All Forum Posts by: Randall Williams

@Robert White,

thanks for that, very helpful - and for the letter,

@Wesley W..

I'm buying a duplex in my town. At inspection, the tenants in one unit didn't know who we were or what was going on. They figured that they'd be evicted when the property sold. 

We close in a month. I'd like both tenants to stay on. The current owner's agent is saying no to any communication with them about the sale until closing. 

Any suggestions on how to ease the transition for the tenants?

Thanks, 

Randall

My thought, too. Just soliciting wiser minds. Thanks! 

@Matt Motil, and anybody else hanging in - this deal is moving, thank you. @Brent Coombs, I lowballed and they bit, thanks for the encouragement.

Quick financing question? I have $27K in easy liquid now. If I put $20K into the deal up front, the monthly payments drop by $180. Does it make sense to lock away the $20K and cashflow better, or finance the whole thing and keep the extra pad?

Thanks a million, 

lifesaver! Of course. Trying to rent spare rooms now in my house and finding the same. Thanks @Matt Motil - lifesaver. 

@Matt Motil, that helps. I've calculated in 1 month vacancy yearly, which may be conservative. I'm tempted to ask both current renters to renew for a year, so I have some time to get my head around the management and expenses before having to fill vacancies. 

@Account Closed, you're right - I got the cap rate wrong, good catch.

@Brent Coombs, Thanks for the helpful feedback. I ran the numbers and like how it looks to offer less. I may do that pending inspection, then get a bid for the separate propane heaters and see how that goes.

 @Bill Jacobsen, Thanks - I plugged in higher expenses and a one-month assumed yearly vacancy, and it still works.

Appreciate y'all, thanks for weighing in. Brent's post in specific got me rethinking the math of the deal.

Hi everybody, and thanks for any ideas you might have about this. I looked at my first potential rental unit last week, and I'm pretty sure I'm going to pass. Here's the skizzy:

Two-family unit, B-grade, fair condition, 10 minute walk from my home. Water heaters seem to be in good to very good condition, propane boiler appears to be in very good shape, roof looks good. Plaster walls with some crumbling, electric seems all solid. Last year's rough numbers are below:

Asking price: $93,500.

Units rent for $650/$975 each, total yearly rent $19,500

Taxes: ($2,850)

Insurance ($485) 

Propane ($2,326)

Yard ($605)

Water/Sewer ($597)

Other Expenses ($868)

Total Operating expenses ($7,790)

Last year's financing put the owner at a 12.5% cap rate, and a net yearly cash flow of just over $6K.

I can finance it on a HELOC from my home, 3.5% over 15 years with $2K in closing costs. A commercial loan is 5%+ on 20 years, with $3-4K closing costs, (boo-hiss.) If I finance $90K, payments are $650. If I finance $70K and pay the rest in cash, my monthly is just at $500.

if $650, projected annual return is $3910 assuming the above numbers hold and 100% occupancy (risky assumption)

if I drop $20K into the place in cash, my monthly payment is $500, and yearly return is $5710, again assuming a perfect world and full occupancy.

The best tweak I could see to the above numbers would be investing in separate on-demand heaters for each unit so that the propane cost was passed on, though I haven't looked into area rents enough to know if that would be competitive. 

It feels potentially too risky for me as a first-timer - a large expenditure over the first several years wouldn't be unlikely, and that would destroy any small profit the rental would make. Plus, it feels like lots of potential hassle and risk for a few hundred a month, versus other potential options.

Am I missing something besides the obvious 2% rule? I'd be grateful to hear your perspective on this deal if you have a minute. 

Thanks!

Hi gang, 

I'm sharing my story here because I'm interested in your thoughts and feedback, and because I'm pretty excited about how the buyer-turned-investor learning curve is shaping up. 

My girlfriend and I bought our first house together 6 1/2 years ago. She had the down payment, I had the credit score and monthly income to make it work. I didn't know how to look at the terms of the deal - she was excited that "they gave us a house!" But I was fixated on the six-figure interest projections of the 30-year note. 

It was a 5/1 ARM at 5.65% - I didn't know what an ARM was. we split a year later, I bought her out, then for $600 bucks in fees, I moved into a 5/1 ARM at 3.99%. I strongly considered a refi and fixed-term loan, but I decided on the ARM with an aggressive payoff schedule.

Twice last year, I looked seriously at rental property - once getting approval to finance, the second time I worked out a 3.5% home equity loan at for 80% of my current house, which would have bought the other property outright. I ended up not doing either deal. In addition, I've been renting out two rooms in my place for about four years at an average return of $750 a month.

I got within striking distance of paying off the mortgage this year, but decided to invest in liquid index funds and keep the mortgage interest deduction coming. The ARM is up soon. The bank has informed me that the interest rate is dropping half a point, and my new payment is $160.00 a month. Goodbye, mortgage interest deduction, hello extra cashflow.

And THAT's when I finally cracked. The opportunity cost on not investing the extra dosh now seems way too high, right? 

My current plan is to buy a single-family home near mine to rent and hold long-term. Once that's rolling along solidly, I'll be ready to look at other options. 

The rent-should-be-2%-of-the-buying-price axiom is slowing me down. I think I can hit 1% and cash flow positive, but 2% seems really hard in my area. Better to stay close to the place I already own, or branch out and deal with the extra logistics of property elsewhere? 

Thanks for reading - I'm pretty excited about this community, and grateful for the connections I've already made. Forward!

Hi everybody. New investor, very happy to find this forum. 

What sparked me finally getting more serious about learning more was a great real-estate decision paying off, and the opportunity cost of not doing more of it. I'm interested in starting with acquiring a single family home, either a flip/rent or a rent-as-is setup. Happy to meet more folks from Maine, especially in the Bath/Brunswick/Topsham area.