All Forum Posts by: David Graham

As far as getting the utility costs, when we bought our primary residence we were concerned when looking at it. The house is huge and electricity is expensive (and everything in the house is electric). 

We just called the electric company, told them we were looking at buying the house, and they gave us the average over the last 12 months. Obviously, that can be skewed if the house is vacant. I don't know if all utility companies would be this liberal with the information, but it can't hurt to try.

@Mike Dymski @George P.

Thanks for the information. That's where I needed clarification. My thinking was correct based on turnkey. In order to grow fast, most likely avoid those and pick up investments where you can create equity. Got it.

First, thanks for so many responses and so fast! All great information

Maybe my problem is I am thinking of properties closer to turnkey. Not one that is necessarily going to be bought way below AVR because in my mind it was a property that doesn't need much work.

@Jason E. Smith - It was an example scenario I'm just playing in my head to make sure I'm understanding.

@George P. - I can understand that for a property that needs to be repaired so you have a higher AVR, building equity quickly. But what about a property that's fairly turnkey and bought near or at market value? I see where the idea is to buy the property 10-20% below market, but what if it's a market and still provides a good CCR as a rental.

Let's say you have 20% equity going into it if it's at market value. Correct me if I'm wrong, but the max LTV for an investment property refi is generally 75%. 75% of the appraised value would have to be the original purchase price ($140k in this case) in order to pull the full investment ($40K) back out.

That means the appraised value would have to increase to ≈$186,667. That would take 5-6 years at a ≈5% appreciation per year. Not including pay down.

@Chris T.  - Thanks. Will do.

@Mike Dymski - Agreed on the return. However, getting my initial investment back is important as I am not made of money and would need it to buy another property.

Yes, the equity is great, but unless I can pull it out it's not working for me. From my understanding I can only refi up to 75% LTV.

Maybe rehab wasn't the right word. I was thinking light work like interior paint, carpeting, maybe appliances. I wasn't thinking of anything major. Or do those things add more value to the appraisal than I am thinking? Again, I might need to get away from thinking of turnkey properties where I can't build equity into it and buy it way below AVR.

@Jerry W. - Thanks. Great information.

Thanks again everyone.

Hi,

I am new to real estate, reading what I can, watching BP webinars, etc. I have yet to decide on the route of REI I want to take, but I'm positive it will be in the residential rental market.

I am having trouble grasping a concept and it may just be because I haven't read enough yet to have it click.

It seems it would take quite a while to break even. For instance:

House: $140,000

Total out of pocket: $40,000 (down payment, closing and rehab)

Assume a $500 cash flow, which, from what I have read seems like that is optimistic.

From those numbers it would take 6-7 years to break even. That's obviously assuming you don't take into account appreciation.

To me that's a long time to $40k, and if I want to do what I see so many other people say, buy one rental per year, that's a lot of cash being floated before you are in the black.

I have seen articles on cash out refinance, but you would still need to have enough equity built up to stay within the LTV for the refi, right?

When we are ready for our first buy, we will likely use our HELOC from our primary residence for the down payment, but pulling cash out of the rental to do the second buy would require substantial appreciation (in theory). Not to mention, it would compete with needing to pay the HELOC off.

Thanks for any insight.

@Account Closed Thanks. Much appreciated.

@Justin Stamper Got it. From the phrasing I thought there was something specific about Florida that made it more worthwhile.

@Account Closed I was looking at Beenverified. I don't know if you have a different package, but if they only have one package you might want to revisit it because the most expensive is monthly at $22.86.

@Justin Stamper I am in Florida, you mentioned it makes so much more sense to be licensed in Florida. Why is that?

I am one of these people new to real estate, lack experience and (much) knowledge. However, I'm also not the person on the verge of bankruptcy.

I just joined late last night/this morning and posted my intro. In response, someone suggested wholesaling as a first step. I wasn't familiar with it, so I did a little research and have at least an idea of what it is.

Then, I found articles and other threads talking about this same topic, wholesaling vs RE agent. I prefer not to skirt the line so I am willing to spend the money to get a license if wholesaling is the route I decide to start.

The thing that gives me pause is I'm not interested in being a real estate agent. At the moment I want to eventually get into owning rentals (niche could change as I learn more). In order to actually be an agent and not have to worry about the gray area of wholesaling, I would have to get a sponsor, right? Why would someone, knowing I'm not interested in being an agent, want to be a sponsor?

Thanks for the responses.

@Account Closed I appreciate the info on wholesaling.

Aside from my lack of knowledge of the actual details on how to perform this type of deal (contractually), it seems there is some controversy as to whether you are acting as a real estate agent.

I found an article and lots of suggestions in the forum about it which suggested getting your license to make sure you aren't crossing any boundaries. My concern with that is I don't really want to be a real estate agent, but I would still need to be sponsored by a broker, right? I would think they would shy away when they learn I am not interested in selling properties.

Also, thanks for letting me know about the meet up. I won't be able to make it this time around, but good to know these options exist.