All Forum Posts by: Corby Goade

I don't think I would have ever had the guts to buy a rental property outright. I bought a little house, expecting to live in it for a few years. I got engaged and we bought a house, and I just kept my other house and rented it out just to give it a shot. The best move I made was getting a HELOC on that house before I moved out- it gave me a line of credit that I was able to use as a down payment on other investment properties once I had some experience0

Will you have any equity in the property? Technically, you don't need 20% down, you need 20% equity. If the cost of the build is $200K but the appraisal comes back at $240K, you should be able to work with your bank to eliminate the cash out of your pocket. This might not be the case on a new bulid, I am sure there are people on the boards that can speak to that better than I can.

A couple other thoughts- banks won't let you borrow your down payment, so that's probably not an option anyhow. They want you to have skin in the game, that's the whole point of the down payment. Secondly, it likely that the mortgage insurance would be less than the interest you'd pay on a private loan anyhow. If you don't have 20% equity, I'd suck it up and pay the insurance for a couple years, then refinance when you do have 20% equity. You aren't stuck paying the MI forever, just until you have enough equity to refinance.

I'm not a wholesaler so you can probably ignore everything I say. That said, I would find a local REI club and start making connections. Be honest about where you are in your RE career and ask to trade some labor for mentorship. Your likely to find another wholesaler who will split some deals with you when you find them, but walk you through the process and help you find buyers. When you do get a deal under contract, you'll have some contacts to pitch the deal to. Good luck!

My method is pretty simple for residential rentals. In my area, a 1% deal is about as good as it gets. A quick look will tell me if I can get close to that. If I think I can, I use a commercial property kind of analysis to determine what the NOI will be. Most people don't include debt service when calculating NOI, but I leave it in because that's still real money coming out of my pocket. Doesn't matter to me if it's a SFR or a 200 unit building, the NOI is what really matters.

If you haven't, find an REI club in your area. You'll find lots of people who will be happy to discuss how they do it in your market. Best of luck!

I generally enjoy landlording. There are several other factors, but most importantly, I constantly learn how to do things better as a landlord, things I wouldn't learn if someone else managed my properties; Everything from making adjustments to sprinkler systems to making changes to my leases in order to avoid making a mistake twice. I know a few good property managers, but they have their own systems in place and often they don't match my system. Finally, even with a property manager, things are rarely truly "passive." The property manager calls me to ask how I want them to handle a situation, and of course I want them to include me in some decisions, but by the time we discuss options and make a decision, I could have called a couple contractors and have had it taken care of on my own.

All of that said, my ultimate goal is to have no choice but to hire a good property manager.

Are there tenants in the property now? If so, you should be provided with the leases you will inherit- share those with your lender as proof of additional income. @Blair F. is right, many banks won't take that income into account unless you've been landlording for a couple years, but it couldn't hurt.  

Hey Jackie- I have one 2/1 in my portfolio and it's the only dud. I am not sure what your market it like, but in mine, 2/1 is harder to rent, you get less rent, and price per square foot for sale is significantly less than anything with 3 or more bedrooms. If I were to look at another 2/1, there would have to be enough room to add at least one more bedroom, and hopefully another bath too. That's the only scenario that I'd entertain a 2br sfr. I ask my real estate agent to only send me listings for 2br sfr if they have over 1,000 square feet, so that there is at least the possibility of adding a bedroom. Good luck!

If you are set on wholesaling this property, I'd work with the current owner and walk them through the eviction process before I had any sort of legal agreement with her. If there's no lease (depending on how tenant friendly your state is) it could take months to get the tenant out, maybe longer. Sounds like no one wants to deal with this tenant, and your buyer won't want to either- it severely impacts the value of the property.

Hey @Aaron Millis, I've done a few BRRRRs, and refinanced with conventional loans. First thing first- you HAVE to know your numbers, understand the financing and be sure that you will still have cash flow that will be sufficient for you. Getting cash out (cash out refi) with up to four mortgages is relatively easy, just find a banker or broker who understands what you are doing and what the Fannie Mae and Freddie Mac regs are. You'll get a different LTV based on the property and how many mortgages you have. After four, your only option for conventional refinancing is delayed financing:

https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html

 After 10 total mortgages, you are looking for private money or portfolio loans. I'm not there yet, but hope to be soon. Best of luck!

Thank you @Stephanie Medellin! Seriously, I've been making calls and sending emails furiously over the last couple weeks and you are the first person who could give me a straight and simple answer. Your post makes sense and lines up with what I've read in the FM guidelines as well as the feedback I've gotten from most banks. Much appreciated.