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28 minutes ago, Bull Dozier said:

I have what I hope is a quick and easy question.  I'm selling a house (first house, moved and rented it for a few years, now selling it).  I have a purchase agreement negotiated and we are on track to close 12/29.  The buyer just sent over a consent to arbitration agreement.  Is this standard?  Preferred?  I've tried to do some research, but all I kind find is that this seems to be pushed by home builders on to buyers and is not in the interest of the buyers in these cases.  Who would benefit here, on a 100+ year old house?  Any risk to agreeing to this, or is this more for my benefit so I should sign before they change their mind?

I'd ask them why are they planning on possible legal proceedings? What do they fear may need to be arbitrated? It's a simple purchase of a house. They have 10 days to get their inspections and then they lose earnest money if they pull out after that...simple. Once they close, it's theirs without future obligations from you. So, barring a good response from them, I'm going by only the purchase agreement, I'm not signing any last-minute docs that may complicate the process, and we are closing next week.

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1 hour ago, Bull Dozier said:

I have what I hope is a quick and easy question.  I'm selling a house (first house, moved and rented it for a few years, now selling it).  I have a purchase agreement negotiated and we are on track to close 12/29.  The buyer just sent over a consent to arbitration agreement.  Is this standard?  Preferred?  I've tried to do some research, but all I kind find is that this seems to be pushed by home builders on to buyers and is not in the interest of the buyers in these cases.  Who would benefit here, on a 100+ year old house?  Any risk to agreeing to this, or is this more for my benefit so I should sign before they change their mind?

I have never seen an arbitration agreement in a residential real estate transaction between individuals.  No idea your state, but New Jersey has peculiar arbitration rules that would almost certainly call into question the legality of the document anyway.

And beyond that, if you are this close to closing I'm guessing you hit all the other contingency points in the contract - does the contract require arbitration?

 

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33 minutes ago, Yankee23Fan said:

I have never seen an arbitration agreement in a residential real estate transaction between individuals.  No idea your state, but New Jersey has peculiar arbitration rules that would almost certainly call into question the legality of the document anyway.

And beyond that, if you are this close to closing I'm guessing you hit all the other contingency points in the contract - does the contract require arbitration?

 

Standard MN purchase agreements has a reference to an optional arbitration agreement, and it was originally declined.  They just sent in a request to add an arbitration rider, which sounds like is totally our option, but I'm confused why they would even float it at this point.  The house has passed inspection and appraisal, so the last step is the final walk through.  I'm shuked. :shrug: 

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39 minutes ago, Bull Dozier said:

Standard MN purchase agreements has a reference to an optional arbitration agreement, and it was originally declined.  They just sent in a request to add an arbitration rider, which sounds like is totally our option, but I'm confused why they would even float it at this point.  The house has passed inspection and appraisal, so the last step is the final walk through.  I'm shuked. :shrug: 

Gotcha..... no idea about law there but ignoring something you are under no obligation to stop ignoring isn't a crime in any state that I know of.

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14 hours ago, Yankee23Fan said:

Gotcha..... no idea about law there but ignoring something you are under no obligation to stop ignoring isn't a crime in any state that I know of.

FTR, I broke down and asked my BIL (a lawyer, but not a real estate lawyer) talked me into it. :shrug: Obviously, if it comes in to play one way or the other, it is going to be a cluster, so I'm hoping it is all much ado about nothing.

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For those that have rental properties, and are still buying new locations, are you able to find properties that work with the 1% rule? Here in Portland, it's just not possible. Most properties will net a half to two thirds of a point at most. I'm really having a hard time when it takes 15-17 years to get cash positive.

 

 

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2 hours ago, skycriesmary said:

For those that have rental properties, and are still buying new locations, are you able to find properties that work with the 1% rule? Here in Portland, it's just not possible. Most properties will net a half to two thirds of a point at most. I'm really having a hard time when it takes 15-17 years to get cash positive.

