All Forum Posts by: Jay Dean

If you can get a multi-plex and occupy on of the units there is a tremendous advantage.  Search for "house hack" in this forum.  As little as 3.5% down payment.

A friend of mine is at a real estate investment seminar and called me all excited about some piece of software offered.  Based upon a quick google search, I think it might be Rich Dad's - Real Estate Success Software.

Does anyone have an opinion on this?  I don't know the cost, but I am guessing that it is super expensive.

I own a condo free and clear.

After repairs, I have about $60,000.00 invested.  I can rent the condo for $875.00 and it nets about $200.00 per month.

I am weighing to options:

Option A - Continue to rent.  Net $200.00 per month / $2,400.00 per year.  Look into a cash out refinance (approximately 70%) and use that toward a second unit.  Estimated total leverage 30 - 40 %.

Option B - Sell offering Owner finance.  Sales price $65,000.00.  30 year term at 10% interest.  The goal here would be to find a person or couple with solid earnings and not so good credit.  This would be key to get these kinds of terms.

On their side of the deal - $570 Mortgage, $75.00 Taxes, $225.00 HOA fees - Total - $870.00 excluding expenses (same as renting).

On my side of the deal - Receive $570.00 per month (nearly three time what I am currently getting).

I recognize that I lose my cash position by using this option, but I see this as guaranteed money coming in monthly.  If they don't pay, I foreclose and repeat the process.

Not sure I fully understand the tax implications of the owner finance option.

Please share your thoughts and ideas.

Thank you.

@Heather Morris I recommend that you be up front and honest and face the problem now.  Explain your situation without making excuses, own up to the mistake, and promise to pay all that is owed plus any late fees.

The more you avoid the awkward situation and make excuses, the more likely your landlord will react adversely.

@Jacob Pancheau

Don't wait until the meeting / viewing to run your preliminary numbers for income vs expenses to see what your real cash flow looks like.  On a 30 year 5% loan your monthly payment would be around $1,000.00.  If they are 70 years old like you said they may want a shorter term. 

I go into negotiations knowing what I am willing to pay based upon my expected rate of return.  My offer is what I am willing to pay to insure positive cash flow, not what they want.

You haven't provided much data regarding expenses but I am guessing it will have modest cash flow at best.

Also, do a check of other rentals in the area.  I have a hard time believing that rent can be raised by 20 - 30%.  Nobody purposely rents under market by that much unless they are having an issue with vacancy.  At $625.00, the already have one of the two units empty.

Something smells fishy here.  That means they net $55,000.00 per year and they are selling for only $176,000.00.  This also means they value each home and the land that it sits on at $16,000.00 (if you completely discount the rental income).

This might explain why they are asking for a huge down payment.  They might be cash starved and liquidating this asset to keep afloat.

@Tony Sklavounakis do like @Andriy Boychuk suggested and ask to see the books and tax returns for 2016.

This might be a great deal, but I am a little suspicious.

@Beverly Joseph

In my opinion moving directly into 5 - 20 unit apartment buildings is a huge first step.  I'm not sure I would do that if I was in your position unless I could partner with someone who knows how to buy and manage properties of this size.

With regard to cash vs. leverage, I prefer to buy in cash.  I feel like it improves my position especially in a competitive environment.  I can always do a cash out loan later if I chose to.

Welcome to the forum.

I'm not sure how much cash you can get out of your current home but buying and fixing a home takes money.  More money than I think you might get in a cash out.

Be careful about over extending yourself.  If you make a mistake, you are potentially going to lose the home you live in.

I think I would be inclined to buy a new house that is reasonably priced to live in and rent out the house that I own.  Doing this, you could pay as little as 3.5% down and use the rent toward the new home. 

This is one potential problem with having partners especially when you don't have control. I would try to get the partners to buy me out and then go get a new property that I can control. I would definitely not guarantee the loan on your current deal especially if you do not have direct control over decision making in the LLC.

Fix it up and then pay for the maintenance of the yard out of your pocket.  Include this cost in the rent amount.  Tell them maintenance of the yard is included. 

I had a renter that did not properly care for the yard and had problems with the grass and plants dying and / or growing out of control.