I closed on a duplex I bought at auction for $9,000 today.

[DrunkFish]

So this is something you're doing right now? Still have yet to rehab it and what not, correct?
edit: Answered in above post while i posted. Interesting. That'll be a lot of work!

 

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[redsfaithful]

Front porches could look really nice with some paint.

Mind PM'ing me roughly where you are operating? I'm in Bexley - have considered doing something like this, but tough to find time. I do get some of the local wholesaler's emails, it's interesting what is out there, but some of the neighborhoods I do find intimidating.

 

[Travispassiveinc]

Our marketing on properties works really well IMO and I usually end up with 10-20 renters per property

what type or marketing do you do that works best?

I do craiglist and postlets mainly. YouTube has landed a few.

 

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[EvanOkanagan]

That duplex would cost 400-500k where I live...

 

[Madhu]

I live in the UK, where as a general rule of thumb, bargain properties are in difficult to rent areas (This is a very rough rule, you can find brilliant offers if you hunt around, but it requires a lot of work and often lots of repairs).

Is it different in the US? From a UK perspective, this $9000 property seems to good to be true!

 

[Swoop]

Congrats on the purchase. That's a nice chunk of house for that money.

Please post some pics after you get it fixed up...I geek out on home renovation stuff, haha.

-Swoop

 

[JSW]

I live in the UK, where as a general rule of thumb, bargain properties are in difficult to rent areas (This is a very rough rule, you can find brilliant offers if you hunt around, but it requires a lot of work and often lots of repairs).

Is it different in the US? From a UK perspective, this $9000 property seems to good to be true!

It sounds like you say that from experience Madhu, what areas roughly have you hunted in and what would you consider a bargain price here in the UK? I'm from London myself, I'm sure you're familiar with our prices haha.

Got distracted from the op there for a minute, nice purchase man! As Madhu said, it's largely a different ball game in the UK, especially London where I am.

 

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[andviv]

here's to show you what it would look like with a cashout refianance strategy, which I absolute LOVE because it's effectively having your cake (Keeping the property) and eating it too (Putting a lump sum of cash in your pocket).

$27,500 total investment
70% LTV @ $65,000 after rehab value
$45,500 total cashout value, putting $18,000 in my pocket
Interest would run 5.25% or so on a commercial-style loan, or right around $2,400 per month. So, the property would *only* clear $6,000 per month, reducing my net income to $500, but putting that $18,000 in my pocket along with the $27.5k initial investment.

Just curious, what banks are you seeing doing refis like this in your area?
Are you actually getting these types of refis done, or it is just a general idea that you have not implemented yet?

Also, The estimated rents sound higher if the cost of living is as low as you mention. Are you getting similar rents for other properties in the area?

In my limited research for the mid-west, the rents vary quite a lot and I was not able to estimate with confidence in the income side of the rents equation.

 

[BrandonS85]

Just curious, what banks are you seeing doing refis like this in your area?
Are you actually getting these types of refis done, or it is just a general idea that you have not implemented yet?

Also, The estimated rents sound higher if the cost of living is as low as you mention. Are you getting similar rents for other properties in the area?

In my limited research for the mid-west, the rents vary quite a lot and I was not able to estimate with confidence in the income side of the rents equation.

The rents are typical for the area or slightly under market rates (I'm trying to go a little under normal rates for the area).

Last year I was able to more or less do finance on 4 different properties - Two 20yr notes and two as part of a $100k line of credit we could use to (if everything went right) buy, rehab, rent then cashout refi to pay off the loan. The problem was/has been in 2014-15 that the banks we're working with just don't comprehend buying properties as fast as we are. In 2014 I bought something like 12 properties, 4 were in the first half of the year, the remaining 8 were in the second half.

So when we showed the bank our finances for FY 2014, it showed income that reflected effectively 4 properties operating 100% of the year, and 8 properties operating less than half of the year. Rather than estimating income through 2015 of all properties at 100% less vacancy rates, they took only what income we showed in 2014, and based an estimated full year of 2015 expenses (Taxes, insurance, repairs) against it. So, by their estimate, we were to have a pretty poor performing year due to them assuming that we would be operating the ~50% of the properties in 2015, when in fact we've operated them closer to 90% or better. So, in order to get new refinances through, I'm waiting till we complete 2015 and go to them showing we hit all of our 2015 goals, and a tax return showing 90% or better occupancy on all the properties.

