All Forum Posts by: Justin Marshall

I would be more concerned with those numbers as 1 months vacancy is actually over 1 years cash flow.  The numbers don't really work unless this is fully turnkey and you have no maintenance costs.  100/month doesn't even cover the service call fee for anyone to show up if you do have an issue.  Are you able to rent this by the room for a high rate or would it better suite Air B&B given your location? I don't know your market nor the caliber of house but the numbers seem so thin. If you can spend minimal to get to the higher end of your cash flow numbers I would go that route over worrying about interest rates. You have 71/month difference from lowest to highest rate.  I'd also attempt to negotiate some closing costs from the seller.  You would be money ahead to increase your loaned amount by the 5k and not worry about points and stay at the 2.75% as it would only increase your payment 20/month roughly to go this route.  Increase the purchase price and have sellers pay your closing cost.

Approach the tenant with a form of value.  Why are you increasing the rents? Just because the market dictates a higher rent won't go over well and will most likely end up with a vacancy.  We typically lay a scheduled increase in our leases yearly as a percentage or even flat monthly increase. Check your guidelines as most states won't allow extremely large rate increases but they have to be over time.  

I would research a handful of markets to follow numbers.  Most turnkey properties after adding on management fees truly don't cash flow well or if at all in the current market.  A lot would depend on what your goal is for future investments.  I don't feel playing the appreciation game is the best strat after the housing market increase the past 10 months.  My market is currently shifting and most units are no longer selling over list but rather 2-3 percent below.  

Do you have the ability to add to your portfolio with current capital? Are you wanting to scale? Have you decided if you like being a land lord? Are there opportunities for you to buy more properties at a reasonable value?

With the prices you've mentioned on the first 2 purchases and assuming accurate numbers of 100k equity when finished with rehabbing I would tell you to shoot for the small/mid sized apartment buildings if your market has them for a reasonable price. I say reasonable price as you cant buy off of proforma or "make" the numbers work. Also pending your business structure and lending structure would dictate how to move forward. If you haven't transitioned into an LLC I would suggest you do so and also start looking for commercial lending as moving past a 4 plex most lenders wont look at owner occupied options. If you've gotten 100k within 2 properties I would suggest a cash out/refi and lock in the lower rates for a decent period while allowing you to leverage your money for additional investments. A lot of lenders don't care for the cash out aspect and will offer to just do an "umbrella" or "cross collateral" of the properties. This is not your best option as then each unit is tied together and an exit strat becomes more time consuming and difficult to do because your lender is now the deciding factor in splitting the loan apart if you choose to sell.

I feel the answer to this question is determined by how long you anticipate owning this property.  Few investors I feel hold sfh for any lengthy period of time of 10 yrs or longer.  Is your portfolio large enough to support a higher payment with a quicker pay down or do you need the cashflow to stay afloat?  I personally run 5 yr fixed with 20 yr ams as it gives me a decent mortgage price will still receiving lower rates.  When you refinance its always nice to up your cash flow but even when rates go up the pay down would offset most increases in rates over the 10 yr period you laid out.  Personally I vote for the 10 year for this fact as I assume you've crunched the numbers and either scenario works for your current need.

I'd figure out one side of the business before you attempt starting both.  Real estate is not part time in the least bit if you truly want to make money to be able to live or invest.  We do both in the metro and it took 2 years of just real estate before the financials were able to support what I'd call an investment company as well.  We now flip 8-12 properties a year pending rehab, buying 4-8 passive income properties, and also run a full real estate team.  It won't happen over night.

Karisha with 6 months to move forward typically FHA lending is used for people with a credit score below 680. You should have plenty of time to boost your credit and proceed with a conventional loan. Thus allowing you the ability to buy a property that can have repairs needed not to mention only need 3% down and the ability to eliminate the PMI there for creating more cash flow. If your lender wont allow you the 2nd FHA loan I would have multiple people interested in the duplex you have in Des Moines.

Midwest Heritage will do a 80%LTV with 5 year Arm on 20 year AM at 4.25%

Midwest Heritage or Lincoln Savings will do 80% LTV but both are 20 yr not 30. Midwest is 5 year balloon/refi.