Investment Property 201 Seminar: Renting Homes for $1500+ Per Month

The volume of higher priced homes that are being sold in either short sales or foreclosures is creating an opportunity for investors.  The previous owners of these homes are now in need of a place to live.  Most have been homeowners for years and have no desire to move back into an apartment or multi-family setting.  These new tenants probably have good income and a strong desire to remain in the neighborhood.  They may have simply had a blip in their financial lives as a result of a job loss, medical problem, divorce or other temporary situation that led them to be unable to pay their mortgage payments.

This type of tenant can be fantastic to have as they understand how to maintain a property, they pay their rent on time as they have good jobs, and there are looking to put root down somewhere.  With this opportunity in the market, we want to teach you how to rent to these types of tenants.  How do you find someone that is willing to pay $2000 or even $3000 per month for rent?  What types of properties work best?  How can you command that rent?

Steve Rajavuori, from REI Property Management, will be sharing his experience with renting properties in this price range (over $1500 per month).  Come to this free seminar and learn from an expert.

Rentals Not Allowed

A customer of mine recently purchased a townhouse in Brooklyn Center.  It was a 1970s vintage with 3 bedrooms and they paid $29,900.  It is in terrible shape and needed everything (carpet, paint, kitchen, bath, furnace).  It was also filthy and looked like some of the college houses I had gone to parties in.  The carpet was sticky and there was ketchup on the ceiling of the kitchen!

After getting the offer accepted, we received the association docs.  Needless to say that I was dragging my feet on reading this 117 page document over the weekend.  My customer, being an attorney, dove right in.  Deep within the document were the “rental rules”, which went on to say  that a unit in that association may only be rented if the owner lived in the unit for at least 1 year prior to renting it.  [Insert gnashing of teeth by me,  here].

Why didn’t the listing disclose this?  Why didn’t the listing agent ask me if it was an investor buying this property?  We promptly canceled this PA and will be moving on.  Keep an eye out for this when purchasing a condo or townhouse.  It is more common than you may think.

Stupid Property Repairs #13

Ahhh.  Lucky number 13.

I always wonder why anyone buys a house that has fundamental problems like crumbling foundations or less than legal headroom in the 2nd floor.  I see this all the time.  Then to make matters worse, I have no idea why they will then spend a considerable amount of money cosmetically renovating this property.

About 12 months ago a customer was interested in a duplex by the U of M.  This building had been completely renovated down the to studs with new wiring, furnaces, siding, plumbing, and nice interior finishes.  We thought this was too good to be true.  When we did the inspection, we found that you could literally pull the foundation blocks out with your hands.  The contractor estimated the house needed to be jacked up, dug out and a new $50,000 foundation installed!

Just the other day I got a call from a friend of mine who said he knew a guy that wanted to sell his duplex he just renovated in Saint Paul.  He was selling it non-MLS for $90k and it generated $1600 per month in rent.  I spoke to him on the phone and he said he had installed new furnaces, re-sided the house, installed new windows, a new sewer main, new electrical and all interior cosmetics.  I figured for $90k this could probably be a good opportunity.

I am sure you can see where this is going!  I go into the downstairs unit, which was vacant.  As I walk around, I am getting this strange sensation of vertigo.  I feel like I am walking uphill.  Well I was!  The entire building is probably 4 inches out of plumb.  In other words, the entire building is leaning 4″-6″ to the west.  Here are some pictures I shot.

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There were no camera tricks used in the making of this article!

Reminder: Investment Property 201-Getting Started with Quickbooks

This is a must attend for all landlords.  Learn how to make your bill paying and record keeping much more organized.  This free seminar will launch you down the path of watching your costs and income much closer. If you are new to Quickbooks, this will help you get started.

This seminar is held in Burnsville at 6:30pm on January 26.  Click here to register.

FHA 90 Day Flipping Rule Waived

With so many foreclosed properties on the market right now, the time has been ripe for rehabbers to get into the market.  They can take these properties that may be otherwise unlivable (and can not have a mortgage put on them), buy them, fix them up, and then resell them making a profit.  It is a win for the rehabber, the buyer of the new beautiful house, the neighborhood, and even the economy (as we put people back to work and buy materials).

One speed bump in the sale of these newly rehabbed houses to the end buyer has always been that if the buyer is using FHA financing, (with certain exceptions) FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days.  With many of these rehabs taking 60 days or less, this can mean that you must lose an additional 30 days of interest while you wait with the property empty until the 90 day mark.  The loan process can not even begin (and the purchase agreement can not be dated) until day 91.

Many of the rehabbers were unwilling to wait the 90 days to resell to anyone with FHA financing. HUD realized that this restriction was shutting FHA buyers out from newly renovated homes, many of which were priced for first time home buyers. This week HUD announced a temporary waiver that removes this restriction.  The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The waiver will take effect on February 1, 2010 and is effective for 1 year, unless otherwise extended or withdrawn.  This is good news for everyone.

IP 101.5 Seminar-Cash Flow, Profitability, and Investment Ratios

This seminar is meant to delve into the Cash Flow of a property and the different ways to analyze investment potential of a property, future cash flow, or current price. Brian Peterson, who has been analyzing investment properties for years, will go over many of the ratios and ways to look at your property financially. This seminar is meant for people wanting to take the next step, maybe looking to have several properties, or those who need a refresher on the tools and methods to analyze these properties.

There will be a special interest in multi-unit properties and commercial properties and ways to come up with prices, cash flows, or to compare to other investment properties. We have special guest Rob Bonahoom to talk a little about the current financial environment for approving loans. Come take it to the next level with this anticipated seminar on January 12th. You never know what you can take away from these events, but they have proved very valuable to investors in the past.