All Forum Posts by: David Bowles

@Delbert Standifer My humble opinion here is that your “friend/mentor” just MIGHT be trying to pull the wool over your eyes.

1) Regardless of when you will “own” the house, you are buying a MONSTER of a problem. Depending on municipality, that addition could cost you thousands in the further when the city finds out.

2) I’d only spend 45k down if I were getting over 8k back in my pocket on year 1.

3) It doesn’t even sounds like you’re getting a “deal” at all with your friend discounting you 5k. If that dude thinks he can market and sell for 90k in today’s market there is NO WAY that 85k for you is a good deal.

A friend of a friend actually sold me a house last year. My first rental. I didn’t have a lot so they wanted to help me. He sold me the house at 43k, and it appraised at 62k. Even though we agreed I’d pay him some down, he let me get a mortgage. I ended up doing a 60k mortgage, which required 19k down. After the sale, he gave me about 17 back (the difference between the 60k mortgage and our agreed upon 43k price). 10 months later I’ve recovered my initial investment and I’m cash flowing 350 a month and now have around 33k equity thanks to this market. Now THAT is a friend helping out a friend.

I’d be super concerned for you as a new investor, that you aren’t being set up for success on this one. If you want to move forward however I would at least do these few things.

1) Get the property under contract with plenty of contingencies (ways out are VERY important here) and a closing date maybe two months out. If he’s truly your friend, none of these will be showstoppers.

2) Contact the municipality and find out what the ramifications are of the unpermitted addition. YOU ARE BUYING THIS PROBLEM AND NEED TO FIX IT.

3) Get inspection/appraisal

4) run numbers to find out if it’s a good deal

5) Back out or Close and move forward!

Either way, good luck!

@Kevin K. Thanks Kevin! I’m STILL WAITING on the seller to get all their stuff together......

@Camile Case I didn’t find any decent comps at all in the last two years in my town. I live in a relatively small town, and I think that might be part of my problem. Not a lot of real estate like this comes and goes. I have a call out to my mortgage broker now, but I don’t know if he does commercial yet. I’ve also tried googling commercial real estate in my area, but I just wasn’t able to find any good comparable properties.

I’m in a situation where most of my cash is tied up in a flip that won’t go to market until May/June, so I’m going to need to find some private funding or a partner for the down payment. I’ve always heard “you make your money when you buy”, and I think that’s the cause of most of my concern here. I have no idea what a good price is or not, but I think Katie might’ve been on the same thing when she told me too worry less about whether or not I was paying too much for it and just look at the returns.

Why is life so hard??? 😂

@Katie Neason Thanks for the in depth response! I'm still in the information gathering phase right now as the listing isn't even put together yet. I still don't know if the landlord pays the utilities, but I saw separate electric meters on the building. I'll find that out shortly. I don't know what market is for retail space in my area yet, but I know that the two apartments and the SFR are all under market by about $500 combined. If I converted the SFR into an office space for say a real estate agency/office spaces or something, I could probably increase the rent there by another 3 to 500 after I get it up the current market for a two bedroom.

@Rachael A. Tanner Did you end up purchasing this property or any like this? I've also come across and opportunity to purchase a commercial property that is a storefront with two 1br apartments above it. AND, there is a small 2/1 SFR right next to it. Opposite side of the property is one of the largest groceries in my small town. Seems like a great opportunity! Current rent roll is 42k a year combined. 8k yearly ins/taxes. They are asking 350k, and I have no idea how to manage that number in my head. I'm so used to residential! Do you have any wisdom to lend a young investor?

@Cason Acor Thanks, I’ll do that!

I just had an agent bring me an opportunity that I have a few questions on! It's a 2 story commercial building with a barbershop on the bottom and two 2/1 apartments on top. There is also a 2/1 SFR on the list next to it. Rents for the 4 "units" are 1300, 550 (discount to the downstairs shop owner), 700 and 950 respectively. 3500 total monthly gross. 8k yearly tax/ins. Everything has been rehabbed except for 1 upstairs apartment in the last 18 months. They are asking 350k for the whole lot of it.

Obviously it's a great ROI, but how I know if I'm overpaying for the commercial property? I've only dabbled in residential up until now. What am I missing? Should I just buy this and figure it all out?

@Russ Wahl If you like that, move right into “Cashflow Quadrant”. Now that you have the scent of what you want in life, follow the breadcrumbs. I started my “financial freedom journey” 2.5 years ago. My wife and I have paid off about 55k in debt, built about 75k in cash (40k from cash out refi, and 16k from a small inheritance). We also just closed on our first rental in June of this year, and have 14k in equity there! I’m a total normal guy with a wife and two kids. I’m a field service engineer and she’s a hairstylist. My wife and I make less than 100k a year. If we can do it, anyone can! Robert Kyosaki is great, and I think if you sprinkle in a bit of Dave Ramsey to learn to live within your means (this was hard for me LOL), you will have a portfolio of your own before you know it! Keep the fire lit and keep your vision! Good luck!

@Mat Poole The biggest thing I took away from my first rental purchase (closed in June this year) was CONFIDENCE. I had spent probably 9 months of reading books/podcasts/webinars, you name it! I knew way more than enough to buy a house, but I was so scared, I almost backed out! For new investors that think they are “almost ready” I’d say to go and find a great agent (who is also an investor) and leverage that person to find a “safe” investment where you wintlose you butt, and buy that sucker! Do your due diligence, and inspect EVERYTHING. Fix the stuff that needs fixed. Rent it out. When you get to the other side, all of the crazy you went through looks like a beautiful masterpiece that you can learn to recreate time and time again!

@Michael Kammer it is absolutely in your best interest to put everything in writing. Remember that it’s not because you don’t trust each other or anything like that. It’s in writing to PROTECT both of you from the crazy things that life throws at you. Have a written plan for who is responsible for what, both physically and monetarily. Write down how cashflow is split and how much is held in reserves. You get my point. Include in your plan your exit strategy for that specific property! Ideally you two will hold it forever and grow rich and be best buds! Realistically, at some point one of you will want out for one reason or another. Decide now what the best way for one or both of you to bow out of the partnership is, and you will never regret it! Good luck!