All Forum Posts by: Mark Fitzpatrick

Hi Darius, if you're taking out bank financing to buy your deals, it's good to expect and plan for the following:

- Around 25% down payment
- You'll need to have cash reserves up to 6 months of PITI (full payments) in the bank for the property. If you're making down payments, just make sure to keep enough money in the bank to meet reserve requirements.
- You want to have mid 700 credit scores or better. Fannie just revised their pricing recently and they're dinging people with high 600 credit scores harder than they used to.
- Rates for investment properties are typically higher than owner occupied because investment properties are riskier from a lending standpoint.
- I also would advise deleveraging a bit if your debt-to-income ratio is high. It's much easier to qualify if you aren't carrying a lot of credit cards, auto loans, etc.

If you have more questions about the bank financing side of things, definitely feel free to give me a call.

If you market on Craigslist, I would suggest doing some minor staging and using some great looking photos. If you're good at taking professional quality photos yourself, then do it. If not, hire somebody to do it for you. You can always reuse the photos again next time you need a tenant (as long as they're still representative of the unit). Good photos is a big magnet for getting the phone to ring.

Hi Mitch, thanks for the feedback. The reason I haven't been too excited about Southern California is that there are so many other areas where you can get the same cashflow for a much smaller purchase price. I'm not completely convinced SoCal will see a major recovery in prices for a long time because I think a lackluster economy and higher interest rates will be a drag on appreciation for some time to come. My preference is to be invested for solid cashflow with appreciation as a bonus if I just happen to get it. I know there are plenty of people that are doing fine with rentals in Southern California, but I'm just not as comfortable with it myself. Unless prices drop significantly from here, the margins just seem too thin to me.

My wife and I live in Southern California and want to acquire more rental properties, but we don't want to invest in Southern California. We're already invested in TX and we plan to expand there, but I'm curious what's going on in other areas of the country. What areas are you investing in and what is working/not working in those areas for you? We're planning our next move and our goal is acquire more cash flow. Appreciation is nice, but it's not the first priority.

Been there done that too. We rehabbed a unit about a year and half ago that was previously inhabited by chain smokers. We replaced the flooring and painted everything (even stained the kitchen cabinets) and we were finally able to get rid of the smell. If you have stains in the walls or ceilings, Kilz works well in my experience.

If you do end up purchasing a bunch of these, one way you can reduce your risk over time is to focus the cash flow you're generating from your overall portfolio into paying down mortgages. Paid off properties have very little risk in them, and the more you pay off, the more secure you make your business.

You also could sell off part of the new acquisition and use the proceeds to deleverage other properties, which would reduce your risk as well.

I may be a mortgage guy, but I'm a firm believer that leverage - while it can be good - can also add a lot of risk to your business.

Wow, that's pretty scary. I hope other would-be professional tenants don't get any ideas. One way to defend yourself against the "deplorable conditions" issue is to photograph your unit before the tenant moves in and have them sign off on a document that everything is in working order.

That's pretty crazy, but it doesn't surprise me. There are some good property managers out there, but they are very few and far between in my experience. A lot of property managers operate from the point of view that any tenant is good as long as they can get them to sign the lease agreement and collect their commission.

I once had a property manager (we no longer use him) who had been a real estate investor (he owned quite a few properties, but was a bit of a slumlord) and property manager for many years. He once told me that if I wanted more cash flow on future properties, I just needed to put down a larger down payment. He said "you can make anything cash flow with a large enough down payment". What would you say to this guy?

I'm at @mbm_tweet.