All Forum Posts by: Michael Landrum

Daria B.

Sorry, i'll try to clarify. My cousin was living with my dad when he passed away last October. My brother and I were handed down the house, not my cousin. My brother and I agreed to sell her the house and she agreed to buy it. We've all agreed on a price: $45,000. The property is free and clear right now, and belongs to my brother and I.  Where we are stuck is the method by which we are going to sell it to her. She can't get a bank loan due to no credit, we can't seller finance the whole thing because my brother wants cashed out all at once, and we're not able to buy my brother out because neither my cousin nor I have the money to do so.

So, the idea again:  I take a mortgage out on the house. Let's say it appraises right at $45,000. I would pay my brother off his share (we agreed he would only get $20,000), and I would take the remaining. $25,000. Meanwhile, although the mortgage would be to me only, my cousin and I would have an informal (yet documented) agreement that SHE would be the one making the mortgage payment.   I know the risk here is fairly high because the agreement between my cousin and I could be flimsy BUT I think a built in accountability that would keep her steady with payments is the fact that the house mortgage is in my name, not hers.  The only real hangup I can't figure out is, how would eventually switch the title to her name? Would I, as was suggested in my first post, "gift" her the house at the end of the payments? Or just wait until at some point when her credit is established, have her buy the house for the remaining amount she owes?  Idk.....is this all too convoluted?

Hi, I wrote a post about this scenario before and got some good advice but now I have a few more details and an idea that I need feedback on.

Here's the situation: my brother and I inherited a house late last year, with 2 family members already living in it. (my brother, myself and the relatives are all on good terms and the inherent risks with renting to family members is not exactly what I'm posting here for). We all agree that my relatives will buy the house as soon as we can make that happen, problem is, she has no credit and has a very hard time getting a loan.

Here's what we all want:   My relatives/tenants want to buy the house asap because they don't want to waste time and money by renting.   My brother wants to be cashed out. He wants his half of the money that we agreed we would sell the house for, and then sign a quit-claim deed or whatever other paperwork is necessary so that his hands are completely washed clean of the whole thing and he can just move on.    I just really want an income stream. Ideally, I would like to get my half of the cash as well and go reinvest it into a cash-flowing property, but am also willing to seller finance my half of the house (after we pay off my brother some how).

Here's my idea and I need to know if it's first of all legal, and second of all, smart. (I'm in a hurry so sorry for lack of detail).

Idea: Take a mortgage out on the house (BECAUSE IT IS CURRENTLY FREE AND CLEAR),  pay off my brother and myself, and then have my relatives pay off the loan and then "gift" them the house at the end? Is this a viable option?

@Levi T.

ALSO!! GOOOOOD insights into the business that I was not aware of. I hadn't really considered what the rise of interest rates would do to the loan payments. As well, the difference in operating costs for the amount of properties I own was not something I had given much thought too! Again, thanks for the advice!

@Levi T.  Very good! I can see that there's no way to get around the longevity required to really succeed in this real estate biz. I need a more sober-minded view there so thanks for that! As for the "$100 a door" goal that I have, that is AFTER expenses (which include utilities-if i pay for them-, capex, vacancy, eviction, repairs and maintenance). I want to build money in reserves for those inevitables AND THEN have a $100 that can be pocketed.( or, ideally reinvested).

Could you talk a little more about the "two-step"? What is the advantage to leveraging to buy 2 at a time? Keep in mind that my ultimate goal is maximum cash flow, not just control of properties and equity. Is the idea that as I'm picking up multiple properties at a time, I can sell along the way and pocket some of that cash? So, say I pick up 2 properties, rent 1 and flip the other? Then repeat? 

@Jonathan Fowler

Your absolutely right. After reading everyone's input,  i came to the conclusion that this is the pepper way to get the snowball rolling. So now my plan is to acquire about 5 to seven doors, each cash flowing at least $100, and assuming all that cash flow at the least leveraged property. With the low process in my market, paying off debts completely will not be terribly difficult,  and momentum will build incredibly fast. I'm so excited because this seems like such a powerful strategy that will help me realize my real estate,  and financial goals!!!

