All Forum Posts by: Eric Lilly

Hey Everyone,

I unexpectedly found myself diving into (what seems to be) a really solid deal, much sooner than I had expected. I'm worried that I have no chance of being approved for a loan considering my current situation. The property is listed at $120,000. Going for 4% or 5% down. I'm 21 years old. Unfortunately, before my current job, I wasn't making any kind of money that would put my debt-to-income ratio in a good spot. Since February I've been delivering for domino's with the sole purpose of aggressively saving for a duplex to house-hack. My Gross earnings so far this year have been $17,000. ($8,000 of which is reported tips) I know also work for DoorDash as well, so theres extra income there. I've managed to get my savings to $12,000. 

Anyway, I'm under the impression that lenders use your tax returns to verify your income. If they use my 2019 return, that would be very underwhelming. Is there anything I can do to apply this years income? I'm also under the impression that lenders typically want to see 2 years of income history. Is this a deal breaker? Am I screwed? Can I file my taxes early or quarterly to circumvent this? 

Would really, really appreciate any insight and advice, thanks all.

Edit: Also! The fact that the property will be producing income would aid in my debt-to-income ratio right? Is there a way I can account for that income to help get pre-approved? When would I do that, and would I need a copy of the current tenant's lease? 

Hey Everyone!

Rookie investor here. Over the last few months I've been aggressively saving for a down payment while browsing BP, listening to the podcast, and reading a few books. I didn't expect to find such a good deal this quickly. My agent has been sending me automated listings for small multi-families in my area (south jersey). I opened up the email this morning and found (what seems to be) an incredible deal. At least by the numbers. I wish I had been calling banks and delving a bit deeper into the process hands-on before now. My agent is setting up a showing for Friday, my first ever! (My brother will be accompanying me. He is a major project manager for a restoration company. Luckily using him as my eyes to inspect as much of the property as he can for the first run through to give me a better idea of any problems and repairs. I will have a checklist with me for sure.) 

My agent also gave me the contact information for a lender he knows. This gave me a tiny bit of relief, at least I have an "in" with a lender. I will be calling him shortly.

I never really anticipated this happening so soon. I can run the numbers on a deal pretty well. But acquiring financing and actually dealing with *gasp* other people is really triggering my fight or flight response! I know there are countless things I dont know and have yet to learn. But I also know there is no better way to learn then by actually going through, or at least beginning, the real process. So regardless of the outcome, I'm striving to maintain that mindset. I just keep reminding myself not to fall into the trap of "analysis paralysis" and see this through as far as I can. 

Would love any first deal advice. Would also really appreciate any insight on steps I can take towards pre-approval in my specific situation. I'm going for an FHA loan. I am a delivery driver for Domino's and recently doordash as well. I know what I take home every month (never less than 3,000. never more than 4,000) I budget pretty strictly using mint, but I'm really nervous about how my income might look to a lender. My income is solid, but how will it look considering a vast portion of my income is in tips? How might I organize this information for a lender? Lastly, I've only been employed at this job since February. I'm nervous about not having 2 years of history, are there any common exceptions or workarounds to this? I'm very confident and determined in what I'm doing. I know I'm "only delivering food" in some people's eyes, but I have saved $12,000 since February with the exact purpose of buying a duplex in mind.

I apologize that this was so long winded, it just feels like things happening at light-speed and I knew I had to come to BP and lay it out. I appreciate if you've read all of this, and would further appreciate any advice. Thanks, all!

Edit: Also, the property I'm going for is listed at $120,000. 

Hey Everyone!

Currently reading "What every real estate investor needs to know about cash flow" by Frank Gallinelli. Fantastic so far! I actually understand what IRR is! Been practicing running the numbers on some duplexes in my area on Google Sheets, good stuff. As I kept reading, however, Frank explained how the actual calculations behind IRR assume that all cash flow coming in is being reinvested at the determined IRR. This felt disheartening. I had finally found a metric that allowed me to play with the timing of selling and different magnitudes of cash flow and easily see how it would effect the IRR. I ran some numbers for properties in my area and the numbers were looking fantastic! However, I am only just beginning my real estate journey, I'm still waiting to do my first deal. I certainly will not be able to reinvest my cash flow anywhere that would yield the same rate of return, rather I would be saving all of my cash flow to invest in another property down the line.

My real question here is whether or not IRR is still a good metric for me to analyze properties with. Of course I will consider Cap Rate and CoCR as well, but this one seemed like the kicker. If the money isn't being reinvested as the cash flows come in like the calculation assumes, is it still a good metric for me personally? What if I saved the cash flow for 2-3 years and used it to obtain another property that would THEN start yielding the same or similar rate of return? Are those 2-3 lost years of reinvesting the cash flow not too significant to totally dismiss the accuracy or usefulness of my IRR?

The book does talk about the Safe Rate, but I don't have the kind of money to use that. 

Sorry if this was long-winded or confusing. Would really appreciate any insight. Thanks all! 

Hey everyone! 

Sorry if this is a boring or simplistic question, I'm wrestling more with understanding the concept or reason for this. I'm currently reading "What Every Real Estate Investor Needs To Know About Cash Flow" by Frank Gallinelli. Currently reading about NOI. I understand how one acquires this number. However, he doesn't include the mortgage and property tax payments as an expense. What benefits or uses does this have in comparison to calculating straight cash flow? He talks a lot about evaluating the "income stream" and viewing rental properties as such. That makes a lot of sense to me, I quite enjoy that. But what use is the NOI without subtracting the necessary costs of the mortgage taxes?

For example: If the NOI for a property is 12,000 per year. What can I do with or compare that number to as opposed to subtracting say 9,000 for mortgage and taxes and knowing that my cash flow per year is 3,000?

I genuinely want to know, not trying to nitpick. NOI seems like a really important metric, I'm just trying to understand why.

Thank you all!

Hey everyone, 

Big Noob here. 21 years old and aggressively saving for my first down payment. Just beginning the process of acquiring resources and learning about rental properties. One thing that stuck out to me was vacancies. Calculating the monthly expenses for a property, even Captial Expenditures, does seem daunting but at least very straightforward. Vacancies however seem like they could siphon away your yearly cash flow so easily. I'm imagining that my first property's monthly rent is $1200, with a mortgage of $550 and total monthly expense cost of $1000. I haven't come across anything so far on "Partial Month's Rent" for lack of a better term. Basically if a tenant moved in on the 12th, do they still pay for the other 18 days of that month and how so? Is it all stated directly in the lease up front? Would it be approximately 60% (18 days / 30 days) of the rent? So would I be able to expect approximately $720 that month? 

Appreciate it,

Eric