All Forum Posts by: Matthew Mucker

I thought 100% financing was gone!

I'm initially financing $87,500. I'd like to refi 80% LTV which is what I believe lenders will allow.

The initial mortgage would have a $567 P&I payment, and my expenses look like $251 for taxes, $79 for insurance and I'm including $40 for PMI. That would give me $10/mo cashflow at $950/mo rent. Or $50/mo if I get rid of PMI.

Certainly not what I want, is it.

I'd also be $21K out of pocket after down payment, closing costs, and rehab.

If I were to refinance to recapture that out of pocket expense, hmmm... it looks like I'd have to get $1100/mo in rent to break even.

Damn, the numbers sure looked better before. I wonder what I did wrong in my earlier analysis. I like the idea of purchasing $20-30K in equity, but being $20K out of pocket hurts. If I could get $1100/mo rent I could have the equity but no cashflow and no money out of pocket.

Rats. I've spent a lot of time and money pursuing this property and now that I have firm numbers on lending costs it doesn't look nearly as attractive as it did initially. It'll still work even under my most pessimistic numbers (if I don't refi) but the out of pocket amount will sideline my investing for a while.

Jon, the garage has been converted to a family room. It's not unusual in the area. Comps to other 3/2/0 in the area actually average to $140K. (I really wish my comp service gave median, not mean, $/sqft!) If it does actually comp at $140K (which I haven't allowed myself to count on), I'd be buying into $40K of equity.

It appears that renting this property isn't going to be a viable exit strategy. I may have to take a harder look at selling it with a wraparound mortgage. And investigate the ramifications of backing out of the deal before closing.

I'm heading toward closing later this month on this property and though I think I've got a decent deal here, a second opinion would be appreciated.

I've found a SFH in a decent neighborhood, 3 br 2 bath, garage has been enclosed, 2 carports in the driveway. Built 1974, ~2000 sqft, nice yard. I don't think I'd have any problem attracting quality tenants.

The contract is for $92,500. I don't know how much I could get for rent; $950 on the low end, perhaps as much as $1200 on the high end. I expect $7500 to $10K in repairs.

The appraisal hasn't been done yet, but I expect the house to comp at $125K to $140K. (I'm cautiously optimistic that it would approach the higher end.)

The wide range is because I don't know how to account for the enclosed garage. Because the garage is now living space, the sqaure footage of living area in this house is larger than most of the comps. I used worst-case numbers in my analysis and with those numbers it doesn't look great, but it looks reasonably 'safe'.

Using the upper end of the range for rents and comps makes this look like a rather good deal, I think.

I'd like to get into the property, get a tenant, and then refi my initial investment back out so that I can repeat the process. I plan to sell in a year or two to tap the equity to repeat the process yet again.

If that doesn't look possible I may investigate immediately selling this in a wrap mortgage.

Without the refi or wrap, I won't have enough capital to buy my next property for a long time.

I'm at the point in my investing career where I want to multiply my equity rather than grab long-term cash flow.

Thoughts?

Also, be sure to verify whether or not the auction will vacate any liens on the property. It would suck to buy the property only to find an additional $10K of liens attached.

In the end, I do agree with this. I was just curious on getting others' opinions. (I didn't know the exact price of the title insurance until I looked it up when starting this thread. That would be on a $80K house.)

Yes, that would definitely be in the plan. Good point.

Believe it or not, I'm actually considering this.

My father-in-law owns a house he is interested in selling that I think would make an excellent rental property.

He's owned the property for 10 years.

According to county records, this piece of property has had only 2 prior owners: my father-in-law's father, and HIS father.

It's hard to imagine a more risk-free property to buy w/o title insurance. Title insurance in Texas is quite expensive. I'm debating whether or not I might want to save $700 by not getting this insurance.

So, knowing this will spark a healthy and educational debate... what do y'all think? :D

I find this thread insteresting. Many of the 'how to flip houses' resources claim that finding vacant properties is the #1 way of finding leads.

This thread seems to contradict that.

So if y'all aren't finding vacant properties, where are you finding your leads?

Thanks, everyone.

I believe the rule is accurate. But so far, all I have to base that on is personal anecdotes.

Are there any fomal studies that have been done that corroborate that? Something in print, with a respectable name behind it, that I can point to and say, "Listen, Mr. Seller, I don't care what you claim your expenses have been. The such-and-such organization did a study and found that the average NOE for this type of property is X. Here's a copy of their paper, and these are the numbers I'm using when I look at this deal."

While I do respect all of you and your experiences, seeing a study on this topic would help me a lot, both in negotiating and in understanding the business I'm wanting to enter.

I know the "50% rule" is bandied about as gospel here in the forums, but haven't seen any actual, hard data that says that operating expenses tend to be ~50% of gross rent income. I'd like to verify this number is, in fact, accurate. (I believe that it probably is; but I owe it to myself to verify my assumptions, right?)

It would not only help me ensure that I'm using realistic numbers, I also think that it would be good data (ammunition?) to have when negotiating.

Can anyone provide links to studies that address operating expenses as a percentage of gross rent income? The little searching I've done hasn't yielded anything.

I am not a guru investor, but you should realize that auctions favor the seller: as long as there's one bidder in the crowd who doesn't know what he's doing, the selling price is likely to be more than the house is worth. It happens all the time.

After reading these forums, I doubt that a bank would ask for more than the 1st lien. Banks are not in the business of owning real estate; they're in the business of lending money. Owning a vacant house is an expense for them. In today's market, most banks are probably delighted just to break even. :)

It'll be interesting to hear what other, more experiences folks have to say.