All Forum Posts by: Simcha Davidman

Yea, just get the insurance and know that you have nothing to worry about.  If someone gets hurt on your property, plaintiffs' lawyers just want the insurance money.  Very rarely (in my practice, I had one such situation where the client wanted to, and that was a $15,000 auto policy) would any attorney pass up on a million dollar policy and try a case to a jury verdict.

This is not legal advice, just a discussion of personal injury litigation.

I don't think bankruptcy is a good alternative.  I've heard that it will make you a toxic borrower for 7-10 years and lenders will run from you.

Welcome @Vedat Sarayli!

It might be "6 of 1, half a dozen of the other," but I recommend that the new purchase cover all financing, meaning the mortgage on that house, as well as the financing of the down payment, without having to rely on the first house to pay the debt of the second.  But I'm curious if others disagree.

@Christy Harris lenders typically are most concerned that the actual structure is covered, while umbrellas are usually for liability.

No, I'm still in search of my first one.  But the high prices/taxes and my conservative estimates for the gamut of expenses and income don't allow anything to get close...

@Chris Cozzens Welcome and good luck!

I would point out that you're probably not going to get to 1% because you're occupying one of the units.  You'd have to account for what a fair rent would be for your unit, or try for a proportionate percentage (e.g. if you occupy one of three equal units, I think the 1% rule would be "modified" down to .67% to reflect your own living space.

@Abdul Azeez I think there are two options, one good impractical one, and one bad practical one.

1. Find deals off market.  There are countless forum and blog posts and podcasts about this.  I'm trying to figure out how to do this on a small scale.  For example, one great idea is if you drive or walk by a house that looks like nobody lives there, figure out who owns it (usually the person actually has another address), and send them a letter. (I only say impractical because my impression is that these can cost more money if you outsource or can become very time consuming.)

2. Just keep making offers that work for your numbers.  Back into an offer based on whatever your required return is.  If you require 10% return and you expect to earn $2,000/month, the most you can offer is $200,000 (assuming no other expenses :) ), even if the seller is asking $250,00 or $275,000.  Based on a couple discussions I've had with more experienced people and things I've read and heard, eventually you will just come across someone who will accept your offer, or come closer to your offer.  In other words, some guy might be trying to sell his house for $250,000 and other people might look at this house and say, woh, it's only worth $200,000 and move on to the next one.  Just make that offer!

Over time, with decent records, you will be able to develop your own conversion percentage and really be able to project, if I look at 100 houses and make (super low) offers on 75 of them, I can expect to actually negotiate and buy 2 houses. (These numbers are purely for illustration.) But how many minutes does it actually take to make an offer?  Is that worth it?  Is that a good time on your human capital investment?  It probably will be, but that's to be determined...

I think your insurance might be a little low.  I feel like once you have a lease that works for you you shouldn't need an attorney to review it every year.  You might have other legal expenses, like evictions, though.

Also, I have commonly heard between 5-10% vacancy.

Personally, I have tried running numbers on a lot of homes with 8-10% vacancy, and 5-10% for each of capex, maintenance and property management, and nothing ever comes close to working out.

I think I'm going to just budget like $200-300/month for maintenance and capex, forget about property management (because that's my job, for now), and pray!  One guy I know told me he doesn't budget for any of that - but he won't buy if the numbers don't run at like 20% return.  And then when something breaks, he just scrambles.  Sounds crazy to me, but I think he's been doing this for over 10 years...

The key, I've been told, is just keep making offers at prices that work.  Eventually, someone will need to sell to you, and you'll be sitting pretty right where you want to me.  But don't buy for more than makes sense, and if you have doubts, walk away.

Good luck!

Sounds like you own it free and clear - which means the rental income would be mostly yours.  Without knowing more, I would try to keep it and rent it out.  If you need money, you can try to find private money to borrow to fix it up, either here on BP or in your family and friends network.

You need to find out what you can rent it out for, before and after fixing it, and then you can go offer investors an opportunity to earn some good returns.

You can also probably take some equity out of the house, either through a HELOC or a HEL.

Good luck!