All Forum Posts by: Don Young

 Vacation rentals could be just as passive if you set up the right systems! Think big! Account for the potential of using someone else in the future to manage your properties when you analyze the deals! Brandon Turner always says the biggest mistake he made was not doing this at the beginning and it makes it much harder to scale. Good luck in your ventures!

Congratulations @Bernie Huckestein! Sounds like a great property. Best of luck!

Hey @Stephen Frevold, welcome to BP. I am a new guy from the Akron area as well. 

I've mainly been learning about buy and hold strategies, but a lot of the information overlaps. Do you already have your own home? If so, you could look at using the equity to do a flip. If not, you could consider doing a live-in flip. 

There are additional, low-money-down financing options available when you plan on living in (owner occupying) the investment property. FHA and 203k loans are the examples I know of. An FHA loan requires something like 3.5% down, but you have to live in the property for a year. I believe 203k is the same, but with this loan you can include rehab costs in the amount you finance.

I am looking to use one of these types of loans to invest in a multifamily property to do something called house hacking. Housing hacking is a term Brandon Turner coined here on BP for when you buy a multifamily property, live in one of the units, and rent out the rest. Everyone I have talked to in the investing community seems to say that this is a great way to get started investing in real estate.

Thanks @Mike Cumbie. That makes sense.

Does anyone have any experience with wrapping the closing costs into their mortgage in this way? (Having the seller cover them and increasing the purchase price by the same amount.) 

Would the exact costs of some of the items included in the closing costs be unknown at the time of agreeing on the purchase price? If so, how would a buyer handle this...maybe get the seller to agree to an estimate of the costs?

I think I understand that you can get pretty creative in how things are done as long as both sides agree to it, but I have never purchased a house. Are there certain things that should never be part of the negotiating process?

I know this is probably a bit late for the original poster, but I am curious. Could you ask the seller to cover all of the closing costs and increase the purchase price by that amount so that you could include all of that in the loan? I suppose you could even offer to have the purchase price increased by a bit more than the closing costs to sweeten the deal?

@Justin R., thank you very much for the explanation! That was very helpful!

@Sean Cole, thanks to you too! I'll have to check out Ellwood's Formula. The numbers involved with real estate are probably what gets me most excited about it.

@Account Closed, thanks for the clarification! I think I get it. Let's see if I do:

I believe I took your first comment out of context and that's where the confusion was. If you were calculating cap rate on a property you were looking to buy given a certain price, considering a higher rent would mean a better cap rate, wouldn't it? If you buy a home for 100,000 and NOI is 10,000 when you first get it (cap rate of 10%), but raise the rent to get an NOI of 11,000, what you really got is an 11 cap, is it not? Sure, maybe you raised the value of the property by raising the rent, but the calculation for this cap rate should include the purchase price and not the value of the house, right?

Are we potentially trying to use cap rate to measure something that isn't necessarily valuable? Is cap rate only used to capture NOI and value at the time of purchase and past that, doesn't mean anything until you sell it? I think I can see why you would say cap rate is the constant. I believe it is driven by the area's market, so if you increase NOI after purchasing, when you go to sell it, you would sell for the same or a similar cap rate (that is acceptable for your area) but your price could go up with the NOI.

Sorry for rambling, this is my humble attempt to understand!

@Tyrell Perry, congrats on your first property!

@Account Closed, I believe they do. Isn't cap rate yearly net operating income over purchase price? Higher rent = higher NOI.

@Carey Ferreri

I have to go out of town for work next week, but I'll be there if that changes. Have fun!

Thanks @Fred Grant and @Gita Faust !