All Forum Posts by: Andrew Shell

Hey everybody, I'm glad you're still interested in this thread even after a year has passed. Just have to say, buying this property was easily the best financial decision of my life so far.. While taxes are rolled into the mortgage, after maintenance and paying the property manager and HOA fees, the average cash flow collected for each month was around $750. @jim Oconnell my property manager hired someone for the cleaning and I just kinda trusted she knew who to go with. I visited and saw they did a good job do you want me to find out for you? What part of Flag did you buy in? Do you also rent to students? My property management is so-so I would prefer more communication.. Sometimes I'll be charged for maintenance and not be told what needed fixing.. But for the most part she does a good job and I can't really complain because Ive been making money while doing next to nothing. Honestly I could have done a better job on the technical side in this deal.. On the next deal I will be more prepared and able to pay close attention to detail on the out of pocket expenses vs mortgage... A few of my numbers have been lost or muddied up a bit. This deal is rough around the edges to say the least but overall this year from cash flow alone I have made back $8,000. This is without mentioning I got the property short sale at $168000 and had an appraisal two months ago come in at $210000. I try not to get too crazy about equity at this point though.. Since it has little to do with my short-term plans for the property and the markets will always shift before the equity becomes useful to either finance another property or something else of that nature.. Using equity to finance more properties seems a little daunting gotta be honest.

Hey Scott W. thanks for talking to me I really do appreciate guys like you who are willing to help out new guys in the industry. Also, sorry if I came off defensive last night.. I know you are just trying to help.

Ya when I say "we" it's because my family member who is helping me out actually has about half of the equity in the property. I wish I could say it was mine outright but it isn't. I also wish it were a little less rough around the edges as I'm finding out it was. Lol oh well I'll improve with time. Totally, though, it's 2 people.

Personally I put down $20,000 (all I had basically) and overall we're anticipating $42,500 after paying for the inspection, appraisal, closing costs, building a wall/door, professional cleaning/carpet steaming, and holding costs. So my position will be worth 47% The $6,000 in reserve is a figure that my family member decided to put in the account... but is not holding against me because I will be adding money to the account until I have $2820 in the account (my %47 of the $6,000). He knows I have literally no money left, so he said I could pay into the reserve as time goes on.

Ok, so as far as the 20% I will definitely take your advice on that and I WILL save that money for vacancy/repair. So we'll roughly make between $350-$500/month.. please let me know if you think that figure is accurate.

ROI... you may have to help me with. Personally I will make between $165-$235 per month... that figure is between $2000-$2800 per year, so I'll take an average of $2400. 2400/20000 = 12% which probably isn't good by your standards but I'll take it! Another thing Scott W, is that I am not very keen on income taxes. I'm sure that will only syphon more of my cash at the end of the year.. but I'm not sure how much.

Let me know what you think... once again thank you very much for your help, you've been the most helpful person on this site thus far for me. You've brought me to a more realistic thinking that I can see is essential in this business.

Hey Scott W. thanks for your valuable advice! idk if you read about the $6,000 were keeping in the account in the case of an emergency, vacancy, or maintenance. The HOA has all of the repairs to the outside of the unit like roof, windows, doors..etc. but let's say 10% for vacancies and repairs like you suggested, then it will cash flow $500/month. Lol I would sign you up to be in the no vacancy no repair club but I'm afraid that you were only being sarcastic because there is no club.

We put $33,800 down and we aren't tearing any walls down were sealing off a bonus room upstairs with some drywall and adding a door. That will create the 4th bedroom like you assumed after reviewing my math. The addition of the 4th bedroom is expected to take $1000. My uncle is a contractor in AZ and he's willing to do the work for us. Luckily my family has been there for my support even though a lot of them initially opposed my desire to invest in real estate. My friends lived in an exact model of the property with the bonus room converted into that 4th bedroom we are adding so I know it has been done before.

As far as vacancies are concerned, Flagstaff, AZ is about 100 miles from any major cities and most students who move out of the dorms work in Flagstaff and stay for the summer. The amount of out of state students is very very high and is expected to grow as Northern Arizona University projects a 15% increase over the next 6 years. The city itself has grown tremendously and the state of AZ is giving NAU a lot of money every year for new construction. Every year there are new businesses popping up, this year they added In-N-Out (idk if they have it in Illinois but its delicious), 5 guys restaurant, chik-fil-a and snow blowers on the local mountain. I know from experience that students stay over the summer because that is what me and about 150 of my friends and neighbors did when I studied chemical engineering. We have owned the property for a week and we have two separate groups who have asked if they could move in immediately. But you are a wise investor, and we want to be wise also so we are going to have to choose carefully before leasing it out.
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Hey everybody,

I have heard different things about whether people secure financing before or after they have found a property that meets their investing criteria. If you are working with private money, do you try to attract partners/investors before you have found a specific property... with a hypothetical situation per se? Or do you prefer to only ask for private money after a specific property has been found and you can show them the real numbers? After reading a lot of these posts, it seems that private money is mostly built upon relationships, experience, and a good reputation, do you investors keep a list of people that you could turn to if an opportunity presents itself? Should I also try to keep track of people I could turn to? What are your strategies?

I hope I can be like you guys in the future.

