All Forum Posts by: Alan McDonald

@John Alosio Thanks John,  I appreciate the energy. It's exciting and it's one thing reading about it but now going through the motions is little nerve-racking but like you said having BP as a community of knowledge and experience makes me confident that even when things don't go as planned I have support. I'm going to send you a message just some questions on your experience with landlording a duplex while house-hacking because I will be doing the same. 

@Account Closed At the end of the day, the notion of low and no money down deals are basically saying, in real estate funds are needed in general to acquire deals but don't necessarily have to be your own money. In the beginning, it is common if you are going to borrow money for a deal, to borrow the money needed from family and friends. Depending on family dynamics and friends you have, maybe that's an option. For me personally, I don't have much family or friends in a position financially to borrow funds from and depending on the relationship, you might be better off saving on your own. That's for you to reflect on and decide what you feel is a good idea. Or go the route of bringing in partners/investors on a deal but just starting out that is generally tougher since you don't have experience yet. FHA loans are a great way to start because you can use your own funds, save up for it and little reserve and put down a low 3.5%.

@Jasmine Haddock I couldn't have said it better than @John Alosio. Right now I'm under contract on my first investment, a 2 family house, and I'm using FHA 3.5% down. Now I'm not going to lie, I underestimated the amount of funds for closing costs (3% of loan amount is my closing costs) so in a sense, it's like having double your down payment set aside just to get the property. But John was spot on, that not having as much capital to work with, I agreed to a purchase price a little higher than I wanted (seller counter offered with what I felt was a little high) but I got them to pay for my closing costs. So for me , especially starting out, paying little bit more but having more cash in hand made sense. Gives me flexibility and oxygen in case unexpected things come up (knock on wood hopefully they don't).

But I want to emphasize and tie this in to Johns last point about closing with nothing left. I’ve been wanting to buy a place for over a year and trying to get myself to a place spiritually and financially ready to be in a position to pull the trigger that I focused on just saving to get the property , not about having a little extra set aside. Investing is inherently risky, so just be careful about spreading yourself out too thin where your more stressed and just waiting for something to break rather than enjoying and learning through the first deal with peace of mind that you can cover some unexpected things.

This post was more to back exactly what John said and also in a way , reminding myself not to spread myself out too thin and enjoy this journey. Marathon continues

@Brian J Allen

Thanks Brian, makes sense.. Like I said, I’m still green and trying to figure out how these investors are doing no inspection offers and just trying to make sense of it from a buyers view point. So sounds like you said in one way you could waive the inspection but put a caveat of you would agree to price if less than say 15k in work needs to be done.. but in order to know it’s 15k or more in work done wouldn’t you need an inspection? That’s where I go in circles lol

@Brian J Allen With Cap rates shrinking and as you noted, no inspection offers now becoming more common, how would you suggest an investor adapts to that? Being on the greener side, it seems so risky to offer without at least a  general inspection contingency that I wonder how these investors do it ..my first thought is when they go to visit the property before they offer, they go with a contractor and try to see work needed but even then, the structural integrity of the building might not be fully known upon offering and then it seems more of a dice roll/ speculation than calculated risk..

@Tom Harkins good point about desirability, I didn’t think of it that way. Thank you for the insight and I’m curious, did you buy a house in the same town after you moved out? I’m guessing it’s at least near proximity to your now rental. Im thinking if I buy a house that needs work and just live in it while I fix it up and just move out after a year and get a tenant in there, then do it again.. the house hack was an added detail for me to get some landlording skills and extra cash flow during my time in it but could bring up more challenges than benefits. Did the house you first bought need work or was it updated already when you bought it?

Hi guys,

I have been looking in areas where they fit the criteria of low crime, great school district, and nightlife...this is for a single-family home buying strategy, but I find that some areas near me that fit these criteria of top schools, places to live, etc. but have a low percentage of the population that rents vs actually own. A strategy I'm exploring is buying a SFH in a great area, live in it for a year (ideally rent out rooms while in it), and then rent it out to a family after I move out. Part of me thinks that owning a SFH in this area makes it so I have a product that has less supply and being in such a great area the demand won't be an issue. My concerns are one, using the house-hack strategy for the time I will be living in it, and two, also renting it after I plan to move out in areas that say 80% or more of the population owns vs rents. Do you have any experience with this SFH strategy and/or advice that I should consider when looking? When looking at the SFH strategy, would you suggest looking in good areas that are more towards young professionals or those with great school districts that attract families? Any response is much appreciated.

@Christian Kama

If you have a sizable savings, which it sounds like you do, I would throw it at your debt so you don’t have that $500 a month debt payment and then your debt-to-income ratio looks better already and congrats you are now debt free 🍻 You can now focus that previous $500 towards restoring your down payment balance, have a better loan terms and crush it on your first deal with no debt hanging over your head!

By the way, lenders will tell you that they will only lend you a mortgage amount where the payment is a certain percentage of your income. For me recently, a lender gave me 41% was their max loan payment to income ratio. So if you make 3,000 per month, then the most your mortgage payment would be is $1,230.. and honestly that is OK because figure they are trying to protect themselves but I wouldn’t want a fixed payment of a higher percentage either on my end. But that’s just me.. good luck brother!

@Dan K. Hi Dan, yeah they would be upset if I sold it especially in near future and so would I. It is also sentimental to keep it in the family but how it’s been operating is always in negative cash flows for various reasons and I want to make it back to the blessing it was intended to be for my family and not a curse so yes I plan on buy and holdddddddd lol

@Lien Vuong thanks Lien, I see what you are saying, I think I was talking about niche so that I can narrow my area to focus on and learn specifically in that area but after reading your comment, you are right.. I need to take it all in and learn about the various areas which will then direct me towards my niche over time. I am trying to put my numbers on paper now which from a newbie perspective I just don’t know how solid/accurate my system and numbers are.. I guess I won’t ultimately know until I apply it once I purchase the house. Just want to know I did my due diligence and plan as much as I can for when I get the green light to buy it

@Dan K. Yeah good point, I know the property very well and what repairs have been done and need to be done. It's funny how even with the advantage I feel cautious with planning and numbers; partly because this is all new to me. At the end of the day though I know this is a blessing and a way to get my foot in REI