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REAL ESTATE Risky RE Growth Opportunity

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OP
TurtleSprint

TurtleSprint

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FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
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Looking for some advising here and need your thoughts...

I've got some good equity built into one of my properties that would sell for enough to put a down payment for a larger complex. Considering it but am hesitant because it's my most "hands-off" property and brings in good revenue with long term tenants. There's no specific target property in mind currently but I've passed up even looking at a few because their numbers didn't appeal.

Just looking ahead if one comes up. Would it be worth taking on potentially more headache to leave this gem behind? Part of me says go for it and the other part says hold the reliable duplex for a while.

Any advice appreciated!
 

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EvanOkanagan

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Speedway Pass
Aug 2, 2013
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Looking for some advising here and need your thoughts...

I've got some good equity built into one of my properties that would sell for enough to put a down payment for a larger complex. Considering it but am hesitant because it's my most "hands-off" property and brings in good revenue with long term tenants. There's no specific target property in mind currently but I've passed up even looking at a few because their numbers didn't appeal.

Just looking ahead if one comes up. Would it be worth taking on potentially more headache to leave this gem behind? Part of me says go for it and the other part says hold the reliable duplex for a while.

Any advice appreciated!
Instead of either/or, why not do both?

Depending on your financial situation, there might be an opportunity to get a Home Equity Line of Credit made available tapping into the equity of your Duplex. If you were to do this, the funds would be available but accruing no interest. Some banks will even lend up to 80% of the value of your property in the form of a HELOC.

For example:
- Property is appraised by the bank at $500,000
- The bank will lend up to 80% (in this case $400,000)
- If you only have $300,000 owed on the mortgage, you could get a HELOC for $100,000. It would be a Line of Credit at (likely) quite a low interest rate and you would only start paying interest from the moment you utilize it.

This way, you don’t miss out on opportunity if something comes up and you can hold onto the well performing Duplex.
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
Instead of either/or, why not do both?

Depending on your financial situation, there might be an opportunity to get a Home Equity Line of Credit made available tapping into the equity of your Duplex. If you were to do this, the funds would be available but accruing no interest. Some banks will even lend up to 80% of the value of your property in the form of a HELOC.

For example:
- Property is appraised by the bank at $500,000
- The bank will lend up to 80% (in this case $400,000)
- If you only have $300,000 owed on the mortgage, you could get a HELOC for $100,000. It would be a Line of Credit at (likely) quite a low interest rate and you would only start paying interest from the moment you utilize it.

This way, you don’t miss out on opportunity if something comes up and you can hold onto the well performing Duplex.
Good point. I'll get with my bank and see what my options are. Might be time to shop around too and see if another bank wants to play ball.

Thanks for the feedback. I'm chomping at the bit to make another move.
 

WJK

Gold Contributor
Speedway Pass
Oct 9, 2017
867
1,991
542
Nikiski, Alaska
Looking for some advising here and need your thoughts...

I've got some good equity built into one of my properties that would sell for enough to put a down payment for a larger complex. Considering it but am hesitant because it's my most "hands-off" property and brings in good revenue with long term tenants. There's no specific target property in mind currently but I've passed up even looking at a few because their numbers didn't appeal.

Just looking ahead if one comes up. Would it be worth taking on potentially more headache to leave this gem behind? Part of me says go for it and the other part says hold the reliable duplex for a while.

Any advice appreciated!
Personally, I like the comfort zone and high equities... but, I gave up risky moves a long time ago. Growing older makes me a lot more conservative.

But, on the other hand, you're talking about a duplex. Why don't you buy another small residential rental property (2 to 4 units) and move into it? You could buy it with very little down since it would owner-occupied financing. Then after a couple of years, rent it and move on and do it again. It depends on your stage in life.
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
Personally, I like the comfort zone and high equities... but, I gave up risky moves a long time ago. Growing older makes me a lot more conservative.

But, on the other hand, you're talking about a duplex. Why don't you buy another small residential rental property (2 to 4 units) and move into it? You could buy it with very little down since it would owner-occupied financing. Then after a couple of years, rent it and move on and do it again. It depends on your stage in life.
Funny you mention it, I actually do live in one of my rentals. I've never paid a single month of mortgage which has been amazing! Going to try and stretch it out as long as possible. I'm not opposed to another duplex or similar. Just looking to upgrade to higher dollar investments. The goal is to move to managing them full time eventually.
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
Hey all! Time for updates and some advising needed...

