All Forum Posts by: Sam C.

First, good luck and find a deal that works for you then go find another. Repeat until you reach financial goals. 

The choices you are contemplating are like comparing apples and oranges. They are both fruit but completely different in taste. Each one is fine depending on what you're hungry for. Then only way you "lose out" in either scenario is if income cannot cover ownership and debt if applicable.

There is no better returns available for cash money today than rental real estate. If you can afford to buy properties for cash and keep them debt free, that's the biggest cash on cash return you'll find out there today. But many of us can only do so much and need lending to keep the inventory growing. 

That being said some caveats:

Liability: debt free properties are prime targets for attorneys/creditors.

*Leverage: Property rich and cash poor is problematic when there are interruptions in cash flow that strain your ability to meet debt obligations.

Lending: At some point you my hit a wall with being able to get financing. Each lender has rules to how much they lend in any one area and to any one individual.

*Equity: We may like to think that the difference in value and debt is "our equity". I see 30%+ equity as insurance against anyone or anything that can threaten your ownership of a property.

Tenants: What vacancy factor you use in your cash flow calculations is very important and one that seems to be always too low after the fact. Use 10% even with the properties that are "guaranteed" income. I.e.: a vacant single family home is 100% vacant. A 4-unit with one empty unit is 25%. Until you have enough units to somewhat ignore this variable, go with the worse case scenario that still make the numbers work.

*These are two sides of one coin and are on a continuum. More leverage, less equity. And vice versa.  Would you rather own $500,000 worth of real estate with a 40% equity position or 1,000,000 with a 10% equity? Can you guarantee adequate cash flow during ownership to cover all ownership costs?  Leverage and equity will recalculate  the risk depending on the % of each and monthly income. They will also influence how you sleep at night.

Thank you for your honesty. You paid for your crime and you should not be chained to a life sentence because of it. And I sense you are not the type that will waste anyone's time when sharing your strengths and weaknesses. Unfortunately the world ( at least here in the USA) is no longer a place where the one's with the money will lend to those that really need it based on the strength of personality and ethical standards. That being said, any family/friend/associate willing to capitalize on your hard-work and dedication contributions with them bringing funds to the table? If so, make sure you get a small yearly ownership percentage for your contribution (i.e.: finding the deal, manage the property, maintain the property, buying equity over time, etc). LLC's work very well for these type of set ups and transfer of ownership percentages. Get connected to anyone and everyone in real estate that is willing to start a relationship. If nothing more than you putting yourself out there as available to participate in the areas I mentioned above. You can do it and it may take a few years to get "that first one" but don't despair. The best investors will always listen to the particulars of a "good deal". Find a deal and go sell it!!

Make sure your processing/evaluation is consistent for anyone applying. And keep it simple:

Grounds for rejection:

1.They can't afford it/poor credit/new employment (combination of)

2. Registered Megan's Law/sex offenders

3. On parole

4. Number of people Vs number of bedrooms

5. If you have a no pet policy and they have a pet

That's really about it. I get arguments from people about this a lot because they want to believe they can pick and choose renters based on THEIR STANDARDS and PREJUDICES (or neighbors). Don't risk getting a discrimination suit against you. HUD has deep pockets and even if you win you loose.

How old is the seller? Does he need monthly income? Are the capital gains going to eat a chunk of his profit? Try owner financing with say 20% down, 20 amortization, 6% interest, 5 year balloon. Preferred way for a buyer is doing an actual sale where you get the deed and he gets a mortgage. Some sellers frown against giving up the deed until paid in full but you could set it up as a delayed settlement (You get deed when you pay off loan balance). Best for buy and hold until paid off then sell or cash out. Another option is a hybrid with seller holding a second position mortgage for 25-30%, you come up with 20-25% and find a lender for the remaining 50%. Banks get a 50% position this way so their risk is minimal and can get around some of your lack of funds situation. Best of luck and check out a great app on google playstore to evaluate an investment property; Property Analyzer. It provides great hold and buy data that can be changed to see different results. There's a free version that gives most of the features but it does have ads. Still a great little app and very simple and intuitive to use. 

Best of luck! Check out a great app on google playstore to evaluate an investment property; Property Analyzer. It provides great hold and buy data that can be changed to see different results. There's a free version that gives most of the features but it does have ads. Still a great little app and very simple and intuitive to use. 

Welcome. And best of luck! Check out a great app on google playstore to evaluate an investment property; Property Analyzer. It provides great hold and buy data that can be changed to see different results. There's a free version that gives most of the features but it does have ads. Still a great little app and very simple and intuitive to use. 

Check out a great app on google playstore to evaluate the property; Property Analyzer. It provides great hold and buy data that can be changed to see different results. There's a free version that gives most of the features but it does have ads. Still a great little app and very simple and intuitive to use. 

Check out a great app on google playstore to evaluate investment properties; Property Analyzer. It provides great hold and buy data that can be changed to see different results. There's a free version that gives most of the features but it does have ads. Still a great little app and very simple and intuitive to use. 

Check out a great app on google playstore to evaluate the property; Property Analyzer. It provides great hold and buy data that can be changed to see different results. There's a free version that gives most of the features but it does have ads. Still a great little app and very simple and intuitive to use. 

It's a gusty move. If you can handle it, the return is phenomenal. If you can hold on to it at that income level, it should be paid off in roughly 5 years. I'd even give them a new kitchen if they really are staying put. Make sure they're not "friends" of the seller.