All Forum Posts by: John Princinsky

@Matthew Mclean

The less you put into the property, the higher your rate of return as it appreciates.

Example: 100k property appreciates to 104k

If you bought it cash you would have made a 4% return.

If you put 10k down you would have made a 40% return.

Even if your extra cash gets put into an index fund, when you factor in your “effective percentage rate” (your interest rate with tax deductions factored in- assuming that you itemize instead of take the standard deduction), you are most likely going to get a better return for your money that you invested.

If it were me- I’d do a 40 year interest only mortgage with 0% down if I could lol.

But of course- everyone has their own idea of ‘risk’ and discipline in managing their investment(s).

If you DO decide to put a larger amount than needed down- some may consider also getting a HELOC for the equity (even if you don't borrow from it) as an ‘insurance' policy to easily be able to access your equity without having to sell the property or worry about being able to qualify for a refi down the road.

This is all conceptual, though, of course. It will entirely depend on your exact situation.

I recently got my license to do mortgages in Michigan. At this time I am focusing on working directly with consumers rather than investors but because of the dynamics here in Saginaw I’ve already noticed situations where people are looking for homes under the threshold for what I can lend to consumers. (Under $60k) I’m wondering if there are any investors in Mid MI who would like me to send potential tenant/ buyers there way. It would be great to connect!

I have a few questions and would love any input you could give. First a little about me and then I will explain the potential deal. I’ve been into casually reading about REI for more than 10 years. The closest I came to my own investment was renting out individual rooms from my home (back when I owned one) to be able to afford living there while my income had dropped. I learned a lot! Right now my primary business is not doing so hot and I am considering closing the doors in order to seek out a regular job - that way I can bank more money for my long term pursuits. This isn’t yet decided because I still may be able to turn things around. Nevertheless, I am tired of being on the wrong side of compound interest and recognize my need for change. REI has always been a part of my long term vision. Right now I don’t have much in personal cash or assets but found a real estate deal I am interested in considering. It is a Triplex in Michigan (where I live). Asking price is 75k, all 3 units are rented with a gross income of $1,235. It fits the 50% rule, but the max offer so far would be 61,500 based on the 2% rule. I am under the impression that it hasn’t been managed well because the seller has had it for 3 years and has not paid taxes on it since taking ownership. I am just now about to dig further into all of the expenses and details involved. Since I don’t have money for the down payment I am working out ideas for how to come up with the money. With my income being kind of low at the moment, I am understanding that it may be possible to include 75% of the gross income towards qualifying for a mortgage. I wonder if I can find a limited partner for the down payment cash or perhaps some kind of secondary financing, then refinance the property as soon as it is seasoned. If I can obtain the property below the value of comps, would it be likely to refinance it at an amount that would give me the cash to pay back what I borrowed for the down payment? What factors do I need to consider with a strategy like that? Are there other methods that might be viable? I don’t know just yet but I’m guessing the seller is expecting to sell the property conventionally. Any constructive advice would be appreciated!

Sad I missed it!

Just noticed you posted this 3 months ago, are you still looking for someone?

Hey Craig, I live in Saginaw and know a few contractors. I'll see if I can find someone to recommend. How soon do you intend to begin the rehab?

Now that I've read into things more, perhaps I'm at more of the deal analysis stage, since its not under contract... Can you tell I'm green? Lol

Hey John,

I came across a potentially good MHP deal but I do not have it under contract as it is going up for auction. Not sure if it's of any help since its not under contract, but I would be very thankful to have some help with the due diligence needed before putting in an offer if you are still looking for a case study.

Thank you all for your responses. Your input is incredibly beneficial and I hope to be able to return the valuable insight I’ve gained at some point. Hopefully my response here will cover all of your helpful comments.

I guess I should mention that I’m referring to unlisted properties that I would be buying or selling for myself and not be getting a commission on. If it were listed it would make sense for the broker (and me) to receive part of the commission.
So I guess the real question is whether or not the broker should require that I list all of the properties that I work with.

They have told me that this is required by law, but I am not so sure that is true. I do believe it is common for brokers to have this policy with their agents, but most agents don't seem to have much interest in investing themselves (Which surprises me!). I can see that the sponsoring broker would want to have some control over their agents' personal investment practices so that they are not unknowingly held liable for any unethical practices on behalf of the agent. But from an investor's standpoint, I don't like the idea of unnecessarily needing to list my property on the MLS and pay my broker 3% for me to sell my own property.

I did consider a no-service broker for a monthly fee, but can’t seem to find one in my area at the moment. (Which doesn’t surprise me really, because it doesn’t sound like an effective business plan from a broker’s standpoint, IMO) So perhaps I will just have to see if I can negotiate some other kind of terms with a broker…
I wouldn't mind obtaining a broker's license at some point so I have more control (not to supervise a bunch of salespeople!), but in MI you're required to have a minimum of 3 years of full time experience as a real estate professional to obtain a brokers license. I also would like to jump right into just REI, but do not currently have a ‘career' and it seems to make sense to pursue a career in the same industry if I am seeking employment.

So, I guess I need to just work on negotiating with a broker to find a fitting agreement. I do have the fear that it will seem I am overvaluing myself as a new agent and hope that is not the case. I just think that if I am representing myself and not as an agent for someone else, I should be able to fall under the applicable laws/ responsibilities as a property owner.
Thank you all for your comments! I will have to get a look at some specifics in the contracts and/or talk again with some brokers to see what can be worked out with them. (Maybe a smaller %).

Oh, and Joel Owens, not at all discouraging- I appreciate your insight.

I don't mean to be selfish with this, perhaps I just don't see how the brokers role adds any value to an investment I'm making for myself...