 

 

In the right price range and neighborhood it works pretty well here in the Little Rock, Arkansas area.  We have bought three houses - $126K (rent for $1200 ...doesn't quite make it), one for $98K (rent for $1000), and bought one last month for $94K and putting $10K in it (that we plan on renting for $1100).   These are nice, but slightly older middle-class neighborhoods.  

Those numbers don't work as well in many neighborhoods though.  

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Aren't there companies that will come in and clean up your house/yard and make it ready to sell?

Maybe even stage the house with fake furniture until it sells?

Just curious if this is a thing, how much it would cost, whether it would be worth it, etc. Thanks

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2 hours ago, Binky The Doormat said:

In the right price range and neighborhood it works pretty well here in the Little Rock, Arkansas area.  We have bought three houses - $126K (rent for $1200 ...doesn't quite make it), one for $98K (rent for $1000), and bought one last month for $94K and putting $10K in it (that we plan on renting for $1100).   These are nice, but slightly older middle-class neighborhoods.  

Those numbers don't work as well in many neighborhoods though.  

Wow. I'm envious. Freaking market here is en fuego, so that's just not possible. The least expensive place I've found is 375k, and I'd be looking at a rent of about 2k. :(

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26 minutes ago, skycriesmary said:

Wow. I'm envious. Freaking market here is en fuego, so that's just not possible. The least expensive place I've found is 375k, and I'd be looking at a rent of about 2k. :(

Ugh, sounds like a firm non-starter.  buy some REITs.

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3 hours ago, leftcoastguy7 said:

Aren't there companies that will come in and clean up your house/yard and make it ready to sell?

Maybe even stage the house with fake furniture until it sells?

Just curious if this is a thing, how much it would cost, whether it would be worth it, etc. Thanks

Staging is big business. It can be expensive, but the results often net a lot more after the cost.
 

Find a listing agent that has a stager that will go through your house for $100 and recommend what to do.

Let me know if you need any help finding one.

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On 1/13/2018 at 7:22 PM, skycriesmary said:

For those that have rental properties, and are still buying new locations, are you able to find properties that work with the 1% rule? Here in Portland, it's just not possible. Most properties will net a half to two thirds of a point at most. I'm really having a hard time when it takes 15-17 years to get cash positive.

 

 

Bought a duplex in September for $13,000.  Put about $5K in it (so far).  First half is finished and rented for $525/mo.  Second half will take another $3-$4K and rent for $625.  So for about $22,000 we will be getting  $1150/mo.

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29 minutes ago, Random said:

Bought a duplex in September for $13,000.  Put about $5K in it (so far).  First half is finished and rented for $525/mo.  Second half will take another $3-$4K and rent for $625.  So for about $22,000 we will be getting  $1150/mo.

Where is this again?

That type of thing just doesnt exist anywhere remotely close to where I live.

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39 minutes ago, Random said:

Bought a duplex in September for $13,000.  Put about $5K in it (so far).  First half is finished and rented for $525/mo.  Second half will take another $3-$4K and rent for $625.  So for about $22,000 we will be getting  $1150/mo.

WTF? Where is this? That is crazy...duplexes here are 350k minimum.

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7 hours ago, ghostguy123 said:

Where is this again?

That type of thing just doesnt exist anywhere remotely close to where I live.

seriously, yeah, where the hell are you?

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Isn't he in OH?  Maybe outside of Cleveland or Dayton?

Wish we could buy like that here. Just stockpiling cash these days and waiting for the next correction.

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On ‎1‎/‎13‎/‎2018 at 7:22 PM, skycriesmary said:

For those that have rental properties, and are still buying new locations, are you able to find properties that work with the 1% rule? Here in Portland, it's just not possible. Most properties will net a half to two thirds of a point at most. I'm really having a hard time when it takes 15-17 years to get cash positive.