Recently put down an offer on a nice side by side duplex that seemed like a no-brainer. The seller is older and looking to cash in after holding for 50 years. Strangely enough, I was told the price was dropping 10k before we even stepped inside. The numbers made sense and the offer was accepted below the discounted price even! Lots of room for added value and good cash flow in the mean time.

Since then I've been presented with another package deal for two more duplexes. However some of my funds are obviously tied up with the above. These are already completely renovated and definitely turn-key opportunities. I'd have to get creative with financing but my main concern is that there's not a lot of potential to ADD VALUE. Rents will cash flow but I hesitate because they're less of a deal and more of a safe, cash flowing grab. I'm leaning hard towards passing on these if that isn't becoming clear. Thoughts? Would you go with the additional monthly income? Or wait for another opportunity with monthly income but room for renovations?

Cheers!
 

WJK

Gold Contributor
Speedway Pass
Oct 9, 2017
867
1,991
542
Nikiski, Alaska
Hey all! Time for updates and some advising needed...

Recently put down an offer on a nice side by side duplex that seemed like a no-brainer. The seller is older and looking to cash in after holding for 50 years. Strangely enough, I was told the price was dropping 10k before we even stepped inside. The numbers made sense and the offer was accepted below the discounted price even! Lots of room for added value and good cash flow in the mean time.

Since then I've been presented with another package deal for two more duplexes. However some of my funds are obviously tied up with the above. These are already completely renovated and definitely turn-key opportunities. I'd have to get creative with financing but my main concern is that there's not a lot of potential to ADD VALUE. Rents will cash flow but I hesitate because they're less of a deal and more of a safe, cash flowing grab. I'm leaning hard towards passing on these if that isn't becoming clear. Thoughts? Would you go with the additional monthly income? Or wait for another opportunity with monthly income but room for renovations?

Cheers!
You are already in a good deal. Stick with that one. The world is stuffed with more deals. A greedy heart makes for bad decisions and a sloppy execution of those decisions -- which can cause your whole life to fall apart. As you go along, you will find yourself saying NO several times before you say YES. The key to being successful is to know when to say YES.
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
You are already in a good deal. Stick with that one. The world is stuffed with more deals. A greedy heart makes for bad decisions and a sloppy execution of those decisions -- which can cause your whole life to fall apart. As you go along, you will find yourself saying NO several times before you say YES. The key to being successful is to know when to say YES.
Well said. Like I mentioned I plan to pass but figured I'd see what some other views were out there. Thanks!
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
It's been a busy month! In the midst of closing on the side-by-side I've hit a few road bumps that have made it all the more enjoyable.

Event #1: The sewage drain at another duplex started backing up on the tenants so I was advised by my preferred (no longer) plumbing company to have it "jetted" out to clear what's called a belly in the line. Long story short, it turns out the damage was more than a belly but rather collapsing orangeburg pipe... for those that aren't familiar, not good at all. So basically I shelled out a ton of money to expedite the pipe collapse. Ended up having to have the front yard dug up to replace everything and the bills rolled in.

27598 27599

Learning & Outcome: If your city offers insurance for the drain, GET IT. This was my only property that I didn't have covered and thus will take a large L and pay every cent out of pocket. However, I now have very happy long term tenants again who gave huge praise for timely action.

Event #2: A huge gopher decided to set up shop under another duplex crawlspace. (Anyone see Caddyshack?) I caught him in the act and after a few failed home remedies I swallowed my pride and hired a pest removal expert to relocate it.

27600

Learning & Outcome: It appears that any significant foundation damage has been avoided but it ate duct work and the holes will have to be covered and blocked. SAVE YOUR MONEY and skip to just hiring a professional. Ended up being kind of a blessing in disguise though because the hired hand is another local RE investor (albeit much more accomplished) that I plan to learn from and maybe someday collab with. The network continues to grow.

Lastly, I made arrangements to part ways with the management company that I'd hired to handle the gopher location mentioned above. In my short experience I'd advise,

a. Handling your own investments as long as possible
b. If you don't want to, properly vet the new management to make sure your expectations will be met.

Cheers!
 

WJK

Gold Contributor
Speedway Pass
Oct 9, 2017
867
1,991
542
Nikiski, Alaska
It's been a busy month! In the midst of closing on the side-by-side I've hit a few road bumps that have made it all the more enjoyable.

Event #1: The sewage drain at another duplex started backing up on the tenants so I was advised by my preferred (no longer) plumbing company to have it "jetted" out to clear what's called a belly in the line. Long story short, it turns out the damage was more than a belly but rather collapsing orangeburg pipe... for those that aren't familiar, not good at all. So basically I shelled out a ton of money to expedite the pipe collapse. Ended up having to have the front yard dug up to replace everything and the bills rolled in.

