All Forum Posts by: Jeremiah B.

I have no first-hand, or second-hand knowledge of this and do not know if it's true.  And my hunch is that if this were well-founded, there would be many posts on the topic. 

I was listening to a Jason Hartman podcast today (one of my two favorite RE podcasts), and one of the speakers said that Fannie are considering increasing their limit from 10 to 12 financed properties later this year.

Has anyone else heard about this?

Here's the link - the comment is around the 23 minute mark: http://www.jasonhartman.com/cw-381-meet-the-masters-lender-panel/

Hey Matt - Welcome Aboard!

I don't live in Charlotte - but I do invest there.  I've purchased three houses in the last 9 months (the third is closing tomorrow!) and hope to get to around 6-8 properties within the next couple of years.

What type of investments are you looking at? Reading between the lines, it looks like you're looking for a buy-hold SFR, but something that needs a bit of work before listing. That's exactly the type of property that I'm interested in.

I am by no means an expert, but I"m always happy to bounce ideas back and forth, or to give you a second pair of eyes on possible deals.

Forgive me for being the greedy one of the lot, but I'm not clear how this would negatively impact me as a landlord.  Specifically:

• Do I need to re-post the correct ad?
• Is there a risk of invalid tenants actually moving in?
• Do I have a legal duty to review my ads to ensure that they are accurate?
• If the scammers are successful, am I liable for anything?
• Other than not posting the address and checking the ads, is there anything that I can do to protect myself?

Thanks all,

Congrats on saving 80K cash. That's a big accomplishment!

There have been great comments above about the strength of leveraging, and that is all true. But, I want to expand on one additional merit of financing:

If you have 80K cash, you don't have 80K to spend.

Buy-and-holders MUST keep a cash reserve. Whether that is 10K or 30K or more is something that I will leave to you. This will depend on how much you spend, age of the house, insurance, etc - but it should be enough that your roof caves in and you lose your job on the same day, but sleep well that night.

Hi Cameron,

There are no hard-and-fast rules on this, but here are some high-points to the questions you asked:

• what is the actual term for turn-key? That is the term. Turn-key implies that the property is ready for an investor from day 1, meaning all the buyer/investor has to do it buy it and turn the key to open the front door.
• How are these properties marketed? Lots of different ways. I would say that the most common is for a turnkey company to market them directly to investors who they have relationships with - meaning that it might be posted on their website or newsletter. It is not uncommon to see these listed on the MLS.
• Are these sold rented? Ideally (and most typically): yes, but not always. Some are in the process of being rented. Some are even sold in bad shape, with the agreement that they will be fixed up for you. With that said, be very careful of how and who these are rented to! The turnkey companies do not plan to hold the property long-term, so their tenant-selection may not be as stringent as you would like.
• What services are offered to a turn key buyer? Typically, for a fee, turnkey companies will help with everything including financing, insurance, placing a tenant, property manager, repairs, etc. But again, this is not always true.
• What makes a good turn key company? Philosophically: reputation and ethics - with a bit of history thrown in. Practically: strong property management.

The question that I expected but didn't see is about cost. In my experience, turnkey companies geared towards the masses (financed buyers) charge around 5%-10% above market for the houses. Depending on your situation, that premium might be worth it.

I did a lengthy, in-depth, but not that well-written article on turnkey providers a while ago. You may want to check that out here:

http://www.biggerpockets.com/blogs/4117/blog_posts/33407-my-out-of-state-search-step-6a---to-turnkey-or-not-to-turnkey

I agree that cashflow is hugely important, and is a great tool to feed growth. Long-term, cashflow is what we need to live off of, or to achieve financial freedom. But within reason, you can always convert net worth to cashflow. Give me $1M cash and a decent credit score, and I can generate $100,000 in cashflow/year pretty easily.

With that said, net worth is a neat snapshot, but it not overly accurate; not all net worth is created equally. Real Estate is expensive to sell, and depending on cost basis, leverage, total value of property, taxes, condition, market, timing, etc. the value of $1,000,000 in equity is worth anywhere from $1,000,000 cash to nothing. This gets more complicated when discussing tax advantaged accounts or notes.

Welcome to BP.

As far as a first investment goes, I wouldn't lose sleep over this. Sure, it's not pretty, but it could be a whole lot worse!

For me, the big question is in repairs over the next 10 years. Do you anticipate huge costs such as roof, siding, etc.? What about repairs - are they high-end finishes? Is it old and dated? etc.

To me, these repairs represent the biggest risk.

With that said, if the risks aren't huge, time has a way of making most real estate transactions look decent. Over time, if you get a little appreciation, a little rent increase - combined with your paydown and tax benefits, you have something with some value.

This also depends on your goals, net worth and other assets. If this is the bulk of your retirement, you may need to cash out. If this is one of many, maybe you want to ride it out. Not sure...

For me, I'm looking for cashflow, and would like it sooner than later. So, I'd probably part ways with this place.

All above is true, but there are also a lot of lenders who are area agnostic, licensed in several states, and who specialize in lending out-of-area/state. If you plan to invest in multiple areas, it may make sense to have a single point of contact to cover all of those areas.

I have no experience with them, but one example is Ridge Lending: http://www.ridgelending.com/

With that said, I've had the best luck getting local referrals from my RE agent.

Interesting topic - and one that I just went through this week (albeit with termites rather than mold). Props to my RE agent for this one.

Sure, trying to negotiate a lower price is often a good idea, but there are a lot of situations where that's not the correct choice. For example, I would walk away if you don't:

1. Have a clear understanding of what the total repair would cost.
2. Have the tolerance for risk or ambiguity.
3. Have the cash to do the repairs while maintaining general cash reserves.

If these are true, walking away may be a better option than getting a $15K reduction on a $10K repair. The first and third were true for me, so I chose to walk away.

Welcome to BP!

I couldn't find the property you referenced, but I will say that I've (almost) never found an "expected cash" value, presented by a turnkey company that I would trust.

Can you share their pro forma? What is the rent? insurance? age of the house? taxes? etc. What are you setting aside for vacancy and rehab?