 

 

The cash flow that Random creates in OH is phenomenal. We are funding a purchase in South Bend this week...buyer plans on having $43k into it and renting for $800-$850/mo., so, close to 2%. It's a sfh, 3/1, 1200sf.

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There's an older bungalow in the historic district that I have my eye on. It's not for sale and it's occupied, but if you peek in the windows, it looks like a hoarder lives there. What's the play since I have zero leverage? The market here has been consistently warm to very hot and if it hits the market, I am looking for a range to not grossly overpay but enough for the flippers to stand down. We would plan to sell our home (about a mile away) and renovate this bad boy. It looks like the parents of the owner live there?

213 Center Street 

 

TIA. 

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I'm still looking here in the Portland area, but finding cap rates of 5 or more usually means they are a dump in a bad part of town. Otherwise, no positive cash-flow unless I'm willing to put 25% down into a 400k+ place. Freaking crazy, but liking it more than the other investment alternatives at the moment.

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On 1/21/2018 at 9:58 AM, Rattle and Hum said:

The cash flow that Random creates in OH is phenomenal. We are funding a purchase in South Bend this week...buyer plans on having $43k into it and renting for $800-$850/mo., so, close to 2%. It's a sfh, 3/1, 1200sf.

That's still magnificent.

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13 minutes ago, Ridgeback said:

I'm still looking here in the Portland area, but finding cap rates of 5 or more usually means they are a dump in a bad part of town. Otherwise, no positive cash-flow unless I'm willing to put 25% down into a 400k+ place. Freaking crazy, but liking it more than the other investment alternatives at the moment.

Don't you have to put down at least 25% to get an investment loan?

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14 hours ago, Getzlaf15 said:

Don't you have to put down at least 25% to get an investment loan?

Yeah, this is about as good as it gets around here, for cap rate, and having a place that is half way decent. After putting the 25% down, it should be cash flow positive. I'm going to pull the 25% out of my own house, which I own outright, then get a loan on the rental for the other 75%. From what I understand, with the interest deduction, and new tax laws, it's better to do that than pull most of the $ out of my home. 

All that being said, I have to go through the appraisal process, and by the time that's done, this place will probably be long gone. 

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15 hours ago, Ridgeback said:

I'm still looking here in the Portland area, but finding cap rates of 5 or more usually means they are a dump in a bad part of town. Otherwise, no positive cash-flow unless I'm willing to put 25% down into a 400k+ place. Freaking crazy, but liking it more than the other investment alternatives at the moment.

That’s crazy, I had no idea SFH rentals were at caps that low?

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Just sat down to do taxes on my new (unwanted) rental.  Please kill me - choices over expensing vs. depreciating, special depreciation rules (I quit there, so no telling what horrors remain).  Talk about Byzantine.  Someone tell me the new tax plan for 2018 simplifies this stuff?

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Curious to hear what sectors you guys think there is any value out there if any or if everything is over priced. With cap rates set to rise it seems hard to find value right now. I know this will differ by region, I’m in a secondary market in the southeast. We have experience in home building, class B office, self storage and limited experience with flex space and a small interest in some apartments. Interested to hear what you guys see out there as opportunities if anything?:popcorn:

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21 minutes ago, GoBirds said:

Curious to hear what sectors you guys think there is any value out there if any or if everything is over priced. With cap rates set to rise it seems hard to find value right now. I know this will differ by region, I’m in a secondary market in the southeast. We have experience in home building, class B office, self storage and limited experience with flex space and a small interest in some apartments. Interested to hear what you guys see out there as opportunities if anything?:popcorn:

see getz. 

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36 minutes ago, Binky The Doormat said:

see getz. 

I'm a duplex to fourplex type of guy.  Am looking to branch out.  A year ago I backed out of buying a 3 unit commercial building with 2 dentist's and an insurance company in it.  Foundation issues.  

Last month just missed out on a land deal and was going to build four fourplexes. 

Just trying to find things that make sense.  Not easy. 

