All Forum Posts by: Jeffrey Johnson

I have read many times on here that most would not get rentals in areas that are not very appealing to most. Very low income areas.

In my city, like in most we have certian areas that seem to have lots and lots of bank owned properties. Prices usually range from 65K and down. These places really need work as well. I would need to get a real deal in order to actually buy one.

So what are the Pros and Cons of this? Seems like a Pro would be that you could get property for very cheap, but the cons would be that it may be hard to get the rent out of it that you need and its not a area most would want to live.

For thoes of you who own rentals do you deal in areas like this or just avoid it all together?

Would you use a line of credit on a house that is not a primary? I have one rental now that is free and clear other than a HELOC of 20k to pay off all credit cards and other debt.

Seems to me that in to build a nest egg to get a good down on a house will take a while. I am not rich by any means and after all my bills are paid I am not left with much. It would take years to get 20K in cash to put down towards a home.

I am from the Minneapolis area and am interested in getting started in REI. I am still in the learning stage (I doubt that stage will ever end) and don't know much about the market except for maybe my direct area, which is out of the city a bit. But I would be interested at some point in talking with you about this.

OK, so in this case if were are working with the same number what is the possibility of using a equity line to finance it. Does it need to be a home loan?

As far as the seller getting 5.5 at the bank. Right now that may be the case but like we have seen over the last 10 years, that is not going to stay there and probably will not get alot higher. I remember not being about to get a MM account for over 2 to 2.5 not so long ago. I sure would not depend on a stream of income coming from a MM account. Anything else may be to risky, depending on the sellers age and situation.

Or maybe you do this deal with a 10 year balloon and then the seller is getting both the interst and will recive a lump sum later on. Than again, it all depends on the sells needs.

I would like to hear a good discussion on Price VS Terms. Now, first off I am a big Fan of the the buying at a huge discount for cash flow. I have read enough posts by MikeOH on this.

Now I know these types of deals are hard to find and take lots of work. So I am unsure when just getting started and holding down a full time job to make sure the family has food that this is the best approch. It maybe, and it just may take longer to get going. But what about the terms of a deal.

say a seller wanted 100k for their SFH. For this to truely cash flow you would probably need to pay 70k for it. This would be great.

Ok, now because I am really new and am still trying to figure out all this stuff out I am going to throw some numbers up that may not be the way everything works, so please correct me if I am way off base.

Example 1: I get the house for 70k and say I can get the loan for the total amount I would have payments at 585 a month for 20 years at 8%

Example 2: I by at retail for 100k I get a 20k loan at 8% and I can get the seller to carry the second mortgage of 80k at 4% for 30 years. for a payment of 548 a month. Just added 37 bucks to my cashflow.

Now I understand to get this deal it may take alot of work as well and will only be under certian conditions, but the same is for example one. Also I would have to make sure the banks will agree to I am sure.

Ok, now please let me know how I went wrong. Also I would love to see other way terms may be as important as price. Is it better to have your terms and there price?

Excellent, thank you. Now can you point me in the direction of the formulas that you used to find this. I could search for them, but it seems you know them off the top of your head. This will help show me how everything really works.

Or is there one good link on here that has all the formula and explanations of them?

thanks,
Jeff

Please check out this link and see if this is a good deal. I have done some calculations with this online tool to the left of the forum, but I just need to know if what I see is right. I will save any info I have until you can take a look. This is the first time I have ever done this and I have only been reading here for a day. Just wanted to get a feel for how this works. I am by no means ready to buy anything atthis point.

http://msp.themlsonline.com/details.search/c271c6dd4373c25b22b36207eb41cb44/5/results/3365859

if there is a problem with the link its http://msp.themlsonline.com MLS# 3365859

thank you

LOL, nice try. :lol:

There is a small area on the roof that leaks so we will have to replace a few sheets I am sure and will do a complete tear off of the roof. This I can do myself if I wanted to. I have a good friend who is a contractor, so I could get the labor done for pretty cheap. Materials would be the most expensive part. But to have it all contracted out the quote was 5000 and 5500 from two contractors.

The problem that I find with the area is that it is a small town with a medium sized town close by. 1000 people in the town the home is and 27,000 for the nearest larger town. $0 miles in each direction there is 2 cities of about 80k each, but still a little too far to really matter.

There is another home for sale right now that is at 179,900 right now and is somewhat comparable to mine, but the ones sold are really not. They are somewhat close in size, but not in features.

The house sits on a lot that is 16000sq feet and has a 3 /12 car garage. The house has 2500sq feet finished on main level. There are 2 master bedrooms each with a master bath and there is a third standard bedroom. There is a formal dining room and a large living room. The kitchen is huge. Again I need measurements, but it’s larger than most 300K new homes and has more custom cabinet space for sure.

The laundry room is also on the main level. The basement is 2000 sq feet usable, but unfinished. Finished the house would be 4500 sq feet roughly. Pretty large.

It does need some touchups, but I really think that it is worth the 179K I was asking.

Good call with painting over the wall paper. The only way I would not is if it was textured paper. Also what’s a good way to get rid of that popcorn ceiling? Can I just scrape it all off and re-spray it with a finer textured spray? Hate them big popcorns from the 60's and 70's.

I have tried to clean the carpet, but it’s no good. It will not come out. The bad part is really just one bedroom. The rest of the carpet is ok, but it’s old and a little shaggy. Nothing like what you get today.

Lots of great advice. Thank you

The house was somewhat cleaned out. There was still some pictures and furniture around. Thought it would look better than bare. Maybe that was part of the problem. Its a pretty big house. But I could probably take all the old wall paper down and repaint everything a netural color.

What about carpet. Should I replace carpet that is old and has some stains. I am sure I should, but I just don't know how much I should put into the house before I start losing again. It needs a new roof. That will go 5k right there probably. Paint I can do myself, so thats probably 500 bucks. I have no idea on Carpet. The deck could be stained to look a little better and the landscapping is ok, but it could use a little cleaning up I guess. Screen doors are old. I guess I should get new there.

so if I am asking 179 now and then I go and do all this stuff to it, do I raise the price to adjust for that?

Actually the home was left to me after my parents died. When going through the estate it was valued at 179,000. I have not done any real improvements to it to deduct. So it should be a pretty straight forward to figure out.

I like this approach, and it seems to be a great way to do it, but how do you find buyers? I had my house on the market for 9 months and had maybe 10 people go through it if even that. And most were neighbors. Maybe it was the Realtor. He had it priced 40k higher that what its really worth, and kept dropping it.

Yes, I do need to do this, but I am unsure how to find some of this data. I have tried to look at trends of past sales in the area, but I have been having hard time finding the info. The interest rate things is not a problem and I will have to read up on how closing costs work. If you have links that could help me find this info that would be great otherwise I will keep looking

I will make sure I do know these numbers

This is the part that I have to work on. I am not the best salesman that ever was thats for sure. Guess I just need to know all the facts and that should really make it much easier. For example they have both owned homes before and are only approved for 150k. They have no money for a down payment at all. I am guessing even if they found a cheaper houses they still would not be able to get a loan with out a 20% down or taking a second mortgage.

The house is in Minnesota in a little SE town called Rollingstone. Just figured I would add that incase it was ever needed in the conversation.