All Forum Posts by: Ben Kirchner

I wanted to get some advice/opinions from with some experienced minds here.

I plan on purchasing a new home as a primary residence this year.  The idea would be to then move into a new primary residence, and rent out old residence.  The plan would be to do this for the next 3-6 years.  Reason for doing this would be to purchase new property for low money down (5% each) and get a lower interest rate.  

So when looking at my new residence, I'm looking for something that would cashflow right now, so it will when I end up renting it out. I'm working with a realtor to feed me properties from MLS that fit the criteria of: 20 minutes from my work, 2+ bed/2+ ba. I've been looking at the properties fed to me and basically lookign on Zillow's Zestimate to see what they have it as truly worth, and rentometer to give me an idea of what it would rent at. Would there be anything additoinal or different that may serve me better as analyzing potential cashflow on a purchase?

Also, I'm unsure if I should be leaning more toward on fixer uppers or turn key properties with my goal.  I would have some extra money to fund some fixing.  I've thought of narrowing my search as well to filter through properties, and perhaps become more marketable for tenants?  3+bed/2+bath? single family homes? Newer developments (newer hvac, roof, etc...)?  I'm also unsure of what price range to shoot for, to best suit future tenants.  I live in Durham, NC.  The income per capita is $27,748, which includes all adults and children. The median household income is $48,241

When it comes down to it, the cashflow is what I'm looking out for.  The house will only be my residence for a year.  If anyone has experience with this strategy, and could share their first hand experience, I would appreciate your input.  Also, any advice on analyzing properties to cashflow would be appreciated as well.

Thank you

Ben

@Ryan Schultz

What section did you look on craigslist?  I'm a bit grey on the seller financing then refinancing.  What were the terms of the deal, if you don't mind me asking, and at what point did the property go in your name?

I'm trying to find someone to lease my friend's commercial space.  He has it posted on Loopnet already.  Are there other places I could post it to get it more exposure?  

Thank you

Ben

@Ryan Schultz

I appreciate the feedback. It sounds like you have set yourself up in a really good situation.  The multi-family housing where I live are either currently out of my price range, or the ones I could afford now are not in areas I would want to live (crime).   How did you work the financing on the duplex to put no money down?

 I talked to a loan officer who also is an investor.  The recommendation I received was to refinance my current home to a 30yr loan, rent it out, and buy a new primary residence.  After looking at the VIMTM (vacancy, insurance, maintenance,  taxes, and management), the property would bring in small cash flow.   Very small really, but it would bring in something.  I likely wouldn't use a management company, although I've accounted for the expense if that were to ever change.  The property was built in 2010, and is a townhome, so I feel that works in my favor as far as maintenance goes, but have estimated the maintenance fee as roughly 10% of the rent anyway.  

So now the idea is to find a good deal on my next primary residence in the next 6 months, and move forward with that.  

That's a good point, Bram..

My thought was if I rented my current place out and just paid the extra few hundred dollars each month, I would ultimately be in a good position, as it would be paid off when I'm 42. Granted, it would be coming from about $3600 a year from my own money for 12 years. However, I look at the next 30 years and think of interest I avoided and no mortgage, so the majority of the rent collected would go in pocket. I originally was thrilled to lock in 3.5% for 15 years. Since getting into REI education, I'm not sure.

While I'm 30, I am pretty developed in my career. I've been in my field for 12 years, and do make good income. However, there's no passive income. The goal in mind is to make moves now to create passive income, allow more free time and ability to travel. A common dream, I'm sure. I feel REI can be the avenue to that. I'm just unsure of the step I need to make now. I don't have $50k at the moment, but savings are growing steadily. Everyone preaches the value of starting young. I feel now is the time I need to be making things happen. If I have kids in 5 years, I don't want to be thinking of things I should've done. I certainly value all the input I'm getting from people on biggerpockets, books, podcats, etc... Any advice or guidance is greatly appreciated.

Ben

@Jonathan Taylor Smith

I basically considered taxes and insurance to be roughly the same in each residence.  I set adie $105 for repairs/maintenance/occupancy.  These are all rough estimates withh limited "experience."

