All Forum Posts by: Ben L.

I am in

Aaron, I have a similar situation I am going through. I hate to hijack this thread but what if the tenant has been offered to purchase the property in the past by the seller?

Keith,

One way is to take over the mortgage payments (assuming they are low enough where you can make money).

DON'T give up on the deal! You are still under contract right? The first step you should do is call the county and ask what exactly they put on the house. It may be as simple as a Code Compliance Violation on behalf of the county.

Tell the county that you are currently under contract to buy the house and ask them what is owed to "close" the violation on the property and if it is possible to wipe this dispute off the property since you are going to buy it and fix it up (if they say no, usually they will take a discount).

Also, make sure to check if you have any contingencies in your contract if the worst case scenario were to surface and you have to back out.

Just have to repeat that quote, because it says all.

Josh, I may have discussed this with you before (on my other account). To buy yourselves some time before you make the "big switch", may I suggest integrating the ability for the forums to be on "Tapatalk"? It's a widely-known and used application by thousands of people and makes reading forums incredibly easy on the eye.

I don't know the mechanics behind this forum nor the application itself, but it is something to look into if possible.

My parents have brought me into the Feng Shui world when their house was built in 2006. They would read book after book and continue to educate me about it.

I have to admit, I am a firm believer of that gut feeling you get every time you walk into a house and it pertains to Feng Shui (FS for now on..).

Certain features in a house that provide good FS are also just plain appealing to the eye, such as rounded corners in a house (who doesn't like that?), the crystal chandelier in the foyer, or the rounded sidewalks outside.

I don't particularly incorporate FS into my business model. You are targeting the needs of a very specific subset of buyers where my objective is to rehab/market a house to as many buyers as possible. However, it does not HURT to incorporate features to a house that provide good FS...As long as it does not eat your budget and is relatively inexpensive of course.

If you want to do it the easy way, you can match names out of the obituaries like David said to the people who actually own properties in your area.

Another way is to take a trip down to the County Clerk's Office and check out public records.

Anthony,

What is your goal for this deal? Are you wholesaling this one? Are you going to conduct a double close?

Hi Khang,

The 50% rule of thumb is based on acquiring a buy and hold (rental) property:

Say you purchase a house for $100,000 dollars and requires $5,000 dollars to repair (in a perfect world) with a conventional mortgage that will loan you $75,000 dollars for 20 years at 4% interest.

(I cheated and used my Deal or No Deal Real Estate Calculator and e-mailed myself the results but this should explain it by numbers:)

Purchase Price:$100,000.00
Estimated Repair Costs: $5,000.00
Total Investment: $105,000.00

Mortgage Amount: $75,000.00

Cash Required: $30,000.00
(Out of Pocket Money Required)

Estimated Gross Operating Income: $1,200.00
(Estimated Rent per month)

Monthly Expenses:

Vacancy Expense (%): 5.00%
Management Expense (%): 10.00%
Repairs & Upkeep (%): 10.00%

Adjusted Rent per month: $900.00

Property Taxes (Year): 1,100.00
Insurance (Year): 900.00
Additional Expenses: 0.00

Cash flow before Debt Service (Month): $733.33

Debt Service (Mortgage)
Loan Term (Years): 20.00
Interest Rate: 4.000%

Mortgage Payment (Month): $454.49

Monthly Cash Flow: $278.85
Yearly Cash Flow: $3,346.18

Annual Return on Investment: 11.15%

Now, the 50% rule of thumb is a conservative approach to evaluate whether or not a buy and hold deal will cash flow. The bold figures above is all you need to apply this rule of thumb to:

Estimated Gross Operating Income (Rent/Month): $1,200.00
Now take 1,200 and multiply it by 50% (0.5) which will yield you 600.

1,200*(0.5)= 600
This will factor all of your expenses tied into the property such as management, vacancy, depreciation, taxes, insurance (as noted above with my calculator).

Next you will take 600 and subtract debt service, which is your monthly payments towards your loan:

Mortgage Payment (Month): $454.49

600-454.49= 145.51 Cash flow/month

This last figure is the conservative figure you will collect after everything is all said and done, which is your cash flow.

(Also, please note its a bit less than what my calculator has calculated..better safe than sorry!)

Hope this helped you out.