All Forum Posts by: Robert LaPrelle

I'm afraid that the answer to almost every question you ask is: "That depends." A lot of people rent houses just like what you're describing, but that may not be true in your area. Its also possible to have a place that is TOO nice to rent in a particular area. I grew up in rural Virginia, where you would not be able to rent that house, but I have worked in other towns where a place like you're describing would pull down $2000 no problem.

I think your first step should be to find someone who knows the area a little better. Maybe your friend, maybe your realtor, but find someone who can give you a better idea of what to expect in your market.

Good luck!

@Jacob Compton If you can reduce your monthly expenses, then it is %100 worth it! Just make sure to either pay down your mortgage or save up as quick as possible so that you can refinance and lose the mortgage insurance.

@Jacob Compton What are you currently paying in rent? I wouldn't recommend buying this place with those terms unless your monthly costs are going down. Otherwise, my advice would be to save up to put together a down payment and/or look for a better deal. Whatever you do, I hope it works out for you!

Your math is good. (Or, its at least in the ballpark. My vacancy rate is lower, but my maintenance is higher, for example.) The thing that jumps out to me is that 139.42 for Homeowner's Insurance. If you can find a non-conventional bridge loan to cover %20 of the purchase price, you should be able to lose the mortgage insurance. Is there anyone you know who could loan you some startup capital? Is there anyone you could partner with?

Alternately, do you see an easy way to increase the value of the property so that you could do a hard money loan and then refinance in a year?

If you can lose that expense, then the deal suddenly becomes cash positive.

This stands out as a red flag to me:

"The owner said he doesn't have monthly financials to share with me."

That line strikes me as highly suspicious.

If you are sure the deal is on the up-and-up, then there are probably ways to work with his bank to find something that they will be ok with. Maybe you can assume the mortgage?

Could you convince her to make seller financing a condition of the split?

The idea is this:

You borrow $150,000 from your father-in-law to invest in real estate. You buy a property for $100,000 cash and then spend $50,000 on rehab, etc for a house worth $200,000 ARV which you rent out at $1,500/month. Once you have established a rental income, you take out a mortgage for $160,000 to pay back your father-in-law with interest. At this point, you have gained a cash positive investment for $0. That is the most basic kind of BRRRR.

In the scenario above, you might be able to get a little extra cash from the mortgage to line your pocket. Whether or not you want to will depend on how aggressively you want to grow your portfolio. If you get more cashback, you can roll that into your next deal. If you take less cashback, (maybe only take out a mortgage for $150,000 and pay the $10,000 interest out of pocket) then you will build equity faster, but will have less for reinvestment.

That was the hardest phase of investing for me! I had saved up and studied up and found a couple great deals. The spreadsheets said I was making a ton of money, but none of it was actually in my bank account! Hard to stay motivated with no reward.

I should also add, what a great problem to have! Congratulations!

I'm afraid that this is something that you'll have to evaluate for yourself. Do you want to expand your portfolio? If so, you might be better leaving the loan as it is and putting the excess cash in an account for re-investment. If not, then you will be better off in the long term paying off the loan faster and cutting down on your interest rate. 

There is a third option, which is to do the refinance, but establish a HELOC at the same time for funding any future investments. That's what I would do.