All Forum Posts by: James H.

Okay, so I posted a question on general thoughts for a 12K cash house I was contemplating and got some much appreciated responses. Tonight I am going to hand my deposit to the wholesaler and cross my fingers. This whole process is new, strange, scary and exciting all at the same time. Buying cash from a wholesaler is a whole different animal than working through the MLS with an agent.

When I brought my wife to look at the house last night before committing, there was already some guy there with a for sale sign in Spanish and signing some contracts with a Hispanic family (also there) to sell the house to them! So I called the wholesaler and she said "don't worry about him I just let him look at the house and told him I would sell to him if you decided you didn't want it."

So I already know that this 12K house can be flipped to the neighbors for 18K without doing anything to it. The wholesaler chewed the other investor out for trying to bully me out of the property (apparently not the first time she has dealt with the guy) and we commenced to agree on the deal. With closing costs I will be out 13 to 13.5K. The other guy said we could assign the contract to him and he would pay us 2K. I said I'd think about it (but I have already decided against that).

So here I am soon to be the new owner of a cash home that needs about 3K to get it rent ready. This house was a smoking deal! I know there is no appreciation and tenants could be more challenging, but since I will own it cash I can screen for months and not have nearly the losses as I would with a mortgaged home. My main concern is vacancy vandalism. There are pros and cons to every deal. Even though it is an old 2/1 in a low income neighborhood, I am not worried about exit strategy because I already know the neighbors will pay 50 percent more than I am paying for it right this second without me even touching the property. So there will be others.

There is a 2/1.5 duplex a couple blocks away renting for 600. I think I can get 500 for this one and am going to put it up for 600 to see if it will rent for that!

So, right now, the house needs a little work that I will probably do myself over the weekends and will probably take a couple months to do. I have to do it this way because I will be cash poor after exhausting my funds to acquire the property. Luckily I have the skills to do anything that needs to be done around a house short of HVAC (which this house doesn't have). In the mean time, I want to start generating interest and taking applications and so forth.

Can any of you low income rental landlords out there give me some advice on how to screen tenants, places to get the application and lease forms (the property is in Fort Worth, Texas) where you advertise, how you advertise, what kind of deposit and pet policies? How to reduce the risk of vandalism? Any other strategies that I may not have thought of, are unique, etc? I am in much gratitude for any information or contacts!

Thanks
Brian

Rusty, Thank you for the input. While I am not a professional, I recently replaced a vanity in my bathroom so I think I have a fair idea of repair costs. Just kidding. Seriously though, I know my way around a house from doing extensive work on my own (siding, windows, electrical wiring, insulation, extra insulation, fence, deck - on and on) and I do feel like my appraisal of needed repairs is reasonable. Sure,there will be the extra cost of my labor, but that is the part time job that I can work around my own schedule like no other - especially if the house is free and clear.

Hi guys. I previously introduced myself as a newbie from the Dallas/Fort Worth Metroplex and am onto searching deals since my introduction.

Recently I came across a 12K cash deal. The house is habitable as is, but would probably need 3 to 4K to get it up to the standards where I would live in it and feel like I was living in a real house(I mean if I HAD to). The neighborhood leaves some to be desired, but doesn't strike me as a war zone and I did feel relatively safe in the neighborhood (although would not feel safe there at night walking around the street with no reason to). This is a 1953 house, small 750ish sq ft with 2 beds and 1 bath (that is the totally nasty part that will require a new toilet and maybe a new tub.) The tax appraisal is only 22K but Zillow estimates are about 30K. There really isn't a whole lot of data for this area to be obtained from the MLS. My thought is that if it is a decent habitable home with new paint, decently finished wood floors and new vinyl in the kitchen and bath (and other bath improvements) it couldn't hardly rent for less than 4 to 5 hundred a month. Taxes and insurance will run about 100/month. This is in northeast Fort Worth, Texas and is about 5 miles from down town.

Oh, and the wholesaler selling it is picking it up off an 85 year old guy that wants to get rid of it because his son died in it recently (no fowl play). The body was in there three days and it stunk it up, but they had it professionally cleaned by one of those dead-body-cleaner-upper-after companies. So it still smells a little weird, but it is also 105+ degrees here and has been for over a month with no ventilation in the house. Seriously, I don't think it will be a problem once it can air out a little more and has new paint. It doesn't smell that bad - just a little weird.

