All Forum Posts by: Brett Wagner

I would really love some help analyzing a deal that I was offered. 1st time buying real estate (except for personal home). 2 single family homes (across the street from one another). Valued at approximately $60,000 each. Owner is selling them to me for $65,000 for both. They are lease-to-own with the tenants paying $600/mo & $650/mo. They currently have approximately 6 years left to pay before the house becomes theirs. I haven’t seen the inside of them yet but I don’t believe that there is too much in major repairs needed but I will verify to be sure. Owner said just cosmetic. I really only have about $3000 for a down payment so I will need to borrow the remaining just to get the down payment (possibly a HELOC?). Rates I’ve been getting are 6.5% on 20% but variable not fixed. Right now I’m just wading through the waters as this is all a bit confusing right now. Any help would be hugely appreciated.

Just had a deal offered to me and though I don’t have the details yet, i am wondering what documents I should request from the owner. It’s the owner that approached me because she heard I was looking for SFR’s and this deal would be 2 homes across the street from one another. Specifically can I ask for actual documents like a copy of the current lease, any receipts of past work (she mentioned a new A/C unit, etc), and receipts of rent. Although I trust any details that she’ll give me, things in writing is always better, right? This would be my first deal, so please share any other details or advice. Thanks.

Originally posted by @Tom Keith:

@Brett Wagner  hey Bret. Just got able to read on through this lively little post from East Texas and looks like we have a great showing with everyone chipping in.  I would recommend you do as many of the calculators under tools to learn how they function. They are really good.  Ask your closing person at title company how the closing costs break at different prices.  You will see a trend that allows you to ballpark them real tight.  Your agent can also give you a lot of numbers right off the top just by being there all the time. Try to find a good agent that works with investors as they understand the breed.  You sound like you have begun a good relationship with yours already.   Welcome to East Texas everyone. It is big goes from East of Dallas to Waskom and from Red River to the Bay of Mexico!!  

Thanks Tom. Have you heard of the app called “DealCheck”?  It’s basically a deal calculator I guess somewhat similar to BP’s. I play around with that just to see what I get. I really just need to go and make contact with lenders, title companies, etc., etc. and ask questions.  I don’t know what I don’t know. 

Originally posted by @Pete Harper:

@Brett Wagner I saw your post on East Texas investors. We will be retiring in November and move to Streetman TX just South of Corsicana. I’m looking to make contact with other investors in the area. We will be rolling over property from CA in 1031 exchange. At this point I’m researching local markets in TX getting ready for when we close here in Cali.

Are there any meetup groups in Corsicana/Fairview area?

 Hi Pete. Welcome to East Texas. Believe it or not, you’re not the 1st person I’ve met who has come from CA to ETX to raise cattle in retirement.  Unfortunately I’m not sure about any meet-ups in Fairview/Corsicana area. Maybe someone else on BP can let you know. Blessings on your move and getting connected in ETX. I’m a home inspector so if I can help along those lines, just let me know.

@Todd Aaron Ok so not sure how that happened. Sorry for all who have to scroll through that last post.  Hey Todd, thanks for taking the time to share. Much appreciated. So what were the things you were looking for when you went to your friend about a property? For example, you saw a house for sale and then what? How did you analyze the property I guess is what I’m asking. I’ve tried doing some analyzing and haven’t come very close to finding one that works. Not sure if my numbers are right. Honestly I’m kind of just guessing at things like expected rent, interest rates and closing costs, not to mention rehab costs. I’m not even sure where to begin when it comes to getting accurate numbers. I’ll have to pick up BP’s book on buying rentals. Everyone says it’s great.

