All Forum Posts by: Dion McNeeley

Seems there are too many people looking for a place to park cash. This is one of the reasons people are buying deals that have negative cash flow. We are a long way off of supply outweighing demand. 

I agree it is a lot to take on when you are new. Partly because of the learning curve. Tenant laws, tenant relations, state agency requirements for retail etc. The list is pretty big. 

There is also the concern of cash reserves. Can you handle the entire building being empty for months. When qualifying for loans a lot of lenders require a reserve to cover at least three months of the mortgage. 

Do you have someone who has rentals that can help you? Not a real estate egent who sells properties, but more a person who has several rentals they have success with? That would help a lot. 

I have had the best luck with section 8. 

There aren't a lot of landlords that will work with this program so the Housing Authority is a good resource to find tenants. The agency is very transparent and usually lists what they will pay. Rents usually based on how many bedrooms there are. I still screen like any tenant. I require over 700 credit score and no evictions. I have had zero issues with turn over doing it this way. 

The tenants are also motivated to not have issues since they do not want to lose their benefits. No late rent payments, no noise complaints etc. 

Just another tool for your toolbox.

Good luck. 

I paid $590k, taxes are 6k. Insurance is $2500. I make a profit because these numbers do not matter when looked at by themselves. 

The rents need to make sense. Look at the average rents for the area. If you had to accept 10% less than the average, would there be cash flow? Another way is to contact your housing authority and see what they would pay. They are very transparent and usually have a set amount they pay based on how many bedrooms there are in the unit. The first purchase usually reduces or eliminates your housing costs. Each purchase after that your number of rentals change based on the number of units you buy. If you buy another fourplex you get the three new ones, since you have to live there too. But you also get to rent out the unit you lived in with the last place.

Use a mortgage calculator to determine what PITI will be, I also set aside 10% for repairs and 5% for vacancy. Use that number to compare against the rents for the area. I do this in my state and it is why I go for small multifamily. Single family houses are too expensive to be able to cash flow. With three duplexes one fourplex and one single family house I got before getting into rentals, I cash flow over 5k a month. The first purchase didn't make me FI. It was the first step to get here though. Don't let the big numbers scare you. The tenants pay those costs.

Good luck. 

Hello BP. 

I have 3 duplexes and a paid off sfh. I cash flow $2800/mo and live in a side of one of the duplexes for free. 

Recently I was contacted about a non-recourse loan. I have mortgages on the duplexes and the sfh is paid off. If I do a non recourse loan and put these four properties into an LLC, I will free up my own debt to income ratio and be able to get more properties with regular loans for each place.

I am not looking to pull money out. Just put the properties into one loan. What are the downsides? I google searched and came up with a few things. (Defeasance or yield maintenance for example, I have to research what those terms mean)

What I am looking for is things to watch out for. 

My current strategy is to acquire four mortgages, pay one off then find another deal. Keeping four loans so I benefit from leverage but am not over leveraged. However, now finding out I can bundle properties I may change strategies. 

Thanks in advance for any insights. 

@Matthew Olszak thanks a lot. That’s great information.

Hello. TIA

I’m getting estimates from contractors off the Thumbtack app. This will be the first time I have a roof replaced. There are no leaks or issues. The roof is about 30 years old. It’s just time to replace it.

Any suggestions on things to watch out for on the estimates?

Hello @Kris L. 

If you are wanting get a mortgage most lenders will want to see two years of tax returns showing income from the same type of work. You may want to start by contacting a lender and getting the documents together they will require. 

The other aspect to consider is how long you have been friends. Sometimes mixing money and friendship doesn't go as planned. Would one of you be able to handle the duplex by yourself if something changed? 

Good luck, I hope it goes great for you.

@Paul Sandhu I’m thinking some anti discrimination laws kick in and you can’t charge a different rate for men and women. If that is the thing that differentiates them to you.

Also, are you implying a prostitution ring will set up shop? Saying, “They will tell me...” makes me think there is an expected level of deception when women rent from you.

It is normal to charge more in rent when there is an event or holiday. There are apps that adjust prices for AirBnb.

Good luck.

@Jeremy Morton have you considered house hacking? If you purchase a duplex and live in one side you reduce your housing costs. This money can then be added to your savings rate.

This is what I did. I had a sfh. Moved into a duplex and rented out the house and the other side of the duplex. Now I have three duplexes, live for free and have $2600 in cash flow. (Along with no rent/mortgage)

This is enough to cover my living expenses so now my W2 income is 100% saving rate. (Saving =investing)