All Forum Posts by: Colby Burt

Quote from @Colby Burt:

Hi,

I have an opportunity to acquire a 3/2 under the following seller financed terms: Purchase Price: $420,000 5 Year Note & Mortgage Principal-Only Payments of $2,000/month 4% interest, paid at the end of the term along with remaining principal balance I have ran conservative and aggressive numbers for a long-term rental: any way you slice it, it negatively cash flows about $400/month. I am unable to run it as an STR due to zoning laws. I ran numbers as a mid-term rental (such as for travel nurses using a corp lease platform like Furnished Finder) and it also negatively cash flows at about $200/month. My question is, should I not do this deal bc it negatively cash flows? Or does the fact that I put no money down, and a tenant would pay down most of the principal each month make this a good deal? (In short, is paying $400/month for an asset with principal being paid down for 5 years a good investment?)

The five-year term is the biggest concern. It increases the dollar amount of your payments, and you'll be forced to find cash in five years. You'll be backed into a corner if the lending environment is unfavorable when that occurs. Can you access other sources for purchase money? Some hard money lenders offer buy and hold financing. The Norris Group is operating in Florida now (began in CA). They offer it, and there are others, I'm sure. 

So now you're justifying this by saying something you have no control over, and no guarantee of happening, or how much that appreciation would get you, will make a bus running over your foot seem like it was only a motorcycle?

Quote from @Colby Burt:

Hi,

I have an opportunity to acquire a 3/2 under the following seller financed terms: Purchase Price: $420,000 5 Year Note & Mortgage Principal-Only Payments of $2,000/month 4% interest, paid at the end of the term along with remaining principal balance I have ran conservative and aggressive numbers for a long-term rental: any way you slice it, it negatively cash flows about $400/month. I am unable to run it as an STR due to zoning laws. I ran numbers as a mid-term rental (such as for travel nurses using a corp lease platform like Furnished Finder) and it also negatively cash flows at about $200/month. My question is, should I not do this deal bc it negatively cash flows? Or does the fact that I put no money down, and a tenant would pay down most of the principal each month make this a good deal? (In short, is paying $400/month for an asset with principal being paid down for 5 years a good investment?)

What?
How does not putting any money down change the fact you are still going to be paying every month out of pocket?
Negative CF is a cost to you.  Putting up a DP would just make it worse.  Not putting up a DP doesn't make it better...just less bad,...bad still bad.
Kind of like choosing between getting your foot run over by a bus or a motorcycle.  

Hey @Colby Burt, I am one of the irrational dislikers of arbitrage for the most part. My biggest problem is with the people who want to do it. Not the people exactly, but they almost always have nearly zero capital. They want to get started and arbitrage looks like a way to get the ball rolling. What most of us here tell people is that the risk is quite high for low income people to get started with.

The biggest problem is the area IMHO. I have looked into buying a place in the general area where you are looking. So far I haven't seen anything that will cashflow at the current market values. At least, something I can afford. You can get great $$$ on a 1.5m 8/9 place fully remodeled with all theme rooms.

There are several 2/2 condos for sale. They average about $280k give or take in the Champions Gate and surrounding area. The nightly rates for those types of condos are under $100 a night. Sometimes quite a bit under. You have 22k in mortgage (10% down second home on 280k). Even with 100% occupancy that is 35k gross per year at $95 a night. No one is getting 100% occupancy on those units. Closer to 50% that I can see. It is a loser right out of the gate IMHO.

And if you do manage to get someone to allow a sublease for a vacation rental (stop calling it AirBNB as that is just a platform), you will pay above market rates for your leases if the owner is smart. If things so south, you could lose a lot more than you could gain.

Try not to be offended by others responses. We get asked this question at least 5x a week. It gets a little trying after a while. Please do a search and you will find a lot of posts on this subject. There is a lot of data to peruse.

Hey there, 
There are specific zones in central Florida where STRs are allowed. So make sure you do the research. There is a post that has a list of all or most of the communities that allow STRs. I'll find it and post the link for you. Holly Hudson is a real estate agent in that area and she can send you listings in the STR approved communities. She works with investors and is great. I can send you her info if you're interested. We are new to rental arbitrage too and are interested. Like someone else mentioned it's not actual real estate investing but more of a cash flow opportunity. We are doing the research now and all of our due diligence before we make a decision to move forward. We've been flipping homes and are now looking to buy airbnbs and diversify our investments. Wishing you the best on your journey.

Nothing wrong with starting with arbitrage and building up some money to buy a place later via arbitrage rather than leveraging all-in at 100% financing at the potential top of a real estate bubble (unlikely, but possible).  This just isn't the place where you'll find any useful info on it.  And people here will generally steer you towards buy-at-any-cost since everyone here is a real estate investor, which isn't necessarily bad advice, but it could be extremely risky depending on your financial situation.

Quote from @Colby Burt:

Quote from @John Underwood:

Quote from @Colby Burt:

100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha

 You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.

You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.

Tried to ask some seller’s to finance, actually. My offers were rejected. I need to get better at my pitches to owners for seller financing. 

 Also ask if they will carry back a 2nd to cover the downpayment then you can still use WF for a mortgage and have $0 out of pocket.

Quote from @Colby Burt:

100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha

 You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.

You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.