All Forum Posts by: Richard Redding

You probably can't do this reliably without MLS access and you need a realtor for that. Call an established broker and ask to speak to an agent that that does their own flips or has investment property.

But the short answer to your question is that it's based off comps that are renovated to the level you plan to do in your property. It can be very tricky....cross a major intersection and a house may no longer be considered a comp regardless of how close it is.. Or, one street over might all be new builds, which aren't really a comp for a renovated house from the 80s.

Ask a local agent...there's so many different factors I don't have access to

But the triplex....by a mile.

The house will have vacancy from time to time where no money comes in. That will never happen on the triplex, you might have one or even two units vacant at a time, but never all 3. 

I've also found that on my duplexes I'll usually get a long term tenant that ends up acting as a spy for me on all my newer tenants. I don't ask for this, it's just sort of a psychological effect of them having 'senior' status. 

I think you're underselling how much a triplex will appreciate, again I don't know your area, but I suspect that there isn't a huge volume of triplexes around and that should you ever want to sell it, it would get snapped up quick.

Anyway, good luck with the investing. Whatever you do, screen the tenants well. Rental history, criminal history, and credit.

Sounds like you're passing, but I would make the offer contingent on the current owner removing the sex offender. Let the guy that created the mess fix it.

Aside from that, this is a person that has harmed child before and the complex has at least one child in it. I cannot agree with the 'if the numbers work' thought process. If something did happen on your watch, you may not be legally accountable, but morally you darn well are responsible. I know I couldn't live with that regardless of 'the numbers'.

If you're relatively new and can qualify, yes, go with bank financing. It also depends on what kind of investment property we're talking about. I presume hold and rent? Most banks will offer you the same terms, but smaller bank and credit unions may have more flexibility on qualifying you. I want to say on an investment property banks require at least 10% down.

Owner financing is something I would consider once you can't get any more traditional loans. They usually have a balloon payment so you'll have to refinance or sell and they generally have a higher interest rate. You'd still need a down payment for owner financing. They're good if your flipping or holding short term.

I currently have 3 duplexes and 5 houses on traditional mortgages. 

I'm on my 5th flip using hard money from a private investor. It's a high interest rate (10%) but by far the most freedom and flexibility. I can close in 10 days, house doesn't need to appraise, no monthly payments, my vendors get paid immediately, etc. Not all hard money is this way, some can be just as restrictive as a traditional mortgage.

Just this week I was approved for a guidance line of credit from a small bank, which is really exciting. Now I can do flips at 5.25% interest. It's more restrictive than hard money, but more flexible than traditional loan.

But here's the thing, I couldn't have gotten the hard money loan or guidance line when I started out. I didn't have the experience and track record. Frankly, if someone had offered them to me 10 years ago or even 3 years ago, I probably would have ended up in trouble. 

Keep it simple for now, gain experience slowly and safely until you're ready to run. Nothing wrong with traditional loans. Also, if down payment is a big hurdle, you can buy a duplex and move into one side and you'll qualify for an FHA loan which is 3.5% down. That's how I started.

When I was 22 I went out and bought a brand new 2002 Subaru WRX, borrowing about $20k. My net worth at that time I would guess was negative.

Now that I'm 38 and and have a substantial net worth I drive a 2002 Honda Civic with 140,000 miles that I paid for in cash for $3300.

Guess which version of me is smarter and happier?

What kind of car is it and how much do you owe? Can you sell the car and buy something completely paid off? It just needs to start and run, you can find that for $2k or less.

Also, don't lose sleep over this. If you have trouble with stress, you need to find an outlet. You will not make good decisions if stressed. I think rigorous exercise is hard to beat, your school probably has a jujitsu or running club. Reading is not bad either (and free at the library), I recommend 'Waking Up' by Sam Harris. 

Good luck

It's most likely an agent not having enough experience to comp an ARV. I always try to do my own comps and then my wife, who has way more experience with comps, checks my work. I'm right about 90% of the time, but the 10% of the time I'm wrong doesn't make me stupid, or unethical...I just lack experience.

Another possible reason for overvaluing that I've personally encountered is the market shifted dramatically between when I bought the house and sold it. Sales comps can and do change dramatically in 3-4 months. Usually it goes up here in Austin, but I did have one project where we had to drop our sales price 20k after 3 houses within a block closed at a much lower value.

Nothings fool proof, but only work with agents that own investment property themselves and have 3 years experience as active agents. 

I put vinyl plank in all of our flips.(and plan to put it in our rentals next time I do flooring)

 It looks high end, is cost effective, is essentially waterproof so ok for the kitchen, lasts an extremely long time, and doesn't make that cheap sound when you walk on it.

I honestly think brand doesn't matter one bit. How they look is more important, they need to match each other in color, and obviously stainless steel is 'in' right now.

The only exception would be if this is a high-end area where all your competition is using GE. Go tour some nearby homes for sale and see for yourself if you aren't sure.

The way my leases are worded, he would be responsible for the rent until the start of your next contract with a new tenant. This would come from the deposit obviously.

On deposit amounts, more often than not, I'll ask for 1.5-2 times the monthly rent, depending on their credit check, job history, etc. If it goes sideways, one month is usually enough maybe to repaint, but if they damage the flooring or don't pay, you'll be happy you have more.

Always get full deposit and one months rent in advance of over in.

Lastly, no leniency for a new tenant. I have tenants that have been there for years and if they are a few days late, no problem. But someone who's only been there a month or two, if they are late, I need late fees and a darn good explanation for why it's not going to happen next month.

Anyway, sounds like you're getting the hang of it. Experiences like this will be good for you in the long run

If you only plan on owning just a few properties and don't need to free up cash for more down payments, go with the 15 yr.

Every time a friend of mine buys a house (primary residence) I encourage them to get the 15 yr loan. I explain how much they'll save in interest payments over the term of the loan, and they always tell me they'll get the 30 yr loan and invest the difference. Guess how many of them have invested the difference? 

Human nature is tricky because you've got this optimistic guy that says 'I'll pay it off early!', but then the car breaks down or you get a ton of medical bills and you never do. I like 15 yr notes because they force your hand.

For what it's worth, I have 3 duplexes and my primary residence on a 30 year note, and 4 single family residences on 15 year notes. We were throwing a lot of extra money at the duplex (30 yr note) with the lowest balance and making good progress. But I left my day job and our 2nd child is on the way so that's stopped temporarily. And guess what, even though paying it down was 100% the right decision, if someone gave me the chance to take the money back, it would be tempting.

My point is, life can get in the way of the 'we'll pay off the 30 yr note early' people, even those that do have the ability to delay gratification, and a proven track record of making good decisions with money.

Truly, if you can get a 30yr or 15 yr loan for a rental, you're improving your financial position. It's a win either way. Just don't overlook human nature and murphy's law :). I'm on team 15 yr note.