All Forum Posts by: Dan M.

I'm not a wholesaler but this is what I think is important. You have to know a general idea of what type of work has to be done to the house, and how much its going to cost. Doesn't have to be perfect, but it has to be close. Then you find out what the house would be worth if it were fixed up with comps in the area. Then you subtract the fixed up cost from what the renovations would be to get a number. You have to factor in closing costs for yourself and the investor. After that's all finished, can you sell it and make a profit where the investor gets a discount on the property? Each property is different, sometimes an assignment fee might be 3000, sometimes it might be 30,000. Part of that answer is how good of a deal you can get the property under contract for. Lets take real numbers.

You get a property under contract for 100,000. Fixed up, it will be worth 200,000. You go and look at the property before you make your offer and get it under contract, and you determine it needs 40,000 dollars worth of work. Closing costs for you and the investor are 4000 each. 200,000 - 40,000 - 100,000 - 8000 = 42,000. Then you negotiate from there what hes willing to pay and what your assignment fee will be. You should have a good idea by then. 

I would say no because 1) are they skilled enough to fix? probably not 2) Its a conflict of interest 

I say do it then rent it and get a cash out refinance and do it again. If the numbers work your good to go. You have to sacrifice to grow initially, and doing that strategy ( aside from house hacking ) is the best way to growth. I would recommend from the cash out from this deal to find a duplex and live in one side and rent the other, that will propel you quickly to enable long term success with little risk. 

Short answer: Dont pay pmi its a wasted expense. Your return on not paying that expense will far exceed the extra 6% down. 

What some people do is create a corporation then pay themselves salary from the proceeds of the rental income. I like the idea of just doing a DSCR loan though like Michael suggested.

Some other things to consider:

Will the seller of the second property take a short term note for the balance of the purchase price after you eliminate the debt on it? I don't know what the first lien debt amount is, but maybe you can come up with that money and get seller financing even if its only short term while you do the conversion and work. Then they make a little more money and it makes your life easier.

Also if you have a 401k loan if there is enough there you could use that and pay yourself back. 

Why not just use the money from the index funds?

Hello Rosca . Yes you will buy your first house! I would recommend jumping onto realtor.com or zillow or trulia and looking at properties where you plan to buy. If you use the filters you can look for a house at a certain size, or a certain price, or certain bedrooms or a combination of all 3. 

Unless your planning to buy something outright I would talk to a couple banks and introduce yourself and let them know your planning to buy soon. They can talk to you about fees and closing costs so you know what your getting into.

Also an experienced realtor can be invaluable to help answer your questions about the process and show you houses you like and have interest purchasing. 

Ask 10 people and youll get at least 3 different answers. It all depends on what the individual would do with their risk tolerance. Each property is also different. You could buy a 1 million apartment building outright and make 65,000 or 30,000 depending how it performs and what market its in. You could put it down on a 4 million dollar property and make 120,000 or zero or negative. Every deal is different. 

Personally if I had 1 million just laying around Id probably put some of it into real estate, pay down some existing debts, some of it in treasury bills, and some of it in an index fund. 

 It gets added in like Cody mentioned because things break down and you need the cash now to fix them. Look at it this way though by having the depreciation gives you more money per year at tax time, so if you invest it and make any sort of return on it then your ahead of the game when you sell and pay it back if you opt not to 1031. If your also very strategic and cost segregate / take bonus depreciation where available you can eliminate higher level tax income where applicable. 

 I don't know the cost of things in your area but you would get the proceeds of the sale tax free from federal income tax from the primary residence exclusion. I'm guessing you owe around 150-100k so you would have 225k to play around with.  I know that 3% rate is great but look at the bigger picture. If you rented it out, youd make 800 a month, or 9600 a year ( lets assume paydown of loan pays taxes and capex/repairs insurance etc, maybe its more or less you know the numbers not me ) So if you have 225k of equity and make 9600 a year your return on equity is only 4.2% , maybe less. Could you make more than that buying an investment property with 25% down ( roughly 100k down if im not mistaken ) , put a downpayment on your hobby farm, and throw the rest into 3 month treasury bills /whatever ? Just an idea.