All Forum Posts by: Morgan Porter

My wife and I spend quite a lot of time at a lake in southern Virginia (Kerr Lake, aka Buggs Island). We are contemplating buying a house down there and setting it up as a vacation rental. I know all houses are different and every lake is different but does anyone here have a lake property they rent on AirBnB (or similar site)? What was your experience? Can they pay for themselves or generate real profit?

It’s standard and understood that if you end a lease early that you lose your security deposit correct?

Unfortunately, as a non-US citizen, I know that makes it way more difficult. But real estate is all about creativity. Are you married or have relatives who are US Citizens? Or maybe a very close friend? It's all about who holds the deed and the deed can be in more than one name. Loans can also be in more than one name. See where I'm going with that?

The loan officer I work with the most is only licensed to do business in Virginia, DC and Maryland, but he would still answer questions and connect you to someone in your state if there is any possibility at all. He's very creative and will explore any and all possibilities. Google "Sumeeth Theruvath Loan Depot" and you'll find his contact info. Tell him you got his name from me.

@Jan Van der vorm Nope. Uncle Sam always gets a piece.

Better question: With interest rates at near record lows, why aren’t you leveraging that equity to get more property?

In this case, I accepted a separate payment from each roommate individually. So, at the end of it all, that's how I dispursed the deposits. Unfortunately, in this case, the 2 roommates who did what they should have done, kind of got screwed by the others. But I like the quote from above: "I'm running a business, not a daycare".

Thanks for the advice, everyone!

Hey BP Nation, just want to share a quick story of our latest rental purchase which closed on Friday (July 26):

A few months back, we sold one of our rentals in an area that had significantly increased in value but the rents hadn't increased much. Since there wasn't a ton of cash flow on that one, and our overall cash-on-hand was lower than I liked, I decided to sell it. But only if I could do it on my own without paying a real estate agent and if I could get the high-end price. So I  texted the tenant who had lived there since we purchased the property about 5 years ago. Turns out he was interested and qualified so I sold the house for full market price without paying commissions. I used the money from that sale to add to our cash reserves and decided to shop for another rental closer to the ones we are still holding. (I manage them myself so having rentals as close together as possible saves a lot of time.)

Of course, I wanted a good deal on my next purchase. I started simply by posting on my social media accounts that I was looking to find a house to buy directly and quickly from the owner. Sure enough, I got a few leads (I think it was 3). 2 of the leads were not good (too expensive), but one just happened to be near my other rentals, and was a very small house in my price range.

The house is tiny (under 800 sq ft), and has a dated kitchen and bathroom. But it's in decent shape and in a great area (very close to a large university). It's also close to downtown, so it's a very desirable spot for many different types of tenants. The best part of the house is the fenced-in back yard with large pine trees on each side which provide almost complete privacy. 

The owner wanted $125-130k, but after reviewing the numbers I told him the best I could offer was 120k, which was more than fair for that house and very close to the full market price. He took some time to think it over and finally accepted.

Before closing, I also took a contractor by the property and considered expanding the house and making it a 3 bed/2 bath. My contractor drew up the plans but after we got into the details the cost of the expansion would be $60k+. That didn't seem too bad but my analysis of the property told me I'd only get an extra $100-200/month in positive cash flow out of it.

So I decided to hold off on the major renovation and do a simple clean up and repair the minor issues for $5,000 or less and get tenants in it asap.

Meanwhile, about 1 week before closing I posted a ghost listing (just a simple "for rent" listing with a photo of the front of the house and some details). The other photos were too messy, so I didn't want to post them. I expected a few people to reply, but the response was phenomenal! I still can't count up all the emails and calls I got from people wanting to see the house. Apparently small 2 bedroom houses are in great demand.

So I got landscapers and a cleaning crew to the house right after closing and set up 5 showings of the house the day after closing. I also showed everyone the punch list of final things to be done.

It's now the Monday after closing and I have 3 applicants at the high end of the rent I was estimating with! I don't want to celebrate yet because we still have a lot of work to do on the house and I don't have a lease signed, but so far this looks like a win!

Final high level numbers:

Purchase price: $120k (15% down)
Clean up/repair budget: $5k or less
Closing costs and other fees: let's call it 5k
Total out of pocket: about $30k

Monthly mortgage: $750
Monthly rent: $1295
Cash flow (before misc expenses): +$545/month

ROI (before other expenses): 21.8%

I know this leaves out a lot of details, and repairs and other expenses will cut into the overall profit, but we plan to hold this one for a long time (maybe forever), so I'd say this is looking like a good purchase so far.

Star, I see most people have already told you this, but do NOT give up. Real estate investing, like anything in life, takes time. Don't get overwhelmed by looking at the whole journey all at once. Just focus on the next steps:

1. Work on improving your credit. You'd be amazed at how quickly you can get that fixed. - https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/

2. This expands on No 1. but focus on improving your personal cash flow which means spend less than you make. Do whatever you can to live frugally and only spend on what you need. Meanwhile, work to make extra money any way you can. That may mean learning more so maybe try to go from CNA to RN. (Look for a job where they will cover your education expenses! In healthcare, a TON of employers will do that! Just ask!)

3. Save up. First time home buyers get the BEST deals on financing so you won't need much. There are a lot of programs that only require 5% down and sometimes even less!

And not to get too far ahead, but if you don't make a ton of money there are also programs out there that only sell houses to first time home buyers who have LOWER income! I'm not sure about Houston but in my home town (Richmond, VA) they are selling beautifully renovated houses to people with lower income levels. When you have better credit and a little money saved, call the Houston Housing Authority to see if they have any programs for lower-income individuals. Better yet, call them now and talk to them about your situation and see what the requirements are and see if they have any programs that can help you with the first steps I mentioned above. http://www.housingforhouston.com/contact-us.aspx

You can do it!!!

Hey Jim, have you considered "house hacking"? My first property was a 4 bedroom SFH that was probably a bit more than I really could afford. But I was single so I bought it and rented out 2 of the rooms to friends, and used the 4th bedroom as my home office since I worked from home. I did that for about 5 years before getting married and having my first kid, and then my wife and I bought another house and kept the original as a straight rental.

There are huge benefits to doing things this way. #1 reason is you get owner-occupant rates and you have to put WAY less money down! You also get fixed rates. 

I have rentals close to a university and you can typically charge more rent for students (and back it up with requiring their parents co-sign). But I don't think I could sell the houses I have at 3 or 4x market rate individually or as a group. I'm wondering if there was more in the deal than we are seeing in a local newspaper article. We know the media some times get things wrong or simply doesn't have the full story. 

Could you share the link to the online articles?

@Eric C. Good advice. Maybe a gift card or something would be a nice thing to do. I’ve also decided that this story will be told to anyone calling for tenant references. Not sure that would keep them from getting a new place but it won’t help!