All Forum Posts by: David Robertson

Okay, I did some personal research...

It appears I could avoid the following fees if I paid cash because the loan would be unnecessary; Mortgage origination fees, appraisal fees, credit report fees,...

What other fees would I avoid if I didn't use a realtor and paid cash?

If I didn't use a realtor what kind of documents/procedures would I have to file myself in order to legally gain title and minimize risk of loss?

I would definitely consider getting an inspection, a title search, anything else?

Thanks again, much appreciated.

I am currently looking at buying a foreclosure from Wells Fargo as my first investment property with the prospect of flipping the house. Is there a way to avoid dealing with a Realtor and dealing directly with Wells Fargo to purchase the property with cash?

The property I am looking at is approximately $15,000...I would like to offer about $12,000 in cash and avoid closing costs....

I am under the impression that on foreclosures, typically investors have to pay for the closing costs...is this correct?

Any advice on how to approach this? Do I have to use a Realtor to purchase the property or can I just go straight to Wells Fargo and make an offer?

I feel like I could potentially save a couple thousand dollars of unnecessary costs if that is possible....

Thanks for your help!

Again thansk for your help...

Based on my research, this property looks to be a good investment to get my feet wet. (small out of pocket investment, low risk, monthly payment <$200, and should have positive cash flow.)

Now that I have found a prospective property what are the steps to completing the deal.

Is the first step getting all of the company information figured out: setting up an LLC, getting lease agreements?

Any kind of help on the general process for getting started?

Thanks for your help!

On my prospective property, rent would be $ 800 per month for a $40,000 house= 800/40000=2%; so it passes the 2% rule

50% rule; $800 per month, $400 operating expenses, $270 in PITI, so $130 per month in positve cash flow or $1560 a year.

Have you ever purchased a home warranty for your rental property? I have seen them as low as $400 a year.

What are all of the expenses that are typically seen included in operating expenses?

I am going to manage the property myself, and assume that there will be $100 in mowing/snow removal/common area maintenance per month....so would the other $300 per month be for unforseen repairs? The home warranty would be a deductible of $75 per visit....if I had 4 visits a month for the home warranty then the 50% rule would be accurate....however, 4 home warranty visits per month seems awfully high....thoughts?

I see the 50% rule as a very conservative #, but I do not have any experience to back this up, beside my personal home maintenance....

Thanks

The $150 per month expense was only for maintenance. I also accounted for approximately $270 per month in PITI for a total of $420 per month in expenses and net operating income of $380 per month.

I personally do not like 1 bath homes either and prefer 3bed, 2 bath because I think they sell better. However, 3bed/2baths sell for 30% more than 1 bath units and I would like to start small for my first investment before going after the bigger fish. I have done an informal survey of the market (through craigslist) and I got a lot of great feedback from potential renters. I think the property could rent fine at $800 per month with a Worst case scenario at $700.

I will look in to the "50% rule.

thanks for your help.

thanks everyone for your help. Alot of great advice.

A couple of other questions....

1. Do you typically get a home warranty with your investment properties?

In my current budget I have accounted for approximately $150 per month in maintenance or $1800 per year. I believe I can get a decent home warranty for approximately $400 per year with a $75 deductible per visit. If I had a visit each month that would be $900 on deductible+initial fee of $400=$1300 total with the peace of mind to not have to pay for major expenses.

Sounds like a good idea?

2. Also, when you have an LLC, do you open a bank account for the LLC and make transactions through the LLC account with purchase, rental income, expenses, etc.? Would it be wise to hold any substantial amount of money in this account, or is it all at risk if a lawsuit is filed against the LLC? If that is the case, wouldn't it be wise to not have any assets under the LLC?

3. Do many of you have your real estate license? It seems that would be beneficial to have access to properties and cut back on fees on purchase and sale?

4. When is the best time for rental properties to rent? I'm assuming it is the hottest during the spring and summer months and slows down in the fall and winter?

thanks again for your help...the real estate market appears to have a lot of great opportunities out there at the moment...i am excited to get started

I'm new to the forum, but would appreciate anyone's help about my first investment.

About Me: I just turned 24 and have owned my residence, a 3 bedroom/2bath since October 2009. I have a background in construction and an interest in investing. Over the past year I have had much of my financial wealth in the stock market, but with the lastest economic downturn I am looking for a new place to invest. I have been interested in buying real estate for the past several years and I feel like right now is a great opportunity to pick up some properties for cheap with low interest rates to rent until the market is right to sell.

Currently, I have been eyeing my first investment property. I found a 3 bed, 1 bath that is near my residence in an okay neighborhood (good schools, low crime, amenities nearby, but neighborhood somewhat rundown), for about $39,000. With interest rates currently at about 4.5% the PITI payment would be approximately $270 per month or approximately $420 per month with $150 per month of maintenance. I reviewed the rental market in the area and I am confident that I could receive around $800 which is +$380 CF per month or +$4560 a year.

I have several questions:

Question 1: Would it be wiser to buy the property in cash or take out a loan with a $5000 down payment?

--My thoughts are that if I paid cash my holding costs/vacancy risk would be lower and cash flow would increase. However, if a get a loan with a small down payment my risk/investment decreases and I can use leverage to maximize return on investment.

For example if I paid cash and invested $39,000 & $3,000 in capital improvements my ROI would be $4560/42000=10.8% return in the first year.

However, if I only put down $5,000 and invest $3,000 in capital improvements my ROI would be $4560/$8000=57% return in the first year.

Taking out a loan would maximize my return on investment and allow me to free up capital for another purchase. Thoughts?

Question 2: Should I create an LLC to hold the property? If so, do I purchase the property as an LLC or do I have to transfer it to the LLC from my personal name after purchase?

Thanks for your time and help!

Dave