Thanks for posting everybody I'm glad you took the time out to help me out! Prashant P. and David Gellner, you're right about the reserve funds.. I plan on keeping about $6,000 in reserve at all times in the account I opened for this property. I figure that will probably be enough to cover any rehab/vacancies. Luckily, the rentals for this particular area are close to 100% occupied because students compete to get into these units. An eviction would be painful, but I think $6,000 will cover it. Do you guys think this is enough money set aside?

Des N, you are right about a few things, especially about figuring things out as I went. I've never been a part of any sort of home buying process and this was certainly enlightening! As far as my strategy, before I found a property I knew I wanted to find one with some equity from the start, either through a short sale or fanny mae homepath property (there's quite a few in the area). My original plan was to secure the property and then refinance to pay back investors.. but as you guessed I had to change my plan because the family member who decided to help me out with the loan credibility did not want to do a refinance. I didn't want to lose the property I had found because of differing interest, so I went along with the idea and now I will just have to pay back my friend the old-fashioned way. My friend who loaned me money does not have any equity in the house, he just lent me money and now I have to pay him back. There are 2 people on the title, me and my family member.

Here is a more precise breakdown of the income/expenses.

Expenses:
-Mortgage (30 yr, 3.25%) $650/month
-Property Taxes $1200/yr or $100/month
-Management Fees $200/month
-HOA fee $120/month
-Insurance $350/yr or $30/month
(Insurance is low because it technically counts as a condo)

Total Expenses: $1100/month

Total Income = rent = $2000/month

Income - Expenses = $900

Please let me know if you see any flaws, I know there will be income taxes at the end of the year but unfortunately my inexperience may have got the best of me and I didn't talk to a tax accountant about the subject. I don't plan on spending the net income I just want to put it in the account I set up for the finances associated with this property. Honestly, I'm not exactly sure how much I should take out each month for vacancy/repair, but there is $6,000 as a cushion at the moment.

Lynn Currie and Glenn Espinosa I'm glad I'm not the only one that has had this idea and been successful, and I'm happy to hear that somebody else has started at a young age and obviously has succeeded.

Hey all, I've been studying real estate for about 2 years and just finally was able to put together my first deal. I found a nice townhouse in Flagstaff, AZ about a mile off off the NAU campus. I know personally that these townhomes are in high demand for renters because all of the college students like to congregate to that area. I lived in one of these properties myself when I went to school there and talked to our landlord about the ups and downs of the tiny market.

Although renting to college students may end up being a little bit of a headache, there are also huge upsides to the high demand. Plus, I hired a property manager to take care of the nuances, since I don't live in AZ now. Because the market is so backwards, after paying the mortgage, insurance, HOA, management fees and taxes we should be left with a $950 cash flow. I ended up doing a short sale and bought the property for $168,000 and got a second appraisal and it rang in at $190,000. Although we won't be selling or refinancing right away, I'm glad the appraisers opinion is that I got the property for less than what he believes it is worth. It's just a little bit of a pick-me-up.

We are also adding a wall/bathroom to the upstairs bonus room, which should increase our rents by $500 a month. In this market, each bedroom is worth around $400-500/month and by turning a bonus room into a bedroom, we will capitalize on this fact.

Securing financing for the deal was very difficult. I definitely have skin in the game, like my life savings, but I had to go to family members and present a plan of action and was countlessly turned down. My family all thought I was crazy for trying to get into real estate investing at age 21 but after reading enough about the industry and after so many rich dad poor dad books, you feel compelled to act. Finally I was able to convince a friend to lend me money, and some family members to help me with the loan, because I would never be qualified by a bank. We did a traditional 30 year loan with 20% down. I won't be seeing profit right away, because we put money out of pocket into the deal, but after about 2 1/2 years, we will see our first profits and if we choose to refinance, I'm sure we could see some of that money back that we put in. Never the less, we will be making a profit each month, which makes me smile.

The short sale process was a total disaster, I used an agent because I didn't know how to do it myself quite yet, but being out of state and having multiple people on the title made it complicated. Also, choosing Wells Fargo for the financing was a mistake that will never be made again on my part.

I'm very excited about this, and I can officially call myself a real estate investor! YES!! If you've read this far I thank you and I hope my story sounds good and hopeful. Good luck to you all!

This is my first post on this website so if you have any advice about the way I organized my post, please let me know!

I am a novice investor who recently (last week) closed my first deal through a short sale in Flagstaff, AZ. Flagstaff, though, is not my backyard, I currently live in Orange County California. The problem is that I feel the real estate market in Orange County is very competitive and the prices are still very high for real property. I'm turning 22 in April and I've spent the past 2 years studying real estate investing, as it turns out I love it and can't stop thinking about it. Anyways, I've read that a beginners backyard is a good place to start investing... although I sort of feel that my backyard may not give me the best chance for success.

Do you disagree with my thinking and feel that I should resort to creative finance or some other means to investing in my backyard that I know pretty well? Or should I look to other states and counties which I am not that familiar? (The property I bought in Flagstaff is right next to where I went to college for 2 years and I know the market like the back of my hand so it is sort of exempt.) If that is the case, how do you seasoned investors go about picking potential markets to invest?