All Forum Posts by: Alyn Shek

@Zeng Fan Welcome to the BP family.  Let me know if you would like to connect.  

All the best, Alyn

@Matt Smith FYI

http://www.nydailynews.com/new-york/manhattan/midt... 

http://mashable.com/2015/01/20/airbnb-new-york-cit...

@Bob Roach @Merlina Rodas @Diana Tian The biggest hurdle to overcome in New Jersey is the HIGH property tax. On average, property tax is approximately 20 to 30% of your monthly gross income. 

@Curt Smith Thank you for sharing your numbers.  I'm familiar with the returns from other markets but never looked into Atlanta.  Those numbers are fantastic. 

@Bill Gulley  Thank you for chiming in.  Your advice is greatly appreciated.  I'm not suggesting there is any value add with seller financing.  I just happened to stumble across a seller who is willing to offer seller financing.  The seller originally asked for 15% down and 5% interest.  Since then, I've negotiated with the seller for 5% down on full asking price of $475k with 4% interest, 30 years amortization.  The only caveat is the first 5 years will be IO only payments, which is enticing for the seller.  The value add is on the property and the current rent is 15% below market.  The seller never bothered to raised the rent because the tenants are good.  I intend to make improvements with the property and will adjust the rent to reflect market condition.  This is an A neighborhood with great school, and easy access to shops and transportation.  This is an owner occupied area and is stable with respectable appreciation over the last couple of years.  The vacancy in the area is 1.4% and vacancy is historically low in this area.  I certainly don't have deep pockets but I planned to saved all the CF received from this property for future rehab and expenses.  I'm well aware of the high property taxes and deferred maintenance.   Nevertheless, I have plans to hire a local appraiser and home inspector before closing.          

@Curt Smith

Thank you for your advice. That's exactly how I'm approaching this deal with the mindset of COC. The less I can get in, the higher my return. I'm with you 100% on the CAPEX. That's the red flag about this deal. I know going in that this is an older home with deferred maintenance. I'll set aside at least 75% of the cash flow in reserve for future expenses.

Where in Atlanta do you operate?  Do you mind sharing some numbers?  Do you offer TK sales? 

@Willem Young Thanks for your input. 

That was not the seller's plan.  I've negotiated him down to 10% down, 4.5% interest with 30 years amortization.  Even at these terms, I'm not hitting the cash flow that I'm targeting.  I'm re-negotiating with the seller again and this time around, I'm looking to propose a new terms of 5% down, 4% interest, 5 years IO payments with 30 years amortization.  This option will allow me to cash flow.  

Unfortunately, the lot cannot be split.  The 2 family is in the front of the lot and the 1 family in the rear of the lot.  My plan is to rehab the property during each turnover and get the rent to market rate as soon as possible.  At that point, I can either sell it to an end buyer for profit or refi to paid off the seller.  

I like Chicago but most, if not all turnkey operator buy in the South.  If you know of anyone that operate in the North, please let me know. Thank you!    

@Simon Shih The drawback with Condo investing is you are at the mercy of the HOA. What is your exit strategy? What if the HOA remove rentals completely or put a CAP on the number of rentals allow in the building? Also, keep in mind that you cannot get financing if the number of rentals in the building is greater than owner occupied units. I don't recall the exact ratio. Do a search and you will find a lot of posts on Condo investing.

@Curt Smith Thank you for your feedback.  This property is actually an hour drive away from where I reside since I can't find anything that make sense in New York.  I'm trying to come up with 2 - 3 options and presented to the owner and which one he's comfortable with.

The taxes are extremely high, which is what I'm worrying about.  Who knows what the taxes will be after the sales and new tax assessment.  Perhaps I can try to appeal the taxes down the road. 

You hit it right on the head.  I'm coming up with less than $1k in cash flow after debt services and is debating if that is enough cash flow to take on that much risk.  The seller agreed to 4.5% interest for 30 years.  However, with this arrangement I will have negative cash flow after debt service.  My thinking now is to offer 5% down and IO for 5 years, and add value to the property by updating the property and refi with the bank.  By improving the property, the rent will increase accordingly.  That is one proposal and I'm looking for other creative options to present to the seller.        

Greetings to All.  Hope everyone had a festive holiday. 

I have an opportunity to purchase a 2 family frame and a 1 family frame house that sits on one lot. Neighborhood is A, if not A+ with great school.  It's in a desirable area within walking distance for transportation to NYC.  The seller has agreed with seller financing and I'm seeking advice from the great BP nation!  I checked for comparable sales and there are no similar properties sold within the past 12 months.  I should note that a single family in this area sells for low to high $300k. 

Asking price:                $470,000 (market value) 

Mortgage:                    None/Free & Clear

Property Taxes:           $1,166/monthly or $14,000/annually

Sewer Charge:             $100/monthly or 1,200/annually (2 family only)

Status:                         100% occupied with leases in place

Rental income:            $4,160/monthly or $49,920/annually

Market rent:                 $4,875/monthly or $58,500

Utilities:                       Heat, Hot Water, and Electric are all separated (Tenant's responsibility)

Insurance:                   $3,000 estimate 

Long time stable tenants with good paying history with one turnover in recent months, which was re-rented immediately within a couple of days.  The owner do not want to increase the rent as they are good and hassle free tenants. 

Reason:                     The owner is in their retirement age and is looking to sell the property                                   and relocate.  The owner has no immediate plans for the proceed,                                          a reason for seller financing.  

Plan:                          My plan is to put as little down as possible, 5% down 30 year                                                 amortization with interest payment only for 5 years. If the seller agrees                                   with this arrangement, the interest only payment will be                                                           $1,500/monthly or $18,000/annually, and the payments after the IO                                       will be $2,375.27 for 25 years.  

Strategy:                   The property needs rehab if I want to get market rent.  My strategy is                                     to rehab the property when the lease expires and slowly bring the                                         income of the property to market rate and subsequently, refinance                                         with the bank to pay off the seller.   

This is for investment purposes so I don't believe the Dodd Frank Act applies but please correct me if I'm wrong.  

I'm looking for creative advice on how to structure this seller financing with as little down as possible.  

Any advice is greatly appreciated! 

There's something called Self Directed IRA that you can look into. You need to contact your financial institution to discuss the details. To the best of my knowledge, if you use a self direct IRA to fund your investment property, your rental income will pay back your loan with interest. OTOH, with traditional 401k you cannot take out a loan to buy an investment property other than principal residence. It is best you consult with your CPA or financial institution to learn about the pros and cons. Congratulations on your 6th investment property.