All Forum Posts by: Joshua A Kloos

@William Thomas

I am always a fan of paying the bank less. The average mortgage in the US lasts for around 7 years (this is what my agent told me and I'm not sure on the validity of the statement!) so whether you do a 15 year or a 30 year, the odds are you won't keep it for either of those lengths of time. Check the amortization schedule on both options. 

If you pay down the principle more with the 15 year - then do that; more with the 30 year - then do that. Keep in mind your tenants are paying for the rent and not you - so there is really no value in paying it off sooner. Even if you plan to hold onto it for 30 years. 

It seems like the payment schedule isn't too absurd though - a difference of $2400 a year. However, that $2400 could replace kitchen appliances when they break. 

Up to you, but I always vote for the option that puts more money in my pocket at the end of the day. 

Hope this helps! 

Hey guys! 

So, I am structuring my first fix n' flip deal and I am looking for your opinion on types of loans and strategies that I am tossing around. I just finished selling my first duplex and am using the proceeds for this next deal. 

So, I am trying to wrap the property up for around 100K and the comps in the area range from 190K-230K. My goal with this deal is to put in around 25K worth of repairs and sell it for around 150K-160K

(I currently have around 30K cash)

That being said, I have started looking at rehab loans in my area and I am able to fund the loan with a 25K rehab cost built in. However, this would suck up my free cash as the loan costs around 23K to originate. 

I am also considering doing an FHA (I just sold my last FHA loan with the duplex).

I like the idea of FHA because of the low downpayment option and then my ability to fund the remodel with the free cash I have saved up. However, it means paying down less of the property and needing to fund the repairs exclusively out of pocket.

The property is an area where it will still cashflow around $500/month if I rent it out. It is currently going to be listed with my real estate agent and the property looks like garbage. Needs the floors to be sanded, new paint interior and exterior, new kitchen and new bathroom. It is in a B class neighborhood and the current owners (I assume) do not have the capital to do these repairs. This is why I am assuming they will take my offer of 100K for the property instead of the market value of 150K. There is TONS of garbage and the property has been neglected. 

That being said, if flipping it doesn't pan out, it may also be a good buy and hold option. 

Anyway, what are your opinions!??

Best,

Josh

@Austin Neal

I don’t mean that equity should be ignored. But let’s say that the market corrects itself next summer and the deal he just paid 150k for is now worth 110k. The cash flow (the Money in your pocket each month) stays the same, than the 40k in “equity” lost doesn’t mean the deal was a mistake.

I am just pointing out that the value of the property is, for the most part, out of the owners control and is subject to market fluctuations. But the rents are the real money that goes into the owners pocket each month - ie tangible money.

@Joey Saldaña

I'm new to real estate investing myself so take any of my opinions with a grain of salt! 

I think the key do a good deal is your belief in said deal. I'd be careful about reading and "educating" yourself too much. 

Like Nike - Just Do It

Each market is different and has different laws, regulations, ways to make money, etc. So, what is profitable in one market could be not profitable in another. I'm originally from MN and up there, multifamily houses, buildings, apartment complexes are a dime a dozen - there are HUNDREDS of them for sale constantly. Recently I moved to Fort Myers and now everything down here is vacation rentals. Vacation rental space scares the hell out of me - what do you mean renting a whole house to one family for a few weeks/months at a time? I'm just more comfortable with 12 month leases! My idea of buying multifamily has been put on hold because the market seems to thrive off of vacation rentals! 

Anyway, my point being that you should go out and "do" as quickly as possible and figure out what works and what doesn't. Worst case scenario, at least you own an asset! 

@Bruce C.

Craigslist creepers are coming out to play. 

@Tom Roarabaugh

I highly doubt they would ask any questions. I filled out a "gift" form when I was underwritten for my duplex. A relative had loaned me some money for college tuition costs as a gift and I just told the bank it was a downpayment for the duplex (even though I spent it before the property closed). 

I wouldn't worry about it too much, man. 

35K might seem like a lot of money, but to banks and lenders, I'm sure they are just happy you are coming along so they can write more loans! 

@Blake Bailey

I worked as a maintenance guy for two years and owned a duplex in the ghetto. So this opinion is coming from that background. 

Run screaming from section 8 as fast as you can. For a few reasons: 

1. In my experience the probability of having issues is almost guaranteed. This is coming from a maintenance guy who had to deal with their 2am phone calls about them drunkenly shattering their toilets, flooding bathrooms and starting kitchen fires. 

2. Depending on your state laws, the government makes the lease and it is very general. This could create issues as you do not get the option of using your own lease so you are probably at a higher risk. 

It might be a great deal, it might not be. There are folks who are on section 8 assistance who genuinely need it and are great people. However, a lot of people on those assistance programs have some issue which are preventing them from making enough money. Whether it be past drug abuse, too many children, or whatever the reason. By renting to these folks you are increasing the chance that your tenant has issues that come out six months into the lease. Then you are locked into dealing with them for the next year and a half. 

hope this helps! 

@Russ Marlborough

Couple of things! 

1. Depending on the circumstance, if you back out the owner will have to display the appraisal price to future buyers (if he is using a real estate agent), so you could bring that up/talk to your agent about it

2. Get physical confirmation on the rents - receipts, leases, damage deposits, etc

3. If it is cash flowing, why back out? You wanted it at 150k so, in my opinion, who cares what it appraised it - equity isn't "real money" anyway. Home value is for the bank and everything that affects the home value, to some degree, is out of your control. 

4. I don't know your financial position, but losing 13K would be a hit in my opinion and isn't worth backing out simply from that. 

5. The duplex I just sold last Friday for 250K was throwing off $2800/month and I purchased it for 207K a year ago. I asked 250K because of the cashflow - I did to my buyer the same thing that is happening to you. The bank appraised my property at 220K yet I still had a cash offer within 2 days of being on the market.

6. At the end of the day if you like it, I don't think it matters what the bank appraises it at. 

Hope this is helpful! 

@Jermaine Perry

I purchased my first duplex last year with 35K student debt, hadn't graduated yet, was making $16/hr as a maintenance guy (around 33K/year). I used an FHA loan and lived in the bottom and rented out the top portion.

When I went to a lender, I was paying over $1000/month in rent. They factored in my rent savings as well as the projected income the rented out unit would produce and I was pre-approved for up to $220,000.

Check around with different lenders! They should approve you for something - especially if you plan to FHA and live in the property.

@Pasquale Zingarella

I work for a roofing company in Fort Myers/Cape Coral. 

I do not know any builders, but I saw this as an opportunity for some roofing business. =) 

We specialize in insurance work and have around a 95% success rate in getting insurance companies to pay for new roofs on residential and commercial properties. 

We find damage from the hurricane Irma and the micro burst that happened last December. A lot of wind damage went unnoticed/ignored by insurance adjusters. Great way to increase the value of the property/equity standing and get the insurance to pay for it. 

Let's touch base if you have any questions!