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Pilot

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Reply with quote  #1 

There are at least a couple of companies that I've found that buy fixers in low priced areas, fix them up, rent them out, then sell them to investors. they show some numbers that offer large cash-on-cash returns.

 

These are 2 that I've found.

 

http://www.kenhillproperties.com/

http://www.savannahinvestmentproperties.com/

 

Anyone have any experience with this type of thing? My gut tells me if it's too good to be true, then pass.

RonaldStarr

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Reply with quote  #2 

Pilot—CA-----------------

 

I looked at the websites you provided.  I don’t see anything wrong with them or that would raise a red flag to me.

 

However, you still need to do your due diligence before you actually buy.  You can make an offer contingent on inspection and other investigations and then cancel with no penalty if the property does not appeal you, can’t you?

 

Ask for referenceds to prior clients.  Talk to them.  And ask them if they know of any others who invested through these people, so you can question people who the service providers did not mention.

 

If you live where they are, you can check their dealings in the county land records and find earlier buyers to question.  You can also check the courthouses for lawsuits wherein they are defendants.  This typically only reveals the more serious problems people have had with them.

 

Check property values and rental rates where you are thinking of buying.  Check out the neighborhood and town.

 

Good Figuting It All Out************Ron Starr*************

 

 

jc2004

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Reply with quote  #3 

I have had no experience with any of those 2 sites but keep in mind the following:

Say they do a rehab estimate and comes out to 18k. More often than not, that 18k could be 25k or even 30k if it is something serious. Leave enough margin for you just in case there is some undiscovered problem that comes up.

 

"Obviously we can't tell you how much any property will appreciate in the course of the next five years, but consider this example of a property that appreciated a minimum of 20% in five years."

 

Realize the example of one of the sites used is betting on 20% appreciation in 5 years. I don't know anything about that market but there have been markets out there that have not average 4% a year the past 5 years.

 

"In 5 Years your $69,300 Investment earned"

That is before commission, expenses not factored in, etc...

 

I'm not knocking the site, I mean they could be a great deal for certain people but bottom line, is just make sure you are aware and would be able to pay for unforseen expenses that may come up that is not mentioned on the site and their estimated profit is not really factoring in some important expenses.

 

 

 

 

Pilot

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Reply with quote  #4 

Thanks for your input. The main difference that I've seen between the 2 is the Ken Hill people buy and renovate first, rent the property, then sell you the final product. The other one wants you in at the ground floor. That does bring up cost overrun and vacancy issues.

 

I've looked at the comps (using Zillow) for the area Ken Hill works in, and they seem to charge about 20% over comparables. That's a big percentage, but the dollar amount isn't large since it's in a low cost area.

 

 

JohnVosilla

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Reply with quote  #5 

Sounds like they are distressed property investors.  Perhaps the first in NY looking for an outlet to sell and collect fees from out of state investors at the same time.  The second in GA looking for deep pocket investors to fund deals and expensive rehab costs.


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Reply with quote  #6 

Because of the cheap eBay-like prices and the reported cash flow from properties, I looked at the area in 2003.  From that lookie-see, I've always got to go back and ask the question .....

 

with 4 foot snow drifts, hot sticky summers, high crime area, vast areas of what appears to be no pride-of-ownership, low/no appreciation, high and hard-to-fill vacancies .....

Who is it that really WANTS to live in Buffalo? 


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reijoe

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Reply with quote  #7 
Some people actually like living where it snows in the winter. Once you get used to it, it's not as pressing as it seems from the outside. There are all kinds of activities you can do right outside your door when there's snow on the ground.

And I know that people here praise San Diego like it's the land of milk and honey ... but there are plenty of people that don't look at it like that. I'm a recent transplant from the midwest to California. When I first moved out here, it was in the middle of July. Everything was dry and the grass in the hills was about to spontaneously combust. To me, it seemed like I was moving to the desert, which was not a welcoming thought. I'm sure Californians in general will be appalled and balk at my comparison of the area to desert, but compared to the midwest, it really feels like it. Our grass stays green year round without any watering. Creeks don't dry up in the summer. It actually rains in the summer. Another nice thing about the midwest are the thunderstorms. There's something nice about sitting on your back porch, sipping a cold lemonade in the afternoon while lightning is rolling across the sky off in the distance. There's bonus points if the sky turns that pale-green-yellow color in the middle of the day.