So, what are your general thoughts on owning low value properties? I love the idea of owning it fee and clear. It might not attract the best tenants, but I could let it sit for months and months to screen for the best tenants and only have 100/month expenses for insurance and taxes and minimal yard car. It still seams a little scary because it is a lot of money. Even though somehow my mind is programmed such that I would feel more "comfortable" putting the same 12K into a DP, closing and rehab costs and then financing a mortgage on a bigger house more familiar to my senses. But, logically, that doesn't make sense. Sure my tax break would be smaller on the cash home, but it seams so much simpler and certainly lower fee.

Any general thoughts are greatly appreciated. Success and failure stories with cheap house similar to what I am looking at would be great. There may even be a possibility to flip this little thing if I played my cards right. Not really part of my long term plan, but I am open to anything that makes a profit. Thanks in advance for your greatly appreciated input!

Brian

My agent has been great. She is very unselfish and wants to show me the ropes for renting my units once I get them including setting up Section 8 if I so desire. She has encouraged me to manage my own properties rather than hire it out. She just has a real passion for landlording. A lender I called at random referred my to her. She has 20+ properties and has shared details of the last three properties she has acquired since I have started working with her (about 3 months). She is in a place where her investments appear to be shifting into the next gear and she is pretty much all cash now.

I will start looking more heavily into Fort Worth. I am generally more comfortable with Tarrant County than Dallas County, I guess because I live in Arlington. I office in Dallas but will soon office in Fort Worth, so I will have a closer physical proximity to Fort Worth properties in general. I haven't looked too much in Weatherford. Most properties I have seen there tend to be a little higher than my range or mobile homes. I will keep looking, though.

Greg, I just finished watching your interview with Josh Dorkin about local bank financing. Good information. I perused your website as well. I like the blacklist page you have dedicated to dead beat tenants. I'll make sure to check that when I screen my tenants. Maybe Bigger Pockets could open a list organized by state to drop names into that members could check...Don't know the legal ramifications of that....I'll keep my ideas to myself until I get some real experience under my belt.

Wow! Thank you for the warm welcome. I recognize most of you from other helpful threads I have followed to augment my knowledge.

All,I need the encouragement to be patient as this has been a long time goal of mine and now that I am close it is tough not to settle for something just for the sake of doing it. I do NOT want to make that mistake. So thank you for your positive reinforcement.

Bryan, I lived in Austin for 15 years before I moved to Arlington 2.5 years ago. I am sure you are enjoying Austin. When you say west Fort Worth, would you be referencing White Settlement or River Oaks? Or am I getting farther west than you are thinking.

Bryan and Will, although familiar with some of the conventional/traditional methods of bank financing, I am not very sophisticated in the realm of financing. Could you direct me to a good source that explains sub-to financing. I have never heard of it before.

Robert and Greg, very nice to have some local support. I have many questions now and some that I am sure will come up later you may be able to help me with or maybe just tell me I am concentrating on the wrong thing. For instance, my agent discourages me from considering anything less than a 3 bed 2 bath. Her concern is that anything less will attract non-family tenants that will tend to be less stable than family tenants. She also considers the exit strategy to be a little more advantaged than, say, a 3 bed 1 bath. I tend to agree with her logic, but don't know for sure. What are your thoughts on this? There seams to be a lot more deals if I am willing to sacrifice the extra bathroom and/or bedroom. It is down right tough to find a 3/2 in my range (40-60K) in a decent neighborhood that doesn't involve a garage conversion and/or repairs that require more cash than I have(I really don't like garage conversions). I suppose the deal is harder to find because it is better and there is more competition... My priority is not in exit strategy, but it would be prudent to have a good one. To be sure, SFH is the route I am pursuing until I gain some experience with handling tenants and rental units.

Thanks again for all your feed back. I am actually really exited to finally start engaging here and getting feedback.

I am new as well, but can tell you that there is a better chance than maybe that you would be loosing WAY MORE than 50 dollars a month if you rent the house for 1000/ month. Search "50 percent" rule to get a general idea of what it will really cost to rent your house. Than search "rental expenses" to get an idea of the expenses associated with renting a house that you don't see as an owner-occupant, no matter how good your tenants are. If your unit went vacant ONE month, that would put your expenses closer to 100/mo. for that year without even factoring other costs that are definitely there.

