All Forum Posts by: Michael Hastings

@Diana Muresan , thanks for mentioning this here. This is news to me as well, and when researching this, I found information stating "The maximum loan-to-value (LTV) ratio on a HomeStyle mortgage varies by property type, but it's typically 97% for a one-unit, principal residence with a fixed-rate mortgage. The LTV maximum for two-unit principal residences is 85%, 75% for three- and four-unit principal residences, and 90% for one-unit second homes."

Can you confirm if these LTV limits are in place for owner-occupied properties or can they apply to off-premise investors? (I am specifically interested in using something like this to finance buy and repair of SFH/duplexes that can be used as rentals in the midwest).

@Matt Nuttall , congrats on this investment!  I would ask, is this a "house hack" for you?  The down payment is about 6% of the total, and I assume a bank would not finance this with that down payment for an off-premise investor (I may be (probably am) wrong here about the financing, but I am interested in how you pulled this deal together since you mention that the Rents on the property pay for the mortgage).

THX!  

@Tony Karns , I had this issue on a property that I owned in Oakland, California, several years back.  The problem was that it was a Victorian home from the late 1800's, and during the 60's, a prior owner installed cement shingles that were loaded with Asbestos.  I had no idea this was the case, and after contacting a roofing contractor, he had someone come out and verify the asbestos.  Let's just say the cost to remediate and remove the shingles would have been enough to kill my cash flow from the property indefinitely.  I was a rookie and did not take this into consideration when taking on the property, even though it came up in the inspections (which I re-read after my contractor told me of this issue, I did not know the magnitude of what it meant when it came up, and the realtor did not point out what it meant).

I would suggest getting off BP, and searching the internet to find a local asbestos guy who can give you the facts.  I bet most of these guys in your area would know just by the address what the potential for asbestos would be and possibly could alleviate your fears by a simple inspection.  Or confirm your fears.  Either way, get with someone local is my suggestion, I am sure there are several near you who would be happy to discuss.

(To let you know, for my project we ended up leaving the asbestos shingles in place, and I sold the property a few years later).

@Daniel R. , I have contacted several schools and this is not frowned upon at all (at least from the few calls that I made).  They certainly are not going to add your property to their list of available housing for students, but all gave me suggestions on how to advertise vacancies to inbound students, and note that many students (think professional studies) are adults with families, who are seeking accommodations that are family-friendly (one housing rep flat out told me that they run out of family accommodations months in advance and always get asked about help finding housing around the schools)...

Food for thought.  

Hi @Mariana Pasin ,

This is an interesting topic to me, as I have started to research student rentals.  Although you are asking about specific locations in Texas, I think that this model would work in any town in the United States that has a private, public or trade school where housing is needed for students.  I am researching locations in the Ohio market (Dayton, Columbus, and Cleveland) as I am bullish on real estate in those areas.  I have researched properties near major universities, hospitals (needed for medical/nursing students on internships/residencies) and cannot find specific regulations needed to get into this.  I have even found that when contacting the housing offices for these schools that they welcome additional space and will refer students when you have vacancies.

Typically, I have seen SFH - 4 unit buildings that have a "share the room" situation for students (2 people to a room). The rents are amazing, as long as you are OK with year over year turnover and possible vacancies during summer months or holidays (could make up money with VRBO or AirBnB rentals during this time).

Most of the rentals I have seen have furnishings, appliances and charge a rental fee that spans the quarter or semester needed for the students (think like "Fall Semester, $1600 per bed, 2 beds per room, as an example...this number is low and is just to provide an example).

There are a lot of people here on BP who do this on a large scale, you should search the forums, find one or two and ask to pick their brain.  I just started my research by looking for properties around target schools until I found one of these for sale, contacted the agent and asked them a ton of questions.

Good luck and happy hunting!

Hi @Bianca M. ,

Congrats on taking the first step, which is just asking for help!  This is a good plan, to purchase a MF property and use the cash flow from the other unit(s) to pay the mortgage.  Although I do not know your area, thus I cannot point you to the best areas to look for these properties in, I can tell you one universal thing I have learned since restarting my Property Investing, and that is there are a heck of a lot of people within 30 minutes from where you live now that can help you.  Frankly, if you cannot get a referral to a local realtor from a friend, family member, a teacher, or other local professionals you may know, any realtor will do initially, to help you get started.  As long as they are patient, licensed and willing to help you (and they should since there is a possible commission at the end of this rainbow).

I would suggest starting with one of the national realtor sites (zillow, redfin, realtor.com, etc), search for multi-family properties all over your area, pick one (anyone that looks interesting) and call the agent to get details.  It is that easy and will start the conversation on what is needed (price point, lending needs, down payments, etc).  As you ask more questions, you will learn more, which will lead you to ask more questions, etc.

Good luck and happy hunting!

Hi @Mike Ojo ,

Congrats on the find. I think you are hoping that someone will be able to help you analyze this as a good buy, and if so, I believe that a heck of a lot more information is needed. From my perspective, if you are getting a property at a price of 17K that has a ARV of 79K, there must be a lot of work needed (and possibly other factors that make the property non-desirable at the moment).

Although you can make a lot of money via fix and flip through problem-solving, I think you will need to disclose more information about the property (address, info on rehab cost, how are you are getting this ARV, etc) before you can get a good answer to your question.

I would suggest connecting with a local realtor there for more help, or seek out someone on BP who is active from the area (even a property manager could help) to assist you with sorting this out.

I have some experience with fix and flips in my past, and they are absolutely nothing to play with for the beginner unless you have a lot of cash set aside for the unexpected (and there will be unexpected costs) or some experience in a trade where you can offset cash for your labor.

