All Forum Posts by: Bryan Reid

@James Wilcox gave you good advice about the HELOC. If you get a HELOC it gives you the flexibility to buy - or not - another property if/when you find one you like.

The one caveat I'll add, though, is that it isn't easy to find lenders who will use properties in that price range ($50K) as collateral.  You may be forced to use a non-traditional lender (ie: not a major bank).  For that matter, just the fact that you're not a US resident may present some headaches with a traditional bank.  

As far as the $300-$350 / month rent, where did that figure come from?  That seems a tad low in Lexington, even for a $50K house, but may be accurate depending on where it is.  Do you mind disclosing the location?

Your first step will be to find a good property manager.  I don't believe there is a cadre of property managers seeking to specifically rip off Aussies, but it is always true that a good PM can be quite good while a bad PM can be... very, very awful.  

Feel free to message me and I can give you the names of a few good local PMs.

@Clayton Crawford

One thing that jumped out at me in your post:

You say you want to find a property to buy which you'll be able to cash-out-refi to recoup your down payment.

Have you let the broker know that is your goal?  Because you say the broker keeps showing you turn-key properties.  You'll never buy a turn-key property where you can immediately cash-out your down payment.

If that's your goal, you need to be focusing on fixer properties that need a considerable rehab.

This may simply be a case of the broker not understanding your goals.  Either way, the broker has been more than patient, and has gone well beyond the call of duty if they've shown you 50-100 homes...  Its definitely time to have a conversation with the broker to make sure you're both on the same page as far as what you're looking for.

PS: Also need to add - make sure YOU know what you're looking for, too!  If your goal is to do the cash-out-refi, don't bother looking at or offering on turn-keys.  Your broker is right that offering that low on a house in good condition is a waste of everyone's time.

PPS: Last point - your broker is also right that an informal phone call is just as good as (and sometimes better than!) a formal written offer if you're throwing out a low-ball.

Lots of great input here from everyone.

Seems like many different methods are floating around out there.

I hope to pull together some of the more common ones into an expanded post laying out various risk analysis methods, probably sorted by property/deal type.

@Andrew Johnson Agreed that the 'best' way to look at risk probably depends on the strategy.

Buy-and-hold is enough different from fix-and-flip that separate analyses might be a good idea.

More than anything, though - I just hope more new investors will stop discounting risk altogether.  It makes no sense to compare an on-paper 15% return on a rental to an on-paper 30% return on a flip, and make a claim that the flip investment is twice as good.

@Christ T.  Good point that newer investors will not have their own historical data to use for the expected value estimate.

This is another good reason for new investors to talk with someone with some experience before jumping in - to get a realistic sense of expectations.  Even if you're having to use someone else's historical results rather than your own, that still is better than nothing.

And I 100% agree that 'paralysis by analysis' is a real hindrance to getting started.

It doesn't sound like you have quite enough information to decide yet if the contract is finished or not.

Have you been under the floor yet to see what it is that is poking through?

If you decide this is a defect that the contractor needs to fix, I certainly wouldn't pay the full balance on blind trust, but right now it sounds just as likely as not that the contractor has nothing to do with your issue.

To each their own, but I wouldn't hesitate a bit on this one.

She has a good income -to-rent ratio (>4x), good references, good credit.

And it doesn't sound like she has been jumping jobs every 3 months... She has held a steady (albeit part-time) job for 4 years + attending school.

I really don't see any downside from what you describe - and I am very selective about my tenants.

With all the focus I see on calculating investment returns, something I consistently see missing in the analysis is: RISK.

There are two sides to consider when analyzing any investment: Risk and Return.

As a community, we do a good job (and BP's tools help here) at predicting our potential returns.  But very rarely do I see these analyses tempered by any effort to quantify the risk side of the equation.

I like to perform a simplified risk analysis as described in linked article, as well as running multiple return analyses with progressively bleaker assumptions.

But I'd be very curious to hear what others think/do, too - how do you consider risk?

Am I being overly cautious in my approach?

"Its on the internet, so it has to be true, right?"

Seriously, though - CNBC should be ashamed to be linked with an article that makes such an obviously ridiculous claim.  In an era where traditional outlets are routinely derided as "Fake News" one would hope they would be a bit more cautious with headlines like these.

That isn't to say buying cannot be more expensive than renting if you cherry-pick the properties and data, but when you compare apples-to-apples (ie: buying vs renting for a typical rental property) renting is almost always going to be more expensive.

If that wasn't true, landlords everywhere would be losing money every day.  By definition, if a property produces positive cash flow, the monthly costs of ownership are less than the costs of renting.

Hmm... well, since you're unable to assign the contracts like you had hoped, I guess you could always do what is both moral and legal, and abide by your contract **In Good Faith**...

Congrats on buying 6 homes.