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31 minutes ago, Getzlaf15 said:

I'm a duplex to fourplex type of guy.  Am looking to branch out.  A year ago I backed out of buying a 3 unit commercial building with 2 dentist's and an insurance company in it.  Foundation issues.  

Last month just missed out on a land deal and was going to build four fourplexes. 

Just trying to find things that make sense.  Not easy. 

We’ve got similar holdings to that commercial building, have been fortunate keeping tenants in place but have a few leaving this year. New build outs can get pricey when you have a tough layout to re lease but this is a sector in our area that doesn’t seem as overpriced as apartments (larger complexes) and self storage which are at real low cap rates. 

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My biggest concern is that Wall State is buying up a significant percentage of the single family home market.  They've driven prices up to the point that they are now buying in the 300k market which represents homes in the top 20% in this market.  When the dump comes (and it will), they can single handily crash the market.

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1 hour ago, BassNBrew said:

My biggest concern is that Wall State is buying up a significant percentage of the single family home market.  They've driven prices up to the point that they are now buying in the 300k market which represents homes in the top 20% in this market.  When the dump comes (and it will), they can single handily crash the market.

That's what I'm worried about. I'm about to buy my first rental property, and know I'm buying at the top of this cycle. That being said, I believe that if you're in it 10 plus years, you'll get by any normal correction. I'm thinking correction being 10% or so. Not the 30% dump we had after 2008. Interest rates going up as well insulate a few % point drop.

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The real estate market has been very friendly for me since I started purchasing income properties back in 2012.  I had saved enough money to where I put solid enough down payments on each property to where the rents were more than enough to cover the mortgage payments.  At this point--all but one of my properties is fully paid off and the one that isn't has a very small balance on it.  My advice for anybody that wants to get into real estate is to make sure to only do so if at least one of the next two things are true

a) you have enough of a down payment to where your rental income vs your mortgage payment is at least in line even in the case of a moderate market correction. 

B) you have enough remaining  liquidity after you purchase your property so that you aren't forced to "sell low" in the case of a shake up in the estate market. I personally think that real estate is one of the safest long term investments that one can make--but the mistake that most people make is that they get into properties that they cannot comfortably afford.  Once there is any decent shake up in the market--they are sometimes forced to sell a property at a loss.   If you buy a property--leave yourself enough liquidity to where you can handle some decent market turbulence without having to suffer a real loss.  Having that liquidity will allow you to ride out any turbulence.   

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So you guys that do this alot.....is every freaking transaction just a bunch of silly game-playing nonsense?

As I mentioned a few months back, I was in attorney review for a new place back in September. Made 2 offers (the last one at just under 99% of asking price). No counter. Waited a week, they finally countered at 99.5% of asking price and I accepted. The seller delayed attorney review for 3 days (claimed they were out of town for a wedding) and then cancelled the deal a week later when they got another offer for an additional 1%.(basically 8 hours before we were going to be under contract)

Made an offer on another place last night. 98% of asking. The realtor claims they have "other offers" and now want "best and final bids" by close tomorrow. So now they think I'm going to blindly bid against how many others (not really sure, could be nobody). And its not like we're talking about some fancy estate here. Its a 3 BR condo.  It has most of what I want (not everything) and is in a good area (although probably about 15 minutes from where I'd prefer to be).

Local inventory is low right now, so I get it. But I just cant stand all the stupid games. Do they really think this is the best way to solicit the best price? (if there are indeed other bidders)

Edited by TLEF316

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Pretty much how it works in a seller's market. Wait it out and buy on your terms. A correction will come.

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2 hours ago, TLEF316 said:

So you guys that do this alot.....is every freaking transaction just a bunch of silly game-playing nonsense?

