All Forum Posts by: Michael C.

Jeff and Rich,

I appreciate both of your long replies. I've learnt a lot more about condos already. I attempted to search the forums for condo related articles and didn't find too many. The book I'm currently reading recommended on this site had one page in a chapter on property types that did not recommend condo's but did not go into detail. However a few pages later the author goes into detail about determining how much to spend on a SFR versus rent and suggests buying a SFR is the expected rent is 1% the home price. Until now, thanks to this site I've been reading you should aim for 2% so now I'm taking the book with a grain of salt.

Anyways, Rich, you're last response made much more sense regarding the fact that with condo's you get sucked into having to pay part of the cost for having the pavement redone, or bushes planted or whatever it may be. I realize with the HOA's and now the assement fee's that you never own the place clear..but at the same time realize you never truly own any property free and clear since you always owe property taxes.

I'm certainly not trying to argue with successful investors that have clearly done well for themselves... just explaining my thinking.

1 bed/1 bath condo - not as desirable as a 3/2 SFR but functional.
Walking distance or 2 minute car drive to reputable college. Nearby places going for about $800/month. Figure it would likely be rented by one college student. The price is 24,900 which if fully financed with zero down and 6.5% interest would be $230/month for mortgage on a 15 year fixed. The property tax is $300/mo split by 12 is 25/mo. I'm not sure about insurance but just to throw in a number would say 500/year so 40/mo. SO monthly rent is 800 minus say 300 for mortgage and taxes and insurance... that's 500/mo left over. Obviously that's not taking into account assesment fees which I honestly don't know what they'd run. But given the goal to make 100/mo per unit for cash flow, this is 400/mo over that goal. So 4,800 a year over the 1,200 a year target (from 100/mo per unit). Though I may be naive and that may not cover the assessment fees...

And how that compares to a SFR.... From what I'm finding - a SFR in Mass area would go for about 150-200k (and this is a low end home with no upgrades) and would rent for not much more than 1,500 though this is on the high side compared to the house. According to the 2% rule a 200k house should rent for 4,000/month? So clearly this would not cash flow... also... the property taxes on a 200k home would be 2,400/year which is an additional 200/month. The condo numbers looks so much more attractive. Frustrates me when I read about guys buying rental properties for 40k in ohio or similar places that rent out for good money...

Again, not trying to sound argumentative... just trying to talk through it.

Thanks again for all the replies. I really appreciate them.

Mike

Thanks for the replies. I tried searching the forums for thoughts on condos and did not see too much.

Did see that you're kind of restrained by the overall condo association? HOA fees typically, but that should either be included in rent or taken into consideration when running the numbers. Does sound like they can appreciate fast in good markets but depreciate faster than SFH's in down markets. In terms of selling, they're less desirable so harder to offload if looking to sell.

Again I was solely looking at the numbers of a unit that costs $24,900 (1bed/1ba) and is just down road from a college. The cash flow would be great specially when compared to SFH's in the area but I realize there's more strings attached with condo's.

The Massachusetts area seems to be tough for cash flow properties compared to other places but I know people are doing it so there's ways to do it.. I just need to keep learning and searching. I found a townhouse that was victim to fire selling by insurance company for about $30k and when last sold in good condition in 2005 sold for 144k. But seems townhouses and condo's fall into the same boat and should be stayed away from.?

Just started my third book that was recommended through this site "Rental houses for the successful small investor". I did notice it was written in 1999 so I'll take parts of it with a grain of salt but expect the overall concepts to work.

Are there types of rental properties that are more desirable than others?

The area where I'm looking in Massachusetts has expensive SFH's so they don't seem desirable since the rent/cost ratio isn't reasonable.

There's three story homes that with some cosmetic needs are selling for 120k-150k putting the cost per unit around 50k (be conservative) and rents between 850-1100.

I located a 1 bd/1ba condo that's in a complex which is selling for 29k. Other than some fresh paint, carpet cleaning and probably small cosmetics the price seems great... and it's walking distance to a reputable college... my guess would be 800/mo for rent.

Where I'm going with this post is.... there's different avenues... The triplex has a lower rate of return on investment BUT being that the price is more you can build more equity and a larger house price for appreciation (though I know you shouldn't count on appreciation)... the 29k condo could be paid off real fast and then the place is not building equity...but is strictly a cash flow property... honestly both sound great to me

Just curious? I'm still in the learning stage.. trying to learn and take in as much as possible. I'll be moving to Massachusetts in about two months and want to hit the ground running at that time... Thanks for reading..