But what I didn't have back in the midwest that I love out here is the varied terrain. The elevation changes provide great environments for all sorts of activities - hiking, biking, camping, rafting down white water, etc. Then there's the coast and beaches for surfing, hang gliding, and much more.
AnTex

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Reply with quote  #8 

My team provides a similar service in Texas (Austin and San Antonio) to what Ken Hill does and the main thing to keep in mind when buying junkers from out of state is to make sure that you have a firm renovation contract with the FINAL price to you that includes all of the rehab work.

NEVER - ever do "open book" renovations with your contractors.  I did this once when I was new to the business and my bill ran 10K over on the first house and $18K on the second.    Open book is where the contractor charges you as they go in the project.   Sounds lovely since you get to see every receipt for every expense, but the overruns for this type of project can kill your profits in the end.   

 

Lumber and copper prices have SKYROCKETED in just 2 short years.   You will want to make sure you have hired a contractor who is in a strong enough cash position to start and complete your project, even if prices for materials go up.   Some contractors try to rook you into escalating cost contracts, so keep an eye out for those who want to charge extra if materials increase - which they most certainly will if they take too long to complete your project.    Most bids should be valid for at least 90 days and a savvy contractor will build in a little cushion for increases so that he or she won't have to ask for more money mid way through the project. 

 

When we sell a "rehab to rental" properties, our end user price includes our fees and ALL of the rehab, barring some catastrophic discovery in the renovation process (which is rare).   

 

Change orders and anything added by the client is always addressed up front in the rehab contract.    It should be written to protect both sides, your from the contractor and the contractor from you (face it, clients forget verbal agreements as much as contractors do and clients ALWAYS try to get free upgrades that were never discussed in the main contract)!

 

The very best time to do all of this negotiating is up front in the deal when the love affair is still strong.   At the time of conflict is no time to discuss getting ceramic tile surrounds instead of plastic inserts.  

 

Other items to be aware of:

 

There is also a difference between rent ready and move in ready - oddly enough.   Rent ready is typically a fully rehabbed property including all appliances, all someone has to do is tender a deposit and start renting it.   

 

Move in ready is more of an almost finished product, but a little tiny bit more has to be done for someone to get settled in.   We typically do "move in ready" in the lower end parts of town where appliances can walk off, etc. if a vacant building is left too long - of course the main goal is for us to have a tenant in place when the new buyer takes over, but some deals work better as move in ready if there is no tenant lined up at close of escrow.    Move in ready works well when a buyer has a discount appliance relationship and wants to supply appliances later or have a handyperson do some advanced finishout, etc.   Move in ready is obviously a little cheaper than the fully rent ready product. 

 

Check out the renovation experience of the company - how long in business, how many deals have they done, can they prove their experience with HUD settlement statements and actual renovation contracts?  Will they share their client list with you?    Or better yet, ask them for the list of deals they have done and call the current owners direct to ask how the transaction went - because anyone directly supplying you with references will most likely pick the best ones.  

 

Fortunes can be made with fully rehabbed, but lower end / affordable homes as rentals.   Blue collar and lower income does not necessarily mean a war zone.    We rarely buy in war zones because the resale simply isn't there, but we have doubled and tripled our money in lower income areas that have turnaround potential.   

 

The upside in San Antonio is that it is hard to go wrong with a $60K property renting at $650 or more per month.  I'm not sure what the prices are on New York and Georgia these days for a similar product.  

 

I've been rehabbing older homes for over six years now and reselling rehabs as rentals to Californians for two of those years, so I have a lot of experience with the Ken Hill model.  If they are legit and you like New York, and you like the numbers, go for it. 

 

However - shameless plug - you can most likely achieve the same goal, with possibly more cashflow, for a lot less money in Texas!  Oh yeah, and there is NO SNOW!  ;-)


 

AnTex InvestmentGroup, Inc.

http://www.antexgroup.com

 

512-441-1593 office

775-206-5709 fax

anaylor@antexgroup.com

 

Agent – eExecutive Realty, SW, LLC

SoCalStan

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Reply with quote  #9 
Quote:
Originally Posted by AnTex

However - shameless plug - you can most likely achieve the same goal, with possibly more cashflow, for a lot less money in Texas!  

