All Forum Posts by: Nathan Emmert

 Sorry, that's just plain ignorant.

Places with low cost of living... low taxes, low insurance... guess what, they tend to have low rents.  Places with high cost of living... high taxes, high insurance... they have higher rents.

Beyond that, places that rent for higher amounts will have higher expenses... making a $2,000 a month place rent ready will cost a LOT more than a $500 a month place.  The finishes and condition of the property just need to be that much higher.

The 50% rule is a great guide... but yes, it needs to be tweaked up or down +/- 10% depending on the particulars of the property... I think that's what the OP is asking.  It's a pretty good starting point, he wants to know how people refine it.

As to Elizabeth's point... CoC has nothing to do with the 50% rule. The 50% rule is all about expenses. CoC is dependent on 4 things... 1) expenses, 2) GOI, 3) financial terms, and 4) amount of cash into the project (down payment + rehab). She can focus on CoC all she wants, the OP was simply asking what % expenses she's currently showing on her taxes to see if the 50% rule is holding true in her area or how far it has drifted.

Once you pass 4 units, you move into commercial lending... a completely different set of mortgage guys/brokers in that world.

Yes, you can get in with less than 20% down. I believe a typical commercial loan will be at 65% LTV... but in the commercial world the lender may allow a seller carry back of some or all of the remaining 35% with a 2nd position loan/mortgage/lien.

Things to know about commercial loans... they'll have shorter amortization (generally 20 years versus 30 on residential)... higher interest rates (generally a full point higher)... will be variable versus fixed... and will likely have a balloon payment.

I don't know of any Florida realtors but you want to look for a commercial realtor.  Do enough searches for commercial real estate and I'm sure you'll find a few who specialize in it down there, it's a very different market from residential.

I don't know of any first time buyers programs... you aren't investing with owner occupied as your competition, you're in a purely investment world in complexes.

Good luck keeping your payments low.  You could accomplish that two ways... one would be to make a huge down payment... less financed, lower payment.  The second would be to buy a severely depressed property.  If you buy off a valuation from a $200,000 GOI and somehow turn it to $400,000 GOI, your mortgage is going to be smaller relative to the new income.

Personally, sounds like you're trying to run before you walk.  I'd stay residential until you know what you are doing.  You can buy a handful of 2 - 4 unit properties for the same $600k, can buy them in series so you don't need the full $120k down payment before purchasing the same one.  You get far better financing terms with residential mortgages... and there's no real down side as a $600k complex won't be large enough to give you any real economy of scale.  The 5 unit to 60 unit complexes are sort of no mans land... crappy terms but not large enough to get the economies of scale investors want.

Always remember the golden rule... he who has the gold, makes the rules.

It's no different then a store advertising "Up to 60% off!!" only to find out the 1 item they have 60% off is a $1 bookmark up front marked down to 40 cents, the rest of the stuff is on a far more modest sale...

Or a more relevant one, 3.275% APR!!! If your credit score is over 800, you have 0% DTI, and get God to co-sign type restrictions.

Ads are marketing... they are made to draw eyeballs and generate calls... not to be fully forthcoming with the whole truth.

Simple answer... for most, cash is a finite resource... and cash often limits your ability to take advantage of deals.  With that said, they want to utilize their limited resource in the most efficient way possible.

If you're able to buy 100% financed... creative financing... seller financing, whatever... the rules may change... but the more traditional, conventional/bank financed 25% down investor is going to have to maximize the use of their cash.

Not sure what you're asking us to evaluate.

You didn't give us the market rents for the units.

You didn't tell us what fair market value on the property was.

You didn't tell us whether there were split utilities on the property.

You didn't tell us what sort of financing you had lined up or how big of a down payment you were planning to make.

You didn't tell us your goals for the property.

Without this info how are we supposed to evaluate the purchase?  Are you buying equity?  Beats me!  is the property going to cash flow?  Beats me!  All I know is they're asking $250k cash and the property taxes are outrageous.

My gut feel is that there is no way in hell this is a deal but I'm not sure.  I'm guessing it will rent for about 1% of purchase price but given that about 33% of your gross rents are going to go towards paying taxes the property won't cash flow.

3% difference is price is like a 20 - 25% difference in your profit margins on the back end...

Sure, there are plenty of lenders who will loan to 70% ARV... but probably not to people they've never worked with before.

You can argue all you want that their investment is covered by the property... but frankly, they're in the business of collecting interest payments, not foreclosing, fixing, and selling to recoup their investment.

Walk, then run.

5/3rds and Huntington don't work well with investors.

PNC does portfolio lending but they generally want you to hold assets in the bank greater than the loan amount so that's probably out for you as well.

I'm not familiar with Citizens.

AAC and Founders both do portfolio lending over on the west side of the state.  If you're looking conventional I'd simply find a good mortgage broker and go from there.  Max out your 10 loans on that front and then move into portfolio lending.

Just be careful with deals like this as they will impact your DTI and potentially prevent you from doing additional details until the financing is gone or redone to more favorable payment plans. Generally a bank will look at something like 75% of GOI minus PITI (principle, interest, taxes, and insurance) to determine if the property is cash flowing (helping your DTI) or not.

So you paid $43,500 for a property that produces $650 in income...  That's about 1.5% rent... an "okay" deal.

From a Cash on Cash (CoC), it's terrible. You're over $10k into the property and it's negative cash flow each month once you account for repairs, vacancies, taxes, PM, etc.

That said, you're making an equity play.  In 5 1/2 years it's paid off and begins to spit off a few thousand of cash a year for you.  But, you've got to make it that far.  If you don't have the W2 income to support the payments, you're one big repair or vacancy away from losing it back to the seller.