All Forum Posts by: Account Closed

Hi,

My husband and I are looking at two homes. 

One is in a bad area, but is cheap and would require some renovations (cleaning, paint, and a couple new windows, etc), but provide quick cash flow ($50,000 + $20,000 rehab) since I could easily be turned into a duplex. Each unit would rent for $650. The mortgage would probably be around $650. Instant $650 in our pocket! (leverage ~$25,000)

The other is in a nicer area and would not require renovations ($70,000). It's a 3BR one bath and would probably rent for $750. Which would only put about $100-$150 in our pocket a month, but the leverage would be ~$60,000.

The cost of either home would be the same. Which would be better to purchase? It's a matter of do we want money of course, but we can't seem to wrap our minds around it.

Is cash flow better than leverage? or is leverage better than cash flow? In which case would one be better than the other?

We currently own a home with $100,000 in equity and are thinking of taking a HELOC for our next investment property. I'm just giving this information so forum members could help answer this question better for us.

Thanks,

Jeri and Evan

Good point Andy.

So Jon,

What I believe your saying is pay off my own house as soon as possible with income I'm generating from renting rooms. Then use the leverage of my entire home to invest? (My DTI would be so low.) I currently rent 4 rooms @ 450, everything included and my mortgage is $667, w/utilities a grand total of $1,000 (maybe $1100). Leaving $800. Isn't there some rule bigger pockets follows? That I should assume half of my profit goes into up keep? So $400. If I pay the mortgage at $667 + $400. I could pay off the house within 10 years! (which is really quite awesome, but I wouldn't let me have money to keep investing in the present). I do work full time, so technically I could invest with that money (since I'm not paying utilities or a mortgage anyway.)

I'm just brainstorming. You seem like a pro. I could take this scenario in any direction (I turn 25 tomorrow). I want to consider all options and do what's best with what I have.

Thanks Jon.

So, what would be a best next move so I can start accumulating rental income? Take out a second mortgage for $20,000 (as to not increase the DTI as much as possible) and put it as the 20% down on a $100,000 investment property? (Again...all hypothetical numbers.) Accumulate rental income for 2 years, then leverage against that?

It was a foreclosure in an up-in-coming area. 6 blocks away houses easily go for $200,000, but on my block more like $70,000. I'm not sure how the appraiser's calculation works, but I know they take a random sample of homes to compare their values to the home of interest? This is all new to me.

Hi,

House cost = $59,000, but with repairs the total cost came to $82,000. [I put roughly $8,000 down = I owe $74,000 on the mortgage (30 year fixed)]

My house was appraised at $150,000 before repairs. (I need to get appraised again)

My equity is $76,000 right?

DTI = 29%

Credit Score = 720

What would a real estate investor do?

Taking out a second mortgage for the full $76,000 to buy a couple more properties would put my DTI at roughly 51%.

Wouldn't that kill the entire purpose of what I'm doing? A lender wouldn't lend to me with a DTI like that, which means I wouldn't be able to purchase rental properties.

I don't think I'm thinking about this the right way. I would like to use the equity to buy two homes and rent them out.

If I hypothetically take out that second mortgage for the $76,000 and I try to buy a second property at 20% down for (simplicity sake lets say the second property is $100,000). I would need another $80,000 from a lender. Would they give that to me with a high DTI? I wanted to spread the $76,000 over at least two properties.

Edit**I'm currently renting rooms in my own home. I'm not paying for the mortgage at all, but wouldn't my lender, in his calculations, assume I'm paying the mortgage and use that in his DTI calculation? (DTI calculation above includes me paying mortgage)

Hi Minh. Thanks for responding. I'm not sure I'm following you. If I hypothetically take out that second mortgage for the $76,000 and I try to buy a second property at 20% down for (simplicity sake lets say the second property is $100,000). I would need another $80,000 from a lender. Would they give that to me with a high DTI? I wanted to spread the $76,000 over at least two properties.

Hi,

House cost = $59,000, but with repairs the total cost came to $82,000. [I put roughly $8,000 down = I owe $74,000 on the mortgage (30 year fixed)]

My house was appraised at $150,000 before repairs. (I need to get appraised again)

My equity is $76,000 right?

DTI = 29%

Credit Score = 720

What would a real estate investor do?

Taking out a second mortgage for the full $76,000 to buy a couple more properties would put my DTI at roughly 51%.

Wouldn't that kill the entire purpose of what I'm doing? A lender wouldn't lend to me with a DTI like that, which means I wouldn't be able to purchase rental properties.

I don't think I'm thinking about this the right way. I would like to use the equity to buy two homes and rent them out.

Edit**I'm currently renting rooms in my own home. I'm not paying for the mortgage at all, but wouldn't my lender, in his calculations, assume I'm paying the mortgage and use that in his DTI calculation? (DTI calculation above includes me paying mortgage)

Thanks Everyone! Great Advice!

I'm just brainstorming, nothing too serious.

@Dick Green. I'm not looking for a specific property type. I'm simply looking at overseas options. All options. Nothing specific.

@Mike Jones, I'm not sure I follow what your are saying. Ali states that "You need to know if foreign nationals are legally allowed to own 100% deeded freehold property in that country." Which to me indicates that I can't own 100% every where.

@Mike Jones, but for some reason I was under the impression that in most countries only citizens of that country can own property there. (I'm speaking from information I read a year ago and I can't remember where I read it, so I might be entirely wrong) I thought in the bahamas you can only own land if no bahamians what that property, then it can be bought by an outsider. Or I thought I read in Thailand that a non-citizen can own a percentage of a property as long as a Thai also owned some percentage of the property as well. Again, I might just be making this all up, but I read this somewhere to get this impression.