All Forum Posts by: Payton Pearson

@Ozzy Smith Very true! Just get hooked up with the right real estate agent who knows your goals, and you will succeed!

Drive. Never give up.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $129,900
Cash invested: $32,475

This is a 1948, 4-unit apartment complex in the Oakwood area of Ohio. It is currently an "ugly-but-sound" building that is a cash cow, especially for its purchase price. Each unit has it's own HVAC and water heater (I know, right?!).

What made you interested in investing in this type of deal?

It was in literally the best area for real estate in all of Dayton. The moment it went on the market, my real estate agent (Colleen Carr) knew it was a steal. Oakwood is where the million-dollar mansions are, and this being on the outskirts of the municipality, it is bound to do very well. I got it for well below the appraised value ($179,000, pre-renovations!).

How did you find this deal and how did you negotiate it?

The previous owner was a real estate agent herself (Patty Skilken), and quite honest in her sale of the property. She made a great profit off of it, with a mortgage completely paid off, and having received 1760/month in rental income previously. Colleen Carr found it for me, and we put in an offer within 6 hours of it being on the market.

How did you finance this deal?

Conventional loan with 25% down, 5.25% interest rate.

How did you add value to the deal?

I plan on doing complete renovations of every unit, eventually replacing the rubber roof, fixing up the garage doors, fixing the window lintels, eventually re-paving the driveway, and much, much more. I have a statement of work with outlined pricing already developed for the property.

What was the outcome?

I bought a property for $50,000 below market value in the best area of Dayton, instantly adding $50,000 to my net worth. Two of the units still need to be rented out, but renting out these apartments is very easy. I already have a lead for one of them, and I just got the property today.

Lessons learned? Challenges?

Treat the seller well, be grateful for the opportunities provided to you. Ensure your team is very good at what they do, and always stay connected with them.

Also, for this purchase in particular, if you see a deal and can afford to buy it, POUNCE! They are sold quickly, which is why they're so hard to find. This requires you to pay CLOSE attention to the market, which you will only do if you truly love real estate. Therefore, TRULY love what you do in order to do it well.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

MY Agent: Colleen Carr -- she has gotten me two incredible deals thus far. She truly is at the top of her field (top 50 in agents in the Dayton area).
Selling Agent: Patty Skilken -- incredibly honest, and a firebrand (spunky!). She will be no-nonsense with you, and will be able to help you out with your needs.
Mortgage Broker: Phil Forbes -- he knows my plan, and always gets me the best rates. He's also an investor himself, and has courage, which is important in this field.

Nothing.

@Trent S. Any help I can provide :-) Yea, I don't know much about LLCs at the moment either because I'm just starting out, but I know that you can deduct whatever you spend on repairs/improvements to your LLC properties can count as a business expense.

Hey guys,

I know HELOCs are rather intimidating. It's a difficult calculation to figure out at first (at least it is/was for me! I went months without understanding how it worked), but here is a simple calculation for determining the credit line size you will have access to if you decide to open up a HELOC (home equity line of credit):

1. Determine the appraised value of your home. Let's say an appraiser tells you it's worth $200,000

2. Determine the total outstanding debt left on your mortgage. Let's say you have a $100,000 mortgage left on the property.

3. Determine the LTV (loan-to-value) you can get from your bank. This is typically between 75-80% of the APPRAISED value of the home.

4. Calculation:

(Appraised Home Value)*(LTV) - (Outstanding Mortgage Debt) = Size of credit line

So, using our example above, with a 75% LTV that the bank will give you:

($200,000)*(0.75) - ($100,000) = $50,000 credit line.

This is an ACTUAL CREDIT LINE that the bank will give you. It's very useful and very smart to open one up if you aren't upside down in your property. Just because you open up a HELOC doesn't mean you have to use it--but it's there if you need it. The other great thing about HELOCs is that they are paid back with SIMPLE interest, not amortized interest. That is, for example, if you are being charged 3% interest on a HELOC, and you use $10,000 of it, you will pay 3% on $10,000.

Now, I am still learning, so correct me if I'm wrong here, but in addition to this, HELOCs are typically open for 10 years, which means if you take a $10,000 sum out of the HELOC, you can pay it back over the course of 10 years. At 3% interest, over the course of 120 months, that means your monthly payment would be $85.83.

HELOCs are also usually acceptable down payment mechanisms.

Anyways, for the newbies out there like myself, I hope this helps with some basics about the HELOC. Summary of the above: if you can open a HELOC, it's a good idea to do so for the extra credit access.

Congratulations on your first real estate investment! I wish you the best and will do whatever I can to help you/walk you through the process.

@Anthony Capaldi Start building your credit ASAP! If you don't have credit history, you can't get loans. If you can't get loans, you can't buy properties.

@John Hunt Well of course, you have time on your side. If you get, say, 10 properties before you're 30, and each property gets a rental income of $1000/month before PITI and other expenses, when you're 60, you'll no longer have Principle or interest, and can just collect fat checks. This is, of course, assuming you stop at 10 properties and do a 30-year mortgage scheme for all of them.

If you have a bit of resolve, you'll get better and better. You're also obviously very smart, and the great thing about real estate is that it's one of the few fields that actually rewards the more you know.

@Grant Rothenburger Thank you! I had similar thoughts. One of the very best filters I can think of is whether or not they are church-going. This isn't the end-all-be-all, but an excellent first step to discerning if they're above board.