All Forum Posts by: Jim Patrick

Like I said, I do agree that appreciation is a great thing over a long period of time. That said, if you want to talk about leveraging funds to buy more investment properties then appreciation isn't always your greatest benefit.

Say you buy a property at 7% interest for 15 years at $100k. In 15 years at 5.34% appreciation it is worth about $218k. You would be able to refi to about $174k leaving you with 74k profit minus financing costs from appreciation. You would receive 100k from principal paydown.

On the other hand, you can own an asset free and clear, have a helluva credit line to buy other properties for cash, and get a very nice cash flow (I bet those rents appreciated too).

And while I agree that appreciation is the best benefit over a LONG period of time I can't agree with your example over a 5 year period. As you said, that 5.34% appreciation per year youre using is over a period of 59 years. I bet there are a lot of areas that won't see that over the next 5 years, wouldnt you agree? Using your example, at least I know I will be making 12k, of which 8k is liquid. Tax benefits are definitely great at all times though.

How can you justiyfy appreciation as being "miles ahead" of principal paydown? The way I see it, principal paydown is at least guaranteed equity that you will be building whereas, as MikeOH said, appreciation is speculation.

As long as tenants are paying rent and paying your mortgage you are gaining equity. Appreciation is a great benefit indeed, especially on high ticket and highly leveraged items such as real estate, but it is highly variable (unless youre looking over a very long timeframe). I would rather know I am definitely building wealth rather than possibly.

I've read through a number of posts already about the best business entities for investing and they obviously differ greatly depending on what type you do. I don't have much cash or credit and will be focusing on mostly CAs and perhaps some SLOs if the numbers justify the risk. Correct me if I'm wrong but it would seem an LLC would suit my needs the best.

That being said, I dont have any real assets to go after and CAs are relatively low risk. The main reason I want a business is for the name, I feel it will help legitimize me when approaching sellers and would tie in well with my marketing plans. Is it possible to begin as a sole propietorship and then change to an LLC once I get going? What would the costs be to form a SP?

If there would be a better approach than doing a SP Id like to hear that too. Basically all I want to be able to do is have a business name at the lowest cost possible, liability protection is not really a concern to me right now

Kevin,

Thanks for the advice and feedback. I've heard similar things about the 203k being difficult to deal with. The lender I spoke with told me that small cosmetic jobs usually don't work in draws but bigger jobs do require inspections to release more funds. She couldn't give me any definite answers so I would still need to look into this further.

I know of the 50% rule from reading these forums and it does make perfect sense to me for straight rentals. However, I will be using this as my residence and it will be shorter term, 2-3 years. I want to take advantage of tax-free profits and figure by getting into fixers and making a profit when I buy/fix I can build-up some some cash reasonably fast.

On another note, in terms of resale of multi-unit properties how is the price figured out? Around here there are mostly single family homes on small lots, some townhouses and some garden style apartments. No real comps for triplexs or duplexes. Would you just compare beds/baths? Or is the extra rental income somehow figured into the price?

Really, no feedback on this? Nobody has any opinions about buying a multi-unit property as a first-home? Pros/cons?

I am just getting into real estate right now but just wanted to share briefly because I found myself in a VERY similar situation.

I was a biological sciences major at Clemson and realized my junior year I wasn't going to follow that route. Decided to pickup 2 business minors, entrepreneurship and business admin. I was just starting to tak interest in real estate at this point but agree with what everyone said that a degree is a great thing to have.

Science may not directly relate to real estate but you can pull lessons from anything you do in life. Science teaches you how to analyze, problem solve and present data in an unbiased manner. You must be able to research unobjectively and reach conclusions based on your findings. Seems that might come in handy in real estate.

After graduation, not wanting to get into science, I did door-to-door sales for a few months and then did collections on car notes for about a year. I didn't truly enjoy either job but once again pulled great lessons from both. I just recently got a job as an assistant listing manager with a busy real estate team in Alexandria, VA to learn the business and give me a foundation to start investing.

Hope this helps.

Been a while since I first introduced myself but I've been busy working 2 jobs and studying for my real estate license. Wanted to get some advice on my gameplan for my first investment and use a potential property as an example to see if my thought process is on track.

