All Forum Posts by: Pedro Torres

@Nicholas L. 

Thanks for the insight. I read through those 4 forum posts; after reading through them I'm not worried at all and will still continue to get a property. Though I probably won't go with a BRRR like the example I gave.

I talked to some lenders about that 85k house and there wasn't any real benefit if the house ends up being 130k. At that point it would just be better to get one that doesn't need a rehab around 130k. The only real benefit they said was the more experience I have with rehabbing the lower the down payment would be the next time. Which I definitely want but may not on my first property. 

I've also lived in that class of neighborhoods before. Some while growing up and others while I was an adult, my first house was considered a D here in Las Vegas. 

Also seems like those people were very concerned with their cash flow. I'm not trying to quit my career anytime soon so breaking even or putting in some more money into the house after I buy it is fine. 

The other thing that I forgot to mention was, what about commercial offices? I found an off market deal for a building at 120k that is currently being rented by an attorney with a lease to end next year. Are those more or less risky than a SFH?

Thanks for all the opinions/info. If I was to do OOS BRRRing then I would be going through the property management company to get it up to their standards. I'm aware that it will cost more than if I was there managing it myself. 

Since it's my first property the last HM Lender I talked to said it would be 9.9% interest only with a 6 month period before I can refinance to a traditional (or DSCR) at around 7%

Seems like both conventional/HM loan will be the same in the end. Only real advantage I see in going with a Hard Money lender is to build trust with them as the downpayment gets lower the more flips/experience I have. 

Plenty of things to consider here. 

@Jason Wray - I've only spoke with a handful of lenders, so far none have offered 10% down. I'll also have to look into Second Home/Vacation Home requirements since this is the first time I'm hearing about it. 

Hello everyone, I'm in need of some advice on my first rental property. Just some backstory, I attempted to do this years ago but quickly realized my credit, income, and debt was terrible. Now I believe that I'm ready to make some moves. 

My financial standing: 
Income - 130k W2 
Credit Score: 690-710 (depending on when it's pulled)
Debt: 330k VA Loan on primary residence, Car Loan $11k and no credit card or student loan debt
Cash: 30k 
Children/dependents: None

I'm looking to be an out of state investor as my local market (Las Vegas, NV) is out of my price range and decided on Kokomo, Indiana to get a property around $100k-130k. I've done a lot of research and have an agent & property management company that I'll be working with that is local to that city. 

I've been approved for a conventional loan for up to 200k with 15-25% downpayment depending on if it's a SFH or MFH.

My main concern is that if I went with the conventional loan then all my money will be tied up into it and I won't be able to easily add a second property. I'd have to save up for another year or two. So I've been looking into getting a hard money loan for a property that needs some rehab, for example I found an off market one that is $85k with SOW at $20k and ARV $130k.

So the question is, if you were in my financial situation would you throw the cash in a SFH or would you focus on a hard money loan for the BRRR method? I'm less concerned about cashflow and more about building equity currently since I plan to keep my W2 job for years to come.

And if anyone has any recommendations for a good hard money lender with low fees then please let me know. 

Thank you everyone. 

@Jonathan R. - Well that doesn't help that there isn't a universal system in place. I'd consider where I currently live to be a C+ neighborhood, but I have friends that say I live in a ghetto and some are legit afraid to come to my house. Then I have other friends that say I live in an amazing neighborhood and wish they had my house. I did some searching on gosection8.com just now and saw the competition (I used 48224 as the example), the impression I got is that with a decent street and a good internal rehab they all kinda seem the same around $850 rent. 

@Jim K. I'll check into the "Roth IRA ladder conversion." Seems like another big issue is that the rating system is different for each person, one persons D-class is different than another.

@Tim Jacob - Thank you for the insight. These are things that I'm going to have to look into depending on where I invest, still not set on the city yet. How would you handle the water bill? Charge them slightly more rent or have them pay for it? I've heard both ways. Didn't even factor in an alarm system. In your experience what's the vacancy rate in lower end areas? Are we talking about a few months between tenants or 6 months? 

Also where does everyone find an accurate measure of an area? I know we talk about A B C D ratings but even the property that I liked before is in a C neighborhood according to Niche.com 

https://www.niche.com/places-to-live/n/morningside...

Or lets look at a property like this: 

https://www.realtor.com/realestateandhomes-detail/...

https://www.niche.com/places-to-live/n/east-englis...

These are all considered C or C+ areas...but how accurate is that really?

Thank you again for everyone that responded. 

@Dennis M. - I'm not worried about anything. Not worried about finding a PM willing to service, finding tenants, or being the most knowledgeable about the area at the moment. I'm not pulling the trigger on any deals at the moment, I haven't decided on what area I'm going to invest in yet...it might not even be for another year before I buy a property. It was buying cash vs financing and I used the money in my bank account as a starting point (25k) Maybe I should have just made up a number and said 50k instead. "You think because you're flying out and touring the building or driving around for a weekend it's going to make you a knowledgeable investor for the area lol?" - First of all, I never made that claim that just doing so would make me knowledgeable in the area. I also never said I'd be up there for just a weekend either. I understand the power of doing research and making connections in the area of where I invest before just rushing in to buy a property. So don't insult my intelligence with your assumptions on what you think I believe, if I thought I had all the answers and a solid plan I wouldn't be on this forum asking questions. 

