All Forum Posts by: Dimitar Yankov

Yes, it will be purchased as an investment on my end. Numbers were just hypothetical, but regardless, the tenant will come up with all the cash needed to close the deal. He will basically pay premium to leverage the property with my credit. 

In what way is this any riskier than typical rent to own?

Thank you for the input. 

Basically this is the idea. But if he ever pays of the original note, he will have the equity. That's all. If he stops paying he will be evicted (per the rental agreement we will have in place). 

Yes, I am Bulgarian

Hello all,

I need your advice and help with analyzing a potential "creative" deal. Here is some background info: I have been approached by realtor in PA that I know. A client of his was recently about to close on a house, but his financing fell through last moment and was unable to close. Now the client has a new born, his wife no longer works and as they are on a single income for the time being, they may not be able to qualify for a mortgage. They need a new home as the current apartment they rent is too small for them. The client is in the construction/contracting business and can rehab houses with his colleagues who are licensed contractors. Also keep in mind that I live about 4 hrs away from that town.

The details: Note that numbers are hypothetical and for easy math to help illustrate the scenario!

The idea is that the client will find a SFH that he likes, in need of updating/repairs (possibly distressed property) for around $90k. I will buy the property, and he will reimburse me for the entire down payment, closing costs plus $5k on top because I will use my credit history to leverage the property. At this point I will be $5k ahead of the game and will have full ownership of the house.

The client will become a "vested tenant" however he also wants to invest another $30-$50k into the house to rehab it. ARV should be around $170k. The client (at this point my tenant), will start paying off the mortgage (principal, interest, renters insurance and taxes) and will pay me extra each month. For example, he will pay $1000 per month, $700 will cover expenses, and $300 will be my monthly cash flow. He may also make accelerated payments to pay off the principal quicker (in 10-15 years). Once the mortgage is paid off, I will transfer the property to his name, and he will pay me another amount which will be equivalent to the appreciation over these 10-15 years (on average 2-3% annual appreciation).

The catch is that he will have all the equity in the house (the principal he paid off during this time, and the forced equity from his rehab). I will only benefit from the $300 monthly cash flow over 10-15 yrs and the two payments (one when I buy the house and one when I transfer it to his name). I will also keep it as an investment, so I will get to write off depreciation, however I will have ZERO $$$ investment from my end.

Of course, I want to have have a solid contract that outlines everything including his responsibility and his risks. If 5 yrs down the road he decides not to buy the house, he would effectively loose it and I will have a full ownership of the rehab house plus all equity (this is his risk). Since he is vested, this guarantees zero vacancy and zero maintenance expenses on my end as he will be responsible for everything (it is essentially his house).

Has anyone done a similar deal? This is somewhat similar to Rent to Own deal. What are the possible legal, contractual, financial complication and possible risks for me as an investor? Any thoughts and opinions would be appreciated.

Should I pursue this deal? Yey or Nay? 

@Christopher Rutherford I will be moving to the area this summer and would be looking to purchase 1-2 properties over the next year or so. Would be great to connect once I am there. Please feel free to send any investment opportunities my way (looking for SF/TH or multi) that will cash flow. I would consider turn key or something that may need a little work but will have equity once fixed up.

So it is final. My wife was accepted to UVA, so we will be moving from NOVA/DC area to Charlottesville this summer for roughly 2 years. I am looking at rents for 1BD/2BD, and am thinking that I'd rather put a down payment on a property than spend $20k on rent over the next two years. As I am looking to build my portfolio of buy and holds, I think this may be a good plan. It'd be great to connect with any investors, wholesalers, RE agents and portfolio lenders in the area! 

Are the areas where I should stay away from? I notice that most properties will rent for below 1% of property value. Is this a correct observation? Any tips about the area would be greatly appreciated. 

@Andrew Miskovich Thank you for the referral. Is Eric Thompson on BP? Is he with Howard Hanna? Are there areas/neighborhoods in Williamsburg that I should stay away from? That multi looks interesting, if each unit can be rented for $1k or more. 

@Matthew Kreitzer Thanks, I have yet to find out what is the way to go there and what the market has to offer. I will reach out to you once I am down there as I may have questions! 

Any other info on the area would be greatly appreciated. Keep it coming! 

Hello BP-ers, 

There is a good chance that I will be relocating to Williamsburg, VA within a few months since my wife was accepted to William & Marry. I am thinking that we will be moving to that area in August/September of this year. Since this will probably be a short term relocation (2 years), I would like to connect with RE agents/brokers who are investors themselves or have extensive experience in working with investors and know the area well. If the market is favorable and numbers work out, my plan is to buy a property this year as a primary residence that will become a rental property, and hopefully acquire another 1 or 2 buy and holds next year. I would like to buy something that is needs a little work for building more equity, but would also consider turn key properties. I plan to manage them myself at first, but will need a property manager after we move back to the NOVA area, which also leads me to the topic of renting to college students if the properties are near William & Marry's campus. Do any of you have experience with renting to students? I know this could be rewarding, but also comes with its own challenges. What areas/neighborhoods in Williamsburg are best for buy and holds? What type of properties tend to be most commonly targeted by investors (ie. TH, SF, duplexes)?

Are there any local RE groups/meetings that I can join once we move there? It would be great to meet anyone who is investing in that area. 

Many thanks in advance!

take 5% of the monthly revenue. Say you have $50k annual revenue, divided by 12, gives you 4166 per month. 5% of that would meant that you should set aside $208 for maintenance. That puts you at $2,500 per year for repairs, which is not that much. I would typically budget at 10% (say $5k per year), as it is more conservative approach. 

Curt's advise is on point. However, that will eat into your profit margins. Budget the cost of the property management each month, plus the cost for them to rent the house. Will you still have a good cash flow if you hire a manager?

That being said, there are other things to consider. Is the house close to you (10-15min drive from where you live, or say 1hr or more away)? How quickly can you respond if tenants need maintenance/repairs done? Can you do the occasional drives by the house to see if anything out of the ordinary is happening? Can you do visits every 6 months to see the inside condition of the property? If you have a solid lease agreement, and you screen the tenants before hand, I think it is doable. Just do your homework. 

Hi Mike, I've been doing non-real estate photography as a hobby for several years now (I have a 9 to 5 in NOVA), but if you want sent me a message and I will give you a link to some of my work. I am also looking to invest (but and hold) so I am naturally interested in real estate as well.