Posted by Henry on February 02, 2002 at 21:03:43:
Thanks for the feedback, guys! It was very helpful. I live in New York and houses in the areas that I am interestered in sell for about 145K to 195K. Once I buy the house, property management would be my responsiblity. The real estate company just buys the houses, does the rehab and then resells them. To attract interest from buyers, the company offers low down payments.
I have had some experience as a landlord in the past. Thanks.
Re: Low down pymt house - Posted by Henry Stone
Posted by Henry Stone on February 02, 2002 at 14:04:46:
I am considering doing business with a real estate agency which is in the business of buying “junker” houses, fixing them and then reselling these houses. They offer low downpayments of 4k-5k for single family houses and 6.5k-8K for two family houses. My game plan would then be to rent these houses out. Does this sound like a good idea? What are some of the possible pitfalls? Any help would be appreciated.
Re: Low down pymt house - Posted by Tim Fierro (Tacoma, WA)
Posted by Tim Fierro (Tacoma, WA) on February 02, 2002 at 15:44:13:
What you want to find out more on is who will pay to do the fixing up, how much is the rental after completion, does it cover costs with cash flow, who manages the properties, how do ‘they’ determine the downpayments needed, etc… IE: You have a lot more information to get in order to tell if it is a good deal and what pitfalls may happen.
Your message doesn’t discuss these things. We who are reading can only guess at the many possible pitfalls and there are too many to list not knowing all the details.
Your area may have houses that have full market value of $30k for a really nice home. That means you are putting down over 10% of your money to buy it and you still have to get it rehabbed and rented. If your area has full market value of $500k homes that you will be buying, you are only putting in 1% for a downpayment. We don’t know your area, only you will know.
Your game plan is to rent them out, but it looks like you are paying a company to buy, rehab, and property manage everything for you. What is your profit potentional doing it ‘their’ way and weigh that against doing it yourself. The company you are considering may want to sell to you at the most price they can get and get a cut of the commission, then property manage it for you and take a part of the profits; we don’t know and you haven’t discussed this part in your message.
Nothing wrong with a company doing this, but you need to get full details on the whole setup from purchasing, to the managing, to the exit of the deal. If you have this information and just didn’t post it, then you will have to review it and maybe ask more specific questions to get the answer you seek.
But to your answer, here are a few;
Rehab costs were to much, now overbudget.
Renters thrashed the place, out of pocket expenses.
Rents in the area don’t cover PITI and cash flow.
Toilet busted, you need to go out there with a plunger.
Marketing fees are higher now, please send more money.
When you deal with a company, read the contracts carefully so you understand your part in the equation. What are you responsible for, and what they are responsible for.
Re: Low down pymt house - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on February 02, 2002 at 15:41:41:
Henry Stone------------
The plan is ok. Just be sure that you know for how much the properties will rent and what the expenses want. You will want to read up on property management. In Fact, you might want to do that now, before buying, to see if this is an approach that is congenial for you. Try Leigh Robinson’s “Landlording” book and Jack Reed’s “How to Manage…” book–website johntreed.com If you spend $50 on books and, after reading them, feel like you don’t want to be a property owner with renters, you may have saved yourself a lot of grief.
Also, learn the property values where you are, so you know you are not over-paying for the properties that they offer. If you can, get them to carry part of the purchase price in their loan. Then, if the are physical things that go wrong with the property that they did not warn you about, you may have some leverage to get them to fix them.
Study up on investing before jumping in.
Good InvestingRon Starr*