All Forum Posts by: Ron Gosling

Hi Nichole,

Since you have been working REI for over 20 years, you may not remember the amounts for the question I would like to ask. There are tons of success stories on Bigger Pockets on how people grow their portfolios. The one area of growth I'm having trouble believing or understanding, is the amount of debt carried by an investor while accruing properties. Please tell me what you think was your average amount of debt (mortgages, HELOC , etc) you carried every year while working to your $5M level now.

I think FEMA has a nice money raising scam going with mandatory flood insurance. I own a SFH not to far from you in PA and it's located in "a 100 year flood zone." Once in a zone its very difficult or nearly impossible to get away from the expensive premiums. My advice has three options; 1. Continue as is and adjust your accounting to compensate for the additional premium payments, 2. Do what you can to pay off mortgage and escape mandatory flood zone payments and finally, develop an exit plan to sell the property and avoid the issue in the future. Sorry, my experience says there's not much more that can be done.

My wife and I have made a cash offer for a buy and hold short sale SFH property back in mid-January. The owners accepted the offer and the paperwork was forwarded to the lender for final approval. We expected a long wait but added a contingency that if the deal was not approved in 30 days, we would walk away. A few days after the offer was made, we had a Home Inspector and Pest Control specialist walk and review the property. Not much new in the findings we didn't expect except for visible termite activity (doesn't seem too big or uncontrollable) and water damage to a bedroom window frame and interior wall due to a poorly installed AC unit and subsequent rainwater entering the house at the installation site (also reasonable to repair and capital budgeted for the fix). Neither issue was on the owners disclosure.

Now for the questions: if the 30 days pass without lender approval and we cancel our offer, does the original listing become null and void?  Can the original offer be modified lower to compensate for the repair work?  Do the owners, listing agent and lender contract for a new listing? Finally, since a copy of the inspection report went to the listing agent, do the two aforementioned issues, especially the termites, need to be mentioned in the new Seller's Disclosure?  

We like the house and all the financials work out even with the repairs.  If the house goes back on market we would make another offer at a lesser amount even knowing that the lender will take their time making the final decision.

Your input, comments and answers are eagerly awaited for and thanks in advance.

if you don't mind me adding my two cents, if you are thinking of central NJ, say Mercer or Middlesex counties, go a few miles more west into Bucks County, PA.  Real estate taxes are much less.  Depending on the state you work and repropricity laws, payroll taxes are less.  Several NJ transit lines border PA and have express runs into NYC.  There is access to major N to S and E to W interstates.  You will get more home for the money in PA than most of NJ.  Drop me a line if you have any questions.

Many benefits of military members and REI. First and foremost, access to VA loans. Decent rates and very little or nothing down. Second, renting to other military members you have access to some of the most reliable, decent and dependable renters. Finally, chances are you'll pass through Lejuene or Cherry Point a few more times during your career and will have a place to live. Imagine having a rental home or two or three in NC and CA or other posting states over your career span. Chances are you will always know someone or have contacts at all your duty stations who can help looking over your properties. There is a dependent wife who writes a lot of articles on BP on the joys and perils of military REI. I don't know her name but search for articles on military REI and you'll find her. Good luck & Semper Fi.

A wise mentor once told me, if you own 10 SFHs, you have tens sets of different problems.  If you own a 10 unit complex, you've reduced the amount of different problems and made common the other issues.  My plan is to take the equity of my six paid off properties and to work a financing deal to purchase a multi-unit property and ideally double my holdings at one shot.  Still a year away but sounds like we have the same goals.  Good luck.

Interesting question.  Why are you declaring the initial value as $180K?  I also think you are very generous with the increased yearly values.  If your heart is set on this property but you think the sales price is skewed to the higher side, you and the owner can split the cost of an appraiser.  If the home value comes in lower, that may put you in a better offer position and provide a source of reality to the owner.  Finally, if this is a property you have emotional ties to, look at the intangibles.  Don't concern yourself with pocketing cash flow if it's not needed.  Paying extra on the principle would allow you to pay off the mortgage sooner and would change your other numbers.  Talk to a CPA and discuss the tax advantages such as depreciation and immediate write-offs as well as a longer or shorter mortgage time frame.

Why is it being auctioned?  Unpaid taxes?  Liens?  Sheriff's sale?  The owner may not give you honest answers.  The listing agent should have the history, why's and how comes of the property.  Try a local total search.  What is generating the auction and whom is owed money is your primary goal.  Depending on you far along the process has gone may determine the outcome.  There is slight chance you can pay off the lien and take possession of the property if there are no other liens and there is a clear title.

If you can't do the rehabbing yourself, or not comfortable determining costs of rehabbing, take along a trusted qualified contractor.  Also get a property inspection immediately to determine if there is something potentially bad that you don't see.  REOs are very finicky and there is no rhyme of reason in their decision making process.  Try to determine local property comparisons (comps) on very close, very similar properties.  This will give you a possible guideline on offer price and potential resale price when repairs are complete.  Once you determine the repair costs, you can try to subtract all or a portion of the costs from the asking price.  Finally, finding a good, local real estate agent to act as your buyers agent . Their commission comes off the listing agents commission.  If you're confident the property is a good deal and fits your budget and other numbers, work with your agent and make an offer.  If you are feeling extra ballsy, have your agent add a 72 response/decision clause on your offer.  It tells the seller you will only wait three days for an answer and if there is no response in 72 hours, your offer is null and void.  Good luck.

I closed my first SFH rental last August and had a tenant and lease 12 days later. First piece of advice, read every blog and article in BP on renting and leasing. The are also a few very good sample leases you can use on the site. Contrary to popular opinion, Landlording, done correctly, is not a passive adventure. I used Craigslist to advertise. I set-up an on-line credit and background check app which prospective tenants paid for (I believe $35 or $40 per application). People need to see what you are renting before they commit. If you have the time, arrange for the tenant visits on a Saturday or Sunday and expect to be available several hours. Some show on time, some late, some don't show. A good tenant will make your life easier. Conversely, rushing to fill a vacancy with a bad tenant is a nightmare. Spell out what constitutes an emergency in the lease. Basically a fire or flood receives immediate attention, most other things the next day. I manage my units myself and am very proactive. Never allow a tenant to call a contractor or repair person without your knowledge. If you don't care to be, you'll need a Property Manager at 8% to 10% of monthly rent and it's also hit or miss finding a good PM. I personally talk with the prospective tenants and try to find ones that are good with their hands, have or work as a tradesman and have tools. Very smart to have tenants that can change fuses, outlets or filters. Be patient and diligent and you can find and answer or solution to every possible issue in BP. Good luck.