As I mentioned a few months back, I was in attorney review for a new place back in September. Made 2 offers (the last one at just under 99% of asking price). No counter. Waited a week, they finally countered at 99.5% of asking price and I accepted. The seller delayed attorney review for 3 days (claimed they were out of town for a wedding) and then cancelled the deal a week later when they got another offer for an additional 1%.(basically 8 hours before we were going to be under contract)

Made an offer on another place last night. 98% of asking. The realtor claims they have "other offers" and now want "best and final bids" by close tomorrow. So now they think I'm going to blindly bid against how many others (not really sure, could be nobody). And its not like we're talking about some fancy estate here. Its a 3 BR condo.  It has most of what I want (not everything) and is in a good area (although probably about 15 minutes from where I'd prefer to be).

Local inventory is low right now, so I get it. But I just cant stand all the stupid games. Do they really think this is the best way to solicit the best price? (if there are indeed other bidders)

I try to discourage my sellers from playing those games fwiw. Doing paperwork right away stops 99% of the nonsense imo.  I have driven to clients after midnight to get contracts signed.  It makes me look bad if my people play games. 

  They can't play games if I keep the time short between "offer accepted' and "Executed P&S."  You can even ask for offers on P&S but I don't usually have to do that.

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On 3/11/2018 at 8:57 PM, GoBirds said:

Curious to hear what sectors you guys think there is any value out there if any or if everything is over priced. With cap rates set to rise it seems hard to find value right now. I know this will differ by region, I’m in a secondary market in the southeast. We have experience in home building, class B office, self storage and limited experience with flex space and a small interest in some apartments. Interested to hear what you guys see out there as opportunities if anything?:popcorn:

I'm all singles and doubles.  Not necessarily by choice, but because its what makes the most sense in my market. I would like to get a multi unit apartment, but the paybacks are horrendous here (10+ years and awful turnover).  I can buy (and rehab) singles and doubles for < 3 years rent.

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On 3/13/2018 at 8:07 PM, TLEF316 said:

So you guys that do this alot.....is every freaking transaction just a bunch of silly game-playing nonsense?

As I mentioned a few months back, I was in attorney review for a new place back in September. Made 2 offers (the last one at just under 99% of asking price). No counter. Waited a week, they finally countered at 99.5% of asking price and I accepted. The seller delayed attorney review for 3 days (claimed they were out of town for a wedding) and then cancelled the deal a week later when they got another offer for an additional 1%.(basically 8 hours before we were going to be under contract)

Made an offer on another place last night. 98% of asking. The realtor claims they have "other offers" and now want "best and final bids" by close tomorrow. So now they think I'm going to blindly bid against how many others (not really sure, could be nobody). And its not like we're talking about some fancy estate here. Its a 3 BR condo.  It has most of what I want (not everything) and is in a good area (although probably about 15 minutes from where I'd prefer to be).

Local inventory is low right now, so I get it. But I just cant stand all the stupid games. Do they really think this is the best way to solicit the best price? (if there are indeed other bidders)

We do not play games.  Ever.  We work on a daily basis with so many agents, and our reputation within that community is very important to us.  As is usually the other agents' to them.  We've had difficult clients that wanted to play games, but we steer them away from it to every extent possible.  If we get multiple offers, we will always go back and ask for best an final from all offerors.  That's normal and in the best interest of our seller.  And price is hardly the item that matters most.  The terms and contingencies are very important at that stage.

I don't know the rules within your state, but if they gave you a signed counter offer and you returned it signed, that would equate to a ratified contract in our state.  The seller is locked in at that point.  But state to state, real estate laws vary quite a bit.

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Rental Guys -

Considering purchasing a rental place (a duplex) with a buddy.  Idea would be to slowly accumulate multiple properties.  He already has 1 and runs it, doing repairs, collecting rent, etc.  I would mostly be a financial contributor.  He is a realtor as well, so we save money there.  I have a few questions I’d like to hear back on though from the guys who currently own properties:

- how much annual return do you look to get?  We are thinking of buying these properties in cash deals so all we would have to pay is taxes, insurance, water (anything else?).  For this first property, its listed at $199 but we would try to get them down.  He says we would probably have to pay $450 a month in taxes etc.  

