All Forum Posts by: Kim Rock

So does a mortgage broker do this "wrap" mortgage or is it something we do on our own? I am not familiar with this process. Is there any risk involved in this for me? And what if the seller does not want to put the home in an LLC, will it not work?

Okay thanks I appreciate it - I was starting to feel like I was making a mistake. I wouldnt go past 2 homes in the same area, and as I said - the only reason I want to add the 2nd is because is it fully furnished/turnkey and ready to be rented which is nice. I am afraid of what will happen is the market slows down in terms of rentals in my area and me having 2 homes that need to be rented out and vacant.. but fingers crossed that that doesnt happen. If anything I think the poconos are becoming MORE of a vacation destination than they ever used to be.. so I SHOULD be okay (I HOPE!)

Couple of things..
1) I manage it myself. This to me means bookings, advertisings, dealing with tenant phone calls. This is not cleaning/maintenance though - I have a cleaning lady who I pay who lives locally and cleans after every turn. She also takes inventory and keeps me up to date on things I need. I go up maybe once every 3 months and bring anything thats needed. If I have a problem and need a maintenance person her husband is a plumber and can fix most issues. I havent had an issue that hasnt been tenant related and the tenant hasnt paid for. The cleaning fee she charges me is an additional fee charged to the tenant when booking so it is not out of pocket.
2) You can easily self manage if you have a person out there you trust as your cleaning/maintenance person.
3) I know it's only 10k a year profit - but in the long run it's paying for itself and in 10 years when I have it paid off, it's going to be 330k (more at that time) in equity - thats why I am doing it. I am not looking for the short term profit in it, I am looking at the free equity - is that not smart?

From the other thread, here is my response about the cash flow - Home is located in the Poconos in PA:

Here are the details for my other house, and the reason why I am considering buying the 2nd.
Yearly PITI: roughly $28,000
Yearly association fee: $2500
Cleaning fees (paid by renters)
Yearly average utilities (cable, phone, heat, electric): $3240
Yearly advertising costs (vrbo/homeaway.com etc): $600

Total costs: $34400

The house rents solid 3 months in the summer and 3 months in the winter. It also rents during every holiday period. I will not include random off season rentals as they are gravy to me..
A summer week = $1500
A winter week = $1700
Holidays are a bit higher
A full summer season = roughly $18,000
A full winter season = roughly $24,000
Random other holidays = $4,000
Total yearly rentals = $46,000

Total yearly profit = $11,600
Now granted this is assuming full occupancy during high season, assuming some vacancy, you could round down to $8-10k a year profit.

Hi Vincent,
Yes my home is in the Poconos.
There are a few listings currently that are turnkey and will provide you with both summer and winter rentals. I would be happy to show you some listings if you are interested and share some of my tips for making the rental successful.

P&I = 1832
Insurance = 41
Taxes = 416

The neighborhood is actually new construction - and my neighbor just bought last year. It's fully furnished and ready to go (and about 20k less than what I paid for mine, and then had to turn around and furnish the entire thing). So the fact that its close to retail is fine by me, because its basically coming with about 15k in furnishings/tv's etc.. it's completely turnkey (everything from pots and pans).

The idea of the subject to is a little odd to me. I guess because Im not used to it. I just cant imagine a seller ever saying they would go for it, and take all the risk involved in their credit depending on my ability to make payments. I can't believe so many of you do these kinds of loans and get sellers to agree to it! I would almost feel uncomfortable asking him to do that actually. I will probably stick to a conventional loan even if it means higher rates for me and more down payment. I do appreciate all of your advice though. - if you think of anything else, let me know! :)

Well - I actually own the same house next door and rent it out as a vacation rental. 50% of the rents definitely do not go to rental expenses.. It's less. Maybe 50% if you are using a property management company but I do not. if you want clear facts on vacation rental breakdowns I can provide that as thats what I currently do w my other house.
Here are the details for my other house, and the reason why I am considering buying the 2nd.
Yearly PITI: roughly $28,000
Yearly association fee: $2500
Cleaning fees (paid by renters)
Yearly average utilities (cable, phone, heat, electric): $3240
Yearly advertising costs (vrbo/homeaway.com etc): $600

Total costs: $34400

The house rents solid 3 months in the summer and 3 months in the winter. It also rents during every holiday period. I will not include random off season rentals as they are gravy to me..
A summer week = $1500
A winter week = $1700
Holidays are a bit higher
A full summer season = roughly $18,000
A full winter season = roughly $24,000
Random other holidays = $4,000
Total yearly rentals = $46,000

Total yearly profit = $11,600
Now granted this is assuming full occupancy during high season, assuming some vacancy, you could round down to $8-10k a year profit.

With that being said - my neighbors house is currently for sale.. and seeing how well I do with mine, I don't feel that it is a bad investment. I honestly got into it thinking as long as I didn't lose money I'd be happy - for other investments I do expect at least 100-200 month profit as a general rule of thumb. But those are smaller 100k properties. I guess I figured if I was able to have the rents pay the mortgage for a 330k house, I would be doing pretty well - considering in 10-15 years (if I was making extra payments towards the mortgage) I would have 330k in equity.

Does that make sense now, my reason for wanting to buy it? Does it seem like a better investment from that point of view now? I know it goes against the typical grain of investing, but I think it's worthwhile.

I definitely woudlnt do anything "creative" that would violate my code of ethics. Thats why I am asking for suggestions - LEGAL/ETHICAL suggestions lol.. Also - to answer your question, the retail value for this house is around 350k so I am getting it right around retail value - but even at that, am still managing to make a profit.

And lastly, as far as taking over the payments on the current mortgage, I am not sure I am clear on how that works? The mortgage never gets transferred into my name but the deed gets recorded as transferred? This doesnt quite sound safe to me - who has more of a risk doing it this way, myself or the seller? and if so, what risks are involved and how does one get a seller to agree to such a thing? Sounds complicated/slightly shady almost but that may be because I am unfamiliar with the process.

Well basically it's roughly a 330k house. The seller is willing to raise or lower the price as needed to help me get whatever I need out of the deal financially (higher price, higher commission, lower price, lower commission, higher price, higher seller assist, etc...) I am going to be the realtor for both sides of the transaction so I will also get the commission from the deal obviously which is sort of like getting money back (altho I have to pay taxes on it) .. So pretty much I am trying to buy the property, would prefer not to have to put more than 10k down total including closing costs. I wish his loan was assumable, I would have loved to just take over the payments, but we checked and it is not. Can't think of anything else "creative" on my own besides fooling with the purchase price and my commission and a seller assist. Soo.. Ideas? :) I'd prefer to save as much as I can of my own money to put towards buying my own personal house sometime in the next 6 months, rather than struggling to put money down at that time because I spent it all now!

Yeah thats what I came on here to try to learn about.. Its not a rehab so I think that eliminates hard money? It sounds like thats just for flipping/rehabs. I need to learn more about subject to/owner financing. I already asked the owner if they have an assumable mortgage which they dont. I would love to find ways to just take over payments without having to go through the down payment process but I am trying to sift through posts to figure out which is the best way to do this deal.. (it's a tough task - so many posts to go through, ive been up reading since yesterday morning LOL!)

I agree, which is why I am assuming I will have to go with an investment property loan which is going to be about 20% down that I dont have ;)