All Forum Posts by: Ralph R.

When I look for a loan I don't let them pull credit unless I am prequalifying. I too don't want all those credit hits. I tell them what I think my credit score is. (I get enough loans I usualy have a ball park number. ( you can get it 1 time a year for free and its not counted as a hit on your credit). That, your annual income, maybe some questions about other finances will get you some ball park numbers for interest and what you may qualify for. This gives you a chance to get to know the people you will be working with. When you find the right company or bank then you can prequalify. You might check out the blog forum on bigger pockets about Bank of America before you talk with them.

RR

Jerry is right 40k a year appreciation is too good to pass up particularly with such a low interest rate loan. No way would I refinance that loan. a new one will be 4.8% or higher. Get all the cheap leverage you can! That being said please remember I am pretty much a buy and hold person. You gotta do what is right for you

RR

I am not an experienced wholesaler, but if you came at me with those 2 offers I would take the 135 owner finance. hands down. I wouldn't even think about the 80k cash unless I was absoloutly panicked to get some money. If I am reading it right I would get an extra 55k plus a small amount of interest to wait 5 years for my money. That's a bit over 10k a year. what would you do? or am I missing something?

Ralph Ramey

@ Joe gore

You can bet I use the same agent to close. Typically I don't sign a contract with her until we are ready to submit an offer. She has done the leg work, worked with my PM who has to rent it after I buy It, (and who also works for the same company) and they both deserve their pay check. The PM steers me away from bad areas, hard to rent places, and houses in poor condition. In return she gets the property to rent. If we did it right the property rents easily, both lady's get their respective commissions, and I get a rental that cash flows, in pretty good shape at a good price. I try to take care of those who take care of me. It really works. Apparently Tanners agent hasn't figured that out. I would never work with a guy who had lied to me or was not following through. Been there done that. Never again.

Ralph

Lilian

Patience. It takes time to find the right property, but even more time to find the right agent, right repairman/company, even the right loan officer. It also takes time to learn what you are looking for. You are right its a different point of view. I compare it to cars. The rental property is like a work truck. you look for dependability as well as good looks. It must be durable, and in good shape. The numbers become all important.

The average person looks at a house as a home. lots different. While it must be durable and also look good, things like lighting, interior decorating, floor plan become more important in the house you are buying for your self. Remember your looking for a rental. Keep reading Bigger pockets, and don't get too frustrated you are on the right track!

Ralph Ramey

Tanner

David is right. The right agent is very hard to find. I am an out of state landlord, so I have an agent I use quite a bit. When I am looking for a property I tell her what I want. If she finds a property on the MLS then she works for the normal commission. The last one she found was not listed yet. I negotiated with the seller, but didn't feel comfortable closing without an agent. That's when I signed a buyers agent agreement with her. She drew up the offer, and the sale proceeded the same as any other sale. I have trouble letting somebody else represent my interest. Nobody seems to look out for me like I do. I let her look for properties, and if she finds something I like I fly down and check it out. Point is don't expect somebody else to have your back. Bottom line is they always are looking out for themselves. I also use the same loan officer, same tittle company, same PM when I can. Took me lots of time to find these people, and it limits where I can invest, as I must stay in their respective area, but it does create a certain level of security.

Ralph Ramey

@Karen Margrave

@Alma Mills

Alma and Karen

I am not sure if the mortgage company allowed me to donate the down payment because I was selling to my son, or if it is something any seller can do for any buyer.

I too am not trying to be harsh, but this deal has too many red flags. Many of us have learned the hard ( and always expensive) way. Bigger pockets has helped me tremendously, unfortunately many things I have read here have only served to reinforce some lesson I have already learned the hard way. I still learn new things here. It is one thing to learn creative ways to buy properties, but would be devastating to purchase the wrong property using them.

