All Forum Posts by: Tom R.

Aside from the title didn't say I was missing out and I only called it that because I didn't know what else to call the thread and I figured that it would get attention. And no I'm not blowing off steam either I'm just concerned that other potential deals could slip through my fingers in the future and I have no idea how to prevent it from happening.

This morning what appears to be a great deal showed up on my realtor search. Its exactly what I've been looking for SFR in a good neighborhood less than $100 /sqft. According to the realtor its been listed on their site for 2 days but didn't show up in my regular search until this morning. Had I not already had all my money tied up in another house which is closing soon I would have been very upset. This one is $25k less than the one I'm buying and should rent for about the same amount. There are no pictures of the interior but as long as repairs are no more than 10 or 15k this would have been a better deal for me.

A couple of hundred in repairs are no problem but electrical repairs in my area usually range in the thousands. Only a licensed electrician will can make the necessary repairs and If there isn't room for a couple more breakers in the breaker box he will have to install a new box and rewire it. The window alone will cost a couple of hundred of dollars add in a hundred more for the other minor repairs and I'm already at 300 before the major repairs have started. In a rental house in CA everything has to be to code. This was advertised as a freshly remodeled move in ready home and I ran my numbers as such. I knew I was going to have to make a few repairs but from where Im sitting Im looking at around $1000 in repairs possibly more.  

I know my budget is a lot tighter than most investors would work with. This is my first home purchase. I don't even own my own home. I sought a lot of advice when looking for a house and everything has been far more expensive than anyone told me. Example my closing costs are over 10% of the loan amount everyone told me to expect 5%. That alone cost me more than $2000 off my budget.

I keep running the numbers as the price goes up and they still work but it keeps getting tighter. Yes I will still make money on the investment if the price goes up another thousand or even five thousand but I set a limit for cash on cash return when I decided to become a real estate investor and I intend to stick to that limit.

I'm pretty sure the windows are wider than they are tall but I will look into it.

The seller wasn't happy about my request for repairs. He threatened to his agent to back out but in the end offered to drop $500 off the price. So I am getting estimates for the repairs which need to be done before a tenant moves in that I cannot preform myself. If the estimate comes out to be more I will counter with the cost of repairs. If that is not acceptable I think I will back out of the deal. I will eat about $500 in inspections and fees but I'm already pretty much at my max for this deal and a new house went up this week which I think could provide even higher cash flow than this one.

In my area pretty much every one is listing rents at or close to the Zillow estimate. I've also noticed the rent price per square feet stays pretty close to $1/sq ft. 

I haven't heard of this but it sound really risky. The interest from a cash advance from my credit cards is over 25%. New credit cards generally have 0% interest from 1 to 2 years but if you don't pay it off in that time you are stuck paying high interest.

Just a what if scenario. I'm trying to learn as much as I can before I have these problems.

What if the damage is more than the security deposit?

$22000 cash is almost exactly what I am starting with now. I currently have a $106k house in escrow which I plan to rent out for $1000 per month. Mortgage insurance and taxes will cost about $570 per mo. If I put away 100 per month for repairs I will net $330 per month. I've had borrow from my 401k to pay the closing costs which are about double what I was expecting so its going to take about 6 years to earn back my initial costs but in that time I can purchase at least 6 more properties and if they have the same cash flow as the first that's $2300 a month in passive income.

My first property is in escrow now after I made my offer I created a excel worksheet to keep track of all my income and expenses related to the property. It subtracts all expenses from the income and shows me my profits or losses for the month and year. There is also a big red band at the top that changes to green when I have earned more than my initial cash investment.  It even keeps track of the loan subtracting the principal paid each month so I can see how much equity I am building.