All Forum Posts by: Des Shei

Factor all those extra costs into the Max purchase price and as long as your attorney has reviewed/approved the contract and the numbers work, pull the trigger. Those are just another part of the terms and in my mind, everything (mostly) is negotiable in a deal as long as your profit margins are secured. I've had experience with this type of scenario in the past. 

I would echo what everyone has mentioned. Your best bet would to ask when the leases expire and determine strategy from there. In CT you would be bound by the terms of the existing leases (if they are in place); now, on the other hand, if they are on M2M agreements, then you generally have less to worry about other than the tenant being difficult about moving and requiring an eviction (which may not be a pleasant experience for you if it's your first rodeo)

R,

Des

@Michael Noto - Sometimes I've had to do this as well to get the best value out of a project, although it's not always the first choice. However market conditions do often warrant the need to adjust strategies. When you buy right(as you did) and have multiple exit options(as again, you did), things tend work out in your favor at the end don't the? As an added bonus, i would bet you probably learned a thing or two more about that local market than you did before you embarked on the project. Great job and continued success to you!

R,

Des

@Brian Pulaski

That is the point of the bank placing the opening bid(even though it is in essence not a true "bid" per se- more like a hedge). Some of my best deals to date have been via the auction mechanism. The best being municipal foreclosures.

R,

Des.

It is common. Remember, the bank is trying to cap (or recoup) losses as best it could, the appraisal is just used to get them an estimate of current value and really has nothing to do with the outstanding loan commitment. With that in mind, the foreclosing entity (if it's a bank) could, but doesn't have to place an opening bid at the appraised value; it'll typically depend on how hungry they are to move the asset. Therefore, if an investor is willing to purchase for higher than the opening bid, they could, and any proceeds go to satisfy outstanding liens (first municipal, then in order of Mtg lien position). 

if you are buying your first property to house hack; don't worry so much about the up/down vs side to side. Your main concern at this point should be how to maximize your returns. Therefore focus on finding the absolute best deal you can afford (4 fam-) using the least amount of your own capital (CFHA- 1st time homebuyer bonus!). Getting this right from the beginning will exponentially increase your chances of successfully scaling up your future holdings. Here's my high level analysis of how it may play out:

If you can lock up a 4 Fam in Central CT for 150K or so ( i know they tend to be less expensive up there) you can theoretically rent 3 doors for at least $2.4k/month on the low side and live on the fourth. With a $145K mtg (assuming 3% down), and say 5K in taxes, you should be able to generate a "net" cashflow of about $900-1000 after PITI (but before accounting for vacancies allowances and CapEx). All this while living for free. Doing it this way will also significantly derisk the R.E investment/learning process. On the back end, live in a unit for 1-2yrs, save your earnings during that time and use for 10-20% downpayments on future purchases. rinse and repeat.

hope that helps,

Des.

@Kelly Niddrie

You want to find the absentee owners when you look at the field card. Also best to target one town at a time or if a major city, then a section of the city and really get to know it like the back of your hand. It's also a game of volumes and knowing what indicators to look for. I personnaly love doing D4D in the winter time :) 

Here is my targeted advice to you:

if you are driving for dollars; 

-Identify the properties during your D4D campaign

- note the address(es) 

-drive to townhall if they don't have online access 

-find mailing address for owners of record

-send out targeted mail to offer a R.E solution to them

-follow up even if you get a "No" the first time

-if you get interest, negotiate and lock in the deal for around 50cents on the dollar

-Wholesale to another investor for less than 70cents on the dollar. (Network and build buyer lists)

-rinse, repeat and optimize

-Stay FAR AWAY from gurus... You are fueling their business, and have nothing in return to show for it.

Hope this helps, Good luck,

Des,

I too have experienced a steep hike in recent years- I'll be looking to leverage my volume in 2016 for better premiums-  on average I'm paying about $1k per door on my units; no claims and above average deductibles. What I've tried to challenge before(especially on the leveraged properties) is the bank assessed replacement value which drives the premium. If you are buying the property at a bargain(which you should) a really high replacement value doesn't help you at all- it just dries up cash flow. Chances are that in the case of a total loss, you'd probably look to purchase another investment first instead of rebuilding anew. 

I would suggest this- assess from an opportunity cost standpoint- if you can borrow out of your Heloc at 4%, and invest those funds in an income property that will return anything north of that(say 7-8%), Then thats definitely a GO decision. Therein lies the beauty of leverage. This analysis also excludes the appreciation gains over time which I look at purely as the icing on the cake. The key here is making sure your ROI projection is solid. In addition, once you have both properties cash flowing- you could focus on paying down the heloc quickly to free up more CF(start benefiting from compounded gains over time), or pay it off when you liquidate the primary.