For my first investment I plan to purchase a home as an owner-occupant as I currently rent. 203k loans are starting to be used more and I was actually talking to a Countrywide loan consultant yesterday and they even give additional closing assistance if it is one of their properties, I wonder if other banks are doing this too. I'm using this because it requires very little cash out of pocket, I can ge downpayment and closing cost assistance through various programs and I can roll all rehab costs into the loan including 6 months of payments while it is being rehabbed.

I live in South Arlington, VA and home prices are high here. Prices seem to have leveled out but there are many deals to be had especially foreclosures and short sales in rough shape. I only gross about $5k a month so wouldn't be able to afford much which is why multi-units interest me.

This leads me to my example property:

Its a short sale for $369,900 in an up and coming neighborhood right by a park and down the street from the local high school. It is a triplex that is all separately metered, 2 1br/1b units and one 3br/2ba units. It is over 100 hundred years old and from just the outside (viewing it Friday) it probably needs to be completely rehabbed.

What I feel the most realistic estimate would be due to location and after being rehabbed is $900 per 1br and $2000 for 3br for total of $3800. Taxes are about $400 per month. I would live in a 1br unit so after taxes and cost of that unit I would be netting about $2500 month. Obviously insurance and maintenance need to be taken int account as well. I plan to live here a few years to get the tax benefits and it won't need much maintenance after rehab hopefully.

So with say, $2000 a month from rents going towards the mortgage, and my personal budget of $1100 month, how much could I pay for this home including repairs? How much of the rents can be credited towards income? 75%?

Sorry thats such a long-winded post, just want to make sure I'm at least pointed in the right direction. I appreciate your help and feedback.

Jim

Thanks for the welcome. I apologize for the late response but Ive been busy with the move and trying to find a place to live. Hopefully should be all squared away tomorrow so I can move out of my friend's guestroom.

As far as my real estate goals, Im still trying to figure out what exactly the best path would be in my situation. Ultimately, as I assume most people do, I would like to be able to live off my investments with passive cashflow and minimal active participation. I do realize that the buy and hold strategy, which is best to accomplish this, is a few good years away at this point.

Basically I'd like to do a bit of everything as I get into investing. Start with wholesaling then do some lease-options and subject-to's as I get more comfortable and build reserves. Within a few years once I have adequate capitol I would like to begin doing some rehabs as well. In the end I want to have a business that can generate the highest percentage of leads into profits as possible by offering many possible solutions.

I should hear tomorrow about the real estate job but feel confident. I feel it will be a great opportunity to get a free education while getting paid. Unsure yet whether I will pursue my real estate license or not, need to weigh liability and disclosure issues when I reach that point.

So I'm excited to see where I will be 6 months from now, hopefully a bit closer to my goals.

Hey all,

First, just wanted to say I've been a lurker on this site for quite a while and have been very impressed by both the knowledge and willingness to help others that this site's memberbase has demonstrated.

Now, a bit about myself. My name is Jim Patrick and I graduated from Clemson University just over a year ago. I have been interested in real estate for several years now but have never really felt as if I had the knowledge to start. I recently re-evaluated my current position (location, job, etc.) and realized it was time for a change.

Though its only been a year since graduation I have been stuck in a job that I hate that has no career growth at all, let alone a path towards my goals. I do believe everything happens for a reason and one day it seemed like everything was pointing towards me making a life-changing decision. A very good friend of mine was moving to Alexandria right when my lease was over. I decided it was now or never to get out of my job and leave Philadelphia so I quit and will be moving this coming week.

I have already managed (pretty definite) to find myself a job with a real estate company and will be going in next week to iron out the details. The position is as an assistant listing manager, doing a lot of data entry and administrative functions. I figure this will allow me to work closely with agents and clients and gain some firsthand knowledge in the industry. Hopefully I can negotiate a high enough salary to live comfortably off of and have time to start investing on the side.

So as of now Im going to get situated over the next few months and then begin delving into the world of investing. I plan to start with low cost methods such as wholesaling where I can gain knowledge, and capital, without much of my own money at risk. I would like to buy a fixer-upper within the next year as a personal residence so I can minimize my risk while learning the ropes.

I look forward to participating on this forum and you should be seeing a lot more of me in the future.

Jim