All Forum Posts by: Account Closed

I am trying to make sure I don't pass on a deal because of it not meeting certain metrics.

Is cash on cash return and CAP rate really important for someone who plans to buy/hold/rent (long term) plain jane, blue color, type properties (SFR/small multifamily) in order to replace w2 job income? It seems to me that cashflow is the most important metric in this case.

I have searched the forum and while there are posts about this, none really fit my question. 

It sounds like he has never used his RE license. He told me he had it but never really has done anything with it. Also, it's been 2 years and not sold and he was not the listing agent.

OK. I have spent the last week mapping out my plan to get started. I have a goal to purchase my first property by the end of August. I have been watching a house that has been for sale by owner for at least 6 months. I called and was able to get permission to access it from owner a few weeks ago. 

It is a 3 bedroom/1 bathroom 50's cape. Nice, rural area about 10 mins from town. New roof, new windows, new vinyl floor. I am accounting $4900 for replacing the heat pump as it is quite old and it needs all appliances. The layout of the bedrooms is funky (probably is really a 2 bedroom originally) as you have to walk through one bedroom to get to another. This can be fixed up better with a few 2x4's and some sheetrock eventually. I can do this.

Anyway, it was previously listed on MLS for 80ish almost 2 years ago. The owner is elderly and living with family now. Has owned it for 50 years. Son is taking the calls and is an inactive, licensed agent. Super nice guy on the phone. Price is now 70K.

I made this spreadsheet and am attaching an image. I'm wanting to explore owner financing (with $7000 down) but also need it at more than a 50% discount to make the numbers work. I'm thinking of writing a letter directly to the owner but am nervous about offering 32K for a 70K asking price AND trying to get owner financing. I understand the worst they can say is no but want to keep the dialog open. I am currently unable to meet them in person as we are traveling for the next 3 months for work. I imagine it will still be there when I get back.

Here are the numbers: https://imgur.com/a/wNJmGng

Thanks everyone for any input.

Looking to sell a townhouse in Henderson.

 Thanks Karen.

I should have stated something to the effect of "If all my numbers are correct, and it can legally be done is this a good investment move for cashflow.."  I've rented the house for several years and it was not hard to find a renter. So the demand is there.

I am trying to think of different strategies for my first deal. This one popped in my head on a long flight yesterday.

My personal residence is a 3 bedroom 1.5 bath brick ranch on 0.44 acres. It would probably appraise at 105K and I owe 78K. Current loan is 6.625% (bought for 90K 10 years ago (less than desirable credit back then).

I wondered if I could do a cash-out refinance, get 25K and build a 26x26 or so garage with some type of living space upstairs. I could probably rent a 1 BR or Studio for $400/mo. I have enough room for it where it wouldn't be too close to the house or neighbors. Almost as if it was it's own 1/4 acre lot.

Here are the numbers:

Value 105000

Balance 78000

Rate 6.625

----------------------------------------------------------------------------------

New Mortgage - 105000 

New Payment Payment (PITI) 850/mo (current 730)

Cash Out 25000 (Accounting for 2000-3000 closing costs rolled into new loan and what the balance will be in several months)

25000 to build a garage with 1(2?) bedroom/1 bath or studio maybe. I'm not sure how off I am on this estimate for a plain jane garage with living space. I have no clue about water/septic/electric needs/costs etc. Water is city though.

Rent living space - 400/mo (w/o utilities)

New payment goes up 120/mo.

We won't be living here much longer, maybe a few years to save money and invest. So the house will turn into a rental if that makes financial sense.

So in the future total rent between house and garage studio - 1100. Less payment of $850, leave 250/mo positive cash flow, not including other expenses, vacancy etc.

In the meantime, we have a garage, which would just be a luxury and could probably rent out later for storage or an extra rental income from the tenant.

Now that I type it, it seems like less of a viable option but maybe....

Adding image link to give a better idea of the house and land. https://imgur.com/a/1Q6MvAt

@Anthony Dooley Thank you for this. It is a good start.

However, I don't understand why you said the condo is a low rate of return....Ah nevermind I think I got it as I was typing. 

Because it is worth too much compared to what we are getting in cashflow. Meaning we have way too much money tied up in it. Is that right?  This whole time I have been looking at it like a good investment, puts 450 or so in our pockets each month. When in reality I could sell it and buy 2 $65,000 properties (cash for example) that cashflow $650/each a month for a total of $1300...plus we'd have 130K in equity (with cash purchase).

Holy crap if that's what you mean then you literrally just turned on a lightbulb for me.

Thanks, Mike for the reply. You've given me a few things I haven't considered. I'll be looking into the Self-directed IRA today because I doubt we can borrow from the current one as it was from a previous job. I will research your other suggestions. While I've come across both terms before, I don't know much about them.

Hi Craig. Funny you are in SC too! I was just in Mt Pleasant a few weeks ago.

I think the bad debt can wait for us. I think it is more important to get started. Plus the additional cash flow from rentals can help pay things off. The school loans are low interest (4.2%). The other 10K will be paid off at the end of the year. I sold a business and the new owners pay monthly. Their balance is equal to the debt balance. Our debt to income ratio is low enough where it won't affect us buying the first property. Our cash was also depleted because we paid out of pocket for my wife to get her masters.

While I want to follow the "find the deal and you'll find the money" line of thinking, it's hard. I want to feel confident look at properties that I have an idea of how much and how I will get said money.

Are you looking to invest in your area or looking outside of MP where I'm thinking things are much cheaper?

Although this is a new account, I have been coming on here for a few years. I have listed to every BP podcast, read some books etc.

I have been interested in investing since 2015, when I listened to, yep, you guessed it. Rich Dad Poor Dad. I have looked at a few deals here and there and pondered a lot but didn't know where to start (which stopped me).  Well, my wife and I committed a few days ago to making something happen. The problem is, I still have no clue where to start.

Our Goal is to replace our monthly income with rental income. Min $4000 (basic necessities), comfortably (for us), $6000. We'd like to have this within 5 years.

I have no clue where to start!

I am interested in mobile homes, mobile home parks, and multi-family mostly. But I am open to single-family and other suggestions.

I am in a decent market I believe. South Carolina, 10 miles from a decent sized university (huge football following), literally surrounded by lakes and mountains. (Maybe some AirBNB type options too.)

My biggest unknown is financing. I think we have a few things on our side but I have no idea what options would work for a first property and what type of property we should consider.

W2 income is 50-60K/yr but will be about 80-100K/yr soon. It is all from my wife currently as we are traveling for the past year for her job. I will re-enter the workforce in 3 months when we are done with her assignment, bringing our w2 income to the 80K-100K level.

We own an "accidental rental", free and clear, out of state, that grosses about 11000/yr less PM (1000/yr) and HOA (4600/yr)..it's a condo so that is why the HOA is so hight. Value about 130K (probably very conservatively).

Also have a 401K, currently about 160K.

Wife has debt of 27K for school loans. 

I have debt of 10K from business equipment loan. This will be paid off end of year.

We also own a house (primary residence) that has maybe 10K in equity. Owe 80K @6.625%. This was bought 10 years ago when credit was pretty low. This house is also not co-owned on paper.

Credit scores are both mid 700's.

We have about 5000 in cash on hand. We have had some recent medical expenses so had to dip a little. We'll be able to save an extra 2000 a month (conservatively) once I return to work.

I am asking for a bit of help on where to focus our attention as far as type of investment and the smartest way to finance.

Thank you to anyone who replies.