All Forum Posts by: Sam W.

Paul Nagy,

I like it...cash-in about $25.9K (down + ~ closing + 10% for initial repair"stuff"). NOI around $229/month = rough CR of 10.6%. You didn't mention utilities so this is assuing tenants pay all their own.

Now, the first year that you'll live there you'll have neg cash flow for this unit, but you know that.

If they're units with no skeletons in the closets, I think it is a good solid base hit.

If an investment depreciates by 30% it must then apprecitate by 43% just to get back to even. Do I think real estate (across the board) will appreciate 43% in the next 2-3 years? Nope.

Of course a realtor wants you to pay full market price.

You must look at your objectives. For me, cash flow is key (when dealing with buy and hold rental property). If market value doesn't allow acceptable cash flow, then I can't buy it...the carrying cost is too high for the "promise" of appreciation down the road.

A couple of ideas off the top of my head:

- Use it as a "grub stake" with a partner who is willing to take me on as an apprentice to learn the ropes in REI.

- Lease a vacant "unloved" property for 3 years with permission to sub-let it.

- Buy and then resell a vacant lot at the county delinquent tax sale.

- Buy supplies and equipment - start a venture to provide clean-out of severly distressed (trashed) properties.

Alan McCraney,

In a previous post I meant to say that the gentleman's method of amoritizing the property benefits you as the buyer - not the seller...you'll actually pay less interest with his method...but your initial payments will be higher than with straightline amoritization - will cross over (be less) at the 75 month mark.

Anyway, is the reason you can't put a new mobile home on the property because of zoning (isn't zoned for MHs but if they are already there they can stay)?

Alan McCraney

The method of amoritization that you are describing (fixed principle payments, declining interest) benefits you as the seller by allowing you to pay-down principle much faster than a normal mortgage amoritized under standard fixed payment method. It looks like he is offering you a 15 year mortgage.

By my napkin math, you'll pay $44,094 in interest with this gentleman's repayment schedule and $51,894 with a normally amoritized mortgage...a savings of $7800 over the life of the note. But...something to consider....your initial monthly payment will be higher under his method ($1055 versus $843). The cross-over point will be in month 74 (a little over six years).

So....do you want higher cash-flow up front with a lower monthly payment, or do you want to pay less interest over the life of the loan? For me, cash flow is key.

By the way, I agree with Bill Gulley - 6% isn't bad for seller financing (with nothing down it appears from your note).

Alan McCraney,

All amoritized loans are handled exactly as you describe. If you have a 360 month mortgage, on the second month you are only paying interest on using the principle for 359 months....and for 358 months after the third month, etc. Because most people don't want their monthly payment amount to jump around every month, the monthly payment is standardized. That is why amoritization tables show decreasing interest and increasing principle payments over time. Most people just don't think of it in these terms.

Now, that said, I agree with Jon Holdman that if he wanted you to make interest only payments for 11 months and then a big interest and principle payment on the 12th month it would be strange. Not sneaky or cheating...just strange.

Nathan Huzzey,

I'm not a mobile home expert (but there are some true experts on BP). My only piece of advice is that I would not try to skirt pulling permits for a major rennovation on a mobile home. Way too much can go wrong (and tenants can get hurt). If I couldn't get the permits because I'd lose the grandfather status once I did, I wouldn't do the rehab.

Not sure how attached you are to the land, but would it be worth taking the bad mobile out and selling the good mobile on a 2 acre lot (could use the strategy Joel Owens highlighted)?

Chris P.,

As Tevis Verrett said, in some neighborhoods if you put a 4x8 sign in the front yard that states, "Steal this house"....someone might just take you up on it.

I'm not a fan of signs everywhere because I think they make the area look trashy....and I invest in the town I live in.

Between the "I buy cheap houses", "Bob's Discount Mattresses" and "Income Taxes Done Good" signs, I always get the impression some seedy fly-by-night companies are posting them (but that's just my natural suspicion). To me, a big 4x8 sign in the yard makes it look like the circus has come to town.

Just my impressions.

George P.,

I would get another 4-family ... and am actively looking.

In my area, multi-family offers the best cash-flow (I'm a buy and hold investor).

I bought with conventional bank financing (25% down, 30 years).

I too am hardly an expert - and I haven't stayed at a Holiday Inn Express lately.....

In my mind, he who names the price first SETS THE BAR...I'd rather begin negotiating from a position that I established rather than reacting to a value someone else placed on the property.

That's why car dealers put MSRP stickers in the windows. They set the bar for negotiation.

Of course, this advice is worth exactly what everyone paid for it...