All Forum Posts by: Abraham Saldana

Hey ya'll

Just finished closing up a deal south of Raleigh, and one of my investors has approximately 50K left to invest in the area.  I am looking for a good turn key rental property that will cash flow well enough to provide between 8-10% a year.  Prefer smaller homes in class A neighborhoods.  Thanks.

Welcome man!

Since youre new, I just wanted to let you know that for me, the biggest step so far in buy and hold deals has been saving up enough for that first down payment.  

I bought my second place after living in my first home for 4 years, by refinancing for the full amount and then pulling out cash to purchase a good deal I found.  That has slowly snowballed and I now own 5 properties but it took some time.

There are other ways to do it, but this one has worked out for me well.  Either way best of luck and I hope you have a great one!

-Abe

Congrats man!

I am still in, but if you havent used your VA entitlement yet, and are planning on living in one, I would consider trying to purchase a tri/quad plex. Live in it for a year or two (while paying no mortgage, but SAVE what you would be spending on the mortgage), refinance with a regular mortgage (utilizing the money you saved) that way you get all your entitlement back and go and purchase another quad while fully renting out the one you previously lived in. Do this every year or two for 5-10 years and you'll easily have 10-20 units and a nice passive income base.

A few notes: When you purchase your next (2nd and beyond) VA home, I would make sure you put at least 5% down. This way you're only paying the 1.5% funding fee. If not, you'll end up paying 3.3% which depending on the price of the MFH can really add up quickly.

Hope this helps a bit.  Take care and best of luck!

-Abe

Hi Ben,

North of 85 closer to Duke is a great area that caters to students / young professionals. 

South of 147 is a much more varied place.  There are pockets of great areas, but near NC Central there is still much gentrification that needs to take place.  But could really appreciate over time.

Right now the rental market is hot in durham, but there are a lot of multiunit buildings coming up near Duke, so I dont know how rents will fare (at least for those renting to students) in the next year or two.

I currently have a few homes closer to south point that are very rent friendly.  They've been good cash flowing units so far.  

Hope this helps and best of luck!  Let me know if you ever need any other help!

-Abe

AJ,

Do you have any more pictures? Currently looking at 7-8 other properties within the area and trying to asses which ones to visit. Mainly looking for pics that show what repairs and updates will be needed to reach ARV.

Thanks

Where in Clayton is it located?  I am currently investing in the area.  THanks!

Jace,

Your CAP RATE is basically the Net operating income compared to how much your property is worth. A higher Cap Rate is better usually because that means you are making more money vs how much a property is worth. It can be confusing, so here is a quick example..

Lets say your property above gets the $1000 a month you project (so 12K a year), and your house after repairs is worth $150,000.  Your Cap Rate is 12000/150,000 = 8%.  

Lets say you have the same property, still make $1000 but the house is worth $100000.  Your Cap rate is 12000/100000 = 12%.   

The CAP Rate of 12% is better because you should spend less money to buy the house, but make the same amount as someone who bought a more expensive house for 50K more.

Does that make sense in regards to Cap Rates?


As for property taxes, the easiest thing to do is to go to the county web site and look at the property taxes.  They will usually say something along the lines of 6-10 cents per $100.  So you just take your property value and figure out the corresponding property tax that way.

Hey Dave,

Currently live in Durham and was about to invest in MFH here as well, but stopped after I went around and noticed that there are a lot of high unit properties coming up near 9th street / East duke campus area. That is going to drive some stagnation among rent, (especially among all the Grad students). However, if you are looking for nicer SFH and multiplexs, I would look near the Southpoint mall area. That is currently where I live. If you want, I can send you some specific places to look as well...just shoot me a PM! We're in the same boat looking for SFH's, but I dont mind helping out!

-Abe

Also remember everyone, that if the 3.5% funding fee for your 2nd + VA loan seems a bit excessive, you can lower it back down to 1.5% if you put down 5% on the house. I recently did this with my 3rd VA loan. In the long run, it was cheaper to pay 5% down, and the 1.5% funding fee than the straight 3.5%. It saved me over 10K, but took some cash upfront to do.

That is what I do as well.  We currently have 4 properties near all the bases that we lived at.  I do my own property management, and a few take aways I have learned over the last few years are the following:

1. Renting a SFH military town is easy, but finding a good tenet is not as easy. Since so many people are transient, it really pays to buy in a nicer area where senior officers / enlisted live. That is what we have done with our properties. They have a higher willingness to pay, and if you can get a fixer upper in a good neighborhood, you can both cash flow well and have have great equity when you leave. Currently, the houses where I have purchased near high officer/senior ranking members cash flow between 30-40% above my base mortgage.

2.   If you buy in an area where it is cheaper / lower ranking members live, I would definitely plan on playing the long game.  I currently own a town home where I barely break above even when all expenses are added in.  However, the equity I am getting each month in both appreciation and principal is now reaching about 50% of the mortgage.  So even though it hasnt cash flowed well in the last 10 years ive owned it, I used no money to buy it, I am gaining a good amount of equity each month and when the mortgage is paid off in another 10, I will just be getting out of the military and 100% of the rent will be coming to me.  

3.  For property managers, I found that it was easier to use them when I bought near cheaper areas.  However when it comes to senior officers/enlisted, the hassle is actually not that bad.  They are usually self motivated (hence the rank), and will usually fix things on their own.

If you have any more questions let me know.  Id love to talk more!