Brenden is right. You need to study this business very thoroughly. I have until I am almost fed up with it and I haven't even closed my first deal! But at least I know better what I am up against, and I still want to do it.

Hi guys. My name is Brian and I am from Arlington, Texas. I work as a geotechnical engineer by day and am just starting to accumulate enough savings to jump into my first buy and hold deal.

I have already read many topics at Bigger Pockets and am already using the 50 percent rule to make cursory analyses of properties in which I might be interested. It seams there are enough deals that meet minimum general criteria.

I will be looking to finance a deal. From my research (e.g. looking at listings on-line and in person, speaking with lenders and my agent and perusing BP) it appears that the minimum cash requirement to get into a good deal is about $20K.

I have come to this conclusion for properties ranging from 40-60K. The more expensive properties require bigger DP and the cheaper properties require more rehab. All end up with about 3 to 4K in closing costs - if they are repos.

I currently have 12K at my disposal to acquire property and to have a safety net. So, since my comfort level lies with a 3K safety net, that only leaves me with 9K to work with. That amount money seams to limit me to Fannie Mae foreclosures (10 percent down as opposed to 20) in good shape for about 40-50K.

Until I have more money accumulated (it takes me about a month to save $1000) are there any other strategies that you guys recommend? Bear in mind I have a day job and am limited to evenings and weekends for boots-on-the-ground stuff. Any advice is greatly appreciated! If any DFW investors want to point out some of the best areas/neighborhoods to search, I would be much obliged.

I know this post is getting long, but I have another question. I recently came across a deal that fits my budget (above). The problem is that the neighborhood is squeaky clean, but about 70 percent of the houses have bars on their windows. The asking price is 40K and rent comps are about 850/month. Taxes and insurance would be about 2000/year. My agent advised against it based on the neighborhood, but the hood doesn't seam bad except for the bars on all the windows and doors. There are no foundations issues, no cracks in the brick or sheet rock, which is rare in the DFW metroplex in my price range(I am sure DFW investors would witness for me on that one). So, basically, my tenant quality would not be as good and the resale wouldn't be very good (estimate break-even). Bu I am anxious to get something that will generate some money so I can increase my rate of savings for the next one. All opinions are appreciated.

Thanks in advance for all your input!

My question is: With the relatively small amount of disposable income I have, is it better to separate some of that off to make extra payments to the house mortgages to pay them off sooner, or should I just let the mortgages sit for 30 years and save save save for down payments for new properties? I am 32 years old and just getting started and would love the idea of quitting my day job to do real estate investing. But after you calculate the cash flow after expenses on a rental, I would need about 20 houses to comfortably support myself assuming each house was "throwing off" 300 a month - which from my research requires a very very discounted purchase price. If it takes me two years to buy a new house, I'll be 70 years old purchasing my 20th house. How do those of you who have 20+ properties get said properties? What can I do to accelerate my acquisitions and control my debt burden at the same time? What is a good blue print to follow now that I am already 32 years old and am just now purchasing my second house and have the first house just breaking even (hopefully).

Background:

I am in the process of buying my second house. This second house will make a great rental but we will have to live in it for a couple years due to FHA financing. We will rent our first house, but it won't make much positive, if any cash flow. It could easily go negative depending on the tenants we get. However, this is our first step to acquiring a new property and then multiple properties. Once we can move out of the second home, it will rent for good cash flow.

I work as an engineer and make a modest salary, but have about 50,000 in student loans. No debts on cars right now (but the wife's car is in pretty bad shape!). No big cash reserve (mostly eaten up from new property, say 5,000). Mainly enough cash to protect the rental property-barely and not much of an emergency fund, but that is the risk I choose to get a great deal on a new house in this market. I was not thinking like an investor when I bought the first house and realize I made a mistake - but that is bound to happen right? I can't sell that house for what I owe on it and even if I could I could not recover the money I invested to improve it (new windows and hadri plank siding).

So now you know my situation. I want to acquire more properties with good cash flow. But I don't want to be over leveraged. With my current earnings, it takes me about two years to accumulate a new property because (A) I need that much time to save 20 percent and to show rental income from previous property to satisfy DI ratio, or (B) it takes that long to qualify for new owner occupancy financing and also show the two years rental income from previous property to satisfy DI ratio.

I hope that when my wife graduates her income will help with rate of savings and I, in turn, will also be making more money. In the mean time, I have to assume job earnings will remain the same and just take future improvements as a bonus.