All Forum Posts by: Andrew Kougl

I have had my eye on Iowa for a while but haven't had the funds to land larger purchase prices. Something like this is much more do-able. I'll connect with you and we can discuss.

Thanks,

Andrew

@Alex Moazeni

You do for this particular lender. And you may need to for others as well. Research DTI calculators online to figure out what your ratio is.

@Brenden Kanakaole

Make sure when asking for an individual to specifically respond that you "tag" them with the "@" symbol and then start typing their name. Their image and name should pop up to be selected. Otherwise they won't know you have a question to them that you are hoping for their response on.

Andrew

The lender is referring to your "Debt to Income" ratio. It's a common challenge real estate investors come across. It means personally, there is too much debt the lender views you as liable for compared to the income history you've shown.

I've heard some lenders do not acknowledge rental income as benefiting/contributing to your personal income at all. Still other lenders will only give you 75% to 70% of the income to be recognized as personal income.

Are your properties cash flowing? Is your income statement showing a positive return each month? If so, keep talking to lenders until you find one willing to work with you.

@Stephen Resch

This is an amazing price. How were you able to source this deal? Most things at this price on the market are total guts.

@Chris Gonzalez

Just in answer to #2: it doesn't matter what Zillow, the seller or anyone else says the house is worth. Only you matter. You have a price the house needs to be at or under to make sense. That's all you need to stay focused on. You can reiterate it's an investment and going to be a rental and there are expenses associated with upkeep. At the end of the day it's all math, nothing personal. Offer what makes sense and no more.

@Michael Ramos

A rule of thumb most experienced investors will tell you is assume 50% of rent will go toward operational expenses. With the remainder you still have to pay the mortgage then the left over is cash flow.

Personally I use 7.5% repairs reserve, 7.5% Capex reserve, 5% vacancy reserve and 10% property management. That's a total of 30%, then I have to pay PITI. And whatever is left is the cash flow I can reasonably expect.

Personally I think their estimates for reserves and insurance are way too low and you won't actually see those returns in reality.

I'd also vet the rental amount they have listed there with other property managers in the area.

One benefit of have a separate lender, agent, PM is that they should all be serving as checks and balances for your purchase decision. With turnkey you've really handed over a lot of trust and due diligence over to them and don't have others on your team validating what they're saying.

@Michael Ramos

Are you basing the return of this turnkey vendor's proforma? Can you share the numbers with the group so we can give you input.

Turnkey vendors (not all but many) have very unrealistic estimates for vacancies, repairs, etc. Just remember real estate is about value creation. And you realize value when you buy. The turnkey vendor giving you a discounted property, fully rehabbed with the highest quality (cutting into their margins) at a price below what they would get by selling it to a non-investor homeowner, is quite a tall order and introduces some conflicts of interest if you think about it.

Not saying turnkey is all bad but it needs to be thoroughly vetted like anything else.

@Harry Standafer

I feel like I watched a home renovation show and they where in North Carolina. I distinctly remember it being an older home and was very badly damaged with termites. And they mentioned termites were VERY common in the Carolinas. Something to get an inspection about for sure.

@Lukas Smith

With that much of expenses saved, are you including future mortgage payments in that? I don't understand your statement about the higher downpayment vs higher payment due to PMI. Those things aren't congruent. A higher downpayment should result in no PMI, or to another point you made, the ability to refi out of PMI sooner.

To me no matter how you slice it, you've got to have a stable income if you are going to be taking on added expenses. What if a water heater breaks in month 2 and that's $6000 to replace and install? How does that affect your savings and ability to weather on without a stable income? There are just too many potential pitfalls and I'd hate for something to happen when it could have been avoided by just letting things settle with your personal income for 6 months.

The only way for me that the scenario changes is if it's a househack. If you can get a tenant to pay your mortgage or heavily subsidize it, vs what you would have been paying in rent otherwise, and you can get traditional financing for it, I'd say go for it, preferably after you've moved back in with someone for 3 months and figured out the best investment location and gotten a more stable income stream started.