@Matt M. - I can see how that experience would be an issue. I haven't seen the properties with my own eyes for 25k and below yet, I could have the same experience you did and not want any of them then save my money to possibly purchase 50k or 75k. That's the real idea behind this, save and use cash vs financing. 

@Jim K. We would all do things differently if we went back in time. With my current life I'm past the point of being willing to house hack, yeah if I went back 13 years I would have done it easily. We also have a different investment/retirement goals from the sound of it, I think 401ks are a joke unless your employer is matching (and even then, what's the point if the goal is to quit my job sooner rather than later) and same with an IRA. I'd rather spend that money on the possibility of gaining an income generator instead of having a retirement fund that penalizes me for taking gains out early. Don't get me wrong though I am taking your advice into consideration, I know there are people that have had terrible experiences with 25k properties...but there are also people that have made it work. I'm trying to do as much research to tip things into my favor and like I said before maybe that does require me saving more money.

I'm still on the fence on this cash vs financing thing though. Let's use 35k since someone else mentioned that number.

I purchase a property for 25k and put 10k into rehab, all cash. I rent out the property for $700 a month ($8400) a year. Property management takes 10% ($840 a year) leaving me with $7560 for the year. Let's assume that it's vacant for 3 months while trying to find a tenant -$2100, now I have $5460 for the year. During the rehab I fixed the major issues with the property, so lets throw out -$1000 for repairs throughout the 9 months it was rented to a tenant, leaving me with $4,460

Is that so bad? (I know the numbers are made up, if someone can give me a real life example of how their property is doing that would be a big help) It's nice to know that since I paid for the property in cash that I don't have to cover a mortgage while it's vacant. I'm also not looking for appreciation since I would have purchased in cash, it would be a bonus though to land a property near a gentrification area.

I forgot taxes and insurance but you get it. I'll still come out making money. 

@Eric Wagner Yeah, I do worry about situations like that. I just updated my profile to show where I'm from, ideally I would like to invest here in Las Vegas but everything got expensive here lately. I purchased my house 3 years ago for 150k and now it's around 212k and it keeps increasing (I also don't live in a great neighborhood). Great that I have equity in my current one but when I look for investment properties it's hard. 

Just a quick look shows that for 150k I could get Mobile homes (in parks), Condos, and a few townhomes (all with a high HOA fee). I know you can make money here in Vegas but I think it's geared more towards the established investor.

Thank you all for the responses. 

@Matthew Paul The sample property that I linked is just for a reference, from my research that I've done over a few months on the MLS I've seen houses like that all over the Detroit area spanning different neighborhoods. With cash though I'd like to get off the MLS and find better deals. As for the bundling of houses, my assumption (and I know it's not good to assume) is that those properties were purchased and left to rot a long time ago which is why they are unappealing. Doesn't mean the entire city is doomed.

@Jamiel Strickland I read your post about investing in Detroit, what are your thoughts on property management? Some have mentioned that nobody will want to service parts of Detroit, do you find that true? Would you stick in the 25k range or have you found that upping it to 50k brings better results? 

@Marcus Auerbach Correct me if I'm wrong but wouldn't a seasoned investor have the credit/cash to purchase and invest in "higher end" cities/neighborhoods? My thought process is that why would they settle for $500 a month rent in Detroit when they can goto another city and get $1500 a month rent? Sounds like established investors would have moved on from cities/deals like these but that makes room for others like me to start investing

@Jim K. I can admit that I don't know anything about Detroit and it's areas which is why I'm still doing my research. I've read posts on Morningside and did google searches, some people say they like investing there and others say that it's not worth it. Doesn't seem to be a universal agreement on Detroit in general. You do bring up a great point which I'm going to look into further which is property management and how they service less desirable areas. Again, that property I linked was just an example. The 25k I have isn't fixed, it grows every month and with research maybe I will find out that 35k properties is the way to go or 50k, maybe I have to use some of that for rehab...maybe I use financing for rehab. I'm still in the researching phase. 

Hello everyone, 

I'm looking into buying my first property. Currently I have 25k in cash (with 2k added each month from my 9-5 job) and was looking to buy in the east (Milwaukee, Cleveland, or Detroit areas), because of how inexpensive these properties are. I want to buy and hold. 

The question is, do you think it's financially better to buy a property in cash or use my HELOC (5.5%)?

Here's an example property, something like this is what I'm looking for: 

https://www.zillow.com/homedetails/5524-Maryland-S...

Of course I will fly to Detroit and check out multiple properties while I'm down there. Also take time off of work to organize contractors for the light rehab that needs to be done. Check to see if there are any taxes or other expenses attached to the property before purchasing it. Hire a good property manager. Check the neighborhood (currently according to niche I live in a D+ area and I've been happy for the 2 years I've lived here. 

So I really just want to know is it worth spending my 25k, buying and holding. Then repeating the process by saving up money from my 9-5 and rental income to purchase another house in cash? Maybe this time upping the price to 35k. Then 45k. Then 55k etc. 

What do you all think?