All Forum Posts by: JT Spangler

The numbers don't look great, as-is, but I'm jealous of your ability to acquire that much potential income with that small a cash outlay. I agree with the recommendation that you move into the carriage house and fix it up (after fixing up your unit to get market rent). If you do that and increase your underpaying tenant, you should at least be covering your immediate carrying costs with rent, which will free you up some.

Get another quote or two on paint. Then you're free to decide if you'd rather (1) keep fixing the carriage house, to subdivide and rent or sell, or (2) seek your next deal.

@James Syed Makes perfect sense to me. Let me know what happens with the deal!

You always have more than one option. For instance, you could probably raise the house up out of the flood plain for ~10k. Voila, no insurance needed!

Who are you finding to finance a mortgage that small? I'm looking at SFRs in that price range, and I haven't found a lender yet that will finance under about 50k.

That said, running the numbers with the 50% rule, your yearly gross income is $3300. This rule will cover your maintenance, vacancies, and PM. So leftover gross profit is $3300 per year, or $275/month. I plugged in financing 20k (with 5k or 20% down) to a 15 year mortgage calculator with a 5.75% rate and your monthly debt servicing would be $166/month, leaving you with $109/month in positive cash flow.

Now, it looks like the expenses you posted exceed 50%, so I would make sure you're using the real numbers and not pro forma ones, or call around for some quotes to lower those numbers. You should also figure out financing, because (I'm in the process of doing this myself, by the way) a hard money lender will cost you more than conventional financing, cutting into your profits.

With the information you've given so far, I think it's a good buy at 25k, but I would probably try to acquire it for 20k, since I'm not sure about your financing and expenses.

@Steven J. -- that's actually exactly the plan with this property. Since I don't have the cash on hand for the purchase, I'd do that with hard money and pay out of pocket for the rehab. Once it's rented I could either cash out refi to pay off the HM, or just pay it off in cash.

Thanks for the encouragement, all! Even if we can't come to terms at least it's good practice with the numbers and the negotiating.

@Chad Clanton : I'd love to read about your experiences if you do get a chance to blog them. Sounds like a pretty similar situation to this one.

Thanks, @Greg Rulfs ! If I don't get these, it just gives me a few more months to get my financing ducks in a row and clean a few blips on my credit report (that's keeping me from getting the primo interest rates).

I made my first offer on an investment property today. It was an unusual one, but it's an unusual situation. A guy has been rehabbing this property near my old neighborhood (aka, in a neighborhood somewhere between blue collar and ghetto, call it a C area) in his spare time, and before he got finished it was vandalized. They broke all the glass in the doors and windows, stole the hot water heater, and the kitchen cabinets. Now he just wants out. I drove by it, both last night and this morning, and it doesn't need much to be a finished 2/1 cottage. I think 10k is a generous estimate to have it be a nice rental property (I just got done finishing out my garage as a recording studio, doing all work myself, so I think I have a decent understanding of the estimating here). He's asking for 40k and he owns it free and clear (I spoke to him on the phone today). House exterior is great, roof is new, electric and plumbing are new (he's a plumber by trade), and the foundation is in great shape.

I did some rental comps, and I think I could get 650/month for it if it was finished nicely, and maybe 700/month if I add central AC (which I'd definitely look at doing if the numbers work).

I offered him 17k, in cash, when I get back to town in January, and while he didn't accept it he also didn't hang up on me. He wants to check his records and see exactly how much he's got into it. But he knows that I need to have it rehabbed and rented for 30k max, with a 10k reno budget, meaning a max purchase price of 20k. He also knows I'm looking at another 2/1 slightly across town that's a bit bigger but listed for 25k. Really, his place is a good buy for me up to 25k purchase price, but if he wants cash I'm not sure I'd be able to come up with it in a month. If he and I can't agree on a price, I'll try to get the other place, which is open to owner financing.

I'll keep you guys posted, but regardless it was a pretty fun day for me. I'm excited to have a shot at a 2% SFR really soon, and even if I don't get either of these it's good to know the deals are still out there in my town if I hunt hard enough.

Thanks @Wayne Woodson I plan on budgeting for a property manager but self managing my first few, just to learn how much of a hassle it can be.

Sure thing, @Brandon Turner ! Glad to do it. The podcasts have been great on my drives.

Yeah, so that pretty well covers it. I'm JT, and I'm a musician who's been living in Nashville for about 3 years now.

I just finished an extensive search for a SFH for my primary residence (I looked at over 50 houses in my neighborhood for over a year before finally getting my current place under contract), and once I was done I realized I had acquired an important knowledge base to add to my 'getting started in real estate' checklist -- I know exactly how much houses should be selling for in my neighborhood (east Nashville). I also have a ton of musician friends who rent, so I have a pretty good idea about fair market rent. I live in one of the hottest neighborhoods in one of the hottest towns in the US, so while the deals aren't easy to find, I believe they are out there. The 1% properties are around me, but there are also 2% and up, I think, if you are smart about it. The other good news is that my neighborhood gentrifying, with musicians and hipsters moving in to an area that was pretty sketchy a few years ago, so there are still bargains to be had on the outskirts and if you don't mind fixers.

My side hustle brings in enough cash that I think I can start making offers on places as soon as I'm back for the new year. My realtor sent me (at my request) all of the cash sales in my two zips of interest from the last 60 days, so I'm getting a feel for who's buying and for how much.

Anyway, I'm not real sure what else to say. My short term goal is to learn everything I can about buying a SFR the smart way and putting a good tenant in their, first quarter '14. My near term goal is to have $1000 monthly net coming my way in the next few years. I'm fairly mechanically inclined, and enjoy rehabbing and DIYing, so I'm planning to help my 50% rule by getting any place I buy in good shape before renting, as well as doing my own maintenance where possible.

I'm excited to start tearing into some of the information here and meet some of you guys.