All Forum Posts by: Sasha Mohammed

@Jonathan Bluth (any relation to George Bluth? lol) Lots of questions, I'll try to keep the answers short:

How do I find specific utility costs for my area so I can properly analyze deals?

Typically, the tenants are responsible for the utilities. The only utilities you should include in your calculations are ones you plan to pay. Gardener or sewer/ trash for example (sometimes included in property tax bill). or if your property has any common area utilities, like electricity or water that is not individually metered between the units. 

What utilities are needed? Are these paid by me through the tenants monthly rent or is this a separate bill that the tenants need to deal with themselves?

This is the tenants responsibility. The rents go to you. If you have any common-area utilities you're paying that you want to include as a flat fee to the tenants, include it in the rents. Everything else is on them. They will get sent the bills by the utility company and they'll pay it independent of you. 

How do I get the tenant set up with these bills?

Tenants handle this themselves, unless, again, there is some sort of shared meter. When they move-in (or sometimes before) they will call and have the utility turned on in their name. At that point, billing begins for the tenant, they pay it, and when they move out, they call to have it stopped. 

How do I go about offering a lower price to the seller than what is being asked?

GET AN AGENT. I can't stress this enough. Especially as a buyer, where you don't have to pay the cost of the agent (the seller does). Let the professionals do their job. 

How much should I plan to set aside for extra monthly income besides rent?

Not sure I understand this Q, so I apologize if I'm making assumptions. As a potential/ future landlord, be prepared for things like maintenance/ repairs and vacancy. These things sneak up on you, and if god forbid something big happens like a busted pipe in the water line, you can't leave your tenants hanging for months while you come up with the money for a repair. Always be prepared for the worst. 

Do hard money lenders work by lending you the money needed for a down payment or lending you the money for the entire property?

Hard Money lenders will loan you the funds for the property WITH YOUR down-payment. Hard Money is risk-based, not based on your ability to repay (the way standard mortgages that look at your income, taxes, etc. are). Hard Money will mainly look at the property and it's cash-flow. They'll want you to have a substantial equity/ down payment, much more than Fannie/Freddie lenders will require. Most of my Hard Money lenders want 25% down so you have some skin in the game, which balances out their risk, since they're not checking to make sure you make enough money to pay the loan back. 

What type of credit do I need to get a mortgage loan?

620 to get a Fannie Mae/ Freddie Mac loan. If you plan to live in the property (which it sounds like you don't) you can go lower on credit with an FHA loan, but FHA is only available for 1 property at a time -- the one you live in.

Feel free to PM me if you need help finding lenders :) There are options between Fannie/ Freddie and Hard Money. 

@Ryan P. Kotschedoff Good for you, man! Starting early :)

I started out around 22, working for free for my cousin who was a Loan Officer. He had me walking around to Real Estate offices handing out chocolate bars and talking loans, trying to get some referrals. NOTHING came out of it at first. But actually, looking back, I learned a TON. 

You'll find plenty of places willing to bring you on as a free intern if they're busy enough, and it sounds like you have the tenacity for this business if you're 15 and already on it. They'll have you making coffee runs and organizing paperwork, possibly setting up open houses or doing some marketing. If you have any interest in the loan side of things, you could apply somewhere as a Loan Processor (without any licensing) and get a feel for everything that goes on on the back-end of the sale. You'll see the RE business inside and out and have a good understanding of how things actually work besides the open house cookies and glitz and glam of the paychecks, and surprisingly, that helps more on the RE tests than most of the classes/studying (although all of that is really important too). 

Most of this business is commission only, so get used to working for free and busting your butt. But it's a ton of fun. I wish you the absolute best of luck!

Dusty, when it comes to Rentals, the numbers are almost all that matter. When you're looking for a home to live in, you get all the feels, and that emotion will play a big role in your decision making. It's a totally different game-plan walking into it. Now, if your question is between buying and renting, I always say buy! This may not be the response you get from everyone, and market conditions definitely play a role -- do your own research in the market you're in. But when your option is between your capital going towards borrowing something vs. buying something that will be increasing in value down the road (hopefully), it seems more logical to go for the buy (in my opinion).

In the scenario you outlined, I would do the math. Find a home you're prequalified for, get the estimated mortgage payments, and add up the cost of ownership as if you were renting it it out (assume rents stay the same, which they will probably increase in 2 years). Use conservative numbers, or for some help, check out the calculator here in BP. Figure out the cost of ownership of the rental (mortgage, insurance, taxes, HOA's (if applicable), property manager, any utilities you'll cover for your tenant, throw in a margin for repairs/maintenance, and vacancy... and then take that number and divide the estimated rents by the cost of ownership. For example, if your cost of ownership is $1000/ mo up against $1250 a month received in rents, 1250/1000= 1.25% this is called your DSCR, or debt service coverage ratio. Most lenders want to see a DSCR of about 1.25% to offer you a loan, so that's not a bad target. If the DSCR is anything above 1.0, the property will be cash-flowing, and it could be a great opportunity for rental down the road (October). The higher the DSCR, the better.

Remember to use CONSERVATIVE numbers. over-inflate the costs, underestimate the rents received. assume worst case scenario, and assume the market will change down the road because it will. And lastly, remember to do the math and research on each individual property. 

Congrats on the upcoming wedding! Hope this helps a bit. 

@Alaska Wagoner Hello! I would say welcome to BP, but I'm a newbie as well :)

OC is definitely a tough cookie to crack when it comes to real estate investing. there simply isn't much margin here. Personally, I've been looking to buy for YEARS and just haven't found a sweet enough deal to pull the trigger on. With that said, I've begun looking around in other states and am finding WAY better cap rates just about anywhere else. In Ohio, for example, you could buy 2 or 3 properties with your savings alone! in cash! (don't do that). 

I created my own Numbers (mac version of Excel) spreadsheet to calculate Cap rates and ROI since BP's calculators are limited in the number of inquiries you can run without having to pay. I'd be happy to share it with you if that helps.

I don't suggest putting all of your cash in one project, rather find some lenders (feel free to PM me, I can help with this as well) that can do loans based off of the property itself and not your personal income/assets. The rates and fees will be higher, but you could put something like $7500 down on a $30k property that brings in $1300/ mo when your mortgage, taxes, and insurance come out to like $650/mo combined. Just throwing numbers out there from a previous find, but there are a ton of places you can borrower the money from without needing to show personal income that would allow your savings to really stretch, and maximize your passive-income potential. When you're talking about these small down payments, your $55k could land you a good handful of cash-flowing properties, and allow you to do that traveling you want, or move out of country if that's where your fiance's job takes you. You'll even find better options in California, but outside of OC; out of state, though, seems to be the real money-makers these days. 

I, too, am in Costa Mesa. if you're still in the area and would like to meet up for coffee sometime, feel free to reach out! I'd love to meet other like-minded females in my age group like yourself!

Best of luck!

Feel free to PM me. I've got more than a handful of options for lending on commercial properties.

@Chukwudi Motanya if you have the ability to go fannie/freddie for your investments, you'll definitely get better interest rates and less (or sometimes no) fees. fannie/freddie cap out at 10 financed properties, though, and they will qualify you based on income and ability to repay. still, this is the best option for your first 10 if you have the income on-paper, but yes, you would be paying on 10 different mortgages one at a time. 

Additionally, for purchases, it's possible to do portfolio, but it is difficult as you're working with 5+ different sellers at one time to secure one loan. It may make more sense (so you don't lose deals) is to refi INTO a portfolio loan once you've acquired the properties and once they've stabilized. 

Happy house hunting!