All Forum Posts by: Josh Layhue

Thanks for the response. I did check with the county. They are definitely on one lot. I'm still unclear as to why they are like that. I lucked out and got these units from someone who had filed bankruptcy. Unfortunate for them. With the market the way it is, the bank let go of them pretty easily. I just wanted to be clear on the refinance and splitting of the properties so that I know my options in the future. Thanks again for your input!

I'm pretty new to the real estate investing game. Here's my current situation:

I own 5 units on the same lot that are in the form of 1 triplex and 1 duplex. I paid $47,000 for the units and have put about $15,000 dollars worth of repairs into them with another $5,000 needed. They are currently appraised at $92,000. The rent that I am/will be able to get is about $500/unit/month for a total of $2,500/month (only 2 are currenlty rented). I owe approximately $30,000 on the loan because I put about $15,000 down. I have 2 questions:

(1) The triplex and duplex are on adjacent lots. Should I look into subdiving them so that they are on their own lots? The idea would be that I could sell the duplex (the property next door to the duplex sold for $45,000 about a month ago and it is a small one bedroom house) to get some cash to re-invest if I find a good deal and need cash while allowing me to still keep the triplex for cashflow.

(2) Should I refinance to get my cash back? I'm not sure exactly how refinancing works so if anyone has the time, maybe they can start there. If I refinance the property for $75,000 does that mean that I would have cash-in-hand of $75,000 minus current mortgage balance minus already invested cash (down payment and repair costs)? And then I assume that I would have a mortgage payment based on a loan of $75,000 vs. my current payment based on a $32,000 loan. Maybe I'm way off base... please let me know. Again the idea of refinancing would be to get my cash back.

Any and all information is greatly appreciated!

I'm new to this, so take it for what it's worth. But you said your current property allows you to pay the mortgage and have $200 left over each month. Do you mean $200 left over after mortage + expenses or just the mortgage? I would imagine that if you meant only the mortgage that means your expenses are probably more than $200/month and that would leave you with negative cash flow overall. Can you clarify?

I actually did have the place inspected. The inspector and I sat down and came up with an estimate of $10,000 to $15,000 in repairs. I've also talked with several contractors to verify the home inspector's estimates. We're supposed to close this week.

As a follow-up to an earlier suggestion, is there any downside to subdividing? What's the risk vs. reward?

I'm all for it. I have a few spreadsheets that I've been using and I'd like to post them for 2 reasons:

(1) to share with the others something that may be useful and save them time, and
(2) to have some other eyes on my work to make sure I don't have any errors in my calculations.

I think it would be nice to have a convenient place to post these.

Thanks for the response. One advantage we have using the bank that we are using is that my dad owns a successful business and has always had his accounts at this bank. It's a small town so everyone knows everyone and thankfully my dad's name carries some weight at the bank. They are certain that they'll get their money back so I should be able to negotiate pretty good terms.

As for my goals, I'm looking to rent for awhile and then sell in about 5 years (depending on the market). Any advice on what terms I should shoot for?

I worked out the details with the bank yesterday. We are purchasing the property for $47,000. I guess the next step for me is negotiating the best terms with the bank. Any suggestions?

Guys, I appreciate your opinions and the information that you've shared. It's obvious that you both are much further along than me and I'm learning as much as I can every day. I'll consider all of what you've said before making my decision and let you know how it goes!!!

Wheatie,

First off, thanks for the response. I have 2 follow-up questions if you have time.

(1) I'm sure this was probably explained somewhere else, but I can't find it. What is the logic behind using the purchase price + rehab costs to calculate your monthly mortgage payment?

(2) Is there ever an advantage to taking out a shorter term mortgage (maybe 10 years)? I understand that it cuts down on immediate cash flow, but is there a long-term advantage?

Welcome, Dan! I'm from Uniontown, PA (south of Pittsburgh). I'm just getting started in investing and I've found that there is a wealth of information here. I hope you stick around.