All Forum Posts by: Dion McNeeley

Hi @Eddie Gonnella,

This is a good question. There are several schools of thought but here is how I handle this. 

They are running a business. It is nice to be friendly but they know you are in business as well. I not only get three estimates but I make sure all contractors know there are two other estimates coming in. I let them know I watch the cash side but also the time it takes and the quality of work. I like the app Thumbtack for finding contractors for estimates. 

If you lose a contractor because they do not want competition then I think that you may not want that contractor in the first place. You are not their only customer and a contractor knows you do not get all jobs. 

I do the same thing when shopping for a car. I check no less than 5 dealerships and make sure they all know I am shopping around. This saved me 13k on my last car purchase. A dealer from 60 miles away brought the car to me and had the reduced rate just to the dealers closer to me wouldn't get a sale. 

Good luck.

Thanks.

Hi @Jared Chenel,

I think you will have a much better idea of how your goals can be reached after you do your first house hack. This will show you a lot about the process. Saving becomes a lot easier when you eliminate or reduce your rent with the house hack. The faster you can save the easier it will be to get the next deal going. 

I think a large part of reaching your goals is taking this first step. You will become more aware of your spending and saving habits. While 99% of the rest of the people we know are still adding bad debt and justifying it because it is the normal path. 

My goal was something similar but I am working on paid off rentals. Instead of 20+ units I can reach financial freedom with less units. The hard part is increasing the savings rate to be able to take down the mortgages. If you are making less than 50K you may also want to look into a better job or a side hustle to increase your income. 

Also here is something to consider. Large banks like to limit people to 4 mortgages. Smaller banks / credit unions etc limit people to 10 mortgages. So after the first few deals you may find it more of a challenge to get the loans. Lenders only take into account 75% of the rent from your properties too. SO keeping the debt to income ratio at an acceptable level can be challenging. Then the lenders will also want you to have a reserve. What I keep hearing is 3 to 6 months in reserve for all the mortgages you have. This will scale. The more rentals you have the larger reserve you need to keep. Lenders will recognize retirement accounts as a reserve but only about 50% of that money counts. 

Hope this helps.  Thanks,

I will be at the next meet up. There is a different market for Pierce vs Thurston counties I have places in both. Looking forward to a chat.

Thanks,

Hi @Donte Lee,

This sounds like the person is not in a place to be a landlord. If the place is livable for a tenant is there not one there now? Falling that far behind on the mortgage and needing cash for repairs may put the owner in a position where selling is the only option. 

If it will appraise at 159 and needs 10k in repairs are you able to purchase the place as a buy and hold? That is what I would do if the area rents could support the numbers. 

Hi @Kim Stuart,

I have seen the places you are looking at and thought the same thing. I heard on a podcast one time that the guest would run a Craigslist add for the unit and see what the response was. The problem you may run into is if it is a specific place you want they aren't on the market long. My last two duplexes had offers accepted in less than three hours. So maybe try the add thing and get a feel for the level of interest. I know that in Pierce county I have had no issues finding tenants for 2-1's. Usually I have 20+ applicants in a day or so. 

When looking at the tri and fouplexes I have seen some places where the numbers work here even if you went with low rents. 

Thanks,

@Richard Oswald, here are some things that may help.

First get your information together so when you are working with a lender you can get the prequal letters fast. From what I hear NJ is pretty expensive like it is here in WA. So making offers fast can make the difference. Last year I purchased three duplexes and none of them waited until the "review" date. 

If you are looking for SFH you may want to check what the market is like. Here it is not investor friendly. There was over 27 offers on a house that went for way above asking and appraised value. The duplex purchases had far fewer competition. The one that had the most offers on it had only three offers. Also with a higher priced market it will be easier to get cash flow if you go for more units. a duplex may not cash flow as a first investment. It should reduce or eliminate your rent/mortgage costs though. That will make it easier to increase your saving rate for the next place.

I would do some research on the rents in the area based on the same size/type of units. Make sure that the cash flow will be there. I would not rely on the listed rents on the sellers listing. On one of the BP podcasts I heard one strategy of running a Craigs list add and just seeing how many responses you get for the rents you would like to have. I haven't done this before a purchase but I will for the next one. 

Something that has helped my offers get accepted is a letter from the lender stating I am likely to close if the offer is accepted. This took a few meetings with the lender and the letter really only states the same thing a prequal letter does. However for some reason the letter from the lender carried a lot of weight to the selling agent. 

Good luck and feel free to reach out if you have any questions. 

Thanks

@Jilanie Staples, I hope it all goes well for you.

First thing I would do is look at rents in the area for similar size and amenity places. If rents are low then you know you will be still covering some out of pocket. If they are higher it may work better for you.

With your first duplex it may be difficult to eliminate the entire mortgage. This is easier to do with a 4 plex but then you may have to borrow more.  

Good luck. 

For a long time I didn't get into real estate because I also looked at it like "It takes X years to get your layout back". I then I realized the money is still there it is just not in cash. My loan info is 25% down and 30 year fixed. 4.6% So yes I did pay more than 20% but I feel it is the safest place for me to put my money. 

I am also looking at value adds. One of the duplexes that is a 2-1 / 2-1 has a den on each side. I am adding walls and doors to make them 3-1's This will raise the rent some. Rents in the area are also going up because the base here raised the BAH for E5's from 1400 and change to over 1800. One rental is also close to a mushroom farm that has a strong smell, but the farm is being relocated. This will let the rents grow.

So in a few years with higher BAH and no smell and adding rooms I am seeing high probability of making more money. I am a firm believer in "making a deal" if you can't find a deal. Just my opinion but it is safer than gambling in stocks, I call it gambling because I do not have the time nor the drive to learn anything about them. I am sure it isn't gambling for people who ave an interest in that world.

There are probably a few hundred ways to do this better that I have. I just know this is working for me.

@Anthony Wick great question. This is the arena I play in. So I’ll try to answer.

The hardest part for me is hearing about people who hit the 1% rule. It hurts my brain to think how happy I would be if that ever happened with a duplex for me.

I have three duplexes and a SFH. Each duplex was purchased for close to 300. One more. One less.

Rents are 2200-2400 per duplex. So my numbers are worse than your bad example numbers.

My mortgages are around 1600 so the cash flow is 600-800. Factoring in 10% for repairs I see positive cash flow of 200-400 a month per duplex. I don’t set aside for vacancy currently since in WA one craigslist add nets over 20 applicants in a few hours.

I’m not comfortable investing out of state. Google Morris invest and read up to see why. I’m sure there are good businesses out there where this works but I feel this would better suit someone where the money was a small percent of their investing funds. For me rentals are 100% of my investing funds.

So I can have the money I save sit in a bank earning negative returns or sitting in some duplexes earning a few hundred a month each.

Yes, people make killings when they time the market. I am not counting on appreciation and I will not make millions in a few years. However with principal paydown, saving for more units each year, I will reach my goals in time. I have also learned what a great deal would look like since I’ve made some mediocre deals already.

I have eliminated my rent, have principal paydown and make 2k in cash flow a month. I have a ways to go still but it is starting to snowball.

Hope this helps. Thanks.

@Michelle Bulich

I think you are missing out on the huge potential of renting to people fascinated by the supernatural. That is virtually an untapped market.