All Forum Posts by: Ryan Detig

@Account Closed  Congrats.  I am assuming you are acting as the wholesaler here and are trying to determine what you can offer her and still be able to assign it.  At least that is what I am getting.  Regarding the repair costs I can probably help you with that.  Can I please have some details on the house?  How many bedrooms, bathrooms, and sqft.  Any exterior landscaping that needs done?  Roof or foundation issues (those are your most expensive items)?  I recommend when you go to see the property that you take a piece of paper with you and create a very detailed scope of work.  My first scope of work was detailed down to the number of outlets and switches to be replaced per room.  Once you have a scope of work feel free to send it to me and I can look it over and give you rough numbers.  I can tell you that 50k in repairs can get you a TON of work for a 3/2 1500 sqft house with the right contractor.  

@Souji Kumar  I invest in South east Texas.  Beaumont, Nederland, Groves, Port Neches area.  Have you gone past your option period? Obviously everyone has different financial situations and maybe a negatively cashflowing investment (is it an investment at that point?) aligns with your current financial plans but I would be very cautious about this.  I think you  should get some advice from someone that knows the area of the property, run your numbers with the local person input, and be prepared a make a tough decision regarding moving forward or backing out and potentially loosing your deposit.   

@Souji Kumar  I invest 2 hours outside of Houston and I would say that cashflow is a little low for me.  A 2.3% return on your downpayment is not too good.  I also think that your estimated 5% vacancies and 5% repairs are a little low.  I estimate 10% vacancy and 12% repairs/capex.  Personally from what info you have given me, I would not buy this property.  I could purchase 2 properties for 154k and both of them would easily rent for $1,250 a month.  I would double check your numbers and make sure you are not buying a negatively cash flowing property because with the info you gave me it looks like it will be close. 

@Jason Dale I personally use mint.com to track my rental and flip financials. I have a separate bank account and credit card for the rental LLC and flips that I do and I opened a separate mint account that links to just those accounts. I just create a separate budget for each property and then create different "tags" for what type of expense it is. This way takes me about 1 hour a week during a flip and 1 hour a month to deal with the rentals. I made sure I sat down with my tax guy for an hour and pulled up the way that I was doing things and made sure he could easily work with what I would give him at the end of the year and he was fine with it. I have 7 units and have done 2 flips. I have used mint for all of it and it has worked great for me. I can see it being an issue if my portfolio grows significantly. At that point I will probably switch over and pay for quickbooks online. I think I can handle up to about 10-12 units using mint so I have a little way to go.

@Daniel Lehrman  In my area I believe it is job related.  I live in Nederland Tx and the majority of well paying jobs are jobs that attract transient workforce.  These jobs are 1-5 year jobs for refineries that pay really well.  This allows the workforce to be able to afford 1000-1400 per month for a house that I might get for 50k - 70k.   The good pay mixed with short term job uncertainty, good schools, and lack of education fosters a rental market of 1.5%-2% rule.  I actually have a property that is a 2.7% rule currently.  Granted that is a triplex.  

@Dave Garlick  I agree with the crowd that conventional is the way to go if possible.  Commercial loans in my experience are easier to work with and much more flexible.  They just come with higher interest rates and balloons.  I personally did not follow my own advice with the 4 rentals I have because I did not have the cash for the down payment.  Normally conventional loans require a 20%-30% down payment for rental properties.  Using the commercial department at my local credit union, I was able to purchase 4 rentals properties in 5 months using negative 4k of my own money.  Yes the bank actually lent out $4k over the purchase price on the 4 properties (one property they lent out 10k over).  This would NEVER happen with a conventional loan.  Commercial loans have allowed me to purchase 4 rental properties that are now cash flowing around $1000 a month.  I would never had been able to do that with conventional financing.  Commercial loans can be a good tool to use but if possible conventional is the way to go. 

@Kristi Buehring    Aislinn Phelan at Keller Williams is great.  Pm me for her contact info.

@Kevin Maldonado Great first post. Looks like you have been doing some research regarding rentals for sure. Here are my thoughts on you situation. First, I have a couple questions. How far away will your new house be? Are you planning on managing this property yourself? Do you make enough monthly income to cover your new mortgage and your current mortgage and still have enough to cover your bills? Is 800 your current insurance rate or is that an estimate for a landlord policy because usually they are significantly different. What does the HOA cover? You said that you were expecting to get a new roof for 5K. Isn't that covered in the HOA? How hot is the rental market in that area?

Regarding the numbers, it looks like you have a good grasp on the expenses.  I think your maintenance budget of $400 is very low.  I usually do 12% of rent but since this property is newer I might go down to 8%.   The rest looks reasonable.  If you refinanced before you moved to a 30 year mortgage I show a best case scenario cashflow (2200/month with 5% vacancy) of  around $200 per month if you used a property manager.  If you managed it yourself (easily doable unless you move far away) you are looking at almost $500 a month cashflow.  Note I assumed 146k note on the refi to take into account that you will probably roll the closing costs into the refi.  

Option 1. if you are really interested in getting into real estate some more, I might consider refi before moving to a 30yr at about 175k.   That would give you 30k to put as a down payment for another rental.  Even at 175k with 10% vacancy @ 2200 a month you are break even with a management company and positive cashflow of $275 per month if you manage yourself.  

Option 2, if you make significant w-2 income, is to leave it as is and just rent it out.  If you manage it yourself you should positive cashflow around $30 bucks a month but in 10ish years it will be paid off and your cashflow will go up significantly.  I would not do this if your income was not significant to support issues or if you plan to move far away from the property.  If you are wanting to be an absentee LL then you might  want to sell and buy a cash flowing property out of state (maybe Texas :)  ).    

Personally I think if you want to be completely hands off, I would refi to 30 years at 146k and get a good property manager.  If you want max cashflow, manage it yourself and refi to 30 year and start learning landlord laws :). 

Feel free to PM me if you want to chat on the phone.  If you have any other general questions please just post below so others can read and learn.

@Avery Wayman I personally think that something as minor as a small gas leak will probably not going to be worth it to pursue anything legal.  Worst case you are looking at a new water heater ($800-$900).  I am also guessing that the sellers gave you a $500ish deduction at closing for a home warranty for this exact reason.   If you got a home warranty you can call them and pay the $70 fee to have someone come fix it.  Personally I would call the original contractor who "fixed it" and see what they say.  If they are super willing to come check it out then maybe they are a reputable company and they just messed up and they will fix it.  If they backpedal then I would contact a plumber you trust or the home warranty company and have them come fix it and just pay the cost.  

@Dave Foster @Kay Ferdous  Wow yes i'm retarded haha.   Kay so sorry hope it did not confuse you.  My dyslexia clearly is showing.  Thanks Dave good catch.