All Forum Posts by: Tommy B.

Are REO prices negotiable or do they typically represent a good deal to begin with?

According to Zillow, many of the REO properties in my area are listed 20-30% below market. If I can get one 30% below market and rehab it with little enough to keep it @ 20% below market then it will most likely be profitable assuming the rental rates support it, right? It seems the competition to get these houses is enough for the banks to get what they want for them.

I spent a couple hours in the public library today. Took lots of notes. I picked up a copy of NOLO Leases & Rental Agreements. That really clears a lot of things up for me! Reading through it and realizing how protected you are if you simply follow a stringent process in picking tenants gives me confidence that the hardest part of RE investing is finding the right deal and buying smart.

One concern I have is based on the money I will have available it is pretty clear I will most likely be going into subpar neighborhoods. I hate to stereotype, but how difficult is it to find reliable tenants? I envision applicants with decent credit and income with a criminal history, a clean criminal background and horrible credit, or a pristine candidate with the exception of that one eviction. Over thinking?

I have read the beginners guide and it is great. I will definitely read it again (and probably again). As far as rehabbing, the less the better for now. I assume that anything I look at will need something done to make it ready. I have a friend who years back would do HUD clean outs and I saw first hand some of the damage people do to foreclosures. They weren't all in terrible shape though. I remember one in particular where the previous owner had taken a hot iron to the linoleum.

Given a choice, I'd rather find houses with little to no rehab needed until I get some cash flow going, but I won't know the possibilities until I get into the market and start looking. Maybe later when my pockets are bigger I will take on bigger projects!

Brandon, thanks for the tip. I'll get on those keywords. I've seen some of your webcasts and they are very helpful. I'll be watching you and taking notes. Thanks for taking the time!

Thanks Joshua!

My most pressing concern right now is getting my finances in order to make my first purchase a smoother process. I don't have a lot of capital to get started. At present I have about $10K that I can tap, but that most likely isn't enough for down payment and rehab. I should have a better position in the Aug/Sept time frame, which gives me plenty of time to learn before the leap. I'd prefer to leave home equity and 401K alone for now.

Other than that, I need to get everything in order as far as lease documents and such. I need to bone up on all the documents I need and have them ready to go instead of trying to figure it out as needed.

Lawyers- how to find a good one?

Lease- How to structure it?

I have emailed my Realtor and hope to take her to lunch next week so I'm sure she has a lot of info. She's been with Remax for several years and I'm sure she has worked with investors.

I also have a friend who's wife takes care of all the ins and outs of their rental, which they started renting last year. She has worked in the apartment industry for years and has colleagues who invest in real estate as well. So, I plan to get together with them and discuss too.

You've done a great job on this site and I'm sure the info is all here. I just need time to sift through it, take notes, and organize my thoughts and priorities.

Thanks!

Hi all, I want to say that I appreciate this incredible website and the time and energy that has gone into each and every contribution. Amazing! I couldn't even get through a movie with my wife tonight without picking up the iPad and checking it out.

I'm new to the game and eager to learn. I've always wanted to do something bigger than just having a good job that I happened to fall into. I've had a busy mind the last few years and it has driven me half crazy at times. The entrepreneurial bug has bitten me, but my ideas never panned out. I was limited to ideas that required nothing more than a shoestring budget and a lot of time. In the end the ideas, while exciting to explore, would fizzle out because the return was too little for the amount of hard work required and the time missed with family. That is where real estate is different and it occurred to me that I can create wealth while using other people's money and working as hard or as little as I want. Perfect!

Anyway, I'm in the information seeking mode right now and I have no doubt that all of the answers are here. My niche is going to be buy and hold and I look forward to buying and renting my first of hopefully many SFRs this year. I'm in the Albuquerque area. If you are an experienced investor and have the time to mentor a newbie then lets get together and have coffee. I'm looking forward to this exciting adventure and thank you all in advance for your guidance, inspiration, and motivation along the way.

Thanks for the encouraging words Ben! Congratulations on your first purchase. Exciting!

