All Forum Posts by: Eric Thomson

Hey Joshua,

Based on the numbers it seems like there is pretty decent cashflow. Is this 100% LTV? Calculating in 10% for vacancy and a little for well/septic maintenance you should be pocketing close to $500 per month. Since it is not a typical rental (you are leasing the lot only) I wouldn't necessarily worry about the 50%, 2%, or $100 per door "rules". Do the tenants own their mobile homes or are they owner financing them from the current landlord?

Hey Leigh Ann! You're absolutely right that it could make your offer less attractive. Are the sellers able to provide any proof of payment (deposit statements, etc)? You are entitled already to a final walkthrough to inspect for damages. Proving those damages did not exist when you first inspected the property will be important. If they could prove rents are being paid on time and in full would that work for you? You could have tenant sign new lease agreement for $1,400 on day one or face an eviction notice. 

Manuel,

I am not sure of a way without having MLS access. An agent should be able to enter a date range for when properties closed in their CMA parameters and get the information you need. Some MLS's may not archive data that old. An agent experienced in the area would be your best bet.

Hello John. Give the tenants 30 days written notice that month-to-month rent will increase and list the day the new rent will take effect. Give them a separate notice that if they would like to sign a 12-month contract you will let them lock in their current rate.

If they agree to a new 12-month contract then you can use the same contract you used in the past, if you are otherwise happy with it. Just change the start and end date and make sure the start date is after the end date of the current contract. If they do not agree to a 12-month contract then they may be about to move out so you should begin finding a new tenant happy to agree to a 12-month term.

Hey Laurie,

There's always an option d (as well as probably thousands of others)! To help you narrow it down, I will try to answer some of the questions I can. 

Being self-employed is already going to create some struggle when trying to get a loan on your next primary residence. It's not impossible by any means, just more hoops to jump through. Buying more rentals will add some more hoops. Your current rental should not pose any issues if you keep it because you will be able to easily show 2+ years of positive cash flow on your taxes, which will help your debt-to-income. Buying rentals between now and then could cause some issues if you don't show 2 years of cashflow on them when you are purchasing your next PR. Again, this is not impossible, but you will have to meet other requirements with the amount of equity and a certain level of positive cashflow. If you have a good lender/mortgage broker then all of these can be easily managed. 

Of the options presented I would prefer option C, with the understanding it could pose issues when trying to purchase your next home. Worst case you can sell the rentals that may be holding you back from getting a loan when the time comes. I would not recommend option A. Paying off that unit should not be necessary for you to qualify for the loan on your next home. However, if you are deciding between option A or having that cash sit in a savings account, I would choose option A. You would be saving more in interest than what your savings account will pay you. 

If you are able to save $20-30k per year I would consider flipping homes to build capital to put towards your next home as well as your first MFH.

:)

@Samson Kay I don't regret reading RDPD. That is where many successful real estate investors started. But I would never pay money to attend any of their events ("free" or otherwise). The book has some great things to offer. The idea of making your money work for you is definitely a golden nugget that should be taken from the book. There are several other nuggets in there as well. But I would not buy into everything it teaches. Paying yourself first is borderline (if not full on) irresponsible. His point is that desperation to pay your bills will lead to greater financial creativity. Let being financially independent be your motivator for greater financial creativity. I don't think you wasted your time reading the book, just approach anything anybody is trying to sell you with skepticism. 

@Adam K. makes a great point. Just pull the trigger! I brought up the financing thing because it's something you can start looking into now, but it shouldn't hold you up from moving forward on this first deal. You will learn to get creative. If you go forward with your plan and the financing doesn't happen down the road like you plan you will figure it out, or you'll come here and somebody will figure it out for you. 

But you would also require a certain amount of equity in the home as well, correct? I've don't that in the past and I had to bring more money to the table because the LTV didn't work otherwise.

Hey Jaime,

The first thing to consider is the financing. Unless you have the income (apart from the rental) to support 2 mortgages it is going to be tough for you to get financing on the next property. The mortgage on this first property will count against your debt to income, but the rental income will not count until you show at least 2 years of rental history. There may be exceptions if you can show a certain amount of equity and if your rental is a certain percentage over your expenses. You would probably need to get into non-traditional financing. This site has plenty of information on that, but you may pay specific attention to owner financing or lease options. Sub2's may be a good option too.