All Forum Posts by: Christopher Brainard

Hey @Emilio Attardo,

In this case, I'm pretty sure your HML is going to see the $25k in concessions and would just deduct that from the loan amount they are offering you, as the "work around" is clearly trying to artificially increase the purchase price to increase the loan amount. I do not believe private money has lending rules which govern seller contributions; however, they will have their own internal rules to regulate it.

The limits you're probably reading about online are for FNMA/Conventional loans, which range from 3% to 9% depending on the down payment. 

-Christopher

The question is so vast it's just hard to give a good answer. 

As a newbie, I would say there are two real problems you face: 

1) You pay too much for the property (including purchase price, any renovations, loan costs, etc). As long as you buy the property at an excellent price, you aren't very vulnerable to losing capital. For example, if you buy a property at 70k with a FMV of 100k and the AC dies on the first week. That sucks, however, you can pay a contractor 5k - 8k to replace that AC and you're back in business. You're still way under market, so even if a catastrophic emergency happens, you can exit your position and still make some cash. Newbie investors get burned by paying too much for a property and expecting everything to go smooth. It never does and it will always cost more than you think.

2) You rent to the wrong tenant. As long as you have a tenant that pays rent and takes reasonable care of your property, you're probably doing alright in the long run. Many new investors don't setup proper screening criteria and take the first tenant that applies. This almost always results in problems and the investor left with a financial loss. 

-Christopher 

Hi @Chris Rios and welcome to BP!

Unless you have a lot of real estate knowledge, experience, and have a sound business plan, your best bet right now is to educate yourself and work the job you have lined up. Ideally, if you can find a salaried job adjacent to the real estate market (like a loan officer), you can also gain valuable insight into the market while you work your day job.  

Once you have an idea of what area of real estate you're interested in, then you can make an educated decision about leaving your job. Ideally, you should totally replace your W2 income prior to leaving your W2 job, as financing does get much harder once you're strictly an investor. Also, your goals probably are VERY aggressive. You're looking to make $120k a year with a $300k investment. That is a 40% COC return every year. Could this be done? Possible. Are there some people out there who are managing this? Sure. Is it probable? I doubt it. If this were easy to do, everyone would be doing it and things like the stock market, with its 8% average return, wouldn't exist.

-Christopher 

Hi @Adrian Pearson and welcome to BP!

Zillow pricing data isn't remotely reliable and is also manipulatable. To find the ARV of homes, you need comps from the MLS.

To get rent rate info, it isn't quite as strait forward. You can also find rental information on the MLS in some regions, but not nearly as much as sales data. You'll probably need to hit up Rentometer or similar service that provides rental comps. You can also look at active listings on apartments.com, zillow, craigslist, or similar sites to see what people are asking. Also, if you have multifamily, you can call other multifamily complexes and inquire about what they are charging.

-Christopher
 

Hi @David Cole and welcome to BP!

I've got bad news for you - the number of things that can go wrong are limitless. I've had tenants die, tenants disappear, buildings burn down, house condemned, floods, freezes, drug dens, lawsuits, pet bites, HOA bankruptcies, squatters, evictions, failed partnerships, deadbeat contractors, etc. You name it, it's going to happen at some point. Once in a while, you may even find a tenant that pays their rent on time, every month, without fail.

With that said, this game is about having a reasonable amount of expertise, capital reserves, and problem-solving skills to deal with problems as they arise. While you certainly should educate yourself on the basics of whatever field of real estate you're going into, you can't truly be prepared for everything and if you spend all your time planning and attempting to account for every contingency, you'll spend all your time planning and no time investing. This is a condition often referred to as "analysis paralysis". 

Just my $0.02,

-Christopher

This is the correct answer. If you can't afford 1% for EMD, it's highly likely you aren't going to be able to close.

At best, you are misrepresenting your capacity to purchase the house and have no equitable interest in it to sell. At worst, you are ruining someone's life and could end up in legal trouble. If you're just starting out, find a partner with the means to close deals for you ahead of time. If you're finding properties that are worth wholesaling, you won't have any issue finding an investor to back you. If you can't find a partner, it's likely that the deals that you're generating aren't worth purchasing (by you or anyone else). 

-Christopher

Just running some quick numbers based on what you provided, if you have $5,000 a month in income and $3,670 in expenses, you're looking at a potential profit of $1,330. 10% of that is $133. We'll assume nothing ever needs repair. 

If you hit your numbers every month, he's looking at an annual return of $1596, or 8% on his $20,000 investment. If your occupancy drops 5% to 10%, you're likely to see no return at all. 

If this is appealing to him and he understands that he could have a 0% return, I say go for it. You aren't going to get cheaper or easier money.

If I were your brother though, I don't think I'd be very keen on this deal.

-Christopher

Hey William, Welcome to BP.

The decision to either expand your existing home or find a new home which suits your family's needs is really a personal decision between you and your wife. You can't really compare investment returns vs family comfort. If you're looking for ideas to explore, you can brainstorm what type of addition you'd like to have completed and get a quote from a GC. Then use his estimated cost and the estimated value of your house as-is and see what's available on the market. If you find something on-market that sounds better than your existing situation + an addition, go for it. If not, perhaps the current location and the addition is the right answer. 

As far as flipping goes, you basically need two of three qualities to really be successful in this space - time, money, and expertise. Of those three, I would argue that time is the most important, as you can always find a loan or hire experienced contractors to do the work. While finding someone with free time is easy, finding someone with free time who has your best interests at heart and cares as much about your success as you do, is quite challenging. Additionally, to learn the ins and outs of the business, you need to participate in the day to day of the business. 

Best of luck,

Christopher

It sounds like the issue is that you have the wrong agent or don't bring sufficient business to him to demand attention. The right agent that is properly compensated will drop what they are doing and be there for you.

-Christopher

It can make sense, depending on what your investment strategy is and how many properties you buy a year. Expect to pay several thousand dollars a year to maintain your license and more marketing your business if you intend to use it for retail purposes. The only real advantage would be to cash in on buyer's commission and avoid the seller listing fee, however, most brokers still charge a flat fee minimum for transactions. Typically, you can negotiate a better price, if you aren't using an agent, as  the bottom line is what matters for most sellers, so it is hard to quantify the exact benefit when buying. For us, we needed to be transacting at least $500k a year to make it worth it - Your mileage may vary.

On a side note, MLS access can be obtained without a license through third party agents and if you're serious about investing, you should obtain it.

-Christopher