 

AnTex InvestmentGroup, Inc.

http://www.antexgroup.com

..... and DEFINITELY with a nicer bunch of People! 
 
Quote:
Oh yeah, and there is NO SNOW!  ;-)

Now wait a minute Angelique!  It snowed in San Ann-tone once when I lived there!  in 1980! 


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Gestures from the Heart Create Lifelong Impact
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Pilot

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Reply with quote  #10 

Thanks AnTex for the info. I only have 1 comment. This will show my ignorant southern California perspective: How can you (or anyone) get $600+ per month rent on a property that only costs $60,000 to buy? I know there are always transient types that may not be in the area long, but who would really pay rent year after year when the mortgage is lower than the rent, especially now with all the creative financing available?

wordlink

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Reply with quote  #11 

Quote:
but who would really pay rent year after year when the mortgage is lower than the rent, especially now with all the creative financing available?

 

People in Texas do it all the time! They either don't know about their credit scores and what amount of house they could be affording, or they want to rent...period.


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Wesley

Bent Tree Financial
RonaldStarr

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Reply with quote  #12 

Pilot—CA-------------

 

“How can you (or anyone) get $600+ per month rent on a property that only costs $60,000 to buy? I know there are always transient types that may not be in the area long, but who would really pay rent year after year when the mortgage is lower than the rent, especially now with all the creative financing available?” 

 

Yep, your CA thinking is showing through here.  Or perhaps more accurately, your high-priced properties perspective is showing.  The ratio of rents to property value goes down for higher priced properties.  Lower-priced properties are much more efficient generators of income than are high-priced properties. 

 

Read “Houses for sale” ads in any newspaper in lower-cost parts of the country.  You will see ads that say “cheaper than rent.” 

 

I have a house in northwest OK that is worth about $35K, I feel.  I just got it rented yesterday for $475/mo.  Now, I am disappointed because it took 20 days after the former renter moved out.  I did get about 7 or 8 applicants for it.  That area has strong demand. 

 

I have another just East of Oklahoma City that is probably worth about $50-60K and it rents for $650.

 

This is why I constantly advise those seeking cash flow to buy in lower-cost parts of the country, not CA.

 

Your observation about rents and costs of ownership might better be phrased: "Why would people own their own home in CA when it is so much cheaper to rent?"

 

Good Figuring It All Out**********Ron Starr************

Pilot

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Reply with quote  #13 

Thanks Ron, I'm glad to hear that. I've given up on buying another rental in San Diego (all of California, actually) and have been looking at Grants Pass, OR. The properties there are more in the $200k range, but you get a lot of land with that. I was planning on flying there this fall to check things out, but maybe I should go to the mid west instead!

AnTex

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Reply with quote  #14 

Pilot:

Both Wesley and Ron nailed it, credit scores (lack of a score, lack of how to apply for and get a mortgage, and / or bad scores) do tend to keep the blue collar / lower income sections of San Antonio hot with rental demand. 

 

White collar Austin is a different beast, most people with good credit and disposable income prefer to purchase if they can - unless they are transient and they know they will be moving in a few months or 1-2 years. 

 

Blue collar folks simply expect to rent...generations deep tend to rent - when I've asked why they are still renting, they say that they don't think they will qualify for a loan or they are afraid to deal with bankers.    Credit mistakes in youth is a main factor in why some of my tenants continue to rent.    

 

I took over a building recently where several of the tenants had renewed leases on one bedroom apartments for over 10 years - it was astounding to me that someone would rent a small space like that for 10 years.   It is not only California thinking, but higher income thinking to wonder why someone would pay as much or more in rent then it would cost to buy. 

 

It never ceases to amaze me that they continue to rent, but as a landlord, I'm glad that there are people still willing to rent from me when they probably could buy!

 

Angelique Naylor Investments
AnTex InvestmentGroup, Inc.
http://www.antexgroup.com
512-441-1593 office
775-206-5709 fax
anaylor@antexgroup.com
Agent
eExecutive Realty, SW, LLC

  

PTInvest

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Reply with quote  #15 
Pilot

Sorry to dig this old thread up but did you have any success with any of these companies. I notice that two of the three links are no longer working, so I guess the companies may not have survived, and that obviously answers your question. I'm still curious whether there is any mileage in these kind of companies.

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