Ralph

Andrew

I am curious why your rents end in $7? Also I must say I agree with Nick. your rent was probably too high. Remember rent is not only house size, but location. I have a house in a very small town in CO. I must tell you it is the typical oops I guess I better rent it house. yes I lived in it ,yes I moved, no I never would have bought it as a rental. (yes I will return to it someday). and yes I now have other rentals. The problem is not everybody wants to live in a small town. The house goes vacant every so often. sometimes 2-3 months at a time. Be careful, don't compromise your screening to fill the vacancy. don't lower the rent too much or you will be looking at paying payments out of your own pocket. Heres what I do. Remember I want to live in this house some day. To ME this particular house is buy and hold till I die. your goals are probably different here.

The first vacancy in this house almost got me into foreclosure. 2-3 months vacant, house needed repairs, and the market fell, couldn't sell it for what I owed. From this I learned 2 things. EVERY house I own the payment is paid ahead. Tomorrow I will make the FEB 2014 payment on 3 properties. I do this when I buy them. My down payment ALWAYS includes enough to make 2 payments. (closing cost + 2 estimated payments.) The mortgage company usually gives you 30 days or more before the first payment. I have even set closings to maximize this time. The buyer of the last house I sold got 50+ days. He made 1 payment immediatly and was 3 months out. as soon as the mortgage sets a week or so I make the first payment. now I'm 2 months out. a week or so later I make the 2nd. now I am 3 months ahead. you may have to train the mortgage company to apply future payments as payments not principal. When I want to make a principal payment, I make it separate and designate it as such.

Secondly, lower rent is better than no rent. I have even offered 1/2 off rent if a good tenant signs a new 1 year lease, and a couple times I have upped it to 1 full month. its cheaper than turning the house for another renter, that you don't really know. I try to buy rentals with current leases. If its month to month, or the end of the lease is near you can bet the odds are some will move out. think about it you probably know more about your tenants than they know about you. you read their rent application. They don't have a clue how good a landlord you will be, or on a single family home how long you will keep it before selling it. It tends to scare tenants when their home has been sold. I don't usually buy rentals that are empty or near the end of their lease, unless my PM recommends it. (usually its one they are familiar with)

I pay every bill on every rental ahead. I typically pay water and trash. The trash because if somebody move out the people cleaning/fixing the place need it. Also the renters tend to leave less trash if they have a free place to dump it. I pay 1 year at a time. Water is 3 months average ahead. My other rentals don't go vacant often, but if they do the wolves don't come bite my butt right away. (All my personal bills are 3 months ahead as well) If you want a nice dinner go have it, and skip the water bill this month. Works well for me

Good Luck

Ralph Ramey

Buy the way I just sold a house in Colorado, where I did give the buyer $40k for his down payment. The house closed Sept 3rd 2013, so this is recent. the buyer was my son, and I don't know if this matters. It was in CO and I don't know if that matters, but we did gift him $40k as down payment on the loan.

RR

I'm not a long time investor, but I have learned some things. ask yourself some questions and be honest with your answers.

First off you make your money when you buy a place. If its over priced you are cutting into future profits the day you buy it. Did you ever pay too much for a car and try to hold it long enough to make a profit? If it is the RIGHT car and you wait long enough you might do it. (pretty doubtful though) Same goes for real estate. The more you over pay the worse your final outcome will be.

Second how close is it to fitting the 2% rule or the 50% rule. Just from reading your post based on the price, and a 20% down pmt. I wouldn't look at any more than the listing if I wasn't sure I could get 6k a month in combined rents. I'm not trying to start a huge discussion about these rules, but they can be used as guidelines. The 2% rule asks for 12k a month. Remember that's with 20% down, factor in whatever creative financing costs, VACANCY RATE (you gotta make the payment if one unit is empty), and maintenance. if this property will cash flow at an inflated price that is a huge red flag for me. What is driving that? Too high rent? deferred maintenance? or will it even cash flow? (Im bettin on the latter)

Third is this a good property to start my investment career in? do I want to own it in several years What is my escape route. how will I get out of this if it turns south? Remember selling won't be an option if its already over priced.(you will need to hold this one until the market catches up to the price.)

You can bet your gonna be on your own for financing. Banks, mortgage companys, and Private lenders, probably even the owner himself isn't going to be excited about paying too much for a property. (then again maybe he already did)

Ralph Ramey