All Forum Posts by: Oscar Brooks

@Eric Bate sounds like you have some options! I think the other folks on this thread have presented some great ideas. The only thing I'd add is that I'm finding that FHA is a pretty big turnoff for sellers in the current market. The stringent appraisal process adds complexity into the closing because they will require repairs before closing on things that seem like minor issues (paint chipping and broken window sashes) and that's just a hassle for sellers. The loan @Account Closed mentioned is awesome, but you have to either make under a certain limit or buy in a neighborhood that falls into a category needing revitalization. Best of luck!

Hey Eric, welcome to BP. I'm in the same boat as you (well not the violinist part) and this is a great place to get info, ask questions, and meet very helpful folks.

Best of luck finding that first place.

FHA allows for up to a fourplex in Minnesota. The amount you'll be able to borrow depends on the county you are buying in.

If you get an FHA you also have to live on the property for a year. If you simply designate a portion of the property as your residence but don't actually live there you are committing fraud so you'll want to be careful there. 

@Tim Campbell

Thanks for the reply and advice!

I'll live in one of the units so won't need a property manager (although I now understand it is good to build that into the numbers anyhow). Because my family and I will be living there, location is a major factor in the purchasing decision. It has taken me months to convince my wife that a duplex could work for our family but she is unwilling to live in a place where she is unhappy even it it is a better investment. If this were a pure investment property I'd have no problem looking in other areas and the reason I want to make sure this purchase makes financial sense is so that we can invest in more in the future. I'll send you a colleague request so I can learn more about that loan. The PMI is killer on some of these analyses so the American Dream loan may be a good option.

Thanks for the replies @Tony Otis @Beau Ryan and @Nate Thompson! So it seems I'm actually not conservative enough (underestimating insurance, no CAPEX, no management) when I was hoping I was being too conservative.

The house above is in Armatage in S. Minneapolis, but I've been looking everywhere in the metro West of 35W (family, work, and school are all West).

Tony, I'd love to swap out 3.5% for 20%, but I don't have the money for 20% down on a property in the 300's. A lot of folks on this site suggest that even if you have 20% down you should analyze the property as if it were fully financed because you can always fudge the cashflow numbers by just paying more down (i.e. if you paid all cash, the property would be all positive cash flow, but that doesn't mean it's a good deal as you mention with cash on cash return)

I've read a lot of positive things about FHA loans on this site, but the mortgage insurance is a serious drawback. It also seems like from a strength of offer perspective an FHA is less attractive to seller's agents in this competitive market.

Beau - just to clarify, you pay $150 per unit for water and garbage? So your total monthly cost is $300 for all garbage and water bills? Or is it $150 total for water and garbage when combining the costs for both units? Sounds like from your and Nate's comments I'm double counting that number in my expenses calculation.

Nate, I'm pre-approved and have funds liquid so I can write a check immediately. Ive also seen a lot of properties go in just a few days, but those are places that I evaluated as having similar cash flows as the property in this post which is one of the reasons I wrote the post. I was mystified as to why deals I thought were bad were flying off the shelf so I started to think my numbers were inaccurate. I saw a place I liked in Minneapolis that was asking 375k and the adjacent house that was the same size, age, and by the looks of it even the same builder sold 2 months prior for 310k. The place has bad cashflow and was pending 3 days after despite being 65k over a perfectly representative comp. 

I've also been exploring many channels for off-market deals and am very interested in a 203k loan. The biggest problem with the 203k is that it is even less attractive than a standard FHA to a seller's agent. It takes an extra 30 days to close because the repair quotes have to be evaluated. I think we'd have to find a foreclosure to get a 203k to be a viable option and many folks have recommended that I don't pick up a foreclosure for my first property. Any thoughts on that?

Hey BP Community,

I'm looking for my first investment property (hoping to owner occupy a duplex) and am trying to heed the advice I've heard on BP webinars, podcasts, and read on the site to make sure the numbers work. In the last month I've crunched numbers on about 20 properties and I got positive cash flow from only 1. I'm hoping that folks can check my results against what they get and give feedback on my analysis. Am I too conservative? Am I not taking some other benefits into account? Any advice is appreciated.

Property: $380k - 2bd 2bth in each unit, 1300 sq ft, 1 garage spot

Rents: $2550 - $1250 and $1300 for the units

Mortgage: $1746.07/mo - 30 yr, FHA, 3.5% down, 4%

Mortgage Insurance: $268/mo - 0.85% of loan amount

Insurance: $100/mo - I'm just ballparking this number

Water: $155/mo

Trash: $155/mo - seems high but this is what is in the listing

Property Tax: $459/mo - crazy expensive

Maintenance: $191 - 7.5% of rental income, 70 year old home

Vacancy: $128 - 5% of rental income

2% rule of thumb: Fail

50% rule of thumb: Fail

Cashflow: -$673

By my calculations, in order to get $100 in cashflow per unit per Brandon Turner's suggestion I'd have to get this property for $252k at the current rents. Even if I got 3k in rental income I'd still need to pick up the property at $289k.

I'd love to know what you all think of my numbers.

Thanks!

@Evan Uribe - great post and congrats on your success. Your triplex cash flow is awesome. Are you planning to live in your rehab project while you fix it up to capitalize on the potential cashflow from your tri?

I'd love to compare results from the spreadsheet I'm using with yours for cash flow analysis. I've been looking for a couple of months now in Minneapolis and my analysis rarely shows positive cashflow. I'm wondering if I'm too conservative or if I'm just not finding deals.

@Doug Thompson thanks for starting this thread! I've been focussed on Minneapolis (still looking for my first investment) but the inventory is so low I'm considering St. Paul as well. 

@David Moore I'm dying to know where this place is, although it sounds like the scope of work it needs is probably beyond my skill set. 

Hey everyone,

I'm just seeing this tread for the first time. Are these meeting still a regular occurrence? Would love to attend. @Daniel Okon any info you can share on the next meet up?

I've read so many articles promoting the benefits of FHA and 203(k) loans, but based on @Jackie Sladky 's comments above, this is a less attractive option for sellers. As a first time buyer I'm worried that by going this route I'll be at an even greater disadvantage to investors with cash in a very competitive market. I just looked at a place in Powderhorn yesterday and there were 4 other groups on the property at the same time.