All Forum Posts by: Shaka Farrier

@Shaka Farrier I see so the VA loan works very differently then the conventional loans. Since your cash outlay is very different, I would gather all that information up front and calculate your cash flow carefully. If the down payment is lower, you can end up with a bigger monthly mortgage amount and that may make it impossible to meet the 50% rule.

If you aren't familiar with he 50% rule, here is a post on that.

https://www.biggerpockets.com/forums/88/topics/133...

good luck!

Sorry I keep quoting you @Iman Yu I am on my cell phone and I'm not sure if the @username will alert you when I type it out manually.

The mortgage payment I used above is what I'm basing off of my worksheet from my lender. My 3.5% is locked in and this is based on no money down. I haven't found a cheaper insurance quote yet but I plan on making some more calls tomorrow

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Originally posted by @Joel W.:

Being owner occupied changes things a bit for the current time and then changes once you move out of it. You are being conservative underwriting to the future, when you don't occupy it. for the present, you must factor in what you would be paying in rent.

Thanks for your post @Joel W7

I plan on putting money aside as if I was renting. My unit is a 3 bedroom and it'll just be me. Im considering renting out a for for $500 or so to a friend just to lighten the load

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Originally posted by @Iman Yu:

@Shaka Farrier The calculation looks right.

Personally, i think the return is a little low. I typically like to look at duplex that rents about 1300 monthly total and purchase price at about 110k. However, that's a class C duplex.

What market are you in?

I do have a multi analysis sheet that i like to use which gives ROI in both dollar amount and % based on ur cash investment up front. If you want to try that, I can email it to you. please PM me :-)

Thanks for your insight Iman. I have downloaded some spreadsheets but they were complicated. I definately wouldn't mind trying yours.

This duplex is in great shape and I would consider this neighborhood class B to B- at the least

My only upfront cash was my home inspection ($500), chimney inspection ($55), and appraisal ($450). Seller pays for the pest inspection when the buyer uses the VA.

I may come out of pocket about $1000 to seperate the water between the units but that doesnt seem too bad.

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I'll keep this short and sweet. I am basing my numbers as if I were renting out both sides. I am rounding my mortgage costs up for easy calculation and my owner expenses (percentages) are pretty conservative

Purchase Price: $215,000

Gross Rents: $2,400 ($1,200 per unit)

_________________________________________________________________________________

-Mortgage Costs-

Principle: $1000

Interest: 3.5% ( I may do a rate & term refi for a 3.2% interest rate)

Taxes: $210

Insurance: $140 (Lowest quote thus far)

Appox.Total: $1350/month

_________________________________________________________________________________

-Owner Expenses-

Utilities: $0/Minimal (water and electric separate)

Prop. Management: $240 (10%)

Cap Ex: $240 (10%) (roof,water heaters, electric heater, hvacs are pretty new)

Vacancy: $120 (5%)

Lawn Upkeep: $120 (5%)

Repairs: $120 (5%)

Approx Total: $840

_________________________________________________________________________________

-Total Expenses/Profit Margin-

Income $2,400

Mortgage: $1,350

Operation: $840

Profit: $210

Deal or No deal?

Am I missing anything?

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Originally posted by @Ken Powell:

After a year of learning and hesitating I purchase my first home in July of 2014 using Seller Financing, in January 2015 I purchase a rental property in Norfolk using Seller Financing again. I just acquire another in Chesapeake using Lease Option. I used less than $7,000 of my own money to acquire these properties. Not much to brag about but I now have the confident that I can succeed at my goal of owning 500 rental units by 2025.
I learned that your ambition and desire to fulfill you Dream should be bigger than your pride. I was first afraid to borrow from friends, family and acquaintances because I did not want to be seen as poor or unable to get a traditional loan because of credit issues. Thank God I had the courage to asked. Another important lesson was to listen less to "Gurus" and figure out what kind of investor you want to be. Then find out what knowledge and resources you will need to excel. Make BP a weekly(daily if possible) learning tool, network, and always be professional.
A word of advice, the people you expect to support you the most is usually the ones that will not be therefore you. Sometimes people don't believe you can succeed at a task or goal because they don't believe that they could succeed. They will tell you a million reasons why you will fail but don't listen to them. Focus on your goal. Never quit but be wise in acknowledging when to make necessary changes.

Congrats on your purchases Ken. I agree with you 100%, we have to dream big. I am currently 28 years old and my dreams are finally becoming tangible. I will be closing on my first investment property in Norfolk during last week in OCT or first week in NOV. I will be using my VA LOAN to owner occupy a Top-Bottom Duplex. I have been doing A LOT of research because I would like to specialize in Lease Options as well. How has that niche been for you thus far?

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Hello again BP, I hope all is well. I'd like to thank everyone in advance for your inputs. This is my first deal and I'm trying to make as little mistakes in the beginning as possible.

