All Forum Posts by: Thomas J. Clifford

@CJ M.

Happened to me too, man! LOL - Great minds think alike, yeah?

That's not a bad idea, but those loans have a lot of special considerations to them, right? Ive never really looked into those too much.

Would OP consider using this as a personal home during the 203k requirement, and in turn renting out your current location? Also bearing in mind that there is no DIY allowed on those types of loans?

Newbie investor looking for his first property to newbie investor in the same shoes - there are a couple things I'd consider:

I'd consider total cost: Is the 80k price what they are asking, or what you think you can get them to agree to? Can you get them UNDER that amount? If the place needs THAT much work, they might be dying to get out of it, and like they say - you can make all of your money when you buy!

I'd consider the age of the property. Yes, you're looking at high rehab costs off the bat, but make sure that you don't end up getting screwed in a few years paying for someone else's Cap Ex. How old is the roof? HVAC? Stuff like that.....the calculator assumes that cap ex is a percentage over longer periods of time, but wont be accurate if you get slammed with buying a new roof 5 years into owning the place! (Don't let this spook you though - just use it as justification when you try to get that purchase price lower!)

Last major consideration: This is your first property, so pad your numbers conservatively. Assume your rent comes in a little less than the $1500 monthly. Assume that most of your costs aren't 5%, but closer to 7-8%. Take what you think your costs will be and double them! I'm not telling you to talk yourself out of this deal, but be realistic in terms of how much time and cost this will take!

Personally, I think that the calculator shows OK numbers, but only if what you've entered is SOLID.


Any other folks with actual experience agree or disagree? Please drop some knowledge!

T.

Interesting question - I'm posting so I can follow the conversation!

30k on 1 unit prop to pay in full vs 30k on multi unit prop paid at 50% down payment.....I would go with the multi-unit personally. I like the benefits of having more than one unit to spread my risk a bit - if Unit A goes vacant, the loss is mitigated 50% by your renters in Unit B...Also, since Prop 2 is in a better area, wouldn't you try to price your units a little higher to make your cash flow a little higher when it comes to ROI?

Aren't there also some "cons" to owning a property outright? Like when it comes to tax breaks and whatnot?

At 16 years old, you're looking at part time work. Not sure what the rules are where you're at, but part time work might look like cleaning out houses or helping with rehab with a general contractor - That's only IF you want to go down that route.

I've got limited experience in RE Investing, but if I were in your shoes, I might break the industry down into a couple of categories: Read about Wholesaling/Marketing, and maybe try to get some part time work in that realm....There's also Property Management, which might become available to you as a leasing consultant or something similar with a property mgmt company or at an apartment complex.....Think about jobs at banks too, as spending time there could give you an idea of how loans are processed and what gets an applicant approved or denied......Lastly, and something for RIGHT NOW - I'd say get in touch with a general contractor that does rehabs - or get your friends and family to keep an ear out for someone they know who does fix/flips - Go to them and try to score a summer job with them....Cleaning out vacant homes, assisting the contractors, doing whatever they ask. That could get you REALLY great experience in what it takes, might get you a decent mentor, and might even score you a partner down the road when you're ready to make your first purchase!

Hope some of these ideas help! Good luck dude.

T.

@Stephen Akindona - Thanks for that explanation - if I could give it 100 upvotes, I would!

If we're scaling that concept and using a 2nd property with the same exact figures, your DTI% would stays the same, since that ratio hasn't actually changed - is my math on that right?

If that's the case, why do lenders like conventional mortgages stop at 10 properties? Is their expectation at that point that you resolve some of the debt and pay off one of the properties before they will consider doing another loan with you?

T.

I've wondered the same things @Ryan Collins, thanks for posting this. Still learning about the BRRRR strategy....

@Stephen Akindona, I'm a little confused I guess by how the DTI% improves, and if you could briefly break it down I'd appreciate it. If you are doing multiple BRRRRs where you cash out 65-75% of a property's equity and create a long-term line of debt, how does the amount of debt you accrue not vastly outweigh the monthly income you bring in?

Is it offset by the 25-35% equity you still have in the property, or does that even matter? Is the DTI% more based off of the monthly cashflow after ALL monthly costs are paid?

T.

UPDATE!

I heard back from my co-worker that is an investor who had his lawyer check in on this.

The mortgage company lost the original loan paperwork. That's why this process has taken so long! The lawyers fees that are being charged are what he called a formality because the lawyers are able to track which case they handled on behalf of the mortgage company.

Because probate ended in Nov, and we stated to the lawyer representing the mortgage company that we have no interest in the property and they can have it, we are not on the hook for the mortgage, the taxes, or anything. If the lawyer decides to follow through with collecting on the fees we can go back to the courts and demonstrate the extended time frame that the entire process took, citing that the probate process for a pretty cut and dried case took nearly two years.

I'll post more if there are new developments, but my main concerns have been pretty much put to rest. Thanks to everyone who chipped in!

T.

 Truly it was more of an appeal to the power of intention/positive thinking than anything else, but you make a great point! Thank you :)

I *DO NOT* have any experience with discussing distressed properties, so maybe take my 2 cents with multiple grains of salt...I DO, however, have experience with cold calling and door knocking for insurance sales, and I am a 10 year veteran 911 operator who has experience with communicating delicately!

I can't speak for this method of "prospecting," but maybe check what your voicemail message is. If it's your personal phone number, callers might be hesitant to leave a message - If your voicemail greeting says, "Thank you for calling ____________ (whatever you may have identified yourself or company as). I am sorry I missed your call - I'm likely working with another home seller in your area. Please leave a message and I'll be in touch soon!" they might be more likely to leave you a message. At the very least, if they called you I imagine that opens the door for you to attempt a generic text message back to that same number to attempt to continue the conversation....

As far as what to say if you DO get into a conversation with them, you can maybe say something to the effect of, "I'm particularly interested in houses in your neighborhood, because of __________(Location is good, close to a hospital, XYZ, blahblahblah). I really appreciate the fact you took the time to call!" And use that as a chance to do some phone screening as to whether or not they seem like a viable lead. You'll probably have to have some questions pre-thought out that helps you decide what you consider viable....I imagine then if you decide you want to look at the place, try to set up a meeting at the home...

That meeting is where you discuss how ugly their house is - lol! Of course, I wouldn't SAY that, but it gives you an opportunity to talk about the distressed look of the place. Talk about any projects they undertook while living there (complimenting THOSE). Also talk about things they may have wanted to upgrade in the property but never could. What made them call you - what kind of repairs are NEEDED - so on and so forth....By the end of the meeting, you both will have "itemized" the areas that need work, and that gives you a jumping off point with how low THEY are willing to sell for, and how justified you are when you give them an idea of how much you'd buy for...

The BP podcasts with Michael Quarles was great with this - He was on episode 77 where he discusses talking with these potential sellers with some finesse...He also was on episode 81 speaking more to marketing strategies as a whole. They are both fresh in my mind since I listened to them last week and again today!

Again - take what I say with a grain of salt - But if they're calling your phone because they are responding to your mailer, you already know that they're at least a little interested in what you have to say. If you're hitting up distressed properties in the first place, I cant imagine that they'll be too offended - they probably KNOW the house needs some TLC!

If anyone has any input on this I'd love to follow this thread also - if my take on it is flawed, please let me know! I'm here to learn and discuss!

T.