All Forum Posts by: Account Closed

This topic hasn't been touched in almost a year, but I wanted to post to see if anyone had some input. I am going to be moving to Okinawa in the next few months, and because of the projected length of my stay, I'm seriously considering buying a home that I can turn into a rental once I leave.

I understand rentals in the U.S. but have absolutely no idea how things work in Japan. I am looking for a local company that is willing to work with an American investor.

Thanks in advance!

Sincerely,
Austin Groupp

Welcome to BP from Shreveport/Bossier! There's a ton of good information here, I recommend the Ultimate Beginners Guide at biggerpockets.com/ubg and the podcasts.

Sincerely,

Austin Groupp

@Lindel Smithwelcome to BP. It's a fantastic resource, so explore a little. I just finished reading the Book on Investing in Real Estate with Low (and No) Money Down by Brandon Turner. It's a fairly fast read, and there's so much information. Also check out the Podcasts... there's over 160 episodes with successful real estate investors from all over the country. I definitely recommend listening to them as much as you can.

Good morning Chris, and welcome to BP. It's a fantastic resource, so explore a little! I just finished reading The Book on Investing in Real Estate with Low (and No) Money Down by Brandon Turner. It's a relatively fast read, and there is SO much information in it. Also check out the Podcasts. There's over 160 episodes with successful real estate investors from all over the country. I definitely recommend listening to them as much as you can.

Reminds me a lot of the house I grew up in, up in upstate New York. Beautiful homes up there, I cringe whenever I hear somebody chops these up for condos... there are people out there who would love to make it a primary residence, and will pay the pretty penny to do it.

Fix it up and sell and/or rent to a single family for the true value of the home.

CaBrena,

Welcome to the community! Very glad to see a real estate agent getting involved. Most agents don't bother learning about the investment side of the house.

There is a ton on here to learn and read. I highly recommend the podcasts. They are packed with great tools and success stories that will help you in your work.

I'm up in Bossier/Shreveport. If you have any questions please feel free to reach out to me. Good luck and again, welcome!

Austin

Alex,

I definitely agree, things don't always work out as we hoped/expected. No matter how much work and preparation goes into any deal, there are always factors that we cannot control that may turn a fantastic investment into a failure.

My point was simply to offer the possibilities of creativity. I definitely think that simple is better (think of NASA building a space pen... and the Russians using a pencil). With fewer moving parts, there is less chance of failure and better control over outcomes.

At the end of the day, it's about the level of risk that you, the investor, are willing to stomach in exchange for possible returns.

Anyway, I agree with you completely Alex, just wanted to put the second opinion out there.

Good luck and thanks!

There's several different options on how to approach this loan, between the 15 and 30 year amortization, with and without extra payments.

Option 1: I think we all understand that 30 years with no extra payments is the longest and most expensive way to pay. You end up paying $360/MO for 360 payments for a total interest payment of $52,800.

Option 2: Get a 30 year mortgage and add an additional $300 to your principle payment. This reduces your number of payments to only 146 (12 years) and only $19,500 in total interest.

Option 3: Get that same 30 year mortgage and make additional monthly payments of $175/MO. Compared to option 2, there are 193 payments over 16 years and $26,300 in total interest payments.

Option 4: The last option is to get a standard 15-year term with a lower interest rate. This is essentially the best of both options 2 and 3. You pay over 15 years (180 payments) (similar to option 3) and only pay $19,500 in interest (identical to option 2).

My $0.02:

In this situation, amortization over 30 years with extra principle payments of $300/MO is the best way to do it. You pay more per month ($660.04) and pay the same amount of interest as if amortized over 15 years, but you only make 146 payments, instead of 180, so you pay the loan off in just over 12 years. That means you have three additional years of finance-free income, compared to the 15-year loan.

Additionally, like has been mentioned already before, if something happens (toilet blows up, roof starts leaking, etc.) then you can forego that extra $300 payment and put it to use fixing the property. Once the crisis is gone, you can go back to making that additional payment towards the principle.

If you can't afford the full $300/MO extra, then consider doing the 15-year option. You pay $125 less per month but still pay the same in total interest.

Hope this helps, and good luck!

Austin

I wouldn't say that being creative is being demanding. I think creative financing is even more necessary when you're starting out, especially when you don't have the cash in the bank for the 20-25% down plus any repairs. Talk to friends/family/coworkers and tell them what you're doing. Don't beg for cash and don't demand it either. Simply have the conversation, some times people will offer to help or get involved all on their own. There have been plenty of books and BP posts/podcasts that talk about private money and creative financing. 

Say you are buying a duplex at $70k with an ARV of $160k and $40k in repairs. You need $14k down at 20% plus the repair, so $54k. Most people don't have $54k sitting around in a savings account these days.

Talk to 20 friends, family members and coworkers (don't break solicitation rules!). Maybe 2 of them offer $5k each towards the rehab costs, and you agree to pay them at a 10% interest in a balloon payment at refinancing. You also have $10k in your 401K that you can borrow at a very modest 3% (that's what mine offers right now). Next you can talk to a hard-money lender and get a $20k loan towards the rehab at 10% with monthly interest-only payments and balloon payment at 12 months. Finally you attend a local REI meeting and tell everyone about your deal, and someone expresses interest in partnering on the deal. He offers to give $10k in exchange for 20% of the profit.

Now you have $40k in "creative" financing that doesn't have to come out of your savings account. Out of the $54k needed to do the purchase and rehab, you only have to come up with $4k out of pocket. If you still need more borrowed money, you can keep going with other financing ideas, such as a HELOC or equity loan on another property (to include your personal home).

Once you're done rehabbing in, say, 9 months, go to a bank and do a cash-out refinance for 15 or 30 years (whichever you prefer) and take the net cash and pay off all of the creative financing, and you keep the remainder. Assuming you did your homework right, and the rehab didn't go too far over cost, you should have cash in your pocket, which you can now use on your next project, while keeping the first one.

While it is a little complex, creative financing can be a very good way to pay little out of pocket, especially when you're just starting out.

Just my $0.02.

- Austin

Maybe you can talk with your tenants. Offer to do all of the repairs one room at a time while they're at work, in exchange for a modest increase in rent. You can convince them that they'll love the new look/feel, and it's like getting upgraded to a newer apartment. Just have them move their furniture/personal items to another room each day. Obviously this only works with repairs that are quick... doing a complete kitchen demo and rebuild isn't likely going to happen in the 8 hours they're gone. But if they want a fresh coat of paint, they'll work with you. If they don't, then not a problem, you can wait until they leave.

If you want to completely rehab your rentals you should wait until the tenants leave. Take advantage of the on-time renters now... the new ones may not be as good as your current ones. Don't rock the boat too much.

Good luck!