Good luck and happy hunting! 

Hi @Aamir Shah, you have come to the right place to get as much information as possible about investing.  I have purchased 5 properties in Dayton over the last 6 months, and I can tell you that the opportunities for solid real estate investing are there.  I choose to start in Dayton (although I live in Denver) due to low price entry points, the market is unsaturated with buyers (so there are still a lot of good buy opportunities), good mix of tenants for rentals and a steady economy at the moment.  I connected with a PM, a property inspector and a few other small investors who are long time residents of the city, and they helped educate me on the area.  Believe me, you need this before you embark on any remote investment.  I also made no less than 4 trips to the area to just look around, get a feel for the area and talk with a few people in city government.

I can tell you that I am no expert at this, and although my investments have been successful so far, this same process can be replicated in 100's of cities, which meet the same criteria that I look for in long term RE investing.  So, be it Dayton or Columbus or Lexington or Kansas City or Dallas or Topeka, KS or OKC, OK or Memphis or Louisville or Boise or Grand Rapids or etc., there is a LOT of ways to invest in and make money in RE for the long or short term.  The keys for me are risk tolerance for the investment, strategy for the term of investing (I am investing for retirement income) and the amount of time you want to spend handling the investment.

So, my point is that although the markets you have mentioned are great, there are several others that also offer the same opportunity.  Look to what is your "why" and then add your "how" to decide on where to invest.  Find a local resident who is a RE professional who can show you the ropes and get you started.

BP will have lots of people you can reach out to and ask questions, all of my initial research about Dayton happen here, and I did nothing more than search for people in Dayton, introduce myself and start asking questions.  Everyone was friendly, helpful and more than willing to provide me contacts as they saw fit.

If I can help answer questions about what I know of Dayton, feel free to message me.  

@Ashley Benning, I have a blended view of the information you have been provided thus far, as I also struggled with where I was going to get money for RE investing.  I have a very healthy 401K with my employer (who matches 50% of my input up to 3% of my salary) and my investments are diversified in the fund across 12 holding areas.  I checked my statement and earned over 13.5% last year, and 11.8% the year previous to that.  Frankly, I have earned well into the double digits in interest on the 401K since 2009, as that was the beginning of the bull run in the Stock Market that we are still on now.  

The word "diversification" has been thrown around here in the thread a few times, and that is my draw to wanting to move some of my investing into real estate for long term buy-and-hold.  I know that I could continue investing in my 401K, work through to retirement and finish strong (barring any unforeseen economic catastrophe), but the sexiness of real estate brings more investment diversification, through:

1.  cash flow

2.  appreciation

3.  depreciation

4.  expense deduction

So, like another poster mentioned, I knew that I needed an additional source of income to fund my REI pursuits, as the returns that I am getting on my 401K now is pretty good (one of my parents retired 4 years ago with only her 401K mutual fund investments (drawing 4% of total) and one rental property (600/mo cash flow, condo paid off), and believe me, life is good for her, so there is no "doom and gloom" if you have only a 401K as a retirement vehicle).

Although many may disagree, I personally would advise against dropping your 401K investment to save money for REI. Why? Because we are still in a stock market bubble, and your gains will be pretty high there, compared to your entry level real estate investing. Many will disagree with this, but my risk tolerance is low, thus I am not as willing to "let it ride" on a RE investment unless the long term numbers pan out for my goal (I look for turnkey properties, fully rehabbed with $300 per door cash flow, 20% down, midwest markets).

There is a caveat here.  I would adjust my answer depending on your age and your risk tolerance.  If you are between 25-35 years old (I think you are 33), since you have a low 401K balance, you can almost STOP your 401K investment, as the tax benefit and interest appreciation you are getting may be low and could be replaced by your real estate cash flow, depreciation and expense deduction on a rental property (especially if the cash flow is invested in another retirement vehicle).  Plus, you have a heck of a lot of years for buy-and-hold, allowing the tenant to buy your investment, before you may need substantial cash flow from the property, so time is on your side.  I am over 50, with a young family, thus my risk tolerance and conservative nature for investing is much lower than many (plus, I got burned bad during the last RE downturn due to buying investments at market price peak conditions).

Many posters here have earned the ability to use their RE investments to retire early (and most likely they were not investing in a 401K during their accumulation period), but that has to be through a combination of frugal lifestyle (while accumulating assets) and learning to live within their means monthly, after the goal is reached.

You certainly have a lot to think about, but I tell you there is no wrong answer here, as long as you are saving for your future and investing in something that will bring a healthy return.

Hope this helps.

@Sean Carroll, you are going to get a thousand different answers to this, and any one of them is just as much correct, as it is just as much wrong.  There are so many benefits and drawbacks to investing in your local market and just as many benefits and drawbacks to investing in a ton of different places in the US.

I think to help limit the context of this conversation, you may want to quantify some of the variables of this question, to help aim answers.

For example:

1.  How much money do you have to invest?

2.  What are your expected gains?

3.  Do you have experience with rehabbing real estate?

4.  What is your risk tolerance for investing?

5.  What is your credit like? (Are you interested in financing?  If so, up to what number?)

6.  What is the long term goal of RE investing for you (what is the "why"?)

7.  How far will you travel for a good deal?  Or will you travel (are you looking for people to help you rehab, market and PM your property? - a la "turnkey"?)?

This is just a start, but I think with a bit more information, you can avoid the usual answers here like, KC, Indy, Memphis, Austin, Cleveland, etc, etc (these are ALL fine markets, but I would assert that investing in any of those cities is NOT always the best choice for the out-of-state investor, based on answers to the questions above, as there are success stories on REI in almost every town in America).