All Forum Posts by: Matthew Pipkin

I'll check out that property and keep looking around my area. If anything looks like it might have potential I'll post again.

Thanks, again!

Thanks, Jean. Good find. Actually, I'm not particularly attached to the one I used as an example on this post. I mostly just needed an example to run the numbers on and then post on here to get some feedback. Reading posts about what people have found in other areas is helpful, but I wanted some honest insight on a property in my own area. And what I have gained from this post alone has been tremendously invaluable. I have been truly impressed with the generosity of those like yourself on this website in that you contribute so much of your own time to educate those like myself who are just getting started. I hope one day I can pay it forward.

One more question - about what should I shoot for having left over from the rent after mortgage and all other expenses have been paid? I remeber reading an answer to this question before, but I'm having trouble digging it up at the moment.

Wow, great info. This has been hugely helpful.

Jean, I think the wording in my last post caused a little confusion. What I meant was that the total monthly payment for principal, interest, taxes, and insurance combined would be about $262/month. Still, I liked your analogy. Cracked me up.

However, after seeing the numbers that Aaron ran (thanks, by the way) it still looks like this property doesn't have much to offer. My problem is that the town I'm in is primarily low income, totals about 12,000 residents, and is the largest town for more than an hour's drive in any direction, so the numbers I've given are unfortunately about as good as I've seen around here.

I've talked to a couple local landlords who seemed to be making a decent profit in spite of the numbers not being so great. Maybe there are some other numbers I've left out that might make investing here profitable? Maybe a different approach? I'm willing to be patient as I start out. I want to get off on the right foot.

Thanks for the feedback so far. And, James, thanks for that tip - I'll definitely keep that in mind as I move forward.

Also, I definitely plan to honor the current lease agreement, I just wondered how to approach raising the rent when the lease was up, or how I can check the background of the current tenants so I know whether they are reliable.

Here are some of the other numbers that I was able to track down today:

Insurance: $692/year through one bank that I talked to

Taxes: 567.76/year for 2013

Using these numbers and an online mortgage calculator I came up with $262 for the monthly mortgage payment for a conventional loan. (I assumed around 4% interest.)

The county appraised the house on 1 Jan 2013 at $25,000.

I'm not aware of repairs being need at this point. I plan to get an inspection to check on this.

I'm still looking into what utilities I might have to pay.

If owner financing is not an option I have some cash set aside that I could use for a down payment on a conventional loan or personal loan.

I'm looking at purchasing a single family property as a possible rental and as my first deal. Here are the details:

1. Asking price: $33,000

2. 2 bed, 1 bath, built in 1900

3. Current tenants are paying $375/month, but similar properties in the area are renting for $450 to $500 or more.

4. I would like to speak with the landlord to find out about the current tenants and to talk about the possibility of owner financing, and I would like to get some kind of application and list of previous residences from the current tenants, but the real estate agent says I can't speak directly to either of them - I'm still learning about the etiquette involved. How do I approach this?

5. If I did purchase this property and take on the current tenants I would not want to maintain the $375/month rate. How could I go about increasing it while giving proper consideration to the needs of the current tenants?

6. What other considerations do I need to be making, and if this is worth pursuing what would be the best way to proceed?

Thanks for taking the time to share your thoughts.

-Matt

Thanks, David. I'll keep that in mind if I decide to pursue the lease option route. I appreciate the feedback.

Guys, thanks so much for setting me straight on this. I realize now that I was confusing a lease option with seller financing. Also, I'll definitely take to heart the words of wisdom regarding tax advice - I'll leave that to the pros. And it'll be a lot less for me to stress about.

As for an attorney, I've already found one locally who has experience with this.

So thanks again for the input. This has been a great introduction to the Bigger Pockets community.

Thanks, everyone, for the quick feedback. But I think I didn't word my question very well. To clarify I'll paste a comment from Steven Hamilton II from an earlier post:

"The Section 121, Home sale exclusion allows to exclude the first 250k or 500k of GAIN for your primary residence. You need to have lived in it for 24 months of the last 5 years before the sale."

If I were a seller I wouldn't prefer to use seller financing because by the time of the sale, I probably wouldn't have lived in the home for the required 24 months of the previous 5 years in order to exclude the first 250k or 500k of gain. Am I making a correct conclusion here? If so, why would a seller agree to give up being exempt from paying the capital gains tax by not selling with a shorter term?

Thank you to everyone who takes the time to read these posts and share their experience.

My question is what would motivate a seller to use seller financing to sell their primary residence using seller financing when it would generally forfeit their exemption from paying capital gains tax? Why especially would a seller agree to a balloon payment after just 5 years since that would give them almost no time to spread out that tax over time?

The reason I ask is that I am interested in using seller financing as a buyer to purchase property and I want to be up front with the seller about the capital gains tax they would owe, but I don't see how I could make the deal look favorable to them.