All Forum Posts by: Bily Elliott

Long story short I paid cash for a small SFR in early 2009 and had a guy move in right away. He was not a friend but someone I had known for several years. We just had handshake terms, he paid rent, took care of things and we agreed that there would be no rent increase for a long time if he didn't bug me all the time by fixing small things. Fast forward to last November, he had lost his long term job about the middle of last year but kept paying on time (he had only paid late once in the previous 5+ years and that was only by a week). The last few months he has been a week or so late. He has not paid this months rent and hasn't responded to my texts over the last few days. Is anyone familiar with Oklahoma laws, I am going to call him and try to visit with him this weekend to see if we can get something worked out. Knowing the guy, I don't THINK I will have to evict him, but I also am concerned that if he cant pay me, he cant come up with first, last and security deposits to move somewhere else.

One question is will you have any equity in your primary home that you are about to buy? Its hard to get a loan against a property with no equity and if I understand correctly, there is a 6 month wait before you can do a HELOC on a home?

@Dawn Anastasi and @Kenneth Hynes I was under the impression the 50% rule was take 50% of the gross rents (1100/2 = 550) and that is what is left for PITI and cash flow. Am I not understanding that clearly? I think its the same as if it were a SFR that had a cost of 50K and rented for $1100 right? Still 50% of 1100. Using traditional 30 year financing, 20% down (10K) and a note of 40K = a payment of $190 which leaves $180 cash flow per door which is great. I see as @Wayne Brooks  said, cash flow with 15 year financing does not work.  So the bottom line is that this is probably a good property at a good price(provided everything checks out), but to make it cash flow it needs traditional 30 year financing.     

I believe the property is under market value (I could be wrong, if it was a steal someone else would have already bought it the more I think about it), so with that being said, a 40K note at 30 years on a property worth 50K has a payment of $190 which cash flows $180 per door.  So it is all about the terms of the financing, but would there be significantly more interest on the 30 year note?  Seems like the extra cash flow would eventually be paid in interest to the bank.      

I talked to my bank, I don't have a pre-approval per say, but I have a great relationship and I can get a 50K home equity loan (against my personal home, long story, bankruptcy and house going back means no conventional financing for a few more years) at around 4% for 15 years equals a monthly payment of $370 a month. There is a two story duplex for sale in a solid C neighborhood, working class, 700 sq ft and each unit is 2/1. Upstairs has been refurbished within the last 6 months (current owners are living upstairs while also re-doing the down stairs. Most of the work is complete, needs paint, carpet and finishing touches). Units are separately metered, they installed piers, and updated the electric. It has been on the market more than a month for 40K, I plan on looking at it later this week. Worst case scenario they don't budge on price and it takes 10K to finish the down stairs unit (I cant imagine it being 50K to purchase and be rent ready, but lets just run with that number because of pre approved financing). I own a rental property close (2 miles away) SFR 2//1 that I rent for $450 but it is tiny, 500 sq ft, I think each of these units should rent for $550 (rentometer.com puts that as reasonable and towards the lower end of rent).

Using the 50% rule $550-370 payment = $180/2 = $90 per door = horrible and unacceptable.

This property does meet the 2%, actually, almost 2.5% which is great (I think)!

This is what I know about the property. It was built in 1930 (this does not scare me, I am very mechanically inclined, plan to do all my own maintenance and repairs), last years taxes were $1054. That's it lol. I am just scratching my head at how a duplex in an area I want to be in, at 25K per door (I bought my SFR for 20K about 6 years ago) to me screams that it is a great deal and I would kick myself for not buying it does not cash flow. What am I missing? I love my SFR, had the same renter the whole time with virtually no maintenance needed on it. Am I the luckiest land lord in the world? Will this need constant repairs and dipping into the 10% funds of maintenance and capex and vacancy funds?

Sorry this is so long, I am just trying to figure out if this property does not work, what does?  The only thing I am seeing is since I am using 15 year financing, if I change it to 30 years (conventional financing) the monthly payment is only $238.  So if I take the 550-238 = 312/2 = $156 per door which still seems WAY too low.      

I understand the using an LLC as a shell (IE new LLC for each property and if it is not acting as its own business it isn't actually a business), but if I own each house in my name and then manage them from a separate LLC is that's a good idea.

I suppose I may just bite the bullet and schedule a meeting with a real estate attorney and tax person, but I am really considering getting a home equity loan on my current home to pay cash for a duplex. I currently have a paid for SFH (tenant is month to month, been there for 5+ years, never been late. Property is held in my personal name, I just pocket his payment every month. After I get another property I will probably start reporting income form both places and such). I read somewhere and it seemed like a pretty good idea to keep the property in my name and then set up an LLC to handle leases, maintenance and anything else that comes up. How do you guys hold title on just a few investment properties?

Just got an email back from the realtor, they are wanting to move back closer to her mother.  It is in an area I know and already have one property in so it seems to be priced right  and a good fit, I guess I need to go do a walkthrough and see how much more work is needed on the bottom unit.

I have found a duplex for sale that was purchased from a bank in Oct of 2013 (I saw the listing when it was for sale thru the bank, but was not in a position to buy so I didn't look at the property), the current owners did some rehabs (according to the listing), renovated the top floor and live there and have done MOST of the work in the bottom unit.  Obviously the current owners are not paying rent, am I right in thinking there are multiple steps to take in making an offer?  Obviously an offer would need to be accepted, but if they are wanting to stay they would also have to agree to rental terms and rate and such right?  Would all of that need to be submitted at one time, an offer and a rental agreement.  I wouldn't want to run a background check and such on a property I don't own, or would it be similar to inheriting a tenant even though they are not paying and assume they are a month to month lease and try to get into a 12 month agreement?   

I will try to make a long story short. I filed bankruptcy in 2011, let the house, car and credit cards go away. There was a sheriff sale September of 2011, I started looking to buy another house last year and to my surprise, it does not matter when the house was foreclosed on, it mattered when the government paid back the lender (I think that is how it was explained to me anyway), so that date did not start until April of 2013. I ended up selling a piece of property that I owned for a good chunk of money and paid cash for a $175,000 house (because I could not get any financing for 3 years I believe from the April 2013 date). So right now I have zero debt (actually about 10K on my wives car) and I own my house free and clear, I own a SFR worth about 30K and I have 80K in my 401K.

I planned on just saving my money and buying another property every few years, BUT if I decided I wanted to jump into financing some stuff what are my options? The only way I can borrow from my 401K is to purchase a primary residence (also other hardships, medical, school and such), I cant borrow to invest. Should I look at a home equity loan, a HELOC, I cant use the 401K money as a down because I don't think I can get conventional financing for another few years (unless I am wrong, Ive been wring a time or two).