All Forum Posts by: Michael A.

@Nathan Hui I care only about rate of return. If the % ROI I am making on my money would beat the securities market significantly than I consider that property a strong buy. You can't just look at cash per month. $200/mo for instance might sound great, but how much did you invest to make that $200/mo?

@Jim S. I second this. I am looking for a property now in a C neighborhood. The housing stock is old, maintenance is deferred, etc. and the potential for unforeseen costs is high. I make offers based on a purchase price tag will return 15%. I’d be willing to accept as low as 10% if there were something really special about the property or location, as there is a lot of gentrification going on near my target area.

If the cash flow is too low you may get burned when something unforeseen arises.

@Wayne Brooks I just want to second the notion above from Wayne - it relies on an endless supply of these homes. How on earth can someone guarantee that?

@Andrew Bailey This is obviously a scam. Also, what happens when the well dries up, so to speak? These incredible deals are going to be around forever, even in a recession? These guys are just going to magically print money for you like this over 15 years?

It is great that you posted this here before buying into this.

if it sounds too good to be true then...

Lastly, your $20k seems like a decent down payment on a nice rental. Go buy one and be the master of your own destiny going forward.

@Hen Ley as others have stated that sounds like a really slow rate of return. Seems like you’d be better buying a high-yield mutual fund at that rate. Easier, less risk, etc.

I am only willing to take the risk of buying a rental if I hit at least the 1% rule. There is little appreciation where I’m looking. If it happens, icing on the cake.

@Ron Singh One thing that can ensure optimal rents in the areas I’m looking at now (C neighborhoods) is in-unit laundry. A lot of the bungalows in the zip code I’m targeting were built right after WWII and did not have these conveniences. And a lot of them never had them installed. People go to the laundromat or use a clothes line. So adding a washer and dryer hookup can increase possible rents in this example by 5-7%.

This was actually the reason I passed on one property that otherwise would have been great. It was a concrete block home with a slab on the ground. There was no laundry hook up, and there was no way to run plumbing to make one without literally demolishing structural concrete to do it! Laundry is a must when you’re paying top dollar in the market I’m trying to buy in right now.

I see posts on occasion where investors cite obtaining 5% down payment loans with low fixed rates at 30yrs. Who is providing these loan products to you? So far I am finding that no bank in my area is willing to lend to me for any less than 20% down. And even if I could get a loan for less than 20% down, the margins are tight enough right now in my area that PMI would eat into profit margin by way too much for it to be worth it.

Any insight? What am I missing? I could buy multiple properties if I were able to spread what I’ve saved into multiple loans with lower down payments.

@Shiloh Lundahl This is an awesome question. I ask this literally every time I am looking at a property for sale here. I still like to look for undervalued stocks while saving up for my next rental. If the market returns 8% on average per year over what now feels like a 10+ year timeframe, then why would I buy a property that returns that? The property is so much more work, risk, etc. since I am shopping in C- neighborhoods. Also, there are some solid stock choices out there that are not at all at risk of declining steeply but also sport a 5-6% dividend alone.

Unless a property returns an estimated 15% or so on paper I do not make an offer. That’s just me being really conservative. Around here that is what I believe to be a really great return provided you can have your offer accepted in this competitive climate. Some other cities I know have much better returns, but I don’t live there and I don’t invest long distance. I have a family and work full time, but also manage my one property so far myself. I have been spoiled by being able to invest from my cell phone for free in the securities market so it really shapes how I look at the risk and responsibility of buying rentals. Great question.

@Matthew Nixon You’re a good man. I really appreciate that you have such a level head when it comes to this. I spent a lot of time getting my finances straight - and I even have a kid now, so my appetite for risk is down, but desire to make my next real estate investment deal is not. I am not ever giving up on the idea of continuing with my real estate investment path, and neither should you. This industry will always be here when anyone is ready to participate. You will absolutely sleep soundly and enjoy life knowing that you did not overextend yourself to take on such big risk if there’s not much to back it up.

And it sounds like our wives are very similar. This is not her cup of tea, so I have to be the one to communicate to her when I think I have found a good deal.

@Renee Yarbrough Congratulations! You’re inspiring me to keep pushing and try to make things happen for my family and kiddo too.