- seems like buying a duplex would be better than stand alone to diversify income stream, but is there any strong reason to prefer stand alone?

-how much do you estimate each year in repairs?  This place is updated recently with newer appliances, but I know there is always the unexpected.

-any other advice for first timer?

 

I know some of these are answered elsewhere but I wasnt able to find them with a search.  If im missing this exact post somewhere a link would be appreciated.  Thanks!!

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6 hours ago, ditka...mike ditka said:

Rental Guys -

Considering purchasing a rental place (a duplex) with a buddy.  Idea would be to slowly accumulate multiple properties.  He already has 1 and runs it, doing repairs, collecting rent, etc.  I would mostly be a financial contributor.  He is a realtor as well, so we save money there.  I have a few questions I’d like to hear back on though from the guys who currently own properties:

- how much annual return do you look to get?  We are thinking of buying these properties in cash deals so all we would have to pay is taxes, insurance, water (anything else?).  For this first property, its listed at $199 but we would try to get them down.  He says we would probably have to pay $450 a month in taxes etc.  

- seems like buying a duplex would be better than stand alone to diversify income stream, but is there any strong reason to prefer stand alone?

-how much do you estimate each year in repairs?  This place is updated recently with newer appliances, but I know there is always the unexpected.

-any other advice for first timer?

 

I know some of these are answered elsewhere but I wasnt able to find them with a search.  If im missing this exact post somewhere a link would be appreciated.  Thanks!!

The SFH/Duplex question is best answered by what your market is returning best.  Just crunch the numbers.  Take into consideration that one vacancy on a duplex is better than one on a SFH, but everything is renting so fast these days that it's not that big of a deal.

I have many duplexes near Tulsa. Live in Boise now, and the 2-4 unit places just don't yield the way the SFH's do here. So SFH is the better answer here.  I'd put away $150-200/mo for repairs.  I was one to always buy in very good shape as I'm not Mr Fix it.  Lot of equity can be made if you are a Mr Fix it guy.  

The goal IMO is to have a solid 5/10/20 year plan to acquire as many as safely possible.   You might get a better total return by putting 50% down on two, than 100% down on one. Just crunch those numbers!

One
$200,000k
rents for $1500

Two for $200k each
$200k loan at 5% is $1074/mo

rents total $3000.... GP is $1926>$1500

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15 hours ago, ditka...mike ditka said:

Rental Guys -

Considering purchasing a rental place (a duplex) with a buddy.  Idea would be to slowly accumulate multiple properties.  He already has 1 and runs it, doing repairs, collecting rent, etc.  I would mostly be a financial contributor.  He is a realtor as well, so we save money there.  I have a few questions I’d like to hear back on though from the guys who currently own properties:

- how much annual return do you look to get?  We are thinking of buying these properties in cash deals so all we would have to pay is taxes, insurance, water (anything else?).  For this first property, its listed at $199 but we would try to get them down.  He says we would probably have to pay $450 a month in taxes etc.  

- seems like buying a duplex would be better than stand alone to diversify income stream, but is there any strong reason to prefer stand alone?

-how much do you estimate each year in repairs?  This place is updated recently with newer appliances, but I know there is always the unexpected.

-any other advice for first timer?

 

I know some of these are answered elsewhere but I wasnt able to find them with a search.  If im missing this exact post somewhere a link would be appreciated.  Thanks!!

About that.  

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9 hours ago, Getzlaf15 said:

The SFH/Duplex question is best answered by what your market is returning best.  Just crunch the numbers.  Take into consideration that one vacancy on a duplex is better than one on a SFH, but everything is renting so fast these days that it's not that big of a deal.

I have many duplexes near Tulsa. Live in Boise now, and the 2-4 unit places just don't yield the way the SFH's do here. So SFH is the better answer here.  I'd put away $150-200/mo for repairs.  I was one to always buy in very good shape as I'm not Mr Fix it.  Lot of equity can be made if you are a Mr Fix it guy.  