Let's get to it:

Financing Option: VA Loan (owner occupy)

Property Characteristics:

Both 3 bed - 1 Bath

Top-Bottom Duplex/(Unit 1) 1200+ sqft/(Unit 2) 1300+ sqft/Detached Garage 240 sqft/ Two washers/two dryers/electric seperately metered/ 2 water heaters (like new)/WATER NOT SEPERATELY METERED)/2 HVACS (like new),carpet (like new), fresh paint, roof is like new

Neighborhood: B-/C+

Asking Price: $224,900

Assessment: $215,100

Taxes: $1.15 per every $100 (so about $2,500

Insurance quote: $140-$150

Section 8 max for thsee unit approx. $1,200

Rentometer.com said average rents for the area for 3 - 1 is $1100. May be able to get more because of the washer/dryer availability.

_________________________________________

Owner Expenses

Based on $1200 rent per unit ($2400)

Water: My BIGGEST concern!! The owner may be willing to get the units seperately metered. Approximately a $7000 project.

I'm thinking that if the owner does this work, he will be less flexible with the negotiation and ask price.

If I keep it and include water into the rents, I may be a section 8 family of a few people. Even having a flat rate for water makes me uneasy.

Property Management: 10% $240 (regardless if I do it myself or not)

Cap Ex: 10% $240

Vacancy: 5% $140

Taxes: $208/month

Insurance: $140/month (USAA quote)

Is it me or do my percetages seem a bit high.

I'm not sure how to budget turn over costs, repairs, maintenance or lawn care.

I'm trying to find a offer that works without lowballing the owner.

I've gotten a few quotes for $224,900. I had the play with the numbers. Thinking about putting in an offer for $215,000 at 3.5% zero originaton, zero points.

P&I would be around $965

If I offer the asking price of ($224,900)

P&I would be high $1300 low $1400

To the average person thay sounds great...live for free, but I really don't want to underbudget.

This post was suppose to be short. Sorry guys. I just wanted to include any info I thought you might as for. THANKS AGAIN!!!

1 Vote

Originally posted by @Barbara G.:

If section 8 pays $1,200 I would figure my rent at $1,200 and and look at the property as having a $2,400 income. So it looks like $224,000 is not a big bargain. It does give a little more then 1% of the 2% rule. If the Seller offers financing with no money down or a small amount down the property would be worth a little more,

Your property is 63 years old so unless things have been updated you are going to have higher then usual cappex and maintanence replacements. As in what year was the roof replaced?

Thanks for the input Ms. Goodman. The roof looks less than 5 years old. I'd say now more than 3 to be honest. The hot water heaters look new and so do the hvacs. The plumber said that things looked good from what he saw under the house and inside as well.

What would you consider to be a small downpayment and why would you consider owner financing with a low down payment to be the better option? The VA is 0 down at (as of right now) 3.5% interest. We are also requesting seller pay all closing costs

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Originally posted by @Thomas Lillevold:

Hi Shaka,

I always do comps for the area and take careful consideration of the condition of comps when valuating properties (in your case you said the property was in very good condition). If a property is priced right I will make a higher offer. If it priced too high, my offer reflects that too. It always comes down to how bad do I want it also. I am a firm believer in offer-counter-offer. I have countered back and forth as much as 4 times before purchasing. If I feel a property is priced too high but is a property I would love to have, I have offered as low as 60% of the asking price. I do think in some cases this is risky because you can offend the seller to the point that they just do not negotiate pricing. Other times you will get the sellers lowest offer on the first counter offer. Its a gamble but my thinking is I need to get the property for the lowest possible price and I never want the seller to accept my first offer because that tells me I offered too much.

Hopefully, this helps you a little and best of luck to you.

Tom

Thanks Tom. I have to say, I do like this property. It's one of the best multis thay I've seen in a good neighborhood. It has everything that I'm looking for but something tells me that I can get a better price on it. I'm just afraid of scaring away the seller if I go too low

The comps are all over the place so it's hard for me to base it on just those. I'm assuming appraisal is the next best way to get better judgement on the actual value of the property

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All Forum Posts by: Shaka Farrier

Shaka Farrier has started 12 posts and replied 55 times.

Post: Epic Fast Funding?

Post: VA LOAN (Owner Occupied) Duplex Analysis

Post: VA LOAN (Owner Occupied) Duplex Analysis

Post: VA LOAN (Owner Occupied) Duplex Analysis

Post: VA LOAN (Owner Occupied) Duplex Analysis

Post: VA LOAN (Owner Occupied) Duplex Analysis

Post: Networking in Hampton Roads

Post: Owner Occupied VA Loan Duplex Analysis

Post: How do I negotiate this duplex without scaring seller away

Post: How do I negotiate this duplex without scaring seller away