All Forum Posts by: Drew Castleberry

So here's the deal. House is listed FSBO @ $154,900. Built in 2001. It has 4 beds, 3.5 baths and 2,662 sq ft with a 2 car garage. Nothing fancy, typical house for the neighborhood with hardwoods, fireplace, etc. No upgrades. House doesn't need any maintenance, although the rough will probably need to be replaced in 10 years, everything is in good working order. He's including a 1 year home warranty and termite bond.

The seller listed it for $154,900 with $5,000 as the down payment with monthly payments around $1,350. I asked him about the terms and what was more important (rate, down payment, etc) and he said he's open to negotiate and they are all equally important.

Here's the rest of the numbers (per month)

Taxes - $207

Insurance - $50 estimated

HOA - $30

Property Management Fees - 8%

Vacancy / Maintenance Reserves - 12%

My goal is to get this property for $0 down, but am willing to do the $5k down if I can make the deal work.

The house should rent anywhere from $1,400 - $1,600. I'm using $1,500 in my calculations.

Possible Scenarios

Option 1: Full asking price w/ 0% down, 4% amortized over 40 years, with a balloon payment at 5 years. ($265 monthly cash flow, $166 @ 5%).

Option 2: $150k, $5k down, 4% amortized over 30 years with a balloon payment at 5 years. ($220 monthly cash flow, $134 @ 5%).

I have no idea if I'd be able to get 40 year amortized or 4%, but I figured if it doesn't make me blush it isn't low enough right?! I figured it's at least a starting point and see where we go from here. The one good thing is that this house should appreciate as our market is heating up and down the road with a few upgrades/updates I should have some considerable equity.

What does everyone think and what would you do? The cash flow for this price point isn't that great, but for minimal invested capital (or hopefully none at all), it's a pretty great return!

A few more details I left out, with the private lender I'm looking at utilizing a short term loan to finance the down payment. Just starting out thinking of offering 7% amortized for 10 or 15 years with a balloon payment anywhere from 2-5 years with a 2nd position on the property. Obviously there are some variables and I'm flexible, just using it as a starting point.

This will only be used on deals where the subject property will have enough cash flow to cover both debt payments and have a little left over using the HML rates, but once I refinance with a take out loan the cash flow will increase with the lower conventional rate.

Does anyone have any advice from experience of using a private lender/OPM as their down payment for a bridge loan with a HML?

I'm still in the process of using my own funds, but am trying to plan and strategize and to get started on locating and developing relationships with private lenders and trying to lay a ground work for a business plan ahead of time. I figure this would be much more beneficial to have the plan laid out for the investor and be able to adjust it, rather than start from scratch from day one.

I'm planning on purchasing properties locally and out-of-state that are rent ready, and utilize a HML bridge loan and then refinancing with my normal conventional lender.

I live in the Upstate and have started investing out of state because of the property taxes. For example I was looking at renting out my primary residence. If I did my taxes would have jumped from around $1,200 to somewhere around $2,500-$2,800. With the rate that property values are (at least in my area), you need to purchase properties at a significant discount. In many areas you can't even find a rent ratio of 1% buying a rent ready unit.

There's always hard money loans as well, but the rate is going to be higher. I've personally seens rates in the 7% range but I know there's some out there around 10-12%. That'd be a good short term solution until he can refinance with a commercial or FHA loan.

@Jay Hinrichs

Just sent you a PM

@Jay Hinrichs I agree with you that appreciation is important and I do look for areas of growth to capitalize on that. I should just clarify that my priority is cash flow and I try to invest in areas where appreciation is likely to occur. I just do not include them in any of my projections. That's why I say that its a "bonus", as I even though I try to invest for appreciation, I don't include it in any final calculations or plan on actually receiving it in my analysis. So for me, its cash flow first, appreciation 2nd.

@Charles Worth

I'm mostly concerned with cash flow and any appreciation is a bonus. As for geographic areas, I'm open to any location except for Detroit and want to stay out of areas with high property taxes as well. I'm mostly looking for properties in B neighborhoods, some A, but want to stay out of C.

Turnkey-reviews.com is a great site, but I always feel its great to have conversations with people that have had the experience rather than just reading a review, that can't answer many questions.

I'm looking to start my investment portfolio and due to the local market heating up, I'm going to have to do it out of state. I'm not bound by location, but mostly looking for decent markets, KC, Birmingham, Indianapolis, Memphis, etc. I'm looking for a Turn-Key company, if you are one send me a message and let me know what you have to offer. Also if you've had a great experience with a Turn-Key provider let me know those as well!

I've been through hundreds of posts and done hours of research on multiple companies and need a little help narrowing down the search!