All Forum Posts by: Chris Sullens

I'm in the final stages of buying my first investment property here in Oklahoma City, where I live. I'm buying from a wholesaler, who has been very unreliable. I thought the deal was going to fall through several times. We are scheduled to close next week, and all along she led us to believe that she would close on the same day as us at the title company of her choice, and then we would close later that same day at our title company (turns out its the same company, just a different office). Now she says she needs us to close first so that she has the money she needs to close the other deal. This seems a little backwards to me, but okay, fine. Should I insist that she close at my same title office at the same time as me though? I feel like I might be a sucker if I give her all that money and let her walk away without any real guarantee that she is going to close her end of the deal. I suspect my bank my have a problem with that too. Am I being paranoid? 

@Account Closed, I see your point. Thanks for the clarification. Then, if I'm thinking about this correctly, if you paid down the mortgage by 20k and then refinanced, your payment would be ~$100 lower, and FROM that $100, about $83 would represent saved interest and the rest would come from the reduced principle payment. Of course overtime this would change, but this would be an accurate way to look at the marginal difference until your remaining principle actually dropped below 20k. (E.g. if you had not paid the 20k, you would have to pay the interest on the full 20k so long as you still owed at least 20k on the mortgage).  

Good questions. My primary goal is to create cashflow and semi-passive income. I have a good job which I intend to keep. So I'm really just looking for the best place to put my savings and get the best cash returns while not taking too large risks. I want to be smart and make my money work for me. I plan to reinvest most of my cash flow by using it to acquire new properties. My focus is cash flow, but I see increasing net worth as a useful byproduct. My strengths are only that I'm tenacious, goal oriented, and I that have a pretty good savings rate to start investing with.

Some people use a rule of thumb that if you can get 2% of the cost of the home as monthly rent, you're getting a good deal. Other's say that those deals are hard to find, and that you can usually do well enough with 1%. So for a house that costs 60k, $600/month would be a 1% deal and $1,200 would be a 2% deal. At least that's how I understand it. 

I'm very new to the game (still working on getting my first house). When looking for investment properties to buy and hold and maximize cashflow, what are the bread and butter properties? SFH? Multi-family? Commercial? What price range? HUD? Do you have to find off-market deals to have a chance at hitting the 2% rule? Do you market like a wholesaler and buy the properties yourself? Is there a sort of basic strategy that works well in the Oklahoma market? Just looking for a bit of wisdom from those of you who have been in the game.

I'm a noob, but I like numbers. Here is one way to look at it that seems natural to me:

Let's say you put 20% down on a 100,000 house. Your principle and interest are about $400/month. Let's say that after ALL expenses are paid, you cash flow a net $200/month on the house (as I understand it, it's been known to happen). Early in the note, most of that mortgage payment is going to interest and very little is going principle. So, that first 20k you invested got you $200/month cashflow and thats about it. What would a second 20k get you? You would reduce your principle and interest by 25% (20k/80k = 25%), so your monthly payment would go from $400 to $300, getting you an extra $100 per month cashflow. Also, you would stop paying interest on that 20k. At an interest rate of 5%, that amounts to $1000/year that now goes to equity that would otherwise have vanished into thin air as interest. That's $83/month. So the net return for you to put an additional 20k into the house would be $183/month. That's nearly as good as your initial 20K down payment got you, or in other words, nearly as good as you would have gotten by putting that 20K down on a similar deal. If you are betting on appreciation, that swings the equation towards buying another house. On the other hand, there are acquisition costs, and lots of foot work involved in getting your next deal. You may decide that getting $183/month for your 20k (11% ROI), is good enough and worth avoiding the headaches of acquiring a new property right now.

@Ed W., thanks for the advice. The earnest money is in fact deposited in an escrow account with our title company. So that's good at least. 

@Jeff Rabinowitz, thanks for the advice. I'm still pretty new with the terminology. But this wholesaler is not assigning a contract. She intends to purchase the house and then sell to us. Does that make a difference regarding what you said? Can I still demand to see her contract with the current owner?

@Jeff Filali, do you mind if I message you on Facebook? I can't seem to figure out how to do it here on BP...

Thanks for the info. It wouldn't surprise me one bit if she hasn't done the proper paperwork herself with the seller, but I really don't know, and I'm not exactly sure how to find out. I asked on the forums a few weeks ago just to what extent the seller is obligated to proceed once they have signed a contract with me (because the flakeyness of this wholesaler was making me feel nervous about investing any more time or money in a deal that may fall apart), and everyone pretty much said that there's not much I can do if they want to give me my earnest money back and then back out of the deal. That's what made me wonder if the seller couldn't do the same to her and back out of the deal. The fact that she has failed to provide access so we can inspect the house gets me out of my side of the deal with my earnest money back. At least that how it seems when I read the contract we have. 

My agent works with investors, and he hasn't heard of this wholesaler before. Neither has my inspector. She canceled the first showing. Then was 2 hours late for the second showing. Canceled the first inspection. Then no-showed at our rescheduled inspection. So now here were are scheduling our inspection for the 3rd time. I can't imagine that she has a good reputation.