All Forum Posts by: Stephen E.

I don't know your financial situation but maybe you should talk to a bank about a commercial property loan? I started with residential loans and when I did my first commercial loan I wish I had done so earlier. It definitely wasn't so bad!

in the market now, if you have the down payment, you should be able to get a commercial loan at 4%. And as mentioned you can always refinance, though I'm not sure I'd ever want to convert a 5 plex into a 4 plex...?

Why not file a lawsuit against the tenants? I'm always wondering when you're unable to evict tenants what would be the harm in taking them to small claims court?

Hi Lianna what @Stephen Keighery said is exactly right. It's a very different set of concerns when you're living somewhere, especially if you plan on staying for a long time. If  you're not trying to fix and  flip, or house hack your  way to another investment, then it has so much more to do with how much you like  living in the place and how much you're saving vs. renting similar (you're definitely doing better  financially than renting,  pretty sure I can say that without knowing anything about the property). 

The better cash flow places for long term renters are not in the most desirable areas in New Orleans. But really if you were purchasing only for cash flow, and weren't doing BRRR or fix and flip, then I'd be looking to places like Mississippi anyway.

$3500 is pretty good rent for a purchase price of $375k in New Orleans. So it partly depends on the neighborhood if it would be worth it. Also, tenants in New Orleans often pay sewage/water, and always pay electricity.

I look at cashflow vs. appreciation as dividend stocks vs. growth stocks. Ideally you want both in the same property, and it does happen, but not for everyone.

It is relatively easy to get, say $1,300 cash flow per $100,000 invested in a different market, like in MIssissippi or Northern Indiana. I'm talking the kind of deal that just about anyone could make, and that's profit after paying a property manager. Basically turn-key properties. Honestly, it's not that hard, but a little harder, to flow at $1,700 or $2,000 with $100,000 invested. And that's without taking a loan. With a loan getting a 25% return on your money is very doable.

The hardest part is finding a good property manager, but it's not that hard. The downside is the properties might be in rougher areas and are unlikely to appreciate much more than inflation, though they will keep up with inflation at least, generally.

So that's really the choice you're making. Cashflow or speculation.

Another thing that lenders will take into account is if you have renters and what the renters are paying. The income generated by a property can trump everything else.

This seems insane to me. What if you do the work yourself over six month. You spend $5,000 on materials but it would have cost $50,000 if you paid someone else to do the job, instead you put in hundreds of hours. 

I would definitely talk to other lenders, in my experience I've been pleasantly surprised by how different lenders are. What one will say is the absolute law the other will just shrug their shoulders at.

Hi Brian. I'm sorry no-one responded to this thread. i'm not an expert, but I have 4 properties/6 doors, and have sold a property. 

One problem I see with your reasoning is that you're counting on something being true that cannot be guaranteed. You're probably right about the 2% increase, I'd bet on it, but it would be a bet. Nobody can predict the future. The reason we make profit is because we're willing to take a risk, but don't count on it as a sure thing.

I would never pay a real estate agent 6%. They would have to be a true magician to earn that money. In fact, I could usually use an MLS listing service for $300 and just offer the buyer's agent 2%. But if you do use a real estate agent hold firm at 4.5% and if they don't like it someone else will. Ask what that specific agent is bringing to the table. That 1.5% difference is a lot of your profit.

Turnkey/new construction is a lot less work, so depending on your market it's not crazy to go with the .75% rule instead of the 1% rule. But it's not the safest way to make money.

One way of thinking about it is properties that don't appreciate but have high rents to value, ie. 2% of the purchase price, common in B and C class properties in places like Jackson, Mississippi, are like dividend stocks. They're safe investments and you make your money on the rents. Places that are more volatile are like growth stocks. Higher rewards = higher risks. Best case scenario is to have both obviously, though very hard to do with new construction.

I do think that new construction is under rated for people who have jobs and really don't want to be thinking about their property. They just want to park their money and come back in 5 years. So not bad as an investment, but not great either. I purchased a very similar property once and I came to see it as a mistake, but only because I got into real estate full time. It was still better than just leaving the money in the bank.

One person said, over time inflation makes every real estate investor look like a genius.

Good luck!

I wouldn't allow them to count federal unemployment boost because that's not verified income. But otherwise I would be fine with it, I might even allow them to credit $300 federal boost, because it seems likely, especially if their credit rating was 680, which is pretty good depending on your property class. I'd be very thorough about checking their references.

I haven't run into this situation yet but it sure wouldn't bother me if I was renting rooms month to month. Depending on your situation and business model I would want references and a credit check. If they have decent credit then it's definitely a non-issue. Partly depends on the property class and your local laws esp. re. eviction moratoriums. Like the other poster mentioned if it worried you then just add an extra month of security.