All Forum Posts by: Fred Ramos

Welcome Jennifer! From what I hear, Houston is a nice market!
Good luck to you......Get to know those investors :)

Sambaran,

I don't know. From lessons learned, I can tell you that it is difficult to come up with the money to do rehab on a property after the fact. We've found it best to just go ahead and do the rehab up front. We haven't taken the approach you are talking about so hard to really give any advice on it. We are strictly buy and hold types.
One thing we are aware of is that if the house is purchased at below market value (30% below market), you could get a hard money loan to help with the reno costs and then refi into conventional but you can't use hard money to rehab a primary residence. it's used strictly for flips or buy and hold.
let's say you did buy and move in and fixed the property for a year. When you go to sell, unless you sell yourself (I don't recommend), make sure you take into account that you will have to pay the realtor fees when sold (Typically 6%), for a $300K house you are are looking at $18K for realtor fees (There went your initial 5% down). So, if you're going to add value, make sure you add plenty to compensate for the fees associated with selling. Also be aware that sellers too
pay closing costs.
One last note, Think to yourself, Once the renovation is done and you are ready to sell, How big will your market be? In other words, will the masses be able to afford your property? or, will maybe 10% of the people even be able to qualify to buy it?
Try to think of every possible scenario before you buy. try to put yourself at an as advantageous position as possible.
Again, Wishing you the best of luck in your real estate investing career.

Sambaran,

Based on the numbers you've submitted, and with jotting in $1500 for insurance (I would assume it may be higher), I have come up with monthly carry costs of about $1,950. This includes HOA fees but does not include utilities. for that just add in another $500. I would think that a house of that size would have a higher electric bill than $300 during the summer.
So, bottom line is this:

Overall costs:------$2,450
Potential Rents -$1,200
Your share $1,250

In this scenario, it will cost you more than the $1,100 you are paying in rent. And take into account that your room mates may not be there forever so you will have to carry that as well.

just seems like too expensive of a rent house to me. If you pay $285K, you should be able to rent it out for $2850 monthly.
My advice, if you want to minimize your expenses and have a buy and hold property, invest in a duplex. Live in one side, rent the other out. No roomy's to worry about and you could possibly have all the carry costs covered by a tenant (Bank the $1,100 a month or whatever you save towards your next home).
Also keep in mind that when your ready for the next property, the banks will look at how much you collect in rent and deduct 25% for maintenance costs of the property. This could potentially increase your debt to income ratio and could affect whether you qualify for the next property or how high of an interest rate you will pay.

Personally, I Wouldn't recommend purchasing this unit.

whichever way you decide to go, best of luck to you.

Hi Mike,

Instead of going through all that, why not try to wholesale the property?
this means no money out of your pocket other than the earnest money (usually about 1%) and an option period (about $10 a day).
Just mark it up a little ($2k - $5K) and transfer the contract to an investor.
Just make sure that the numbers will work for an investor with the mark-up.
Seller financing is great (We have one property seller financed) but I would think that as soon as the deed to the property is transferred, the ex-owner may request the loan to be paid in full (I know banks will, it is called the due on sale clause). I don't know, I've seen some these seller financed deals be a little shady.....Do things right (not insinuating anything) and do a proper closing. you can open yourself up to a whole lot of trouble if something goes wrong while collecting payment for the property while paying another person or entity off.
Gurus?....to me this is a self designated title that few if any, ever live up to.

Good luck Mike!

Hi @Taylor Brannen,

Sorry for the delay in response....been working in your neck of the woods :)
Our original properties were single family and did need some work.....I think we sunk about 4K into the first and about 5K into the second.....Both were estate sales with out of state owners so that helped.
I see where you mentioned about doing a townhome or condo for your first property.....My advice......Don't! for the following reasons.....Though i personally do not worry much about appreciation since I don't plan to ever sell, I do keep in mind the real possibility that at some point and for whatever reason, we just may have to......with that....a single family 3/2/2 would be the easiest to unload if needed.....as well....as the value of the neighborhood goes up so will the value of your property. Also, do you really want to be held to other peoples wishes? this is what you will have with a condo or townhome association....If they decide they want to replace roof, be prepared to pay whether it needs it needs it or not...this is just an exaggeration but i like the flexibility of making my own decisions as to what needs repair and what doesn't and determining which contractor I want to use.

