All Forum Posts by: Adam Johns

@Shawn Callaway

Doing good things! Congratulations.

Originally posted by Jon Fed:

We can afford the payments w my W2, but barely have anything left to pay extra after everyday living expenses.

@Jon Fed not to get all up in your business (but you did post it for advice), but from what I read above, are you the only one working? If so, and there's not some sort of medical reason for your wife to not be working, I suggest you try to cut your spending where you can, and she gets a job of some sort. Even if it's minimum wage and she brings home $200 a week, that's still an extra $800 toward the debt without putting your mom's house at risk.

You have to look at what you stand to lose if something happens and payments are missed. If you don't pay a credit card, there are limits to what they can come after you for. If you don't pay the loan on the house, your mom loses the home.

Also, if you're not familiar, look into Dave Ramsey's Total Money Makeover. I don't agree with some of what he says, but his "debt snowball" makes some sense. He'd have you eating rice and beans and putting budgeted cash into envelopes, but it's up to you how deep you want to go with it.

Hard for anybody to give you solid advice without knowing your situation fully, but I think all can agree that your proposed plan comes with too much risk for your mother.

My wife does the same thing, but I actually welcome it. When she asks me a question about a specific risk and I don't know the answer, I take that as my cue to go look for the answer. The great thing about searching for answers is you trip over a lot of information you weren't looking for along the way.

I also told her that if I get to three deals next year, the third one goes to a vacation fund. She seemed to really like that idea.

If I could go back and edit I would, but my reply was too long ago.

I don't know where I got the 10% of the 50% rule is vacancy, I think that's just the number I see used alot when people are breaking down their NOI. Either way, it doesn't change the rest of my answer.

@India M. your answer is: it depends. Are these REO/short sale properties, or just normal listings that you think are priced too low? Can you show proof of funds? Can you show an investor that they are still getting the house at a price that works for them (usually 70%ARV - repairs, but that depends on your buyers)?

If they're REO/shortsale the realtor might be an asset, some are more successful than others at getting prices accepted.

Just remember when it comes to dealing with realtors and banks, a lot of the "shell games" that wholesalers use aren't going to work. You'll likely need more EM down and less "back out" clauses.

@Antonio Orange Welcome to BP!

Start browsing the blogs and all of the forum topics. Don't be afraid to jump in and add what you can. The more I get involved, the more I seem to learn. Don't hesitate to post questions, either.

Good luck!

@Jason Varney Your post really caught my eye because I had a good friend in high school whose name was Jason Varney. But onto answer your question.

The 50% rule is usually used for residential properties, and it typically factors about 10% vacancy, but there is also a "cushion" built into the 50% rule.

As for how I would approach this; I'm assuming this is a commercial property (and I'm guessing it is, since I can't figure out how to get 40% vacancy out of less than 5 units), then you'll have to actually figure out the NOI. I would use the average vacancy over the last year and present those numbers with the offer. If you think that there is something you can change quickly to get that vacancy rate down (deferred maintenance, better marketing, etc) than you have a lot of room to add value quickly. If you're wrong, and the vacancy stays around 40%, than your offer should be one where you still make money and the deal makes sense.

Aaron Helmholdt someone will correct me if I'm wrong, but I believe this is where you have to look at cash on cash return (CCR) vs capitalization rate. Using your property: $124/mo x 12 = $1,488yr/$5,500(cash in) = 27% CCR Assuming the property was $157,000 (based on $5,500 being 3.5%) your cap rate is $750 (again, just using the 50% rule to figure NOI) x 12 = $900/$157,000 = 5.7% cap rate By financing, you're getting less cash flow, but a higher return, which means instead of having $157,000 tied up in one property making 5.7%, you have more cash freed up to clone this deal. And that's not taking into consideration appreciation and the fact that someone else is paying equity toward your place.

Brandon Radford welcome! The rules for investing in real estate aren't going to change a whole lot based on speculation. If you don't have money or experience, you have to get one or the other. Maybe get a job as some kind assistant to someone in the real estate business while you're in school, and read all you can here. Listen to the bigger pockets podcasts. Live and breath real estate investing so that you speak the language when the time comes to convince the people with money to give it to you. The good news is that of you're right about 10-20 years, that leaves you time to learn.

Was the house that was for sale listed with an agent or for sale by owner? If it's for sale by owner and no one is living there, call the number and ask questions. There's always a chance that they are just waiting for someone to take it off their hands. Same with the rentals, are they just hand written signs, or are they obviously from a property management company? If they're hand written, you may get the owner with a phone call, and they may be ready to get out of the rental business. If they're from a property management company, you can probably look up the address on your tax assessor's website and get a mailing address for the owner. Send them a letter or postcard stating you'd like to buy their house. They might call back and they might not. If they do, ask questions about what they'd hope to get out of the sale. Any owner you can get a hold of is a lead, but not every lead is workable. You'll just have to talk to them to find out.