@Todd Aaron  Hey Brett, My first was pretty easy... I did a lot of research first... lots of it! And I read Brandon's books on buying and on leasing rentals before jumping in and that was super super helpful! I already knew the mortgage person because we were already friends before... She already had real estate that she owned and leased and I asked her all sorts of questions to ease my mind going in. When I found the property I did a quick analysis and also I called her immediately and after I told her the location her response was "Buy it! Make an offer now! Don't wait or it will be gone!" Well, it was... I had found it offered for $40k and needing a lot of rehab. But a few months later it was offered for sale again... it was a flip. So I called my friend again and got the exact same response... so I make an offer on it and we negotiated briefly and I bought it. Probably for a little more than I was as comfortable with, however it was extremely well done and has options that were above average for the location. I had a rental appraisal done for it for additional cost during the process and the results were good enough so that 70% of that number covered my Principal, interest and insurance and property tax payments with a little left over.  I have rented it for nearly $200 more a month than the appraisal said was the max it would get the entire time I've had it. So all I really met were the title company that we used to close with and that was the seller's choice.... I met the seller who does the occasional flip.... good to keep her number handy in case I am looking for something in the future... and apparently her dad has a small construction company, so thats handy if I need to possibly get a price on some repairs or remodelling that I don't want to tackle myself.  I met an inspector inthe process because while I was looking for something, I made an offer on a duplex and I had an inspector check it out and I was there at the time and I was able to ask all sorts of questions and he pointed out many things to look for that I could look at before paying a pro to come check next time. I had just the month before closed on the house I am living in, using the same mortgage company, so I got really familiar with the process and all the documents needed, so this time I was told that I was so efficient with all that that the loan processor would not need to do anything if all the customers were like me. So learning what the mortgage companies want to see is a big thing on your first one... like that they want to see a savings to offset 3 or 6 months of payments in case the place doesn't rent immediately...  I met no contractors because I am a little familiar with construction as I was a residential electrician for years a while back, and I have also done a little framing in the past, and I deal with commercial construction some with my current day job, so being a general contractor isn't a scary thing to me at this point if necessary.  I learned that if you have a ROTH IRA, you can remove all the money you contributed without penalty and without being taxed on it as income as long as you don't remove any of the interest that has been earned on it... That makes it very liquid for doing down payments and closing costs. I learned that lenders do not like any money showing up in your accounts that do not have a paper trail... and making all this easy on the lender will help you get the loan done faster and easier, so no gifts from family or anyone within several month before you start looking to get a mortgage loan. If you do get gifts be prepared to get a letter from the giver formatted to make the lender happy that explains that it was a gift and is not something that has to be paid back. They do not like to see anything that may turn into a loan situation that they are not including in their decision making.  The most difficult part for this one was that the seller was wanting to close in 30 days and 45 is considered fast these days and 60 is normal if everything goes right... but my lender agreed to it and I had to act very fast each time the lender needed something in order to help make that happen. The seller had a legitimate reason for wanting to close that fast.... she was adopting a child and needed the money quickly to facilitate that. So the lender knew about it and everyone worked together to help her make that happen... and it did and they are a happy little family now.  The second most difficult thing was that I had to trust what I had read and trust the numbers on the spreadsheet I had put together as a calculator to show that this would be a cash flowing deal in the end... And trust all that with no previous experience. That was really hard for me. But once I did it and everything did work out... actually better than my numbers showed because the lender was able to lock in a lower interest rate when there was a dip because it was closing faster, so my payment was lower meaning a larger spread available for profits... once I saw that this all does actually work... and pretty much exactly textbook from those books from Brandon on here... It really gives you a ton of confidence moving forward, that you can actually do this and that there really is no massive secret to it. After reading the books I was thinking that it seemed too easy.. that there had to be so much more to it... but like my friend was telling me, you just have to jump in and things tend to work themselves out in the process. Be as prepared as you can but then go for it. And you have to have a certain amount of trust but then you have to switch from research and calculating to doing it.  I hope that was helpful  Hey Todd, thanks for taking the time to share. Much appreciated. So what were the things you were looking for when you went to your friend about a property? For example, you saw a house for sale and then what? How did you analyze the property I guess is what I’m asking. I’ve tried doing some analyzing and haven’t come very close to finding one that works. Not sure if my numbers are right. Honestly I’m kind of just guessing at things like expected rent, interest rates and closing costs, not to mention rehab costs. I’m not even sure where to begin when it comes to getting accurate numbers. I’ll have to pick up BP’s book on buying rentals. Everyone says it’s great.

@James Call Hi James, your profile says you are an insurance agent. As a rookie, I’m not afraid to ask stupid questions... so here’s one for you: what kind of insurance does a REI need for a rental (say a SFR)? Is it different than homeowners’? Is there any other type of insurance that REI should have? Also, there are insurance agents that only sell from one company and others that “shop around”. What are the benefits of using an agent who doesn’t shop around (assuming all things equal, obviously). Thanks for reaching out to us in East Texas.

@Jermaine Kelly Welcome Jermaine. I’m also new(ish) to REI. BP is a great resource for you. I definitely recommend posting and connecting with people in the forums. You‘ll be able to connect wIth people in your area too So many have a lot of good advice and super helpful. Also the podcasts are excellent. There’s a “Ultimate Beginners Guide” on BiggerPockets.com. That also is a great place to start. Welcome again!

@Todd Aaron Hey Todd. Thanks for the post. My day job takes me all over ETX as well. Tyler today, Eustace tomorrow. Would you mind telling a little bit more about your experience buying your first? Who did you end up meeting through the process? How many lenders, contractors, title companies, partners, etc., etc. did you talk with? What was the most difficult part? What did you not expect? Anything else that could help us rookies?

Thanks Mike. So the strategy isnt in some way less effective if you only want 1 property. Is there more risk associated with it because you have less equity? Also, is this strategy only for those who can't go the conventional route of saving 20%? What are the pros and cons of BRRR(R) vs. saving for 20% down payment buy & hold strategy?

Also, I’m originally from PA. Where is Drums?