All Forum Posts by: Axel Norvell

Hi BP Community.

I closed on my first property back in April 2020 and I’m currently house-hacking the property with all bills being paid.

The property next door is vacant and being held by an investor who bought it back in 2017 and is just sitting on it, hoping to sell it. It’s a 4bd 2 ba house sitting on 7k sqft of land.

The property I’m living in now is 10k a lot in an up and coming area of town (property and land values are rising with new houses/people moving in - even during this COVID situation).

Here’s roughly my financial scenario:

- $100k+ in savings that I will not touch as it's in a ROTH IRA
- I have about $15k cash on hand that’s liquid
- I could comfortably liquidate around $10k if needed (although I really don’t want to)
- My Debt to Income Ratio: ~15% (includes current mortgage/bills/expenses to live)

The Property I’m Trying to buy:

Rents: $2,250 (as Duplex)
Expense: $2,100 (Mortgages, Taxes, Bills, Maintenance, Vacancy)

Cashflow: $150 / month
ROI: 18% w/ $10k cash down

Here are the terms I’m negotiating with so far:

Purchase Price: $220,000
Down Payment: $10,000

Owner Finance Loan: $210,000 @ 8% for 2 years
Monthly Interest Only Payment: $700

Balloon Payment @ Year 2: $200,000 (I refinance into conventional)

Questions:

1. Is there a way I can guarantee a refinance for the balloon payment at the end of 2 years? I’m worried I’d be in a situation where I’m denied a refinance for some reason and I’m stuck with a $220k balloon payment. How do people minimize risk here?

2. I’m wanting to do owner financing because I don’t want to spend the 20-25% $45k down payment a bank would require right now. Is that a good idea, or should I liquidate some of my stocks and just do conventional financing with a downpayment at a lower interest rate today?

3. Is purchasing the property next door to combine my lots into 16k sqft total worth it? I’m thinking long term it’s better to have two lots next to each other which I can sell at a premium, vs 2 properties that are disconnected I’d have to sell individually.

@Chris Hopper

When I say breakeven, I mean that I'm living essentially for free right now, and that's even before putting in any sweat equity and increasing the value and rents.

The way I see it, I'm saving money on rent and am now building equity in a property I believe is in a really great area. Tenants are paying down the mortgage, taxes and bills.

I understand I started 9 months ago, but it took me quite an awhile to find a property that met my buying criteria for house hacking. I've pretty much analyzed almost every single property in my buying area within the last 9 months.

Perhaps I could have found something sooner if I lowered my criteria, but decided it was important for me to find a place I'd be happy and excited with for my first one.

My high-level goals are:
- Replace standard living expenses with a property that covers them
- Accumulate savings for down-payments on more rentals
- Build up a portfolio that financially supports the lifestyle I'd like for retirement / financial freedom

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Feel free to private message me on your website needs :) 

Hi all, just thought I'd provide an update.

I'm closing on my first property today that I'll be house hacking. It's a 3 unit (main house and 2 unit garage apartment). It's located in North Houston right inside the 610 loop which is exactly what I was looking for.

Based on my numbers, I expect to break even on all expenses with possible areas for increasing to positive cashflow.

Looking forward to learning and growing while continuing to expand into more real estate!

I would personally recommend vinyl wood plank over wood laminate as it's more durable and resistant to water.

Wood laminate is typically made out of thin particle board, and any water will damage it pretty easily. Vinyl on the other hand is a lot more resilient and won't warp with water damage. It's also harder to chip and can take more of a beating.

You can find cheap vinyl plank that looks like the same as wood laminate too.

@Jerry Padilla This is for an SFH investment with 8 tenants (rented by the bedroom).

I have a deal lined up ready to go. I'm in the process of getting a loan and I'd like to see if anyone here with experience could do a once-over and see if the loan fees look typical. I calculated over $4,000 in fees which seems pretty high, but maybe that's common?

I'm currently in progress on finalizing a contract on a SFH that is currently being rented out by the room.

Right now there are 7 tenants all living in a single-family house. The house is in need of some TLC and I'm intending to do some minor rehabbing to improve the living conditions for the tenants.

I'm wondering if anyone here has had any experience with per-room rentals and if they could share any gotchas. The current owner gave me a few bits of information:

1. Personalities: some times tenants will clash with each other and you'll have to deal with the drama. Either pay the problem tenant to leave, or find a resolution.

2. Vacancy: because it's rented by the room for cheap, I'm expecting a higher vacancy rate. To be on the safe side, I put a 20% vacancy into my calculation numbers.

3. Getting rooms rented is a matter of posting a craigslist ad. The current owner says he receives 2-3 inquiries per day, and usually places a new tenant within a week. Does this seem typical to your experience with per room rentals?

4. Students: given the time of year, you might get more student renters near the beginning of school. Students are typically more reliable with their rent and cleaner (this is based on the current owner's experience).

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What are your experiences with the per room rentals in Houston? Do they cash-flow well for you? Is the management worth the cash flow? 

@Chuck Peck You want to look at your cashflow after PITI, property management, cap ex, vacancy and repairs. If you don't, you're not being true to your cashflow.

Imagine if you ignore those numbers, and in a few years you have a huge capital expenditure (such as a needing a new roof, A/C unit etc). If you didn't account for that in your numbers, your profit is now immediately wiped out.

Saving for those things ahead of time makes you honest with the cashflow that you'll actually be getting (even after worst-case scenarios).

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*This link comes directly from our calculators, based on information input by the member who posted.

I'm looking at a duplex that is currently tenant occupied at 950 / month. The other unit is the same size (3 bed, 2 bath) and can rent for the same for a total of 1900 / mo in rent. That's assuming I don't increase rent to match the rental comps in the area which are an average of $1,366 for a 3 bed 2 bath.

I put in high vacancy as tenants in the area tend to rent month to month, along with 10% for maintenance, capex and management.

The property is in good condition needing minor cosmetic things to be rent ready and appears to cashflow at $552.08 with a 20% ROI.

Is there something I'm missing?

@Mark Gilford are you referring to the Jet Lending event last night? If so, yeah, there were a TON of people there.

I personally had a better time at the smaller events. So far I think Wholesale Nation and The Event in Katy were my favorites as they were smaller and a bit more personable.