The real problem with rent estimation in areas like mine (non metros) is that a very small % of properties are posted on craigslist/online. The vast majority are posted in the newspaper or simply signs in the front yard. Unless you're in those areas and can drive around or access a newspaper, you're SOL to find the actual pricing.

Cost of living in my area(s).

2 bedroom apartment ~$550/mo
Gas/Electric/Water/Trash service - ~$150-$200/mo
Gallon of milk - $2.79
Gallon of gasoline (Today's price) $2
Average starting wage for a worker at walmart - $9.50hr

So, in order to pay for your housing you'll run about 73hrs of labor, and for the most part you will not be taxed on any income. For a household of 2 workers at the starting wage, you're spending 25% of your household income on housing which is under the suggested average of 40%.

 

[Travispassiveinc]

I really don't have a problem finding a 2-3 bedroom, 1 bath home in the areas I work for $25,000 or so in good enough shape that I won't have to put much money into

What grade of neighborhood is that in generally? Ranch style or old 2 stories? and how much do you get for rent?

 

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[Madhu]

Out of interest, why is property so cheap in the US? Also, is it as cheap in places like California or is it only certain states.

In the UK buy-to-let properties are a national hobby (at least for 40+ middle classes. Those 30 and under struggle to find a home to rent for them to live in, never mind a second house to let out). Is it not like that in the US?

It sounds like you say that from experience Madhu, what areas roughly have you hunted in and what would you consider a bargain price here in the UK? I'm from London myself, I'm sure you're familiar with our prices haha.

UK bargains (e.g. £80K - £100K for 3 bedrooms) are in Northern rural areas. The downside is finding a good tenant who can afford the rent and/or won't trash the property (I am grossly generalising, but this is a rough rule of thumb).

Of course for one UK bargain, you could probably buy 4 of the houses BrandonS85 is talking about and it sounds like you wouldn't have the same tenant issues. Gotta get that green card!

 

[Imgal]

UK bargains (e.g. £80K - £100K for 3 bedrooms) are in Northern rural areas. The downside is finding a good tenant who can afford the rent and/or won't trash the property (I am grossly generalising, but this is a rough rule of thumb).

Of course for one UK bargain, you could probably buy 4 of the houses BrandonS85 is talking about and it sounds like you wouldn't have the same tenant issues. Gotta get that green card!

Totally agree with this. There are some bargains to be had if you're willing to put in a load of work doing something up and look in the less desirable areas, but sick with jealousy with the price of that duplex @BrandonS85 !! Even up North you're well into the double figures to get started.. and that get painfully high with the US exchange rate as it is for outside investors!

 

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[Sauce]

Thats about the best advice you can get. Keep the fact that you own it away from EVERYTHING.

I am going to have to disagree with this advice about not letting them know you are the owner (the entity comment I 100% agree with). If you are not a confrontational person or have problems setting boundaries, then you should strongly consider out sourcing your property management.

For my professional real estate business, I try and set up rules and processes so I don't have to worry about how to react to problems. A few examples:

1. Rent is due on the 1st, Late on the 3rd (with a 10% penalty), and I post a 3 day notice on the 5th.
2. If your kid drops a toy in the toilet and causes a back up, it is your responsibility to get it fixed or I will bill you back. I have it written in to my lease and I go over it in the on boarding process.

To the OP, well done on your acquisition. Looks like it is going to generate some great cash flow.

What kind of appreciation has that area seen historically vs the Columbus market?

 

[EvanOkanagan]

Since last October I've bought 13 or 14 more rentals and am hoping to buy more.

Great work man! That's some awesome progress.

What is the average price of these? Are you financing?

 

[EvanOkanagan]

It was 32k last time I checked, unsure where it is now. Have closed quite a few recently under 20k a piece.

Unreal. It's about 350-400k minumum for a dump around where I live. My avg rental prop costs about 450k.

Should move some of my money to Ohio!

 

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[andviv]

Give me a call if you do, I have two entities that have 506 filings and work with private money way more than I do banks.

Interesting. Definitely want to hear more about this.