All Forum Posts by: Thomas Guertin

Do you make enough money at your day job to cover both mortgages?  Because you are not in the business of renting properties yet, the bank on the duplex may want you to qualify for the mortgage as though you have no renters.  Does the duplex have renters in it?

I am assuming you don't have enough money since you are talking about PMI. I would focus on one deal and make money on that one and then do another deal. Don't spread yourself too thin. Do you want to be a landlord or a flipper. Pick one and that is that property you should buy.

By the way, every time I was going to make an offer on a good deal on the MLS, the property was sold within a couple of days.

Tom

I have the same guilt you do but if you are new to buying properties you need to figure out who's good and whose not.  If you only use one, you don't know if what their doing is good or not.  You have no way of knowing what you don't know.

Just make sure that who every you see the actual property with is the person you buy the property through.

Tom

Hi Craig

We just had our first REIA gathering in Springfield tonight. You may want to connect with Tristan Chicklowski because he started the group and he can keep you updated to when the next meeting is.

In regards to not finding properties, I think you have to create the opportunity with mailings and other marketing or find some wholesalers. I don't think you will find a deal on the MLS and if you do, you will get bid out by an experienced investor who knows their numbers down to the last $10 and can pay cash for the property. Try not to get into the thought that the "grass is greener on the other side" syndrome. Keep looking, network and something will come your way.

Tom

I wouldn't mix business and family when it comes to the roof over their head.  If he's good with his money over the next few years, his credit will get better. At that point, you can give him the down payment for a house of his own because he will qualify for his own mortgage.

Tom

If you are truly buying it for investment, make sure that it cash flows if you were to rent the unit that you are living in.  I see people buy a multifamily to live in and if they were to actually rent out the unit they are living in, it wouldn't cash flow.

One of the podcasts mentions that basement apartments do not attract the best tenants.

Tom

I wouldn't do a HELOC, I would go for an 80% loan to value mortgage. That way you have a fixed payment every month and build the equity by paying down the mortgage. You should get the second unit rented so that you have the leases to hand to the bank so that you can get the financing.

Personally, I wouldn't worry about the second property until you have this one settled with tenants (that pay) and you have paid your friend back.  You may be able to use your friend again if he/she feels comfortable that you can get their money back to them.

Tom

It sounds to me that you only called one bank.  I have 12 banks or so in my area and it amazed me how different each bank is.  Some require 70% loan to value and others go as high as 80% loan to value.  Most go out only 20 years but I found one to go out 25 years.

I would suggest making a list of every bank and credit union in Excel and ask what their terms are, how many they would refi, do they have the option of portfolio loan, etc. You may come across one that you like that can do all 10 properties. Maybe you can get a LOC and save some money on closing costs.

You mentioned that you were surprised that "They want leases on ALL of my properties, two years tax returns.... geez. All for a maximum of 4 properties?"  I would think every bank wants this information, it is pretty standard for all the loans that I have gone for.

It's work to get mortgages but if you want the money, you'll do the work.

Tom

I wouldn't do it.  You have a policy of tenants with no criminal records and/or records no earlier than 7 years/10 years, what ever you pick.  Stick to it.  I hear horror stories of people who move in after a tenant signs a lease (with not criminal record) and they're the ones that damage the apartment, won't leave, etc.  Don't do it, Don't do it, Don't do it.

Just the fact that you posted it here, means you have reservations.

Tom

P.S. If you do do it, let me know in 6 months how it turned out.

Here is the deal in my eyes -

Purchase price - $405,000

Mortgage $324,000 @ 5% = $2139/month

Taxes - $519/month

Insurance - $110/month (I think this is too low.  It's either wrong or not for full replacement value.  It's costing me $1100 to insure a single family home - in a corporate name which I would assume that you would create for the property)

Trash - $10/month (This seems very low.  If it is a dumpster, it may be $125/month not annually.)

Maintenance/Cleaning/Contractors - $770/month

Oil - $333/month ($1000/unit for the winter - this might be high, but better to be high then low)

Where is the water cost?

Water - $120/month

Total - $4001/month in expenses

Revenue - $4092/month

Net cash flow - $91/month

I think it is a high risk investment for $91 in profit.  You won't have enough money to replace the roof, heating system, windows, carpeting, etc. when they wear out.

I believe the insurance, maintenance, water and trash are too low in your figures. Maintenance needs to include some CapEx reserves which I believe the seller probably didn't have much of in the year he gave you these figures.

The only way this deal works is two things - the rents are below market so you can raise them up to market rents AND you get a better price on the purchase price.  Maybe it's typical that assessed value is so much lower than the sale price but it seems drastic.

I think if you have $81,000 to invest, you can find a better deal if you keep looking.  You would make a 1.3% cash on cash return.

Tom

Seeing this is your first eviction, you may want to hire the lawyer to make sure it goes in your favor.  I hear horror stories here in Mass how difficult it is to evict someone especially in the winter with children.  The incidences you talk about, no heat and not paying rent, almost sounds like a professional tenant who know the system.  I could be wrong but it doesn't feel right.  You will need to make sure you know more than they do with the legal system.

As to the extra children, I have listed on my lease every person, adult and child, that is allowed to live in the home.

Tom