All Forum Posts by: Account Closed

Gustavo Gonzalez I encourage you to consider the return you could generate by pulling equity from your current primary residence and deploying it elsewhere. If you just pull the equity out and payoff another mortgage, that money is not working for you as well as it could from investing in another rental property, flip, etc. Another thought is refinancing your wife's property if it is not near current mortgage rates.

The NOI of $10k seems high. Have you built into your numbers applicable utilities, recurring maintenance, management fee (even if you will self-manage), reserves for repairs and CapEx reserves? Also after your acquisition and rehab, tax assessed value and resulting property taxes will most likely increase from their historical levels. The financing assumption is questionable. Do you have a lender willing to do a conventional loan that will roll your rehab costs into that loan? I would expect a conventional lender, for a non-owner occupied property, to only loan up to 70-75% of the current appraised value ... meaning rehab costs would be funded out of your pocket or through alternative financing. If you were going to occupy one unit and "house hack" you could use a 203k loan to help fund rehab costs and put less cash down, but it sounds like that is not your approach. Assuming after rehab you can force rents up from their historic levels, the numbers may work out. Without having current tenants and relying on a significant rent increase in the assumptions, I would run a separate ultra-conservative analysis and see if it would cash flow using historical rent levels. Any rent increase from there would be gravy. Since the property is vacant, and you have a rehab period with no rent you will need cash reserves to cover holding costs. The level of reserves ultimately depends on the lender's underwriting requirement and your assessment of risk mitigation, I would have at least 6 months holding costs reserved. Hopefully some of the above helps and best of luck to you.

Adrian Reyes Sometimes it helps to just take a breath. You are young and obviously ambitious. My advise is to focus for now on the small wins you can generate in life for yourself and for others. You say you want to start your real estate career while working two jobs ... So then start it. If one of your two jobs is not in real estate, consider getting a job in real estate. There are many paths that will lead you to where you want to be. Identify a path, and start working on it. Crawl if you have to at first, then walk, then run. You are young enough that you have time on your side. I ran into some personal roadblocks years ago and found a book that helped me get my mind trained to think differently ... The book is What to Say When You Talk to Yourself by Shad Helmstettler. Take care and good luck, Adrian.

Mike R. Have you considered a "cash for keys" offer to the problem tenant?

I would consult with a real estate lawyer. You could execute a hunting land lease to protect your property rights, but there is also liability if folks are climbing into trees with guns. And unless the land is ripe for you to develop, it would be a good source of cash for other investments!

Kevin O'Brien I agree with Al Wilson . There is no need for cap rate discussion on a duplex. It can provide a rough estimate of your expected returns, but is not a valid metric in determining what to offer on the property. If you are buying right, you should be paying well below market value. (Cap rate = NOI / Market Value.)

Scott Prock Scott - Keep the black and white definition of a cap rate in mind. Capitalization rate = Expected Net Operating Income / Market Value of the Asset. Since actual NOI and Market Value are constantly fluctuating, so will the cap rate. The utility of the cap rate is to exhibit for sellers, buyers and brokers whether the deal is in line with the market at the time of valuation in the buy/sell transaction. If you have a property with market value of $1,000,000 and NOI of $100,000 (10% cap), will you pay the seller exactly $1,000,000? Maybe. If you can negotiate the sale down to $800,000, great! That however does not in itself change the cap rate. If the market value of said property is still $1,000,000 after it is bought, the buyer still has a 10 cap property that should be able to be sold for $1,000,000. Using those figures above, if you bought the property for $1,200,000, ouch! The cap rate is still at 10%, and assuming other buyers in your market would only pay $1,000,000 you have additional risk. If you are analyzing deals involving cap rates, it would be highly advisable to consult with a commercial broker that knows the local market well. The commercial brokers are basically the only source for getting reliable information on the current cap rates are in the market. Food for thought ... for the cost of a cup of coffee or lunch, you could get some great perspective and education from a commercial broker.

There is some truth in what you say about the NC metro areas, however there are deals. My connections that have invested in cash flowing properties over the past two years found their deals through their networks, foreclosures, auctions, etc. A big factor in attracting deals is having locals know you, respect you, and know that you have the capacity to do deals.

I consolidated through Great Lakes years ago and had a great experience. If you currently have high interest rates, consolidating will greatly reduce your minimum monthly payment amount. Also, you should be able to lock in a historically low fixed rate now by consolidating. HELOC is a creative solution, but not one I would advise. Just consolidate and pay down that student loan debt as quickly as possible. There are some limitations on the types of student loans that can be consolidated. Here is a website with additional information: https://studentaid.ed.gov/sa/repay-loans/consolidation Depending on your source and level of income, there are different repayment plans the previously mentioned website discusses. I can only speak from experience with Great Lakes, but you can google student loan consolidation to find others. Hope this helps.

Stephen Murray Assuming the current owner is accurately representing opex, it smells pretty good. Are the units individually metered and tenants pay all utilities? $350/mo rent in rural eastern NC is reasonable, but as previously mentioned consider the costs to turn units that will help increase rents. Also, the maintenance costs seem low so be conservative in budgeting for repairs and future capex like roofing, etc. Good luck with the deal!