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All Forum Posts by: Sebby Gabre Madhin

Sebby Gabre Madhin has started 1 posts and replied 86 times.

Post: Paying for Kids College with a Rental

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

@Miguel Jauregui   That sounds like a great idea. Will have to look it up!

Post: Paying for Kids College with a Rental

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

@Thomas S.   I would respectfully disagree.  

In the case of a fairly short time frame such as mine, I would agree that equity can be wiped out, which is why I chose to use cash rather than leverage and to buy a distressed property to rehab and end up with immediate equity.  The market would have to crash to 50% before I lose any money I've put in, and I will have five years of income banked as well, which may be enough to cover a year or two of expenses in and of itself.  Since all cash, both properties cash flow very well.  Worst case scenario can just keep as rentals if timing is not right to sell. 

In the longer time frame, 15 plus years, the fact that the properties are leveraged AND the long time frame are protective. The key here is to find a property that covers all its costs, including set asides for vacancy/repair/capital expenses etc as well as PITI, and ideally maybe a little cash flow. Rents are unlikely to fall as much as home prices even with a crash, and fifteen years will likely take you through both market crash and rebound. It would take an amazing crash not to end up with a good return on your investment, which should really only be the down payment if property is selected wisely.

Just my opinion...

Post: New Project: Chandler AZ flip

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

Sounds great for a first one!  Congrats!

Post: Paying for Kids College with a Rental

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

I only have one child but have done the same thing, but with a different twist I guess. Had an 80 k inheritance from my mother about a year ago which I debated putting directly into a 529k, but she was entering 8th grade so 5 year timeline a little short. (even with the current marke, a downturn would wipe us out.). Bought two rentals for cash, with rehab each property cost total $40-45k each, one is rented for $995, the other for $850, and they are worth well over $85k each, and are in an LLC in which she is a co member. In five years we should have a good chunk of $$ in the bank and, if, as I hope, she gets scholarships etc to pay for her undergrad those properties can continue to give her an income cushion or can be cashed out to pay for grad school. We do have a deal that she can only use them for educational purposes until she is fully finished, then it's up to her to decide.

The other advantage of this technique is that she is learning the business, both in having to get her hands dirty in the rehab and cleanup (TOTALLY what a 12/13 yo loves...not) , and now in following the financials of managing a rental.  I hope she catches both the "real estate bug" and the saving bug.

This is, of course, different from what Brandon talked about, but his timeline is much different since his daughter is only one year old.  If I had the foresight to start at that point, with that same $80 k I would have bought 4-5 properties at 16-20 k down and put them on 15 year loans.  Paid off by the time she gets to college. All good!  But I wasn't that smart 10 years ago...

Post: Multi-Family Refinancing/Strategy Question

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

my two cents.

You really don't seem to have any equity in this house. You have a <$16000 down payment, and have owned the house for three months, so no chance of having any paydown of principal. Your only shot would be if the value appreciates significantly in the next 9 months until your are ready to refinance, but if you had a hard time getting it appraised for $450k in March, I wouldn't count too much at getting it up to $550k in a year. The BRRR strategy only works if you either pay cash OR have a significant rehab to truly force value. I don't see that from your description.

Even if your were able to get it appraised at $550 k, at 85% LTV, that would give you $467 k , minus closing costs of several thousand? You would be lucky to clear $10K and would have a higher payment to boot, since your rate is not likely to go down and you would be financing a larger amount.

If I were you I would focus the rest of this year on saving enough for another down payment through your income (take a side job, hustle your a## off!) and your rents, if you are lucky enough to have no major issues/expeditures to eat into your cash flow.

If you find another multifamily cashflowing deal in a year, then can jump on that with another FHA loan with low down payment. Move into that unit and let your new tenant pay the $1000 for your current unit.

Someone with more knowledge can feel free to correct me, but I do not think that you HAVE to refinance out of FHA when you move out in a year, just as long as you have been there long enough to show that your initial intent was to occupy the property. The only reason to refinance would be to get out of PMI, but, again, if you are trying to save cash to buy a second property, this may not be worth it to you.

Post: Self Adhesive Tiles?

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

LVT.  Can get it on sale or through the bid room at Home Depot for less than $1.50 sq foot for the basic Allure, a little more for the higher end Allure or other brands.  It's a floating install so a little forgiving but do have to prep the floor well if you had carpet with nails etc.

We have been putting it in all of our rental rehabs for the last year so don't have a long history but it installs super easy, looks great, and seems to be holding up pretty well.

I think he was confused in that it is "rent to own" that has been replaced by lease option, not seller financing per se.

Post: Question about payment from Property Manager

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

We have three property managers, based on three areas/types of homes we own.

One deposits, like clockwork, on the last day of the month that the rent was received, so about 30 dd.  It's OK after the first month, and I think it's fair that they protect themselves against clawbacks or repair costs (they don't have a reserve per property that they hold).

We had one that started off with the same scenario described in the OP, paying off around the 15 th for the PRIOR months rent, AND they held a reserve of $500 per property.  These were our first PM and we didn't know yet to negotiate, and what an unpleasant surprise that it took a couple of months to see our first partial payment.  When it came time for renewal, we were an important enough part of their portfolio that we renegotiated to get paid on the 15th the for the current month and to have a reserve of $250 per property.

The third, who we are getting rid of now, is a mom and pop that deals with our lower end properties.  They actually pay out the earliest, and don't carry a reserve,  but seem to require a phone call inquiry around the 6th/7th to check on which rents are paid, which notices need to be sent out, etc. We get paid around the 7th, with a second deposit later in the month for stragglers.   I'm getting a little tired of having to micromanage, and pay for that priviledge, so getting ready to switch those properties to one of our other managers.

So, bottom line is, you will probably have to wait some, but the 6 week thing is something you don't necessarily need to accept, unless this PM is the only option in your neck of the woods.

Post: Has anyone had a similar experience with a lien on a hud home?

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

We have had a HUD home which had a lien that we found on title search (prior owner had not paid their roofing contractor, who placed a mechanic's lien). It went through the compliance department, etc, and HUD paid the lien, we went on to close without issues. It delayed closing by one month but we weren't in a hurry and our lender played along as well...

Post: My first big payday! $13,700

Sebby Gabre MadhinPosted
  • Investor
  • Mount Dora, FL
  • Posts 92
  • Votes 44

Great job!  keep it up, and wishing you much future success.