All Forum Posts by: Brant Richardson

Have you listened to the Bigger Pockets podcasts?  Its a gold mine of information.

You have $10k to your name and consider it sacred but are considering walking away from 38k in equity, handed over to you by a friend?   You could double your life savings with your eyes closed with this deal.  If you are too scared to be a landlord then sell it.  However, if I was your friend and you wanted to just sell it I would say "Hey man, I was trying to open your eyes on how to become financially free, teach a man to fish kind of thing, but it you just want to sell it for quick cash then forget it, I'll sell it myself."

Strategy 1: Rental with minimal positive cash flow until rents go up.  Possibly cash flow negative at times for a while.  You have $0 into the deal, its okay if you actually put something into it.  I doubt you will put $38k into it though. 

If #1 fails then strategy 2: You only live fifteen minutes away.  You live in your new house and commute for a while until you get it turned around.  It sounds like you know how to rehab a bathroom.  If that's true then you can figure out how to do a lot of repairs.

If #2 fails then strategy 3: You sell. If I was your buddy I would want to see you give it a good shot for at least a couple years and I would want you to ask me for advice if things were going poorly. Unless things go horribly wrong or your ARV is completely wrong you will be okay. New roof, new furnace, new water heater...you still come out ahead in cash and way ahead in experience.

A well established investor wouldn't waste his time on $70/month but that's not you.  There's $38k at stake here.  How much could you realistically save per month at your job and how long would it take for you to save up $38k?  Don't answer that, just think about it. 

DP - down payment.

@Jenning Y. I can understand that. If a property appreciates faster than the rents increase and you keep pulling money out with refinances until the ROI that is left is abysmal, then it is time to sell. That sounds like a pretty long process though, not selling off every 5 years to avoid CAPEX.

 You can only learn so much reading and now you are learning while taking action.  That's real progress.  

You learned a whole bunch making rookie mistakes and it didn't cost an arm and a leg.  Sometime those rookie mistakes are measured in 10's of 1000's of dollars. 

Accept rejection and keep making offers that will work for you.  

Your friend is going to just hand over $38k in equity?  I wish I had a bunch of friends like that.  This is sounding like a decent deal to me, especially if you don't have the cash for a down payment to pursue other properties.  You are beating the 1% rule, have a very nice equity buffer, some positive cash flow, decent neighborhood and no money down.  I agree that I would not pull that last $5,500 out of it unless you need it for an emergency fund.  The cash flow is not real confidence inspiring but if you have a good job, are able to save monthly and have reserves that will help.   Five years down the road you might be getting $170 monthly cash flow.  If things aren't going well that $38k in equity gives you a lot of room for a profitable exit strategy.

You will likely not be able to get a loan on a property in this shape to do the rehab. If you don't have cash for the rehab then you need to make the sale contingent on getting a renovation loan. Getting the renovation loan will be contingent on the ARV, your income, your debt, your reserve cash The bank will require an appraisal which will cost you $500-600, it will tell you what the ARV will be, or at least the ARV they will use. They will release the funds little by little as the work is completed and inspected.

A 25 year vacancy is crazy, a lot can go wrong with a 2 year vacancy.  Leaking roof for years?  Is the electricity and water on so you can assess them and the sewer?  I know you want to get started but this sounds really high risk, and a lot of sweat, for 19k in equity.

You need to give us more details before we can say if this is a good deal. No money down, we all like that. If you will get +$5,500 after refinance then you expect to have substantial equity immediately, also good. What is the ARV (after repair value) compared to similar properties in the area? What is the sale price + rehab cost you will be giving the current owner? How much is the rent, property tax, insurance. Are you familiar with the neighborhood, would you feel safe living there?

@William C.  I completely agree with your strategy, refinance rather than sell to access the equity.  I was trying to make sense of Joe Villeneuve's strategy because I know he is a very experienced, successful investor but believes selling is the better option.

The tax assessed value is not what you borrow against and is probably way behind with the place being in terrible shape and vacant.  The bank will send out somebody to do their own assessment and you will borrow against that.  However, in the shape it is in now getting a loan will be difficult, the typical investor would do the repairs with cash then finance it, maybe you could get a renovation loan to cover the rehab.  If you are comfortable with the area it is in then $1500/mo in rents on a $52k investment sounds amazing.  Are you really comfortable with your rehab estimates?  It sounds like a lot cold go wrong and if it has been vacant for 25 years then it is virtually guaranteed that a lot will go wrong.  I would never let a $1k difference make or break a deal but in this case my gut feeling is that you should walk away because of the rehab.

@Joe Villeneuve I get your strategy but I don't see the necessity to sell if you are sticking with SFR's, just refinance and save the realtor fees. If by "just get bigger ones" you mean moving into larger and larger multifamily properties then I understand the need to sell. The realtor fees are no joke when you get into million dollar properties.

If I could easily find deals that provided 20-30% equity immediately I'd be doing real estate full time, be it flipping or LTR.  For me to find and buy 2 more would be a major accomplishment.