Guys I appreciate the replies. That's some good information for me. I'm not in the area yet, still traveling but should be there within about 2 months. I'll start asking around about preferable small banks that are willing to work with small real estate investors. I currently do all my banking with Bank of America which I've never had any issue with, but realize why a smaller one or two branch bank may be better to work with. They might actually hear you out rather than scroll through rules and regulations and tell you why they can't work with you.

So do banks view rental properties as assets or liabilities?

Also - I have not checked with a bank to see what I'd be pre-approved for (loan amount)... but.. just speaking hypothetically.. Say I was pre approved for a $300k mortgage with providing 20% down. If say the triplex was $120k and the SFH was $150k... totaling less than the amount I was approved for.. would a bank allow me to take the full mortgage amount and split it into the two properties? Or do you have to put it all towards one property?

Looking to purchase my first home in about 3 months, but also want to purchase a rental property as well. I've worked on the road traveling the last 4 years and finally settling down.

What I'm looking at is a single family home for myself as well as a triplex home as a rental. I have saved enough money to pay 20% down for both properties and have a safety net for several months of payments (if I lost job etc)...

The triple family homes I'm looking at around about 130k - 150k and each unit rents from 850-1100 which allows for the property to fall within the 2% rule. The units could be rented as is but "should" have some cosmetic work done to be more desirable. The area is a small city area in Mass so SFH's are quite expensive to purchase as rentals.

Ive thought my best option is to pick up a triplex and live on one floor while renting the other two... wait until I can show the rental income as income and pick up another rental.... but that technique keeps me living in a triplex. I'd really like my own place and not live next door to tenants. What would people suggest? I'd like to pick up a SFH for personal use and a triplex as a rental while prices are this low! But I realize that doing so, one after another might not work once banks look at the debt to income ratio....

Waiting for a book to come in the mail that talks about this (that was recommended on this site).... Thanks

Steven, I read Rich Dad a few years ago after my mom gave it to me... I read it.. felt so motivated to do something with my life but honestly had no idea how to do it... seemed like a feel good book with no suggestions...

I just ordered "Flip" and "flipping for dummies" off amazon based on recommendations on other posts... should have Flip Friday to start reading this weekend...

Anyways, I didn't really get an answer to my first question... about acquiring properties... or rather...adding properties to your portfolio...

is it typical to purchase a rental unit with cash flow.... after a year, refiance and use the extra money for a down payment on a second rental unit.... repeat... repeat.....

what are typical time periods for holding the first rental before a bank would let you take on a second property? then third etc.... maybe acquire was the wrong term.... rather, growing your portfolio... thanks!

I don't have experience with this... but im trying to picture the website and the two types of people that would visit the website.

I might agree that two separate websites would be good... what might work well.... on the site that's for people looking to sell their house... say an investor happens to find his way to the page... you should have a link on the page that says something like "if you're an investor interested in homes I have available for sale click here".... instead of having it go directly to the website it could go to either a place for them to put in their email address..once they put in their email address you could have an auto email responder that sends them the link for the other website.... or even have a couple questions they need to fill out along with submitting their email address.... which as long as they fill out a couple required fields they can get the link for the other website.... you might still get some sellers looking over on the other page and getting upset that you're selling their house for less than they wanted to sell it to you but... they agreed to it so you can't feel too bad... though I understand you wanting everyone to feel like they got a good deal....

Ok...well that makes more sense then.

How do rehabbers or buyers establish relationships with wholesalers?

The biggest suggestion I've seen on this site is to join your local REIA. Is that usually the best way?

Since I've joined this site I've learned a lot already and have a list of a couple books I'm getting of amazon to start reading... I did have a couple questions.... more so.... the "flow" of property if you will...

Through reading I feel like "bird dogging" and wholesaling are very similar if not the same?

Trying to understand.. unless you cut out the middle man and do everything yourself... it's probably best to stay with an area that you become specialized in and let others do what they're best... not sure if that makes sense but what I'm asking is..

a bird dog goes out and finds highly motivated sellers willing to sell cheap to cash offers.... The bird dog then writes a contract to buy the property but finds potential buyers to "assign" that contract to? would the bird dog sell the contract to a wholesaler? or is a wholesaler the same as a bird dog?

Who would a rehabber buy from? a bird dog or wholesaler? or either or are they the same?

Do rehabbers usually sell the property after or hold on to them to rent out for passive income? or both...

Do rehabbers usually work with their own money once they have a few deals under their belts and have the cash or do they usually find investors to borrow money from?

Just a couple questions I've come up with after reading through this site...

thanks!
mike