All Forum Posts by: Joseph Walsh

Thanks for the detailed response

 I'm not, other than getting my initial money out sooner to put toward something else.  Ideally, I'd love to use the buy at discount, cash out refi 6 months down the road, but I don't see that happening due to the lack of equity growth.  Which is fine, just not what I am used to running the numbers on.   The cash flow is really good relative to the investment, with room for value add over time on each of the properties.   I'll see much DP a local bank might want, maybe I get it lower than 20%.  Other than that, it really does just "work" for the numbers.  NO need to over think it, time to pull the trigger.

Thanks.

Jay

Hi all,

Question for you all.  We are looking at student rentals.  We found a few that are "great" options.  We have found a few houses that are well priced, and will rent probably at the mythical 2%, maybe more if I were to do some reconfiguring in future years.  Rents are increasing, and due to demand, vacancy, while account for, may never actually happen.  Houses are cheap, 60-80k.  Problem is, there is no growth in this market, these houses will be worth 60-80k.  maybe a few % 5+ years down the road.  What's the best way to purchase these.  I likely can't get the house low enough + improvements to hit 25% equity for a "traditional" private/hml investor, improve, cash-our refi.  How would you approach an investor for say, only the DP and improvement costs, and the return is on the rents for say, 3-5 years, instead of in year 1.

There is a silver lining.  Worse case scenario I could just do a traditional finance and pony up the DP at those prices, but it ties up that cash for 4 years.  It might still be worth it.

Thoughts?

Thanks, 

Jay

Good luck.  It didn't pop with my wife until recently, and she still doesn't get the whole acronym.  What finally got her to "see the light"?  She had an epiphany one night at 3am when she couldn't sleep.  "Holy crap, we could buy a house near campus for less than she has to pay for rent, and get 2x that rent from a couple other students..."  Amazing concept!  sounds similar to something I said a year ago!  The point, the dollars made sense.  After that, it was relatively easy to say:  "take a short term loan from investor (or our account/heloc/etc", buy house at discount, paint the house, do a cash-out refinance" pay off the investor, and collect the money...

Sadly, sounds like you got scammed.  My PM is set up this way:  I put $500 in escrow with them for the property, they use that for "stuff"  Our contract is set up anything over $200 they'll get authorization from me.  They will only use the money from the escrow for "stuff", so I am limited to $500 max even if they don't/can't get authorization from me for more expensive work.  Simply put, they won't spend more than the $500 from the account since it would be out of their pocket, and would have to get the money from me to make up the difference.

Had I done this on my primary residence, I would of been stuck with aan additional $15k bill.  The house clearly had some "settling", the price was low for the market, and the house was 50+ years old, so even though there was clearly some foundation movement "in the past", it was a solid purchase.  Inspection turned up a follow-up suggestion:  "If I were you, I'd get a drain tile test"  I asked the seller if it would be ok, they said yes, house needed new drain tile system and foundation wall re-enforcement: $15k.  I was willing to "eat" all the other nickle and dime things on the property(old furnace, leaky windows, etc), but had I waved the inspection, I would of been screwed.  Long story short, don't do it.

This success story has made me re-consider fix-flip as a tool toward my buy and hold goals.  in combination with "saving", maybe some "making" can accelerate the growth of the rental portfolio....Thank you.

Let's pretend it's legal.  (not an attorney, don't know, my gut tells me it's not, but I'm a pretty "no gray area" kind of guy...so) you're effectively leveraging 5 properties for significantly more than they are worth.  What happens in say, 5 years, when the market corrects?  You're underwater on those 5 properties.  Maybe not, maybe they appreciate, maybe you don't care, with the money you pulled out, you added enough "actual" value in other investments, but unless one of the "maybes" is "you plan to skip town and default", eventually, even if legal, this will require some dumb luck not to put you in a deep debt hole.  Then again, I own exactly one rental, but even my "newb" feelers are tingling on this.

"especially because most employers offer awful 401k fund options. Usually, they are high-fee and have a ton of hidden fees attached with them. I lay the fault on the misguided HR departments." I think this general assumption is flawed and not backed by any real data, these are more likely the exception, not the norm. Every place I have worked(over 20+ years) has been through a big financial house like Fidelity (for example) which has many low cost options. (I am in an index fund at 0.3%) and a few other funds, that even with fee's are returning ~10-12% a year(although this year has been exceptional, approaching 20%). Plus it's optional. Unlike the 12%+ you are forced to contribute to SS for a whopping 0.75% ROI. Don't like the choices, take the tax hit, put your money in a Roth, buy a rental, or classic car and actively "manage" your investment. A 401k/IRA is even MORE autopilot than the very best case scenario of rental with property management. The viewpoint also under states the value of reducing tax burden NOW vs. later. Yes, you pay more in the long run, but would you rather have $5000 right now, or $250 a year for 25 years, starting in 25 years?

Reaching out to the base Ombudsman would be a good start.  There is clearly something going on in this Service Member's life that is having significant impact on him.  Which IS of concern to the Military / Chain of Command.  Whether or not it helps you out as the landlord (indirectly, it probably will), it will get someone aware/involved in this individuals problems and likely will help them out more than you will ever know in the long run.  Financial issues are possibly the single biggest issue the Military as a whole has to deal with that affects readiness.  And yes, sometimes (more than there should be) there are pay issues, the #1 reason people leave the military.  However, in this case, it sounds like this individual's life might be starting to spiral, and you are caught in the path.  Reaching out in a way that might get them the support they need, may also help you out as well.