All Forum Posts by: Darren James

I purchased a 4.7 acre parcel that’s walking distance from a high school in a fairly populated neighborhood. It’s surrounded by a B+ neighborhood of SFRs. A few questions:

- How do I collateralize the land to support funding for the build? 7000 sqft lots subdivided go for about 15k in this area. SFRs sell for 200k- 250k. Builds go for $100-$140 per sq ft.

- Would you build SFRs or duplexes? I count the ability to build 12 to 16 7000 sq ft lots. I spoke with the area councilman who advised against multi-family. Not sure if that matters much.

Any advice would be helpful!

@Kevin Lefeuvre

In the immediate, this will contribute to continued cheap money for mortgages. The dip on Wall Street could lead to a freeze on investing and company growth or even layoffs. I’ve lost 20% in my 401k already since the December downward trend related to the virus. I imagine larger funds and others have lost far more.

The worst effect on real estate could be to employees that are hourly that can’t go into work. If they’re paycheck to paycheck, we may see increases in foreclosures or the inability to pay rent. The foreclosures could be opportunities, but the missed rents could hit an investor hard.

@Jerel Ehlert

Thanks for the reply. So do you stick to regular rentals?

@Randy Rodenhouse

Hi Randy,

You’re right. I do need to get in contact with an attorney familiar with the Texas market. I have a contract for deed real example that was executed in 2016. I was going to use that to start so I could have an attorney review vs draft the whole agreement. The contract asked for 10% down on a 250k home with 2000/mo payment and the buyer was responsible for repairs.

My deal is under market value at 250k, so I’m considering the terms in that contract so I’ll only have a couple thousand in the deal but and still cashflow 600k a month. I definitely don’t want any legal headaches though.

@Jay Hinrichs

Thanks for the reply. The 228k would be less the back mortgage payments, so the existing mortgage balance would be at 208k at acquisition. Looks like at least 15k I repairs. It’s a very skinny deal I terms of equity.

There’s already a renter ready to sign at 2k per mo. The Taxes are steep in Texas, but it’s already included in the 1400/mo existing mortgage that I would take over.

This is not a slam dunk deal because of the thin equity margins, but the numbers make sense considering a 7200/yr return on a 42k investment...17% ROI. I honestly don't think I'll spend 15k on repairs though. The place needs paint, carpet, and a new fence. So the return would just go up if I save on repairs.

I have a subject to deal in Dallas County where I'll pay the back payments on the loan to take over for the current mortgage owners. Here are the numbers:

SFR 4BD/3 BA 2570 Sq ft.

Existing Mortgage Balance: 228K @ 1400/mo (PITI)

Repairs: 15k

ARV: 250K

Acquisition Cost (Back Payments): 20K + 5K wholesale fee +2k (title insurance, deed recording, etc)

Potential Rent: 2000/mo

Cash flow: 7200/yr or 600/Mo.

Instead of renting it, the other option would be Contract for Deed where I would request 5-10% down with a sales price of 250k. That way I would acquire the deal and get most of the acquisition price back immediately. Several buyers have responded to the posting. I haven't signed yet. 

Anyone's opinion would be helpful.

Thanks! 

Thanks Tom! I only have one SF rental with about 30k of accessible equity. It’s something, but I’ll need at least 75k for my next deal.

Hard money costs a lot for a newbie investor. I know that there’s lots of benefits like fast cash, doesn’t show on personal credit, etc. BP, if you had access to a personal revolving line of credit of 100k at 12-15%, would you still use a hard money lender that charges 2-3 points plus app fees ($750) at 10-12%?