All Forum Posts by: Derek Guyer

I would say the minimum amount should be $200/month in cash flow, but that needs to be on an investment that you picked up for much less than $100k. If you buy for more than that, you have a lot leveraged for a very small profit. That doesn't make much sense to me.

Feel free to email or call me and I can try to help you more, if you like.

Derek
C 317-753-7158
derek@landchasers.com

Well, usually the listing agreement allows the realtor to be paid by the seller out of closing. You usually do not have to pay cash to them.

To save you using your own cash, why don't you go 100% financing and leave that cash in your pocket? There are tons of ways you could be using that type of cash to start on your investing long before 2 years from now.

As for the properties you are talking about, I've run the numbers below for you. Included in those numbers is using a property manager. I wouldn't ever suggest going without one.

Here's the monthly analysis on the numbers you gave me on a $135,000 Purchase Price.

$1,800 Rents

-$233 Taxes
-$151 Insurance (Estimated)
-$90 Maintenance (5% of gross rents)
-$180 Property Management (10% of gross rents)
-$150 Vacancy Loss (1 month)
-$907 Mortage payment on 30 year fixed @ 8% with 10% down

$88 Positive Cash Flow

That cash flow seems way to small for something you are paying so much for at this point. Even if you decide to manage it yourself and the property is within thirty miles of your home, if you travel there 3x a month to pick up rents and fix problems, with todays gas prices you'll lose $30-$40 just on gas. If you went that route, you'd be making about $150/month and for the time you spent driving back and forth and dealing with problems, you'd have picked up another job, not an investment.

There are plenty of areas in the country where you can buy for less than that, have someone manage them and not have nearly as much leveraged.

Does that make sense?

Steve,

It sounds like you've been doing a good job of thinking things through before you get started. The first few deals can be so crucial to your success as an investor and I'm glad you're planning this out so well.

To your question: I would say this isn't going to be an easy thing to decide until you get to the point where you are looking at duplexes and know how much it's going to cost you to get into one and also how well it will cash flow. If you're buying right and don't have much cash out of pocket, you should easily be able to cash flow well and not have to mess with the rehab because of the regular amounts of cash coming in every month.

If you buy right, you may have enough left over in your HELOC to continue buying more cash flow properties. I would strongly suggest you work hard to purchase them with as little out of pocket as possible. This would help to limit your emotions because your money is on the line. Plus, this keeps that cash from coming out of your pocket. Buying right can sometimes eliminate taking cash out of your own pocket and therefore leave the need for rehabs very small.

If the property you are purchasing going to be your personal residence?

Since this is the Starting Out section, I wanted to drop a few simple tips on here for all of you new investors aching to get started because I keep hearing questions about this being asked. These tips will help you think through the first steps of your investing venture.

Successful investing requires a successful team. You will need a team of advisors and professionals around you to help you make smart decisions. This is important because most of us can’t start out full time in the field and so we need people around us to help us avoid rookie mistakes.

This team should include a realtor and/or birddog (to help you locate properties and watch for solid deals), an appraiser (who can help you know the ARV of a property and can tell you what it is really worth now), several mortgage brokers (to ensure you get the best loan possible when needed), a good inspector who will help you to know whether the problems with the property are serious or not, but who won't kill your deal when the bank looks at your inspection, a good contractor, a good real estate attorney and accountant, and most importantly (in my opinion), good advisors or mentors. You need people who are working out there every day to be on your side to ensure you work your way through a deal successfully.

Don’t get caught trying to do it all on your own when you’re new to investing. Listen to the people that surround you and don’t be afraid to ask questions. Make sure you make it worth their time to help you so that everyone wins when you’re involved in a deal. If one of these professionals has advice for you that says the deal is a no-go, listen to them. They get paid to make sure you know the facts. Listen.

There is a lot more to explain about assembling a team, but the shorter I keep this, the more people will read it. If you want more information, don’t hesitate to email me at derek@landchasers.com.

In the meantime, start looking for a good team. It will take a while, but will save you a lot of time and money!!!

DLV,

I have an investor who just started investing with Pinnacle in Atlanta. They gave him a list of references that he could contact about their services and everything was very clean when he checked with the BBB. Ask them for references yourself and see whether it's a fit for you or not. It sounds like a great opportunity.

Feel free to email or contact me. I'd love to see if I can help you find properties that aren't as difficult to get into with smaller amounts of capital.

I sent you a PM. Respond whenever you get some time.

This question probably should be posted elsewhere, but I'll try to help anyways...

I'd start by saying that you should talk with a mortgage broker, not just a loan officer with a bank. Brokers look everywhere to find good deals and you'll need someone who will look at every lender, not just the one they work for.

What kind of interest rate can they get you?
How much LTV?
How quickly can they close? (If they say anything faster than a couple of weeks, maybe a week and a half, move on. That's very difficult and they're, most likely, over-promising.)
Do they have any references for people they've helped?

This should help you get started, but is not the end. PM me if you if more questions and I'll do my best to help.

It depends a lot on what you'd like to do with your investing. Where you purchase, how you purchase, and when you purchase depends largely on 1. your plan, 2. your resources, and 3. your motivation.

What do you want to do?

I can agree with both of you, but still think duplexes have more of a safety net if they are purchased correctly.

Our investors are buying at between 50-70% of the ARV. That leaves you plenty of room to unload one if needed. You can't expect to unload a property in any buyers market very quickly because it is a buyer's market, not a sellers.

Also, you aren't depending on just one person to make your mortgage payment in a duplex. You've got the chance to make it with two seperate tenanats and if you've got both units filled, you're cash flowing. In a single family, if the place is vacant you're making the payments yourself if there is a single vacancy. That seems much more risky to me.

There are obviously exceptions on both sides of this argument, but this is the Land Chasers philosophy.

I would highly suggest that you first get connected to a realtor in the area or an appraisar who can feed you some comps and talk to you about the ARV. You will want to know how much they're selling for, as much as how long they are on the market. Get enough comps to know it's a good opportunity.

Second, figure out what needs to be done to the property to make it appealing, if you're going to flip it, and get an estimate on the work.

Third, figure out what your margin of profit is on the deal. If you're working with a rehab, general rule of thumb is that you don't want to have purchased the property and fixed it up for more than 65% of its ARV. That leaves you room for error and room for a quick sale in case something unforseen happens.

Fourth, make sure you have everybody involved to get the deal done correctly. By that I mean your realtor, appraisar, mortgage broker, possible buyers, mentors, and so on. Doing this ahead of time makes the deals move so much faster and provides the help you'll need before you need it. That little piece makes all the difference in the world when you're in over your head on something.

I hope that helps. If not, shoot with more questions.