View attachment 27598 View attachment 27599

Learning & Outcome: If your city offers insurance for the drain, GET IT. This was my only property that I didn't have covered and thus will take a large L and pay every cent out of pocket. However, I now have very happy long term tenants again who gave huge praise for timely action.

Event #2: A huge gopher decided to set up shop under another duplex crawlspace. (Anyone see Caddyshack?) I caught him in the act and after a few failed home remedies I swallowed my pride and hired a pest removal expert to relocate it.

View attachment 27600

Learning & Outcome: It appears that any significant foundation damage has been avoided but it ate duct work and the holes will have to be covered and blocked. SAVE YOUR MONEY and skip to just hiring a professional. Ended up being kind of a blessing in disguise though because the hired hand is another local RE investor (albeit much more accomplished) that I plan to learn from and maybe someday collab with. The network continues to grow.

Lastly, I made arrangements to part ways with the management company that I'd hired to handle the gopher location mentioned above. In my short experience I'd advise,

a. Handling your own investments as long as possible
b. If you don't want to, properly vet the new management to make sure your expectations will be met.

Cheers!
Your right. I do my own management. Your right. Things do go wrong. Your right. You will have unexpected repairs. You must have an emergency fund for those moments.

Here's my other advice. Inspect, inspect, inspect. I change my tenant's furnace filters and service the on-demand water heaters myself. That way I inspect the interiors and exteriors of my rentals both in the spring and in the fall. That way, I see the inside of each unit. I ask them if there are any maintenance issues. I get them to sign a sheet marking off what I did, their concerns and anything that I see that needs to be done. I walk around the outside. It's amazing how much better they keep my rental units. They co-sign the inspection sheet, so they can't say that we don't do any maintenance. That's particularly helpful if I must evict them.
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
I got LUCKY!

We always talk about "learn by doing" and this was certainly a learning experience. I closed on that duplex at the beginning of October with a list of renovations in hand. In the weeks before closing I met with a siding contractor referred by a fellow investor and it turned out to be a GAME CHANGER. This was among meeting other larger contractors that aren't cheap. The boss quoted the siding and then offered up their services to work on the rest of the house since it had been left a DUMP. His siding quote was by far the least costly and I quickly realized they did very quality work. Cue the LUCK... the renovations turned out to be far and beyond what I anticipated when I bought the property. However, with the savings from a smaller siding contract and the abilities of the new crew we could budget it all in. Had I proceeded with the popular siding contractors, the siding would have been complete but hardly anything else. Had I not met this crew, I'd be paying tons to renovate the units because of my untrained eye. Shame on me for slipping with the due diligence. But hey, now I know more of what to look for and it will make me a better investor moving forward. Crisis averted.

More recently, I had a HVAC tech conclude that I needed a new furnace and the one I had was shot. In a similar fashion, I pulled in a referral resource to quote a new system between meeting other popular providers in the area. He and I simply changed out the filter which was filthy and certainly causing faults. Everything fired up and is good to go. Another fortunate experience and friendly face on the team.

Moral of the Story:
Your network is critical. Connections in the business have been absolutely PIVOTAL and saved a boat load of cash. I picked up two resources that will certainly add to my success.
 

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WJK

Gold Contributor
Speedway Pass
Oct 9, 2017
867
1,991
542
Nikiski, Alaska
I got LUCKY!

We always talk about "learn by doing" and this was certainly a learning experience. I closed on that duplex at the beginning of October with a list of renovations in hand. In the weeks before closing I met with a siding contractor referred by a fellow investor and it turned out to be a GAME CHANGER. This was among meeting other larger contractors that aren't cheap. The boss quoted the siding and then offered up their services to work on the rest of the house since it had been left a DUMP. His siding quote was by far the least costly and I quickly realized they did very quality work. Cue the LUCK... the renovations turned out to be far and beyond what I anticipated when I bought the property. However, with the savings from a smaller siding contract and the abilities of the new crew we could budget it all in. Had I proceeded with the popular siding contractors, the siding would have been complete but hardly anything else. Had I not met this crew, I'd be paying tons to renovate the units because of my untrained eye. Shame on me for slipping with the due diligence. But hey, now I know more of what to look for and it will make me a better investor moving forward. Crisis averted.

