All Forum Posts by: Kevin Siedlecki

@Liz Cole - 10% is a pretty low estimate for CapEx, and when you're dealing with a loss gross-rent building like $1050, that's a risky assumption. You're probably going to spend $100 month or more on maintenance, too. What does it cost to get the lawn cut, get the snow plowed, walks shoveled? How about the water/sewer bill. I also realize I forgot management, which is another 8-10%. In the end, there's no much that could convince me to take on a property with only $1050 in gross rent. Maybe if I got it for free, but that's still a maybe!

@Liz Cole - 

Sure- he's what I see as an investor.

$145,000 purchase price 

Rent $1050/mo

Down Payment (25%) = $36,250

Rehab = $10,000

Acquisition = call it an even $50,000 after closing costs 

Mortgage Payment = $590

Taxes = Let's assume taxes are low $50/mo

Insurance = $75 ish

Vacancy (10%) = $105

CapEx (10%) = $105

Maintenance (10%) = $105

So with $1050/mo coming in, subtract all those expenses, you're left with $20 per month. Since a lot of those numbers are guesses, $20 is nothing. Combined with the fact that $1050 gross rent makes CapEx and Maintenance expense estimates low (because it costs the same to replace a furnace or have the lawn mowed whether you pay $145k or $500k for the property), and this house is likely to cost money month-to-month. On a $50k acquisition cost, I would want at least $500-600 cash flow after all expenses.

@Liz Cole - It doesn't really matter what the buyer's plan for the purchase is; your property's value is based on market comps. Based on what you're saying, $145,000 looks like a pretty decent price. It doesn't pass my tests for a rental purchase, but that doesn't matter. You want to price an SFR to sell to anyone, investor or owner-occupant. If newly updated properties are going for $180k+, then $145k seems like a good price to me.

@Daniel McCauley - as long as you've lived in your current home for a year, you can buy another one with any kind of loan you want. The only trick is going to be you will have to meet DTI requirements assuming you're paying both mortgages. You'll be able to find a bank that will count rental income on the one you expect to rent out, but you'll have to call around. The standard answer is going to be that they'll run DTI with the assumption you're paying both mortgages.

@Jim Bryson - Some punctuation could have helped the clarity of your post a lot. Do you mean that you are going to build the house on that lot, or sell that lot in order to buy something new? It sounds like you mean you want to build on that lot, in which case I don't think you'll be able to use the value of the lot as 20% down. I might be wrong, as I've never dealt with raw land before, but it doesn't make sense to me that you'd be allowed to count that as a downpayment - mostly because that would be like counting the equity in a deal as a downpayment, and banks don't let you do that. You need to put down a percentage of the sale price, not the percentage of the market value.

You might be able to refinance the lot at 80% LTV, then use the proceeds as your 20% down. That would give you about $70-75k depending on closing costs for the ref, which you could then use for a downpayment for a construction loan. That's the way I see it, but it's possible that new construction is different. Looking forward to hearing what others have to say.

@Chuong Pham - I'm not a CPA, but I'm pretty sure you cannot. The 1031 is a "like-kind" exchange, which means you are trading real estate for real estate. If I misunderstand that, hopefully someone will correct it here!

@Matthew Hamilton - I'll be interested to hear what people have to say, too. My understanding is that there are very few loans that allow for a subject-to sale anymore.

@Karla Evans - You should analyze it as if you are going to rent both sides out. Hopefully this is going to be a long term investment for you. You are thinking about it the right way - obviously it won't look as good when you take half the rent away, but you are kind of making that money, too, because you're no longer paying rent. 

You also probably will only live there for a few years, but you'll hold it longer. If you hold it for 20, but live in it for 2, then 90% of the life of the investment is with both sides rented out, so you should analyze it with that assumption.

@Daniel Acosta - Congrats! I closed on a new one last week, too, so I feel your excitement! The first one is special, but the next ones are even better in a lot of ways, because so many of the unknowns of the first one are no longer weighing on you!

@Kevin Crowell - I'm kind of confused by your question. If I understand correctly, you are trying to get access to an agent's clients, but skip paying the agent? I don't think that's going to work.