The goal IMO is to have a solid 5/10/20 year plan to acquire as many as safely possible.   You might get a better total return by putting 50% down on two, than 100% down on one. Just crunch those numbers!

One
$200,000k
rents for $1500

Two for $200k each
$200k loan at 5% is $1074/mo

rents total $3000.... GP is $1926>$1500

Thanks Getzlaf,

I actually brought up the buying 2 w/a loan instead and my friend has a strong desire to buy the first couple outright and then start taking out loans on additional properties if all is going well.

One of the units has a longer term renter in there that is paying $800 a month.  Looking at comparables, that is low, but youd have to take in to consideration having someone long term.   It looks like $1000 is a conservative number, though it could go up to 12-1300.  So if we get them rented conservatively at $1000 each:

yearly income: 24,000

taxes etc; 500 x 12 = 6000

repairs: 200x12 = 2400

total = 15,600 yearly (assuming no vacancy which i know is a bad assumption)

that return (15.6/200) is 7.8%

anything else missing?  Is that a good rate on a rental property?

 

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2 hours ago, ditka...mike ditka said:

Thanks Getzlaf,

I actually brought up the buying 2 w/a loan instead and my friend has a strong desire to buy the first couple outright and then start taking out loans on additional properties if all is going well.

One of the units has a longer term renter in there that is paying $800 a month.  Looking at comparables, that is low, but youd have to take in to consideration having someone long term.   It looks like $1000 is a conservative number, though it could go up to 12-1300.  So if we get them rented conservatively at $1000 each:

yearly income: 24,000

taxes etc; 500 x 12 = 6000

repairs: 200x12 = 2400

total = 15,600 yearly (assuming no vacancy which i know is a bad assumption)

that return (15.6/200) is 7.8%

anything else missing?  Is that a good rate on a rental property?

 

Big mistake IMO even considering a long term tenant with low rent to start out.  Places rent very fast these days, like in one day most often. No need for this to be a concern. Get the market rent from Day 1.   This is probably the reason I don't like the 2-4 unit places in Boise. Rents are too low for existing tenants because ma and pa landlords don't raise them.

Your repair bill won't be $2400 if you buy a property that's in good shape.

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@ditka...mike ditka R/E lending will hopefully be 30% of our income this year. I'm curious about the following:

1) Do you plan on fronting all the money for this duplex or what percentage of it? 

2) Are you splitting the yearly net profits 50/50 or what is the participation structure? 

3) How much equity will each of you have if/when property sells?

4) Who will be on the deed, just you or both of you?

5) Does this partnership benefit you more than simply buying on your own and paying a property manager @$3K/year?

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6 hours ago, Rattle and Hum said:

@ditka...mike ditka R/E lending will hopefully be 30% of our income this year. I'm curious about the following:

1) Do you plan on fronting all the money for this duplex or what percentage of it? 

2) Are you splitting the yearly net profits 50/50 or what is the participation structure? 

3) How much equity will each of you have if/when property sells?

4) Who will be on the deed, just you or both of you?

5) Does this partnership benefit you more than simply buying on your own and paying a property manager @$3K/year?

Good questions. 

 

1) we would each be putting up our full share in cash.  Obviously we will try to negotiate this place down.

2) splitting net profits 50/50

3) 50% each

4) Both is my thought, but we have not gotten to that point yet.  I wouldnt do it without both.

5) I think so.  We are buying these properties in the area that my partner and I both grew up.  He is still in the area so easy for him to go fix anything we dont need to hire anyone for, plus to keep an eye on the place.  He is a realtor, so drives around town often so wont be a problem to drive past every so often.   It also allows me to diversify more since we can purchase more places together than I could on my own.  And, it saves on the realtor fee side as well.

