All Forum Posts by: Shane M

Jon,

This makes more sense now. I didn't realize the 50% allowed one to include taxes, insurance, and HOA dues. I had a hard time imagining why it would be necessary to need that much money a month in just maintenance, property management, legal fees, etc.

MikeOH,

After I posted this, I saw some of your posts about the 50% rule. I read quite a few threads last night. Wow, that rule sure makes it hard to find a property. If I were to use the rule, I'd have get the property that is currently listed for $126,500 for 30,500! My P&I would have to only be $182. I derive this number by assuming I could rent the place for $1,100. If I divide it by 2 I get $550. So, when figure all my other costs, HOA dues, Taxes, MI, and Ins, I find my P&I can't be above $182. I am looking at this right? This is also based on a pre-approved 30 year fixed loan at 6%

Another thing is the property's exterior is maintained by the HOA and it is only 4 years old. I think I read a post saying maybe only 10% of the 50% rule dealt with the exterior, so I guess I'd still be in a bad spot :(

What do you think? Still a bad idea? After doing a ton of reading on this forum, I see you and several others are extremely skilled in this business, so your opinion carries a lot of weight.

Thanks,

Shane

I currently live in a 3 bedroom maintenance free townhome. My neighbor, in the other 3 bedroom in the building (4 plex), is selling her home. She may not be the best deal in town, but her asking price is the lowest in our neighborhood.

I'm considering having my realtor make an offer on it tomorrow. Running all the numbers, I figure I'll have a positive monthly cash flow of about $75 after paying P & I, HOA dues, Taxes, and Ins. That's not much, but with property values depressed, I hope to aquire equity mainly through appreciation over the years.

Here are my questions...for now :)

1. I'm currently liquid enough to weather a few vacant months, but even so, should I look to have a higher positive cash flow?

2. My realtor suggested I buy the property to live in myself and rent out my 3 bedroom townhome. This way I can get more favorable loan terms (lower interest rate and down payment). Here's what I wonder... I've got about 40K in equity right now. If I decide to sell it (the property I'm currently in but plan to rent) in say 6 years, will I be able to roll ALL of the equity over into a house without paying capital gains tax? And yes, I've lived in it for over 2 years. I'm not sure how that would work since a renter will occupy it for the latter years.

3. Any advice on what else I need to think about?

EDIT .... I just thought of another question I'd like to ask. If I buy this property, how will it affect my borrowing power for a future investment or personal home? I wouldn't think it would change my debt/income ratio since I'd have a positive cash flow from the rental income, but I would still think my ability to pay a loan back would be a greater risk. This would be due to the fact I could have vacant rental. Am I looking at this correctly?

Good tips Wheatie. Thank You.

But don't you think there can be advantageous such as low maintenance and possibly better quality tenants when comparing a house at similar value?

Anyone else want to weigh-in on this?

Hello everyone! I have a quick question I'm hoping some of the seasoned investors on here can help me with.

There is a 2 bedroom condo I saw in my area that is up for sale. I believe it to be significantly undervalued. I'm considering making an offer to buy it and rent it out.

Here's my question: The seller is using a real estate agent. I would like to buy it w/o an agent in hopes that the seller's agent will drop his/her commission by at least 2%. This would save me a few thousand, but I'm wondering if the savings would be worth me forgoing a buyer's agent. What do you think?

Also, if I decide to not use a buyer's agent, what do I need to be aware of? Where do I start? (I will need to finance it). Is there a good website that can give me a heads up on what I'll be dealing with?

Thanks! :D