All Forum Posts by: JT Spangler

@Albert Yamoah  Yeah, if you only want to have it occupied until sales pick up in the spring, I don't know if I'd rent it. Renters are likely to do more damage than any profit you might clear would fix. I'd probably just carry it for a few months and then list when the sales start heating up. 

In the meantime, if your area will support it, you could consider doing something like airbnb.com short term rentals. In my area (Nashville), a house your size will rent for easily $150/night on the weekend.

In my fully amateur opinion, there are a few things here to consider:

- you want experience as a landlord/PM

- you want to buy in your area, since you know it and are local

- you're not getting advice from your father as much as you're getting instruction

I'm with you on points 1 and 2. Getting experience as a landlord and buying where you know the area are both things I think are smart to do. I'm not sure that this is the place I'd start: a 10 unit apartment building where the margins are tight and you're cashflow negative. My concern would be that there's a run of bad luck (an eviction, a domestic disturbance with a restraining order, and vandalism from teenagers all in the same month), and you don't have the cash reserves to deal with it because you're putting money into the property every month.

I'm a bit concerned about your dad, though, because it doesn't sound like he's listening to and answering your objections. More like he's just talking over you and telling you what to do. If he wants this place so bad, let him buy it. But this is your life, and your financial future -- don't do the deal unless YOU are satisfied that it's exactly what you're looking for.

Now, one part of this deal that I think is being overlooked is that ANY cashflow is pretty awesome, since you're putting this together with no cash of your own in it. If you're able to raise rents up to close to market level (and market rent for a place like this is DEFINITELY information you'll need to lock down a lot closer than you currently have it, because it's crucial info to not only the profitability* but also the value of the property), AND you have cash reserves to guard against the run of bad luck, I would consider doing the deal. Keep in mind though that a lot of the experienced multifamily investors around here look for $100/door cashflow as a minimum. That may be unrealistic for your market and the huge PITI costs, but something to consider.

*experienced MF guys, correct me if I'm wrong, but isn't the value of a property this size calculated not by market comps but instead by gross rents? In other words, if our OP could purchase this place and raise rents over the next 6-12 months, could he either flip the property or refi and force enough equity to pay off the seller carried 2nd? @Aaron Montague @Roy N. 

This sounds like an awesome way to get started to me. I wish I could go back in time and buy a duplex at 24 instead of my first SF, which I sold for a profit but nothing close to what my cash flow over the past ten years could've been.

The numbers from rentometer compared with you debt servicing + insurance costs means your rent would probably cover your PITI but with none left to pay for maintenance, vacancy, management, or CapEx. And after all that, what you're left with is your cash flow. In other words, based on the info that I have here (which isn't much, and I don't know the local market at all, so take with a grain of salt), this doesn't look like a good candidate as a rental property. 

Is it an area you expect to see significant appreciation? Is there any reason why you don't want to sell and reallocate your equity? Is there anything special about your house that would potentially allow you to ask for more rent?

My statements about the 30% equity came straight from lenders, two of them. In general, it's a good idea to consult with experts in areas where you are not an expert, as I have done. The lenders were right and you were mistaken, which is good for me in this case. Sorry you don't think my reference is as extensive; it does have the advantage of actually applying to the situation I was posting about, which to me is a fair trade off. I can see why it would make you cranky, though. I incorrectly relayed some of the details, and during the parts of your post where aren't acting like a jerk, I appreciate your clarifying. As I've both said and shown, I'm happy to learn from people who have experience I don't.

I addressed this in my previous post.

So, here you're just splitting hairs. I'm not talking about some nebulous what-if scenario -- this is my actual deal in progress. With 30% equity in the house, I'm allowed to use 75% rental income to offset the mortgage payment. 75% of the rent exceeds the mortgage (and then some!), meaning the mortgage debt is offset ENTIRELY by the rent. Which is almost exactly what I said. You're free to quibble with the wording, but I don't particularly find any utility in pedantic hair splitting, so I'll probably just pass on reading it. Enjoy the World Series, and may your team score many runs. 

So, got the inspection report back yesterday. It was mostly good news, with nothing on there I didn't expect except that the water pressure is really bad, as are the drains, because of the galvanized pipes original to the house. Trying to get quotes from a few plumbers to repipe the house, and I'll use that to ask for a seller concession.

Also spoke with a local PM who's also an investor, and he recommended I NOT renovate the basement and rent it as a separate 1bdrm walkout. In his experience, I might make an extra 1-200 bucks a month, but with a much larger cash outlay and much higher level of annoyance and upkeep (extra kitchenette, bathroom, not separately metered, noise from one level to the other, etc). I don't know that I can argue with him, so I'm considering renting it as a 3/2 instead of a top/bottom 2/2 and 1/1 (after major reno). The numbers still work, and it doesn't preclude me splitting it in a year or two.

General tip: never believe the sellers' info on what the rent is. :)

@Account Closed, see here:

https://www.fanniemae.com/content/announcement/081...

Page 6. 

Would love to hear your thoughts on this, because it reads exactly as I said initially. Still, though, any input you have I'd be happy to hear.

@Account Closed  You're conflating two different statements I made. 

Thanks for the Fannie Mae links: going through them now. Will reply further when I've had a chance to read through them a few times.

Your link deals with investor and second homes. My current deal is neither of those, as I'm doing OOF. Still reading to find the relevant sections on both.

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As far as the 2 years of rental income needed; you're right, I was thinking of the tax laws. Although you're confusing what I said there with a different part of my post, and I admit to remaining confused as to how income can be a debt on your credit report. But let's leave that aside, because it's not relevant to the other topic we're talking about (or my current deal, so I definitely want to get to the bottom of this).

That's awesome! Congrats.