Edited by ditka...mike ditka

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On 4/19/2018 at 5:08 PM, ditka...mike ditka said:

Rental Guys -

Considering purchasing a rental place (a duplex) with a buddy.  Idea would be to slowly accumulate multiple properties.  He already has 1 and runs it, doing repairs, collecting rent, etc.  I would mostly be a financial contributor.  He is a realtor as well, so we save money there.  I have a few questions I’d like to hear back on though from the guys who currently own properties:

- how much annual return do you look to get?  We are thinking of buying these properties in cash deals so all we would have to pay is taxes, insurance, water (anything else?).  For this first property, its listed at $199 but we would try to get them down.  He says we would probably have to pay $450 a month in taxes etc.  

- seems like buying a duplex would be better than stand alone to diversify income stream, but is there any strong reason to prefer stand alone?

-how much do you estimate each year in repairs?  This place is updated recently with newer appliances, but I know there is always the unexpected.

-any other advice for first timer?

 

I know some of these are answered elsewhere but I wasnt able to find thgem with a search.  If im missing this exact post somewhere a link would be appreciated.  Thanks!!

Considering purchasing a rental place (a duplex) with a buddy. - I did this.  Guy was a Realtor doing $15mil a year.  08 hit and next thing you know drugs, hos, and getting arrested became priorities.  Guys literally disappeared for 5 years.  I got stuck doing all the work and couldn't sell if I wanted to without tracking him down.  Here's the bigger concern, what happens if you guys acquire 20 properties and your buddy gets divorced?  You're going to be in the middle of that.  All that said, in this situation you are getting the better end of the stick.

Curious what area.  Our property tax rate is about a 1/3 of that.

Not a fan of tying up all your cash in a purchase.  As already mentioned, if you do 50% down you grow twice as fast.  IMO it's best to preserve capital if you can.  Also if interest rates go up, it would be nice to have some money locked up at a low rate.

I like duplexes.  Not many in my area, but the return always seems better.  As Getzlaf said, you're market will determine this.  Reason to prefer stand alone is tenant issues between neighbors.

I probably should but I don't estimate repairs.  I just figure that appreciation and the value of depreciation will offset them.

 

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1 hour ago, ditka...mike ditka said:

Good questions. 

 

1) we would each be putting up our full share in cash.  Obviously we will try to negotiate this place down.

2) splitting net profits 50/50

3) 50% each

4) Both is my thought, but we have not gotten to that point yet.  I wouldnt do it without both.

5) I think so.  We are buying these properties in the area that my partner and I both grew up.  He is still in the area so easy for him to go fix anything we dont need to hire anyone for, plus to keep an eye on the place.  He is a realtor, so drives around town often so wont be a problem to drive past every so often.   It also allows me to diversify more since we can purchase more places together than I could on my own.  And, it saves on the realtor fee side as well.

Not to be a #### but it sounds as if your partner will be doing more heavy lifting.  Will the RE savings come out of his 50%?  These questions will eventually come up.

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1 hour ago, ditka...mike ditka said:

Good questions. 

 

1) we would each be putting up our full share in cash.  Obviously we will try to negotiate this place down.

2) splitting net profits 50/50

3) 50% each

4) Both is my thought, but we have not gotten to that point yet.  I wouldnt do it without both.

5) I think so.  We are buying these properties in the area that my partner and I both grew up.  He is still in the area so easy for him to go fix anything we dont need to hire anyone for, plus to keep an eye on the place.  He is a realtor, so drives around town often so wont be a problem to drive past every so often.   It also allows me to diversify more since we can purchase more places together than I could on my own.  And, it saves on the realtor fee side as well.

1. You don't save any realtor fees when you buy. Seller pays both commissions.  Your partner will be making 3 percent when you buy.

2. Like was said, partnerships are the suck. Make sure if you get into one that a lawyer spells out all duties and exit strategy in writing before you start.  I did a partnership on a small take out restaurant.  Worst experience of my life. 

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