All Forum Posts by: Noah B.

@Jerry Puckett Wow! This is invaluable information and a very intriguing strategy! Thank you so much for sharing! My only curiosity is if it will still be effective even if I am using bank financing? In my very minimal knowledge on the subject, it seems like the primary incentive for a property owner to sell their house this way is because it is usually a cash deal which reduces realtor and various other fees. When you find a deal like this, do you still use a realtor and a bank as a lender? Or do you just find an attorney who can draft the paperwork and close the deal on your own using cash? 

My only other current constraint is time. I am very eager to stop renting and purchase my first home and this seems like it could possibly take months to years to come into fruition. Perhaps I begin the process now, find my first duplex through the MLS, then when I'm ready for house #2 the seeds will be ready for harvesting? What has been your experience in average time from first letter to close?

@Jerry Puckett “my letter plants a seed, the other letters water…marketing is like farming not a vending machine” love this mindset! Definitely has me looking at buying through a whole new lens! Thanks again for the feedback!

@Jerry Puckett thanks for the tips! So, in my case, that would look like going to my target neighborhoods and writing a letter to specific duplexes that I would like to buy? Or do I knock on doors? I’m assuming that most of these properties are not owner occupied, so then would I ask for their landlords information and get in touch with them directly? Am I on the right track with this? Sounds like a lot of work but also a great opportunity to sharpen my interpersonal/sales skills!

@Emily L. Wiersema yes absolutely agree about having the numbers make sense post moving out as well as avoiding the c and d class neighborhoods of Milwaukee. Still very tough to find those 1% rule deals on MLS! Haha!

I think that @Anthony Caruso is right that I might have better luck looking off market. @Anthony Caruso, how does one go about finding people who own their homes free and clear? I’ve heard of direct mail marketing campaigns as well driving for dollars. What is a good first step for a newbie like me who relies on bank financing do to find those off market deals?

Thanks for the great ideas everybody!

@Emily L. Wiersema and @Alex Briones Thanks so much for the feedback! Yes, I absolutely agree that it is difficult to cash flow in Tosa or Shorewood at the moment given a purchase price of >$350k--especially with 0% down at 3.75% interest rate. This is the biggest problem I've run into! However, does the 1% rule still apply when interest rates are this low? I have seen plenty of deals (albeit outside of Tosa/Shorewood) that don't meet the 1% rule but still see a healthy cash flow--the main difference being the interest rate is between 2.9-3.2% @ 15% down.

But yes, from the numbers I've crunched, margins are much, much thinner in Tosa and Shorewood. I see a lot of duplexes in Tosa that are selling for >$325k that are only currently rented for $950! The max I've seen on MLS was for an updated 3 unit 1.5 baths is in Tosa is $1550. The one in particular that I'm referring to just went under contract and is at 1932 Parkview Court in Tosa. It is a 3/3 with 1.5/1.5 bath that Rent-O-Meter priced at average/median rent at $1800/1600 respectively. That particular home cost $400k with $8100 property tax and thus a PITI payment of approximately $2700 at 0% down and 3.75% interest rate. It also had a brand new roof and 10 year old mechanicals (AC, furnace, and water heaters)--therefore Capex was relatively low (approx $230/month by my calculation). If both units were being rented at $1550 that would put gross income at $3100 and expenses at $3000 (PITI + Capex + Vacancy) with a cashflow of $100/month.

To me, there are a lot of benefits outside of the hard numbers when investing in a place like this. Such as (theoretically) better tenants, less maintenance, less risk of crime, better schools (which theoretically lead to longer staying tenants) and an easier time finding tenants and being selective about who I place in the property. I see a lot of properties in C and D-class neighborhoods where the numbers look amazing but then you have to deal with more deferred maintenance, higher risk of crime, and (theoretically) poorer quality of tenant.

Anyway, I really appreciate the discussion and continued feedback! 

@Jesse Rodriguez I qualify for a 0% down ARM with Waukesha State Bank. However, your job must require a masters degree or higher and you have to have been in the profession for less than 5 years.

@Bill Ward thanks for your input! As long as banks still allow loans at 43% DTI and rental income is counted at 0.75, then yes I should have the necessary income. If rents continue to rise then yes, I should be able to eclipse $100 cash flow easily. However, from what I have seen in the past 10 months of looking at properties in Wauwatosa and Shorewood, most rents have not increased as quickly as home prices, which makes it difficult to meet the 1% rule.

Hi Bigger Pockets Community,

I am a first time aspiring house hacker who is looking for advice and for someone to poke holes in my plan before I put it into practice.

My goal is to purchase two house hacks in the next 5 years as well as minimize my housing expenses, learn the ropes of property management, and come out the other side with properties that produce at least $100 cashflow per month.

As a healthcare professional with less than 5 years experience, I qualify for a 0% down 5 year ARM at 3.75% that expires in May 2022 (when I will have more than 5 years experience). I have about $65k in liquid reserves that I can put towards a down payment.

I’m thinking my first step will be to purchase a property in a B-class neighborhood in the Milwaukee area (Wauwatosa or Shorewood to be precise) using the 0% down loan. These duplexes typically run about $350-$450k with property taxes ranging from $6-$10k. Most have been built after 1950 but there are a lot in the Shorewood area (which is the nicer of the two) that were built before 1940. All of them are typically well cared for and feature modest updates.

After 1-2 years of living in this property, I hope to purchase a second house hack with a conventional loan in either a B or C-class neighborhood with emphasis on cash flow. Then, after 1-2 years of living in that property, I hope to return to the first property so that I can refinance at 15% equity and not 25% equity.

Well, what do you think BP? Don’t hold back!