was not aware of the trouble. It was a lot worse before back in June and July I am told. I am fixing up the 31 units and will turn around the property and get a lot of soldiers as tenants. The prices in the area are depressed because of the low occupancy rate. It is a low income area too but they have to live somewhere. There is more turnover and crime but I try to stay away from the really bad areas.
My first attempt at this was a fiasco in East Austin where I bought anything that was cheap. I eventually lost all the property because of drugs and thugs and my bad management. If you can get rid of the bad apples you can do well even with slums. You will not get A plus credit tenants with $100,000 per year jobs but getting tenants with a job is a great start. In the past I would interview nice looking girls and rent them an apartment and the next thing you know their drug dealing boyfriends would show up. I did not check job status or credit or anything. If they had the money i would let them move in. I was just lazy and always needed the cash.
I have a manager now at the 31 units that will help me and I can help her too. She did let the drug dealer move in with even a dime. He showed her his Social Security papers and told her the check would be here Friday. She never even got a dime of rent from him. I think this taught her a valuable lesson that I too learned the same way, hard knock college.
Any information on past experience helps. I am not sure of the make-up of the area tha tyou are investing in, but here in Dallas most of the ‘bad’ areas I am interested ina re more like Little Mexico than ghetto. To me as a potential investor/landlord I like it cause most of the mexicans here work really hard and keep lots of cash in their mattresses. I would almost bet none have credit and most no papers, but they got money orders ready right on the first of the month.
I really like the compounding effect of multiple unit properties as opposed to SFHs for rentals. I like the fact that one or two vacancies in an 8 unit building won’t kill you as bad as one or two vacancies when you only have 3 or 4 SFHs.
I need to save up alot of cash though unless I find a desperate landlord I will need a bit of cash to put down and I always feel more comfortable if I have cash saved up incase I have to eat some expenses or make some payments.
After doing some more research, I will have to be careful not to overleverage(using my home equity) and then hit big repair bill, vacancy, that will require more cash. Other good alternative is to do master lease option for rental.
Now unless I come across very motivated seller that have big equity and willing to carry with low interest, and I can get cashflow with reasonable maintenance and repair, then it will do.
Anyway it might be more comfortable for me to buy a SFH first before jumping into bigger purchase.