I just inherited a 2 bedroom 1 bathroom house that is free and clear and am struggling with what makes the most financial sense. I see 3 options

1) Owner occupy (would have no mortgage)

2) Use it as a rental (could receive maximum cash flow)

3) Cash out refinance (could expand portfolio)

I'm aware that there are many details that probably factor in here,  but I'll just wait for people to ask questions if necessary,  and also welcome any general advice.  Thanks in advance! 

Awesome. Thanks for the input. Can I just ask one more question though: Is there "pocket-cash" to be made with a more aggressive strategy of investing? I mean, if not (which is how I see it) what is the point of aggressive real estate investing? Aren't you just managing more property and equity but taking home very minimal cash-flow returns? I'm in it for maximum cash-flow, as soon as possible. The equity I earn on the way is a bonus.

@Account Closed

The price range I would be looking at in my market would be anywhere from 30-40k up to 80-90k. It's pretty easy to find properties in that range in my area. But, I do recognize that a cheap house is not always a deal. I think your correct about the time frame, unless I got very creative about raising the funds to throw towards those first couple properties. Maybe I would have to do some wholesale deals in order to raise some wads of cash that could be used for large principle payments? I don't know if that would be the wisest thing, but it is an idea. What about paying my house down until I have enough equity to cash-out refinance and use that cash to pay the rest of the debt off? Is that a good idea?

A lot of my thinking is coming from a lack of understanding the benefit of leveraging money all over the place. I do understand that you may get high returns on investment because you are not using your money, but it's such a long-play strategy as you wait for tenants to pay off your properties. I guess if you don't plan to hold them forever, then you can sell high and make some money that way, but for someone like me who wants to hold my properties until I can pass them down to my kids, but I'm thinking about how to get maximum cash-flow until then.

I am very new to the real estate world, but I have been consuming anything and every bit of content I can get my hands on. At this point, with a pretty good awareness of my (tiny) local market, I know with certainty that I want to buy and hold rentals long-term. In an effort to keep this brief, I'll just get right to my strategy idea. What I want to do is pay off the first house I have (which was my primary residence, until I placed renters in there just 3 days ago) as fast as possible. At that point, I would be completely maximizing the cash-flow on that property which I would use to make extra principle payments on the next property to help pay off that property as fast as possible. At that point, I would own 2 rentals free and clear, therefore having maximum cash-flow from both of those properties that could be used to purchase the next property even faster, while maybe even being able to pocket some of the cash. I would just continue this process over and over which would increase the cash-flow that can go toward more properties, as well as pocket-cash. 

Now, one clarifying point:

1) I don't necessarily mean that I would only control one property at a time. I would be willing to own a couple properties in the beginning, but if I was to control multiple properties, the goal would still to be to pay off the property with the least debt as fast as possible so that I could turn around and use that cash-flow to pay off another property and so forth. 

Advantages that I see:

The snowball effect that would result from owning more and more properties free and clear which makes it easier to buy more and more maximum cash-flow properties as you go along.

Absolute maximum cash-flow from each property much quicker than waiting the full 30-years for tenants to pay-off your mortgages.

Disadvantages that I see: 

Difficulty rapidly paying off the first 1 or 2 properties.

Untapped equity in all of the free and clear properties.

Here's my questions (in addition to any other comments anyone would like to offer):

Is this a good idea? 

Are there any resources on a strategy like this?

What are some clever ways to pay off those first couple of properties?

Hello everyone, first of all i want to apologize for the unprofesional and incomplete profile. I'm brand new to bigger pockets altogether and registered an account in a hurry.  I promise, im more handsome than the black dot that my picture displays. Anyway, here's my urgent dilemma: my wife and i seized an opportunity to move out of our primary residence, and into my in-laws while they will be gone for a few months. Our plan was to rent out our house and save some money quickly because our in-laws will be charging us next to nothing. It's a win win honestly. Well, as of yesterday, all of our stuff is moved,  but as of today everything feel apart. Here's what i mean.  I was informed today by our lender (after i called and asked) that our loan has a "bond" on it which means that it cannot be rented out.  I did some reading up and came to the conclusion that the reason for this is that its a USDA loan.  So,  i looked into our paperwork,  and the only thing i could find in the Note that was even remotely close to this issue,  is just a statement that said that we(the owner) must occupy the residence for 1 year.  Well,  we've fulfilled that. .is it safe to assume that since there are no written stipulations in the Note about renting the house out, that it is acceptable?  Please help!!!