All Forum Posts by: Jonathan Holmes

Your area/prices are much different than mine so a local perspective would be more ideal. That said I suspect you will struggle to cash flow this as a rental once you move. It could be a break even property on good years and maybe slightly negative on bad years. It is hard for me to guess. However, with a roommate situation you might do just fine. 

If you adjust your time table for your move out you very well might be able to make money off this place and use it as a spring board into future investments. This all depends on your market. Will rents be significantly higher in five years? Because you payment will be the same. The only way appreciation is really going to save you would be if you sell it or refinance it. Selling it will get you cash (maybe). Depending on interest rates a future refi might get rid of your PMI and thus get you some cash flow.

Even if at the end of the day you rent it and it pays for itself you will make money...it just might take thirty years.

I would advise to keep you eyes on your market. It is easy with a steady tenant to lose touch with what the rents are in your area. That said this is extremely area dependent. Where I live I expect a slow increase in market rents. Also keep in mind that as your property ages and takes wear and tear that it may not be up to getting market rent. If the kitchen was just about ready for a fix up and you have a tenant who has lived there five years, then you will need to do some improvements before you can get market rent on the next turn over. This why I spend some time regularly looking at other ads on hotpads or Craigslist just to keep up on what’s out there.

Check you state laws to be sure. Generally it is fine to list your LLC as the management for the rental and form the lease between the tenants and the LLC.

There are apps that you can download or websites that you go to that will calculate a mortgage schedule. Basically, you just need to have a rough idea of the terms. Interest rate, amortization rate, price. Then you add in taxes, insurance, repairs, cap ex, vacancy, management and that’s your monthly payment. Obviously some of that money you pay to yourself to build reserves. You have a lot of options with an owner financed deal you could do a balloon payment at the end but keep your payments low with a 30 year amortization. That would likely require a refinance at the before the balloon payment is due. A word of caution though, if an owner agrees to a 100% financing deal you need to really think about whether this property is a good deal. If it is in a war zone you will need a manager with a very specific skill set. Your vacancy will be high as will your needed repairs and likely eviction cost. That is not meant to be discouraging just make sure it’s a property class you want to be in and that you factor those costs in. Also keep in mind you are far more likely to hear no than yes in this kind of circumstance. Don’t let this break your heart it’s just the norm. Most owners have a hard time accepting that a property they have owned for years is not worth what they want it to be.

Sounds like you need to improve your credit score and/or establish a credit history and save up some cash. Assuming that you will not owner occupy then 20% down is standard for a SFH. Any multi family will require 25%. You can house hack or find owner financing to get around this. You could also do a seller carry back which may reduce your overall down payment but it will still be at least 20% of the borrowed amount and seller carry back is usually only done in commercial loans. (Which require 30% down generally)

Sounds like you need to improve your credit score and/or establish a credit history and save up some cash. Assuming that you will not owner occupy then 20% down is standard for a SFH. Any multi family will require 25%. You can house hack or find owner financing to get around this. You could also do a seller carry back which may reduce your overall down payment but it will still be at least 20% of the borrowed amount and seller carry back is usually only done in commercial loans. (Which require 30% down generally)

If you go the cash for keys route make sure you have them sign something before hand saying they are terminating tenancy. Under most state laws they would not be considered squatters so you must follow the law to remove them. When they hand over keys and have all their stuff out you give them the money not before. Even if this means having it in a truck in the driveway. Next is secure the property. This will mean changed locks and maybe even securing windows. My concern with this situation would be they may decide to take your money and break back in. As far as an eviction goes you are in an odd situation and I would contact an attorney. In my state no lease means they default to a basic agreement based on state laws. With the addition on them not paying rent it’s a bit odd. I would not be surprised if you had to notify them of a change in rent, wait for them to not pay and then evict or Possibly you may just have to give them 30 Days notice to vacate and then proceed.

You’re never to young for your first purchase assuming it’s a good deal. Just be as sure as you can be with your numbers. Rent, rehab, utilities, taxes, insurance, mortgage payment, repairs, vacancies add it all up. Make sure your after repair value is conservative. Everyone is nervous when the buy. You never know 100% if it’s a good buy but you can come close with good due diligence. When I found out my offer was accepted on my first purchase I had to sit down a moment to catch my breath.

How long are you willing to pay their bills? It is tremendously sad that they are in this situation but unless you are willing to adopt them for the rest of their lives you cannot make yourself responsible. You don’t know the choices that were made that have lead them to where they are at. There are people in sad situations everywhere. Your family must be the priority. That said there are charities, county and state resources they can turn to point them in those directions if needed.

Go to almost any national bank and ask if they do FHA loans. Local banks are generally more useful once you have to many active mortgages to get a loan from a major bank. Some of them keep portfolio loans which means the loan does not have to conform in order to be resold on the secondary mortgage market.