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All Forum Posts by: Erik Orozco

Erik Orozco has started 11 posts and replied 88 times.

Post: House Hacking my 1st Property

Erik OrozcoPosted
  • Mcallen, TX
  • Posts 92
  • Votes 72

After 1 year since becoming a member on BP I’ve finally closed on my 1st rental property (4-plex). With this post I hope i can help someone who is new and is considering their 1st purchase get passed paralysis by analysis and pull the trigger! Like most newbies with no money and no experience I was attracted to wholesaling. I closed a couple deals, but I never fully committed to it and my results for the hours I was putting in was subpar. The end goal was and continues to be obtaining cash flow through rentals. 

The Numbers:

4x 2 bed / 2 bath 1,000 sq ft units

Purchase Price- $175,000 

Appraised at $215,000

Term- 25 years

Interest- 3.625%

P&I- $856.79

Taxes- $358.83

Insurance- $195.00

PMI- $119.00

Total mortgage payment- $1,529.62

Water- $225.00

Vacancy (5%)- $125.00

Repairs (5%)- $125.00

CapEx (5%)- $125.00

Gross Rent (3 units) - $1,875.00

Almost all expenses are covered by the rental income. I plan to submeter the water and transfer that expense over to the tenants. The city quoted me $550 per meter, it seems low from what I hear submetering prices range but if if that’s the true price I wont hesitate to make the change. I increased the rent from $600 to $625 and signed a new month to month lease with 3 of the tenants. I plan to continue increasing rent steadily as average market rent in the area is $750. 

How I Found the Deal:

I listened to every podcast twice, some even more! I read the blog at least 3 articles per day every morning. I read at least 50 books from topics ranging from real estate to psychology and autobiographies of successful entrepreneurs. It hasn't been easy and I truly believe that without the right mindset I would have quit before I got started. I attended the local REI, reached out to investors, brought them deals and asked specific questions after doing thorough research! Once i built enough savings from wholesaling and my W-2 job I focused on finding the property matching my exact criteria. A 4-plex in the part of town I was renting in (5 minutes from work and my daughters daycare), $100 cash flow per door, 1.5-2.0% rule, at least 15% equity at the time of purchase. A detailed focused goal is a powerful thing my friends!

After making many offers matching my criteria I received repeated NO's. I stayed with it. As I was doing the due diligence for a 4-plex I found the neighbors 4-plex was being held under an LLC doing some google searches the LLC was tied to a local attorney's office. After speaking to several assistants and waiting on the line I finally got the owner on the phone. I asked him several questions of how he ran his units as far as utilities, rent and such as I was considering buying his neighbors property. He had no idea, he simply responded with "Well, make me an offer on mine!" Then I hit the ground running with the due diligence and ultimately bought his property.

What I Would Do Differently:

-Include a Buyers Finance Contingency. I could have lost my earnest deposit as the deal almost fell through a couple times.

-Have owner and tenants sign an Estoppel Agreement. I’ve had some questions about the security deposit and appliances. The previous owner said neither he nor I would be responsible for the security deposits given to the previous owner before him as these tenants have been in their units for many years. But as I understand I could still be on the hook for this!

-Round up and over estimate all expenses and negotiate an even better deal to account for surprises. After the appraisal the bank came back and renegotiated the term to 25 years. I pushed back, but they weren’t budging. That was an extra $100 of my cash flow gone. 

-Have at least another 10K aside from your 3.5-5.0% down payment for closing and a starting reserve. This might be a no brainer but for some reason it didn’t register with me.

Thanks for reading and please let me know if you have any suggestions or tips for this newbie! Much love for everyone in the BP Community.

@Brie Schmidt Gotta love it when you have the same question and it’s been answered with many solutions on BP already!

@Adam Johnson Thanks for sharing. I will be trying this exact method for my 1st property since most of my tenants pay cash.

Post: What do I need to know about closing on my 1st property?

Erik OrozcoPosted
  • Mcallen, TX
  • Posts 92
  • Votes 72

Thanks for the input guys! @Alexander Felice All 3 other units are currently occupied so I will be inheriting tenants. They are on a month to month lease, but have been in the units for years.

Post: What do I need to know about closing on my 1st property?

Erik OrozcoPosted
  • Mcallen, TX
  • Posts 92
  • Votes 72

Hello BP Community! I'm days away from closing on my 1st rental property. It's a 4-plex in Weslaco, TX that I will house hack at least for the 1st year. I've done much due diligence and decided to pull the trigger based on the numbers! I'm anxious, nervous, and all the above right about now. My question is as a newbie investor what do I need to know or be prepared for at closing? 

incredible story @Joseph Druther! House looks great for a 1st time flip! 

Pumped for a new podcast! Can’t wait to listen!

@Thomas Lorini thanks for the post! Overall looks like a great deal with minimal risk to my newbie eyes. Seems from following all your posts there's a line in the sand: max leverage out properties vs not using any of your equity at all to grow your portfolio. Correct me if I'm wrong but their seems to be a sweet spot in the middle of those two methods which this purchase would fall under? 

I commend you for responding appropriately to all questions and remarks...the reason I joined BP was its "family supportive feel" the site has. But I see a lot of negativity on this thread and lack of belief that someone else's course of action can also ultimately breed success.

Hey David,

Glad to hear you're a fellow newbie taking ACTION! This question jumped out at me because just a few months back I was asking those same questions spending a lot of time spinning my wheels!

Next Step: Your next step would be to mail the OWNER address not the actual house address. (I would get back out there and get at least another 50-100 houses) if you mail only 10 houses you mostly likely will not get any responses and you'll quit the Driving 4 Dollars strategy.

Direct Mail Piece & Template: For my 1st mail campaigns if you're are doing direct mail on a budget I would go with pre stamped postcards from the post office or purchase the postcards and stamps yourself.

The template should be a simple message saying something like "I'm interested in purchasing your home at (home address). If your interested in selling please call (your number). I looking forward to chatting with you." Keep it short and simple with a call to action.

Submitting Your Offer: Once you receive a call be ready to ask several questions, allow the seller to talk as much as possible and gauge their motivation. Depending on their motivation set up the appointment to see the home and build additional rapport. Starting out I made all my offers in person, written with pen and paper explaining how I got to my offer price.

If you need any further help don't hesitate to DM! I'm no expert, but I'll help to the best of my ability! Good luck!

Erik Orozco

Post: New guy from south Texas

Erik OrozcoPosted
  • Mcallen, TX
  • Posts 92
  • Votes 72

Yes sir! Look forward to meeting you.

Post: New guy from south Texas

Erik OrozcoPosted
  • Mcallen, TX
  • Posts 92
  • Votes 72

Welcome to BP Rolando!  Please join us next Thursday

3rd Qtr Mastermind Meetup Corner Bakery - Mcallen (FREE) for networking and making deals happen with other local real estate investors! No guru pitches or sales of any kind (other than houses of course), just good old fashion networking between inspectors, wholesalers, house flippers, etc.