We sat down and had a productive talk today. She was mostly afraid that this was going to cut into our budget. She is on board now and I'm hoping to purchase my first property in the next 3-4 months. I have a lot to do!

David Beard Again, thank you for taking the time. You give great advice! I know I'll have plenty of questions and I appreciate your coaching!

I made a little progress today. I think I see a small crack in my wife's fear. We still need to talk things over, but I think she is willing to make a trial run and buy a property. I told her if after a year it is too big of a headache then we can just sell the property. Still need to save some capital and educate myself, but that is definitely a step in the right direction!

"Note that you will NOT be given credit in your Debt-to-Income ratio for the rental income until you have two years of landlording experience on your taxes (i.e. after you file 2014 taxes in 2015, if you start investing this year). In the interim, your DTI ratio will have to absorb the PITI of new rental properties in the numerator. That DTI ratio will then need to be no greater than 45%, and possibly just 40% if you don't have stellar credit, in order to get financing. Be careful to keep credit inquiries off your account and keep your use of credit card lines modest in the meantime, to keep your scores high in order to get the best rates. You'll want to use only 30 yr mortgages initially to keep the PITI as low as possible (so that it increases your DTI as little as possible until you have that two years of experience). Down the road, if you want to accelerate payments to pay off mortgages more rapidly, you always have that option."

Thanks for the tip. Fortunately, my wife and I both have stellar credit ratings. We just refinanced our home in February and mine is 800+, while she had one infraction that we were able to resolve giving her rating ~750 (should be better now). Our debt to income is less than 15% as of now. So, assuming we spend $100K @ 3-4% for our first investment property then our DTI would still be less than 20% without even factoring in our rental income. Another ace in the hole is that my company contributes to my 401K through profit sharing even if I don't contribute. I could feasibly go to zero for a year and make up the difference once my rental income materializes. I don't mind using the 401k loan as a means to get started or even a HELOC. My number one obstacle right now is bringing my wife around. She trusts me though so it just comes down to the right approach.

Again, time to educate myself. I'd like to have all the forms, lease info, and laws down before taking the plunge instead of figuring it out afterwards. I think I will take my realtor to lunch in the next few weeks and pick her brain.

The more I read, the more exciting this is!

Great advice! Thanks for taking the time. David, I'll digest everything you've written. I haven't really explored the market well enough to understand the deals that are available. I have a lot to learn so the next few weeks will be an exploration period. Great advice to find a couple in the know to help ease my wife's mind. My wife is very supportive of my ideas, but usually my ideas are geared more towards savings and investing on a much smaller scale.

Although it scares the hell out of my wife I am developing an interest in rental properties and I'd like some advice. I am fortunate enough to earn a very good living that allows for 3-4 days off per week due to a compressed work week. I have a lot of time on my hands and have always been interested in running a business, but I have had a difficult time pulling the trigger. I'd like to run a business, but at the same time I don't want to be busy 100% of the time and miss my kids (2 YO son and 6 YO daughter) growing up. I think real estate would be a better fit for my personality than investing strictly in the stock market.

A little about me. I will be 40 years old this year. I am very handy and can handle most painting and repairs myself, but I would hire for major repairs such as roofs and carpets. My wife and I are very disciplined and do not have debt outside of our house payment, which we have about $50K equity in. A newer vehicle is on the horizon in the next year or two. I have about $13K in investments outside of my 401K. I believe we can save an additional $10K this year. I am able to save and invest about 15-20% including 10% to my 401K.

I am able to afford a good life for my family, which allows my wife to stay home and raise our kids, but at the same time I am uncomfortable that our comfort hinges solely on my job. My goal is to create wealth and feel less dependent on my job in the long run. 10 years from now I would like enough revenue to live on with or without my job.

So this leads me to a few questions.

How much capital did you have to get started?
Is $10K in reserves after a purchase adequate to have on hand?
Do you have an LLC established for your property and an LLC established for the property management?
What books did you read to educate yourself? (I just finished Buy it! Rent it! Profit!)
How would you recommend starting out?

Thanks in advance for any advice!