All Forum Posts by: Scott Johnson

Quote from @Reid Chauvin:

Hi @Logan Pourbaix - it sounds like the hang-up is around your Debt to Income ratio. Without having a clearer picture of your income and debt obligation situation, there's not much I can do to advise. If you have any mortgages tied to non-income producing properties, or extensive credit card balances, student loans, credit card balances, etc...those are all things that are reducing your ability to take on this new mortgage. Although, showing an executed lease on this subject property should definitely reduce the effect of this new mortgage on your DTI.

Feel free to reach out if you want a second opinion. I don't mind spending some time with you to analyze your situation. 

Correct me if I'm wrong, Reid, but wouldn't it be best for him to finish the rehab and get it rented before seeking financing? Sure, you may need to wait six months to get your capital back out, but then you get paid. 

All-in: $105,000.00 & a $112,500.00 (75% LTV) refinance means you've gotten paid $7,500.00 to buy the property. That's not including the cash flow and depreciation you'll get from it. Then the income will be used in the refinance.

Quote from @Hoa Nguyen:

Hey everyone! Quick questions that I am hoping someone with experience in owner financing can answer. I am seeking owner financing on a single-family deal near me. The seller is up for it, but the mortgage does have a due on sale clause that would stop me from being able to go through with this financing method. What are some ways around due on sale? 

I think what you're actually looking to do is: 1) Buy the property Subject-To the existing mortgage
and 2) Have the seller carry back the remaining balance and you make monthly payments.
Educate yourself on buying a property subject to the existing mortgage and then learn about how to place a subordinate lien on the property to protect the seller's interest regarding the money they're lending you. That's a more subtle way of buying the property. 

@Kaylinn Restrepo DO NOT SACRIFICE YOUR INCOME

Remember that from Robert's book as well. Especially since you're assisting them financially. My brother and I are starting our investment journey a bit differently. We're wholesalers in Greenville, NC, but all of our buy-and-holds are going into our parents' names. We're building their retirement for them since they're getting close to that age. 

If you wanted to you could use assisting your parents as a "why" for starting out with investments. The cash flow from your rental could go to them, and you get the loan paydown and depreciation. BRRRR is a fantastic technique and we did our first one this year.

Educate yourself first. Get in contact with someone local who does what you want to do and work for free. I asked every flipper I talked to if I could just help them with some of the renovations and found one. They're one of our core buyers now. Give what you want, and it'll come back in buckets. If you want leads, give leads. If you want money, give money. 

Hope this helps!

Quote from @Robert Hamilton:

I am fairly new to wholesaling. I would like to use an LLC as the purchaser, then assign my interest to the end buyer at the closing. My question is would I set up the LLC first having it on standby?

 @Duncan Hayes and @Jesse LeBlanc covered the LLC issue well. I just want to make sure you understand the difference between a double close and an assignment since your title says double close and you say you want to assign it.

• Double close: You purchase the property and sell it immediately after, normally on the same day
• Assignment: You use an "Assignment of Contract" agreement to assign your interest

If the seller wants to use their contract and it doesn't allow assignment, double close is your only option. That's just weird, though, so make sure you're sure of your numbers. Also, make sure you're not trying to wholesale a property that that "seller" is wholesaling...

I walked into a "remodel" and it was complete trash. They laid laminate over soft spots in the subfloor, the appliances were poor quality and the floors were bouncy. Listed it at $165,000.00.

@Alyxandria Welch is a newer investor who can give some insights on house hacking if that new investor wants to connect with someone who's local. She and her husband live on one side of a duplex and rent out the other. They're doing their own property management atm. 

Quote from @Hark Tukay:

I have a turnkey property in Memphis and the management company, which is large, does not respond to emails, phone calls or voicemail. It was so bad that I decided to change management companies. In the meantime, they have a few thousand dollars of mine that they have not released nearly 3 months after I left AND, this property that I purchased from them last summer has issues that should be covered under warranty and now I am facing another $1k out of pocket to fix these issues. I have emailed everyone I can think of up to the owners of the company with no response. I have tried to be polite, especially with all that is going on but I am angry now. Any advice on how to proceed?

Get an attorney to send them a "love letter" regarding the funds they're holding in their trust account. I'm sure that'll make their ears perk. 

Hey, @Ethan M.!

Make sure you ask your Realtor one critical question that rarely gets asked... "How many rental properties do you own?" Those who have experience in the rental market are the ones I would listen to. There are a lot of fake teachers out there who dish out garbage information that loses people money, so make sure you know where they're coming from, experience-wise. 

Going to Rentometer.com will get you a few free rental reports. Put in the city you're looking to invest in and sign up for the trial for the free Pro reports. This will give you a general idea of rents in that area. Then, put in the address of a specific property you're considering and run a report with that. 

Regarding appreciation, I like to focus on things I can control. Cash Flow, Depreciation, and Loan Paydown are things that I have some control over. Appreciation is based on what other people in the market are buying/selling properties for. This I have zero control over. Make sure your returns from Cash Flow, Depreciation, and Loan Paydown are solid, and don't worry too much about how much the market values your property. As long as you're making money, who the hell cares what they think anyway? 

Buying a break-even property in hopes that rents or the price will go up is a buy, hold, & pray strategy, which I stay completely away from. Trust your numbers and make sure the property makes you money. Ask your broker to send you an RPR Report (Realtor Property Resource) that shows the market activity in the neighborhood, city, or zip code you're looking in. This helps as well. They can also send you demographics. 

Tell people you have money, and they'll tell you where to put it. 

Your first investment is in your education. @Luke Carl said to start with the BP Podcast. That's a great place to start. Also, read David Greene's book on investing out of state. 

When you say the numbers don't work because of taxes, @Jared Bauer, are you looking at the MLS? If so, that may likely be why the numbers aren't working. Even in higher-tax states, you can find deals that work. Whether they're right for your portfolio or not is up to you, but using your current LTR as a goal is probably a good idea.

Reach out to some wholesalers in your area by joining your local REIA or just search "sell my house fast in [name of your city]" and reach out to them.

Hope this helps!

$200.00 for the cleanout is a great price. We had to install a new septic tank at one of our properties and it ran us around $4,000.00. Sewer or septic, there's always going to be something you'll need to contend with. For me, the costs fit in my 5.00% CapEx I include in my numbers.

Had an issue where a tenant ran a water line without my knowledge and it went through the lines, so I'd be sure to tell your tenenats exactly where they are so they don't crush them or do something like that. 

Hope this helps!

Originally posted by @Crystal Dudley:

Frank,

Thanks for you response. No, the leak was not due to negligence by the tenant. We had a pipe break under the house. My initial response was to pay the bill-I just wanted to get input from more seasoned landlords.

In North Carolina, the law states we have to keep the property in habitable condition. A busted pipe under the house could easily lead to the house not being habitable. That said, it is my opinion that the cost is on your end. If the tenant had done something negligent, you could totally discuss their paying, but in this case, it's recommended you take the hit and use it as an opportunity to talk yourself up to the tenant, showing them that you're taking care of them.