All Forum Posts by: Adrian DeGraff

USDA in certain circumstances.

Homepath requires only 10%, but it has to be owned by Frannie Mae.

Just so I'm on the same page here. (Cause that's one hell of a magic trick....)

You'd effectively have to find a property with an appraised value of 125% over the foreclosure amount and then you'd start paying a 30 yr mortgage with no equity, but outside the loan, closing costs, etc. you didn't actually pay for the property?

In general, I understand the frustration Clay is facing. Either you have the net worth to start making moves immediately towards building a portfolio or you don't. Most young people fall into that latter category. And yes, you can get creative, but a couple of wrong moves could do years of damage to your credit.

@Account Closed So when I ran this, I was assuming a 20% down payment @ 4.5% for 30 years. Being conservative, I'd say I'd need to request another 5K and at that point, there have to be other deals out there that I can actually do right now, instead of trying to piece together creative financing where I really don't need it.

But I'd rather decline a good deal than accept a bad one.

@Kevin Fletcher @Account Closed @Chris Martin @Dusty Corning

So, the next question I have would be financing.

I've looked at stuff like LendingClub. I'm able to get a conventional mortgage but I'd be short on the down payment and I feel like you'd have to know someone for a long time to cut them in as a partner.

I've even thought of credit as an option (but I'd need to find another lender)

@Kevin Fletcher I'd probably take your first suggestion and budget a spare 5K per property. I have an emergency fund, but I'd rather have a seperate one for investing.

@Dusty Corning Right now, I'd like to get more experience and make some more connections before involving family. I have started mentioning this to friends, but not put together anything presentation worthy. I'm joining the TREIA soon.

@Chris Martin It's not in Wake County, but I have been looking there as well. Do you still want an email?

@Kevin Fletcher How much then? Including an extra 3K as a cushion against repairs leaves 13% CoC.

Correct me if I'm wrong, but essentially, you'd be spending 38K + CC to make $1200-1800 a year. Your cap rate would have to be in the 5-6% range.

You're cash flowing over $100 (and even that's very iffy from what I could figure out from your numbers)...but you'd be paying way too much to do it.

If I understand things correctly, you'd essentially be doing both if you put the money towards increasing the value of your home. You then take some of the increased equity for the down payment on the rental property. It's not a sure bet, I'd think you'd have to see if your home could actually increase in value and even after the renovations it's not a sure fire thing, but if it can appreciate significantly it's a way of killing two birds with one stone.

Also, I'm assuming you already have a significant emergency savings fund and no high interest debt, cause I'd imagine those would be a higher priority.

I wanted to see if I did this correctly and then get next steps (because my situation is kinda hard to figure out).

Tennessee Avenue - Middle class neighborhood within driving distance of a local university.

3/2 1050 sqft

List price: 65,000

Mortgage Payment: 263 (20% downpayment, 30-yr fixed @ 4.5%)

Rental Prep Fund: 2000

Est Rent: 925 (backed by rentometer and craigslist ads, also I'm familiar with the area.)

COC based on 50% Rule: 12.49%

(actually it's 13.88% but I'm counting 90% vacancy even though it's covered by 50% already)

----

Cost Breakdown

Taxes: 94.16 (based on 2013 and 2012)

Insurance: 60 * - need to follow up on this.

Property Mgt: 92.5 (10% of monthly rent)

HOA: none

Repairs: 92.5 (10% of monthly rent)

Vacancy: 92.5 (10% of monthly rent)

Total Est Expenses: 431.67

Remaining Monthly Cashflow: 230.33

Annual Income: 2763.96

Initial Investment: 17200

Cash on Cash: 16.0%

Cap Rate: 9.12%

I feel like i'm being conservative enough, but I just wanted feedback. As long as they don't break the stove each month, I think 10% is reasonable for repairs (the property is in relatively good condition). Vacancy I've usually heard is around 10% as a starting estimate. This is an area that's common for renters and with the student population within driving distance, I think it'd be justifiable. Even the mortgage rate is .2% higher than the average for NC right now.

All this, but I don't have enough for the down payment. I just bought a house and I don't have nearly enough for a 20% down payment. Would this be something for a portfolio lender to look at? Do I even think about looking at those birdcage line...I mean credit card offers in the mail?

Thanks @Dante Nava

I've been just looking for now, trying to learn as much as I can before getting into anything too serious. I'll be sure to give TREIA a try.