All Forum Posts by: John Matthews

Is there a point where it's downright insulting if your offer is too low?

Let's say I'm considering a property with an asking price of $90,000. If, in order for the numbers to work out for me I determine I need to buy it for no more than $75,000. Let's also assume that the tax assessor has assessed it at $150,000. Is there any issue with offering $70,000 (assuming I'll get negotiated up to $75,000)? How about $60,000?

Secondly, can anyone point me to some resources on becoming a better negotiator?

@Steeve Breton Right. I'd love to factor that stuff in, but this will be my first rental (and first passive income source) so unfortunately I can't deduct too much of my taxes (yet!). Right now CoC matters most to me as well since I'm young, I figure cashflow will essentially increase the compounding affect, and get me to where I want to be faster.

I'm glad I moved then! I used to live outside boston (sharon, MA), but moved to Philly for school then work, though I do miss Boston a bit...

@Toyin Dawodu Absolutely it's a bit more complicated, but I don't really wish to get into fix and flips, and in my situation (my boss says we aren't moving into a multifamily, so I have to listen to her) and cash on hand, in order to get the cashflow I'm looking for it kind of knocks out the possibility of using conventional financing.

Hey BP,

In order to evaluate whether or not a rehab (fix and hold) is worth the money, it seems there are two sides to the equation:

• Evaluating what the property will be worth after rehab
• Evaluating how much money it will take to get the property to the after rehab state

And using those numbers to work backwards to an offer price that would make sense for you. I have vague notions of how to do each, but nothing at all concrete. To break it down as I see it:

I know that ARV is determined through comps, but that said, it's my understanding that really the only effective way to get comps is if you're a realtor (or through a realtor) as most past sales on zillow, etc. are outdated or incorrect. So this isn't too much of an issue if I'm working with a realtor, but the issue I see is: most good deals never make it to the MLS, so how can I do this when working through a wholesaler?

To address the other side of the equation, really the only idea I have is to actually ask the listing agent or the wholesaler. I could bring a contractor to the property to help in the estimation process, but again that's more money up front. I'm not opposed to spending money to do my due diligence, but if I can filter out certain properties before I get to that stage, I'll save both time and money.

What do you rehabbers out there do? First before you get out to see the property, then once you do your drive by?

Thanks!

PS: I haven't bought J Scott's book on rehab costs yet, though I plan to in short order.

Look into the rules and regulations surrounding wholesaling.

This thread may help a bit: http://www.biggerpockets.com/forums/93/topics/2329...

as well as this: http://www.biggerpockets.com/renewsblog/2011/2/10/...

@Patrick O'Neill 

Absolutely, I'd love to. Let me know when the next one you're going to is, and I'll do the same.

If you're investing for cashflow you need to consider that. What will each of the places rent at? Then calculate the cash down into your cash on cash return (or cashflow, whichever is more important to you).

I wouldn't even think of buying either property without some idea of what the numbers look like. 

Other than that, if you personally don't feel comfortable being there, even at night, I wouldn't buy the property.

For conventional loans, if you're going to live there you can put down as little as 3.5% for an FHA loan. This works well for a multifamily, you live in one unit, and rent the other 1-3 units, to pay your rent.

As for non owner occupied conventional loans, you're looking at 20-25% down, depending on the lender. As far as I know this is a rule imposed by Fannie Mae/Freddie Mac - because most lenders turn around and sell your loan it needs to meet these standards.

You can look into portfolio lenders. For them there's no hard limit, though I don't think they'll let you put down less than 10%. That said, I don't know much about them, so someone else can speak to them better than I can. The rationale being, these lenders are keeping your loan in their on portfolio, so they do what they want. They'll generally charge higher rates though.

You can look into seller financing if you're going to buy a home from someone who owns their property free and clear. You may be able to negotiate quite low down payments with them.

There's also subject-to financing, where you assume someone else's loan. Since you're just now paying their mortgage, there's no downpayment, but the seller may require you pay them some cash up front.

You can also buy an undervalued property, wait until it seasons, and do a cashout refinance once it appraises for a higher value. Basically conventional lenders will only give you some amount of the purchase price (say up to 80%), but after a seasoning period (generally 12 months) they'll lend you based on the appraised value. 

You can partner with an investor who has money, have them put the downpayment down provided you can add some value to the deal that isn't cash related.

tldr; If you're going to live there - factor on 5%, if you're not, factor on 25%

@Rodney Kuhl Do you have another deal lined up? If not, then I'd pocket the $200/mo until a better deal comes around. Once it does, or you believe it will soon, then I'd refi to get the most out possible (to me, 65/mo is basically the same as 90/mo - both are almost negligible) if you need the money.

Honestly, considering the work going into landlording, even a free $65/mo may turn out to be below minimum wage.

@Michael Shahan - I'm hardly the expert on this, but here's my quick thoughts on suggestions:

You'll likely need to find motivated sellers, be these out of state investors who no longer want to deal with the property, people who are behind on taxes, people who are under water on their mortgage, people who are soon to be foreclosed on, etc.

It sounds like you're not so interested in the nitty gritty of the search process (neither am I). If I were you, I'd get in touch with some local wholesalers. If you build a good relationship with them, you may be able to work something out. You could offer to provide some service to them (not sure what your day job is, if you have one) such as being a birddog, stuffing envelopes, etc. to learn their tricks.

Another possibility if you know that you can get a stellar deal with cash is to network with Private / Hard money lenders willing to fork over the full amount, then find once the loan is seasoned (6-12 months) refinance at a better rate. The deal will really have to make sense though, since they'll eat you up on holding costs until you're ready to refinance

Hopefully someone else has better suggestions!