Again, just my 2 cents.

Again, best of luck!

Welcome Taylor!

My 2 cents - You may want to call several realtors and let them know that you are in the market for an investment property. of course you will get some realtors that will think you are nuts because some (not all) don't really understand the types of properties we want and you will never hear from them again. The key here is to try to develop a relationship with said realtors. usually, after a couple calls and maybe even a face to face meeting you'll come across as being a serious investor.
With that, try to find out from which ever realtor you speak with whether they pass around potential listings within the their office before these listings actually get posted on the MLS. This may help you look at a property and potentially submit an offer before anyone else (general public) will see it. ( i purchased my last property 2 weeks ago in this manner).
never hesitate to let anyone know you buy properties (Friends, co-workers etc.)...you just never know if a friend of a friend of a friend needs out of their situation.
Try driving (Time consuming) around in the neighborhoods you might be interested in. If you notice a property that looks vacant (unkept lawn, newspapers in driveway, yellow or white papers stuck to either windows or doors) jot down the address and look up the property in the county tax records and find out who the owners(s) is. Send them a letter or google them.
google has a wealth of info on individuals (you'd be surprised).
If your not afraid of being leveraged.....look for distressed properties where Hard money numbers would make sense (Less out of pocket, especially important once you have 4 mortgages and have to put 25% down instead of the standard 20%). If you use hard money, make sure to get pre-approved for a conventional loan prior to going ahead....you want out of hard money as quickly as possible (12-16% interest) and the hard money lenders I'm aware of won't loan to you unless you have an exit strategy 9roll into conventional).
As far as what to look for, in my area we like to look in the $90- $110K range...$110k only if it is move in ready. 3/2/2 is the most sought after and therefore, easiest to rent.
We paid a whopping 20K for our first rent property 7 years ago....18K for the 2nd....still have them both. :) The latest cost us $100K.

I hope this helps and the absolute best of luck to you!

Tommy,

If you carry enough insurance, you don't need an LLC. If someone is going to sue you, they want the money, not the property.
We have an LLC and have had it for a few years but I don't see it as my protection. it does however make it easier to file and keeps the business away from the personal.
Transfering a property into an LLC for us generally takes about 5 minutes and a trip to the county clerks office with a small check......beware, and I haven't heard much about it nor have we been brought up on it but, legally banks can use the "due on Sale' clause (pay mortgage in full) in your loan docs should they feel the need to do so.....we've not had an issue with this but just something to be aware of.

Richard,

A small rule my wife and I use when buying an investment property (buy & Hold) is that the minimum rent we can rent it out for would be at least 1% of the purchase price. generally it should be higher but 1% would be worst case scenario ($100K = $1,000 month).
Also, i would consider $230K a little steep for a single family rent house...since you are just starting out you may want to consider a duplex (for strictly rental purposes, I wouldn't want to live with my tenants) because should you have vacancies (and you will!) at least most if not all of the carry costs will be covered.
Get yourself pre-approved. you don't have to have a full 20% down payment to do this. Keep in mind that since you will be qualifying on you and your wife's earned income, make sure that your income can cover the added mortgage. After that (if it has already been included on a tax return) you can add the extra passive income to your bottom line which should make it a little easier to qualify for more loans.
like everyone else here has said, make sure keep reserves to cover the unforeseen....tenants won't stay very long if they have no AC (especially here in TX) and you don't want to be responsible for your tenants items if you fail to fix a roof in a timely manner.

Good luck to you.

On a side note: I got my first glimpse of the Texas Hill Country a couple weeks ago.......BEAUTIFUL!!!

We just recently purchased another investment property but this one came with a little twist. usually when we've purchased, the unit has been empty and we have been able to screen the tenants and decide who to rent to. in this case, the seller wanted to rent the house back for a week while they move out.
Our concern is this, though we have been paid for the 7 days and in the contract it allows for a longer stay at so much per day, what would be our recourse should the seller decide to stay longer and not pay or not take care of the property?
usually we would have SSN's, employers and such but this time we have no such thing.
do we just make a rookie mistake? How can we rectify? We feel out of control.

We recently replaced 3 windows on one of rent houses and I just discovered that there is condensation on the inside part of the window. Not between the panes of glass but on the inside of the house. Has anyone here had this problem with new windows? If so, what may be the cause? Thank you all. We really appreciate your input.