All Forum Posts by: Jesse Waters

If you think $115k is a good price, you can always finance it is, so long as the appraisal will carry it.  Offer $115k with Xyz HVAC unit installed, final price of $120k.  So if you are putting 25% down, your down payment is only $1,000 more.  I have used this strategy for closing cost as well as other repairs.  

Every property that I have purchased, I have managed to get some concession out of the seller, but, you might want to wait until after you get a ratified contract & get your inspection done.  I would first ask for a new AC, cash at closing for one or something along those lines.

The warranty isn't a bad way to go either, just be aware that they don't always replace the whole unit, just the broken parts, and you will have extra fee's associated with what ever they install including haul away, adapters, extra parts, new coolant etc.  I had to have one AC replaced and the warranty company said it would take about $800 out of pocket, and that was only to replace the outside part of the unit.

I could get 2%, but its a part of town that you need the swat team to go into after dark. Generally, we are closer to 1% on a SFR in a decent part of town or 1.5-1.7 for a quad.

Thanks for the post @David Dachtera. I believe that an education in any field is invaluable. No one would drive a car with out getting some instruction first. I also did a course on REI, although it was more of a nation wide program it was well worth my time, and marginally worth the money that I had spent. I feel that if I hadn't taken the course that I would have spent that much or more in mistakes, and the program helped me realize some of the mistakes that I had made up to that point, only having two rentals at the time.

I would personally recommend that people get their education in which ever aspect of REI that they want to focus in through multiple different sources. Books, BP, mentors and the like. I feel that most "guru's" out there are just in the business of up-selling their programs & not actually in the business of educating investors.

The biggest thing I got out of my course, besides how to analyze a deal, was what I didn't know.  Discovering what I didn't was invaluable.  That knowledge of my lack of knowledge pointed me in the direction of what I needed to learn and enabled me to start to fill in the gaps.

By no means am I where I need to be, but I feel that I am on the right track now.  Thanks again for the thoughts.  Education is priceless, but it doesn't have to come from a guru or be expensive.

My properties range between mid 90's construction to the 1950's.  And I am looking at 2 different properties that were build in the 1920's.

I agree with @Kerry Baird about the reserves.  I had to prove 6 months reserves on all my properties excluding my primary residence.  My lender only required principle & interest and also allowed the funds to be in my 401k.  All I had to do was show documentation that I could access the funds should I fall on hard times.  I do think that they value retirement and brokerage accounts lower than savings accounts, since the value can go down, I want to say they used something like 75-80% of the actual value.

I would agree with @Jon Holdman on this one, don't kick them out, bring rents up after you take over.  Every property that I have purchased with existing tenants I have kept, although some view new management as a chance to not pay, and they end up getting kicked out.

If you have one vacancy, fix that unit up, don't go so overboard that your improvements don't give you a good return.  Then, ask a current tenant if they want to move into that unit at a higher rent with a year's lease, or rent it out to a new tenant, then give one of the other tenants a 30 day notice, and start your repairs on the second after they move out, repeat for the 3rd.

Just my thoughts.  Best of luck.

Good point @Marco G. I always like to have my financing in order before I make an offer.  Knowing how things will work out with the bank puts me in a much stronger position when I am dealing with a seller.  I'm not trying to jerk them around, just like to be in the strongest position possible.

In fact, waiting back on an answer from the bank now about picking up 3 more quad's & a duplex in one deal.  Numbers are good, but don't want to have offer's dangling out there until I am in a position that I need to be to get the deal that I want.

You can get a loan, as was mentioned shop around. Also, look at the short term cash flow, ROI, etc if you bought one all cash vs 3 financed with the same amount of cash spent.

Also, look at where you will be in say 5 or 10 years as far as cash flow & gain in overall net worth, equity etc with the help of leverage.  

This is a common discussion that I have with a few REI friends of mine, mortgage vs no mortgage.

My basic though is to get as many good properties as I can for as little out of pocket as possible, re-invest the cash flow & in 10 years or so I should be looking pretty good, and once they are paid off...

Just my thoughts.  Best of luck.

Since you aren't going owner occupied, plan on at least 20% down payment.

Just doing a quick review, I would look at the numbers again.  If it gross rents are $1600, apply the 50% rule, that gives you $800 to pay the mortgage with.  Your mortgage P&I is $814, you are negative $14/month.

The 50% rule isn't hard and fast and it does vary by property type & area.  In my area I generally end up at 45%, but I usually estimate at 52% when I am doing a quick analysis.

Other individual items to consider is lawn, pest, CAPEX (Capital items like roof, AC etc) maintenance. Don't discount management either. You will gain a lot of experience managing your self, however, if your situation changes and you need to place the property under management you want to make sure that it will still cash flow. Also, don't forget about vacancy, generally 8-10%. Will you also be paying any of the utilities in the building? I have to pay water on my 4-plex's since that's what the market demands.

Hope this helps.  Best of luck.

As far as I know, no, you don't have to refi the first one to buy the second, so long as you have lived in the first long enough to satisfy the seasoning requirements to have called it your primary residence as an O/O.

Once you have been there for a while, call up your lender and tell him/her that you want to buy a new place and you plan on living there for a while.  You will have some rental history on the old place, hopefully a bit of equity & they can give you a good idea of what terms they are willing to offer you, which in turn will give you some guidance on how you need to approach your next deal.

Best of luck.