All Forum Posts by: Matthew Free

I am currently looking to buy the following deal and would like help analyzing. The cash flow is minimum but in this current market, this may be the norm for right now? What I like about the deal is that I am using a very experienced friend who wholesales and has a property manager, bank, etc. in place to make the entire process very turnkey. The home is a 3 bed/1 bath sfh and just finished remodeling including new roof and hot water heater. 

Price: 105,500

Rent: 1050

20% down: 21,200

20 year loan 3/3 ARM estimated PITI at prime (7.5): 814

Property Manager %: 8%

If I include 5% for repairs, 5% Cap X, and 5% for vacancy, the property has a negative cash flow. The current rent is lower for the area in order to get someone in immediately, which a renter is already set to be in the property before closing. So, if I take away the 5% for vacancy, figuring that it will fill quickly at 1050 and also cut cap x from 5% to 2% given the recent updates, I see a cash flow of 78 dollars after PITI, 8% for PM, 5% for repairs, and 2% for Cap X. This leaves me with a cash on cash of 4.4%. Help me understand if this is normal for where the economy is currently at or if this deal is a no go, how can the cash on cash be so low when I am meeting the 1% rule. I understand it is because of the high interest rates and 20 year loan. Given the high interest rates across the board, is that just what I should expect in the current economy of a lower cash on cash or is this just not a good deal?

Should I hold off on the deal? 

Is the low cash flow something to stomach in order to focus on starting the timer on the appreciation of this house? This would be my second deal and I want to get moving. My first deal was a year ago and met all of the metrics and was a total home run. Is this a base hit in order to get more under my belt and keep moving or is this just not a good deal. Please help me understand.

Should I speak with another banker to look into a 30 year loan to improve the cash flow?

Should I put more money down to improve the cash flow? Even when I put 30% or 40% down the cash flow improves, but the cash on cash still stays around 4.5%

Thanks in advance.

I am pretty new to real estate investing. My wife and I were successful in finding a really good deal about a year ago and we are now looking for our next sfh. Our markets are the small town we live and other surrounding small towns. My questions are 1.) How is everyone managing the high interest rates? When I run numbers I am not finding anything that cash flows in our area. Home prices have gone up but rent prices have not kept up over the past couple of years. 2.) Are there websites for wholesaling in smalltowns? I am not finding a lot of resources other than zillow or looking at doing mailers to find homes in our area. TIA.

Recently pur hased our first rental.How do you properly move a property into a LLC without triggering a "due on sale" clause or creating other unintended consequences?

I am talking with an attorney tomorrow but how have others navigated this?

How are you setting up your business accounts for your properties? Are you doing 1 account for every LLC? How do you keep things straight and easy? Also, when not using the same institution for both personal and business, I am running into the issue of having to pay for wire transfers or going through bill pay where I send myself a paper check. Any banks out there that make it simple for a business to personal external transfer without fees?

I am a young dentist and my DTI is skewed when taking into account my student loans. I can qualify for physician's loans as they don't take student loans into account when looking at DTI but I can't use them for investing, as I understand it. I own my office and the property with it. I do have some equity built in the property and could pull it out.

I don't really want to pay off my student loans right now as I have no idea what the government is going to do with student loan policy and it might make more sense to pay the lowest amount and have it forgiven in 20 years anyway. However, that becomes the hurddle for DTI in qualifying for loans.

Any recommendations to overcome this hurddle? Would working with a small bank in my small town be a good idea as they would know me? Would looking for private investing or maybe looking for a partner and being a silent investor work?

I am trying to keep my current home and use it as a vacation rental while buying a new home. The issue I am running into is the few banks I have talked to won't extend a physician's loan for second home. Are there banks out there that offer physician's loans in this scenario so long as I can show the first home will be used as a rental? What about moving my first home into a LLC and considering a rental instead of a primary residence?

This question is two fold. The first question is as posted. How do you find 10+ unit properties? Looking on Realtor, Trulia, etc. and not finding much. Considering contacting one of the top realtors in the area and sending out flyers. Other suggestions? How do you make the in roads for off market deals?

Second, we are new investors and Robert Kiyosaki recommends starting small. However, we have a background in real estate management and have recently gone through the purchase process of our businesses's commercial real estate. We were planning on doing a 2-4 unit just to go small because that seems to be the typical advice but we are wondering if that would slow us down from scaling faster. TIA.