All Forum Posts by: James C.

Myles,

You don't mention if you own, rent etc. so I am going to assume you don't have your own home.

1) Get your financial house in order. Loans paid off (as much as practical/possible), credit cards zeroed out, 6-12 months expenses in the bank, plus a down payment. AS A MINIMUM. If you need help, take a look at mrmoneymustache, affordanything, or any other such site. Read, read and more read on real estate, stuff like "The Guide to Buying Your First Property", "Rich Dad, Poor Dad" etc. (yes, this is all #1)

2) Assuming #1 is complete/in progress. Go see a lender and get Pre-Approved for a mortgage. If not approved, then this will tell you what you need to work on.

3) Assuming #1 & #2 are complete/in progress. look to househack a 4 unit. SFR's probably won't cashflow, and you'll have roommates (this is a no-go for me, some love it, you decide for you). 2's, 3's & 4's might cashflow (depending on area/price).

Leave the entity stuff out of the equation for now, Don't worry about the tenants stuff. Make sure that you read about those things, but to just start out, concentrate on the basics of having your finances in order, financing, and finding a 4 unit.

Hope that helps.

Good Luck,

Jim

Daniel,

Conventional mortgage loans generally don't contain a prepayment penalty, as you have mentioned.

Generally, your best course of action is to send two separate checks, one for the payment, the second marked "Principal Payment", along with a letter stating it as such. I would not leave it up to the servicing folks to make decisions for you. Most are wonderful people, however, they are processing thousands of payments per day. They aren't in your head (thankfully) and it's better to make it clear than to "assume" what is going to happen. 

I can tell you, no matter what your individual docs say, and what you want to happen, it probably won't come out the way you think. It will get straightened out eventually, but you will be pulling out your hair in the meantime. Also, once a loan is screwed up in the servicing system, it has a tendency to stay that way. 

The concept of arrears generally comes into play when payments are not made on time. In this case, the older due penalties and payments are paid first, then any leftover applied to the more recent penalties and payments. It's not generally applied to current mortgages with additional payments coming in mid-cycle.

Hope that helps.

Good Luck!

Jim

Christy,

As near as I can get from your numbers, you paid 60K under market, put 17K into it (10 cosmetics, 7 in "improvements"), and listed it for 80K profit (or 20K over market, since you were probably seasonally leading the market). Someone offered you 60k over purchase price (non-seasonal market price), (80-20K) and so, you stand to make 43K overall (60K-17K).

What is the time value of money for you? Is it better to have the 43K in your pocket, or take the lease/own rent and wait for the return of capital? Are you looking to do more deals and need the cash? Can you refi, get your 75% out, and wait for the rest?

How you answer the questions above will help you determine the course of action.

In general, if you are getting lookers but no "good" offers, you are +10-15% over market.

Generally, it all depends on what you think the market is going to do. If you think it's a temporary decline, then the short term lease or normal lease. If you think it's going to go further down, then get it gone. Finally, if you think the value will hold steady, or slightly increase over the period of time for the lease to own term, do that.

Hope that helps.

Good Luck,

Jim

Lori,

Charge the tenant (or take it out of their security deposit) for the cost to rub it out. You could indicate that they could pay it over the next 3 to 6 months (depending on the cost).

Make it clear that any additional vandalism of the property will not be tolerated. 

I would be nice about it, but firm. 

Good Luck!

Jim

Ray,

All you can do is run the numbers to see what works. If you can't get it at a price and terms that make sense, then move on. There is a reason the owner ain't completing it... and you need to find out why, that will give you your motivation.

Good Luck,

Jim

John, 

No.. don't be sorry... English is better than abbreviations. 

AFAIK = As Far As I Know

Good luck, 

Jim  

Tysean,

If she is that good, marry her!

I wouldn't give up on my dreams because someone said it could be dangerous. Heck, life is dangerous. We are all subject to recall at any point.

I would certainly have the discussion with her, and find out how she feels about investing with you. That will tell you a lot. If she does want to invest with you, figure out how to best protect each one of you in the transaction. If not, that tells you a whole lot, and determines your course of action.

It's best to look at the worst case scenario up front. When you set up the transaction, plan for the worst case scenario. Then, the course of action is already set. Think of it as a pre-nuptial agreement sort of thing. Best to deal with problems up front, before they occur, when cooler heads prevail.

Good Luck!

Jim 

Daniel,

A lot of this depends on if you are only doing your deals and not doing any brokerage. I might suggest taking advantage of the training, then switching over to 100% commission brokerage. Much depends on the annual fee and your projected sales. 

Think about what you would do if you came across a sale-able property, but not at a level that you wanted to buy. How would you deal with it? Wholesale it, list it, least/option etc. If you can answer that question, that would help you make your decision.

The listing/selling training is mostly about the prospecting for deals and marketing. If you have 0 experience, this can be a good place to get it. If you need to split for a year or two, it's not the end of the world. You are going to have a cost to learn, you will pay it one way or the other. Being in the brokerage world, if done correctly, can be a fast track to understanding the entire process, and obtaining the contacts to build your business rapidly.

Hope that helps.

Good Luck,

Jim

Joseph, 

My preference is for around 50% LTV on my properties. I don't feel the need to own them outright, but I like my loans low enough so that I can sleep at night. The 50% level does it for me. Each person is different in that regard.

First things first:  I would make sure that I had enough reserves to take care of both my personal stuff, and my properties. 

I wouldn't touch the SFR. I would use excess cash flow (after doing the above) to pay down the new 2 unit. I would keep an eye on the LTV of that, so that as soon as I could lose the PMI, I would.

I would look at my comps for the FHA property, and see if you can meet the thresholds for a conventional refinance without PMI. That will free up $220 in cash flow each month. Even if it costs you ~1200 to refi, that is less than 6 month payback, which is great.

This is assuming that the FHA property has increased to the point where it can be refinanced without PMI. If that is not the case, put your excess cash flow into that and refinance it ASAP, since that will give you the best return.

Keep saving from your W2 income for the next down payment, and use just the cash flow from the buildings to do the other work.

Hope that helps!

Good Luck,

Jim

All,

I'm looking for recommendations for a competent property manager for a SFR in Rockledge FL (32955).

Thank you.

Jim