More recently, I had a HVAC tech conclude that I needed a new furnace and the one I had was shot. In a similar fashion, I pulled in a referral resource to quote a new system between meeting other popular providers in the area. He and I simply changed out the filter which was filthy and certainly causing faults. Everything fired up and is good to go. Another fortunate experience and friendly face on the team.

Moral of the Story:
Your network is critical. Connections in the business have been absolutely PIVOTAL and saved a boat load of cash. I picked up two resources that will certainly add to my success.
Good for you. Are you going to rent it long term or flip it? I like holding things while I collect my rents. Even on flips, one year + one day is the key to long-term capital gains rather than ordinary income.

About your rehab experience -- networking IS the key to finding good help. I have relationships that go back 30 or 40 years. And now I'm doing stuff with their kids and grandkids.

Here's another tip. Make yourself a set of notebooks and 3 ring binders. Take pictures that you can print off into your notebooks & binders. Also, keep a ditigal copy for you computer that you can carry around with you. I use one computer file as a daily log for my job. Then I print it off for one of my binders with my picturres of the job as it was completed. Printing it off may seem like over-kill. BUT, I many times forget how bad the property looked in the beginning. By the time I'm done, I have forgotten all the step we took to get it done. Also, if you're in this for the long haul, years from now you'll be scratching your head trying to remember what you did on a project. Or, who helped you with one problem or another. And what was your source for something you now need to find again. No human can remember all of this stuff. It enough to keep the present project on time and within budget. Oh, and why do I make a hard copy? I can always find my notebooks and binders when I need them. My computer has eaten files from time to time. And things have gotten lost in that digital world over time. I tab everything to make it easy to look up when I busy and stressed. It fun sometimes to open a binder and see my past.
 
OP
OP
TurtleSprint

TurtleSprint

Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Oct 25, 2017
37
35
56
Illinois
Good for you. Are you going to rent it long term or flip it? I like holding things while I collect my rents. Even on flips, one year + one day is the key to long-term capital gains rather than ordinary income.

About your rehab experience -- networking IS the key to finding good help. I have relationships that go back 30 or 40 years. And now I'm doing stuff with their kids and grandkids.

Here's another tip. Make yourself a set of notebooks and 3 ring binders. Take pictures that you can print off into your notebooks & binders. Also, keep a ditigal copy for you computer that you can carry around with you. I use one computer file as a daily log for my job. Then I print it off for one of my binders with my picturres of the job as it was completed. Printing it off may seem like over-kill. BUT, I many times forget how bad the property looked in the beginning. By the time I'm done, I have forgotten all the step we took to get it done. Also, if you're in this for the long haul, years from now you'll be scratching your head trying to remember what you did on a project. Or, who helped you with one problem or another. And what was your source for something you now need to find again. No human can remember all of this stuff. It enough to keep the present project on time and within budget. Oh, and why do I make a hard copy? I can always find my notebooks and binders when I need them. My computer has eaten files from time to time. And things have gotten lost in that digital world over time. I tab everything to make it easy to look up when I busy and stressed. It fun sometimes to open a binder and see my past.
@WJK I plan to rent it long term. At least for the foreseeable future. The cash flow is just too good. We'll see what the next couple years brings. I like the idea of notebooks and binders. I've been trying to take pictures to update social media but it hasn't quite caught on for me.
 
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WJK

Gold Contributor
Speedway Pass
Oct 9, 2017
867
1,991
542
Nikiski, Alaska
@WJK I plan to rent it long term. At least for the foreseeable future. The cash flow is just too good. We'll see what the next couple years brings. I like the idea of notebooks and binders. I've been trying to take pictures to update social media but it hasn't quite caught on for me.
OK. Make it catch-on with yourself. Someday you'll need it! Here's the hidden reason for the pics and the notes. WHEN you must go to court, I have learned that business records kept in the normal course of business are an exception to the hearsay rule. You must be able to show that you always keep those records on every property and every deal you do -- in your normal course of business. Otherwise, your data gets thrown out of court. In other words, on your worst day while you're standing up in court -- and your tenant is talking smack about you -- you can pull out your binder and say, this is what we did, this the way we did it, and this is when we did it. I many times show up for court with a whole pile of binders. For example: When the tenant says that we never do maintenance on a unit, I flip to their record and reply that we did XXX on this date and XXXX on that date and XXXX on another date... and on and on. Then I ask if the judge wants to hear more details or review my pictures. Funny, I win just about every time I must show up in court. This is not legal advice. I do NOT practice law. This is how I learned to do it when I went to law school and it works for me. Talk to your attorney and try it. What do you have to lose?
 

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