@Bram Spieroand @John D.

The reason I would be moving primary residence to primary residence would be simply for the fact I would need more like 5% of a down payment, which I am ready for now.  The other option being 20% down payment for an investment property , which I wouldn't be ready for until next year, not to mention the interest would be higher.  

I like my current home and living situation.  I'm just thinking of what I need to do to take that first step into real estate investing.  I do have some flexibility, as I'm 30, and no kids.  Therefore, I'm open to making some moves to put myself in a better situation down the road.

I've quickly learned this forum has a great amount of knowledge. I'm hoping someone good with numbers can be so kind to review my figures to assist me with my current situation. So I'm looking into purchasing a new house as a new primary residence, then rent on my current primary residence (and only property). I'm trying to crunch the numbers to figure out what my search criteria should be for this new residence. Below are all the numbers and details.

I have bought one home, which is my primary residence.

Paid: $140,000 (in September 2013)

Loan: 15 year FHA 3.5% interest rate

Current equity: $29,000 (Down payment was around $13,000. $16,000 from mortgage payments)

Mortgage + HOA: $1295 ($1175 + $119 HOA)

Payoff date: September 2028

By taking out a 15 yr loan, I sill wonder if that was a good move or bad move. It has certainly allowed me to build up some equity in the 2.5 years that I've owned the property. However, other townhomes in the community rent for about $1150, so if I rented my place out, I would need to put money out of my own pocket into the mortgage. I'll own it outright in 12 years, however.

Assuming buying an investment property would need 20% down payment, it would take me into next year to save that. I was considering buying a new property as my new primary residence this year, then rent it out and buy a new primary residence next year, then repeat that process for maybe.. 5 years? Ideally hoping to expand my investment portfolio, and hopefully make a little cash flow from the rents I would be receiving from the properties.

What I'm struggling with right now, is crunching the numbers to find what I would need out of my next primary residence to make for a better cashflow situation than I currently have going for me. I currently rent a room in my residence, which covers part of the mortgage. I would need to find a property where I would be paying less out of pocket than what I'm paying now.

My current situation:

Mortgage+HOA: $1295

Roomate rent: $$555

Out of pocket expense: $740

If I rent this property for $1150, that still leaves me paying $145 out of pocket. As a very rough estimate of other expenses and vacancy factor, let's say $250?

If this year I purchase a home as my primary residence for 5% down payment, I would basically need to find myself in a situation where I'm paying <=$490 per month for the property. Are my numbers correct? Or am I missing something big? The latter is certainly a big possibility. I sincerely appreciate anyone willing to help me analyze this situation.

Ben  

@David Ebbeson

Hey David.  Thank you for the welcome and reinforcement.  Financing certainly in an area where I have a lot of questions.  You'll have to excuse my ignorance, as I don't have hands on experience with this, outside of the conventional loan I got when I purchased my own residence.

As far as financing for an investment property, going the conventional route through a bank calls for 20-25% down payment.  With that, acquiring properties at a good rate seems quite difficult, even with pretty good cash flow.  The most recent book I completed - "The Weekend Millionaire's Real Estate Investing Program: How to Get Rich in Your Spare Time" mentions some no money down ways of making deals, but it seems like it would be a case by case basis, depending on the seller's intent, or you would simply have to find a trusted investor.  This is a large area where I feel talking to other investors that are closing properties every year have experience I could learn from greatly.

As I stated before, my full time job conflicts with many typical meeting times of REIA. I'm currently dedicating much of my off work hours to learning more about REI through resources, or trying to meet other investors individually. I completely understand that people's time is valuable, so I'm hoping to meet people here I could get help from, while providing something in return. Hopefully someone with common interests even outside of REI, as well. Once again, I appreciate all the help in advice!

Ben

I really appreciate the advice and resource suggestions.  Thank you Paul.

Hey Johnathan

I have not attended any REIA meetings. I looked at some on meetup.com, but unfortunately they all take place while I'm occupied with my full time job. I would love to sit down and talk about REI with you sometime. Let's arrange a time to meet soon!