All Forum Posts by: Brady McClendon

BP!

Who is the best Section 8 property manager in Cleveland and why (can't vote for yourself)?

Thanks!

Brady

Hi BiggerPockets! I’m brand new to real-estate investing.  I want to buy my first rental property this summer, with a goal of making $200k/year in net cash flow within the next 4 – 6 years.

I'm currently looking to buy a cash flowing rental property (ideally 2 – 4 plex, but SFH is ok) in or around Phoenix, AZ. Would like to see $200 per door, but even if I'm under $100 per door, I would be ok with it. I really just need to get started, learn some lessons and use that experience to constantly improve with each investment. My hope would also be that the expected rise in rents would improve my cash-flow on this property in the future (and that the Phoenix area appreciates like many expect – icing on the cake).

I have access to a $250k private money loan at 8%. Interest-only is due monthly from the time I borrow the funds (have not borrowed them yet). I also have $55k in cash. Using the 70% rule (if still possible in this market), that would mean that if I put $20 - $30k into a rehab, I should be looking to buy a distressed property for $250k with an ARV of around $385k to $400k ( $385k * 70% = $250k purchase price + $20k rehab ).

My goal would be to cash-out refi with a 30 year conventional after the remodel, then repeat as many times as I can. I have near perfect credit and great W-2 income, with a low debt-to-income ratio, so I’m confident that I would be able to qualify for a conventional loan (although, not sure what the rate would be). I live in San Diego and have the ability to work remotely for 2 – 3 weeks at a time, if necessary. Phoenix is about a 5.5 hour drive (part of the reason I picked that market – it’s fairly close).

My questions to the community are:

1. Is this feasible in the current market? If not, what is a more reasonable estimate (purchase price, rehab costs, ARV, etc.)?
2.  If so, are there any recommendations for an investor-friendly realtor in the Phoenix area?
3.  Has anyone done this recently in the Phoenix market? Are you able to share any details of your deal?
4.  Are there better strategies available to me in the current market, that would help me reach my $200k goal faster, more efficiently or with less risk?
5.  Any other tips, tricks or advice would also be greatly appreciated.

Thank you in advance for your time! Looking forward to joining the REI community!

- Brady

@Mark Frattini thanks for the advice! The more I think about it, the more I lean toward taking another shot at convincing him to sell to a conventional buyer.  Good tip on the open house weekend. He may tolerate that better than individual appointments. 

@Patrick Prunty would a credit card with a $15k - $20k limit and an introductory 0% interest rate for 1 year be a good option to assist Alex with funding repairs?  I'm also in the education phase and close to taking action.  This is one strategy that I thought I might employ.  Wondering if there is any downside to it (other than the possibility of having to pay credit card interest rates if you can't rehab and sell within a year).

@Dan H. thanks for the reply. Yes, I am in San Diego as well.

Do you have any suggestions for a local hard money lender that I might be able to work with?

Good point about the contractors. I don't think the house needs a lot of work, but I would definitely need to find that out before pursuing the purchase. 

I haven't run the numbers yet, or even confirmed the $1.2 million estimated selling price, but I'm planning on calling him tonight to get more details to put into the analysis. I'll definitely make sure to be extra conservative, because I won't have a lot of room for error, given my current financial situation (not a lot of money to spend on contractors if needed).

@Scott Wolf he's currently working with an agent and a separate company that is supposed to be finding a reputable investor, so the fees are going to be egregious, I'm sure. That's part of the reason I'm trying to jump in.  I don't want to leave that amount of money on the table if it can be avoided (even if none of it comes my way, but just stays with him). I think it may be hard to change is mind at this point, though. It seems like he's just over it for the most part and wants to find a buyer with as little disruption to his everyday life as possible. Thanks for the reply!

Hi,

I've been planning on getting into real-estate at some point within the next 6-12 months (I'm currently in the planning, education and saving up cash to invest phase).  However, my father-in-law just bought a new house (downsized) and is getting ready to retire.  He told me that he is going to sell his current house to an investor because he didn't want the hassle of having to walk people through the house and deal with "tire-kickers."  Additionally, he said that it was a plus that an investor can close in 10-15 days, vs waiting for a conventional buyer to close in 45 - 60 days.

The house is in San Diego, CA and would sell for about $1.2 million.  I believe he wants around $1 million for it.  The house doesn't need much work, so I think I would probably be able to just resell pretty much as-is.  I don't necessarily feel completely ready to jump into real-estate quite yet (based on my current knowledge), but I think this deal is too good to pass up (ready or not) and I think I would be capable of figuring things out on the fly.  They say the hardest part is finding the deal/motivated seller and one just happened to fall into my lap here.

What do I need help with?  The strategy:

My thought was that I should ask him if he would be willing to sell it to me. I figured that to incentivize him to sell to me vs. the investor, I would offer to split the profits with him (the $200k) on the back-end, once I sold the property.  There's a reasonable chance that I could qualify for a $1 million conventional home loan (based on my income, debt-to-income ratio and excellent credit score) and I could ask him if he'd be willing to wait for the 45-60 day close on the conventional loan (which he may be ok with, if he's selling to me); however, I only have about $30k to put down (not the $200k+ required for 20% down plus closing costs).  If I can't qualify for the loan on my own, I was thinking that I may be able to partner with someone, or maybe there is some way to use the existing equity in the property to reduce the down payment?  That's were I'm a little fuzzy on the details.  

Wondering if anyone has any suggestions on:

1. General strategy

2. How I can finance the deal if I'm not able to get the conventional loan with the $30k?  Maybe some combination of loan and seller financing would work? (no idea) and

3. I'm not sure about the tax implications of selling to a son-in-law.  That would have to be factored in. 

Any guidance that anyone can give would be greatly appreciated!  I would love to make this my first deal.  I figure it's a little less risky, since I know and trust the owner and he's been there for over 30 years, just not sure exactly how to make it work yet.

Thanks!