All Forum Posts by: Brett Russell

@John Yanko, if the negative cashflow is because of under market rents, vacancy, and poor management and you see definite areas for improvement, then you might be able to get a very good deal and then turn it around and turn it into a great asset.

@David Hayman, I'm not an accountant, so you should talk with a local professional, but if depreciation and other expenses cause your rental property to have a loss, then you can use that to decrease taxes on W2 income IF your income is below a threshold (it starts phasing out over $100K in income I believe).

@Jomar Taveras, welcome to the site.

There is a ton of great information here.  Start at the "Learn" section of the blue navigation bar, look through the forums and engage.  Make sure to use the search capability as the majority of newbie questions have been asked and answered on multiple occasions already.

@Dev Why, you seem to have a good grasp of the "rules."  As you said, they are just for quick, at a glance decisions about whether something should be a good investment.  

Since your property basically meets the 2% rule, it should/could be a good investment based on that "rule."

The type of debt service comes into play with the 50% rule when you estimate what cashflow could/should be, again according to that "rule."  You just have to ask yourself, "is the potential cashflow estimated by the 50% rule sufficient for me to investigate this property further?"  If so, get more details, if not, move on.

A few issues I see: I'm not sure what interest rate you are using to calculate the mortgage payment, but it looks like the monthly payment will be higher than you state in your post. More importantly, since you are talking of doing FHA many people end up putting less than 20% down which will increase the payment and you also have to account for mortgage insurance. Even more importantly, your income won't be $1950, it will only be $13000 since you'll be occupying a unit. So, there probably won't be cashflow (until the future when you might move out and fill that unit), but it could provide a great "house hacking" setup where your housing costs will be very low allowing you to put money into the next investment.

Good luck.

@Roderick Ike, make sure you spend a bit of time here educating yourself. I would also recommend listening to some podcasts (Sean Terry's Ultimate REI Podcast and the Epic REI Podcast are my recommendations in addition to some of the BP episodes). Also make sure you are networking with other local investors by going to REIA meetings.

@Yemi Odunusi,  

In the example you gave, the buyer is paying $250K for the house and $200K will go to the bank to pay off the existing mortgage and the seller will get the remainder.  

@Christopher Todd Stephens, since you posted this in the wholesaling forum, I presume you are hoping to wholesale deals listed on the MLS?

I would strongly encourage you to look elsewhere for your deals.  The whole point of a wholesaler is to find great deals that other people don't know about and then pass them on for a profit.  Uncovering those great deals is the service a wholesaler provides for which they get paid.

If you are just finding listed properties, you aren't providing much service.  Anyone can find those same deals and negotiate directly with the seller, so why do they need to pay you?

Thank you @Bill Gulley, I was referring to online auctions, as had the OP.

Sounds like I just need to establish a good relationship with a title company to get preliminary title work done before bidding and I should be able to avoid any big title issues.

@Joel Owens

@Guy Gimenez

I'd like to ask a follow up question about this:  what do I have to do to make sure I can get title insurance on one of these properties?  With a traditional sale, it would happen during the due diligence phase and I could back out if it can't be provided.  With the auction, I don't have that liberty.  

Say there are 5 properties I'm interested in, do I approach a title company about all 5 and have them do some sort of preliminary investigation before I even start bidding?  If so, what should I expect that service to cost me?

I'm referring to MI properties if it matters.

Thanks so much.

@Andrew C., you are describing the property from a tenant or homeowner perspective.  The features don't really help us tell you whether it's a good deal.  

We need more information about the deal: how much will taxes and insurance be?  How are you thinking you will finance this since that will affect your debt cost and ultimate profitability?