All Forum Posts by: Tim DeFor

You might consider that at closing the seller is responsible to provide you with the prorated rent for the remainder of the month that you are purchasing as well as all deposits. That way any back payments that haven't been made are the responsibility of the seller and is their loss for not keeping on top of things. Your responsibility will be to keep on top of things going forward. People will often live up to or down to the experienced expectations. This includes tenants. 
I wouldn't let this stop you!

@Jose Lopez you can do this. When I ask what would I look for in a young inexperienced investor, here is what I see. Someone I admire at the stage they are in. Share that you are looking forward to your first deal. Go to meet ups. Listen and learn. Work on creating a clear vision. Be a go to guy for others. Bird dog deals for investors. Help with rehabs. Be consistent. Save up some money. Get to know meet up organizers. Show up early to help set up. Clean up after. Run technology. Mow rental yards when vacant. There are lots of things you can do that are little and they add up. Be faithful in the little things and the bigger things will come.

@Thomas C.sounds like you’ve done your research. I don’t think not having a bathroom on the lower level matters much unless you are looking to rent by the room or looking for resale value. Can you configure it so you could add a bathroom later when funds are available? If the market is strong for larger groups, more beds = more money if not, it may be an extra expense without much return.

@Andrew S. All the suggestions sound good. Consider separating utilities with inline meters.

I'm too trusting. So I misjudge and miss out. Now, I'm nervous. We are all in on a deal. Winning could set us up for future REI toward FIRE. Losing could be catastrophic, derailing the legacy we are building for our grandkids. In October 2020 we purchased a major fixer-upper on 40 acres zoned Ag. Our hope is to rezone and sell off part of the property, fixing up the home, and keeping a larger acreage for ourselves and three 3 acre lots to sell in the future. A developer offered us 25% more per acre than we paid per acre for the remaining acres. The developer would purchase a portion initially and an option to buy with first right of refusal the remainder of the 25 acres. The developer would manage rezoning, replatting, and infrastructure. How do I know if I'm being too trusting or if not moving forward is missing out on a good deal?

Hello Deepti, I'm not an expert in this area, and I'm interested in seeing what other responses you get. If this is going to be a home for you and your family to live in, you might consider a 203K. I don't know what limits or if there are limits for this kind of loan, but I believe it is an FHA loan requiring 3.5% of the after renovation value down. They will finance the renovation costs into the original loan. Since you have up to 20% available for a down payment, this would help keep your capital available for other investments or needs. You are doing the right thing by looking to experts in your area to find out the ARV for the property. If you value it like a flip, you will have considerable instant equity. I believe that contractors working on a 203K need to turn in receipts or bills for completed work in order to get draws from a repair escrow account. Best wishes and Merry Christmas. Onward and Upward, Tim

We closed! I am not officially an out of state landlord. Our payments will be $475 a month. We are updating the main floor apartment with new floors, paint, countertops, bathroom and light fixtures. At this time we are including utilities. It should rent for $1,000 utilities included. After PITI and utilities, we should have $1,000 left for management, capex, vacancy, maintenance, and cashflow. We will be looking at converting the basement into a one bedroom or studio apartment that will bring in another $550. I'm looking into putting in a coin op laundry for the 3 units.

Update: PITI will be $474.50. Other Expenses including generous 10% capex, 10% maintenance, 10% management, 15% utilities, and 10% other expenses still cash flows with 2 units at $750 each. Rents will likely be $875 and $850 within a couple of months.

Hi Ryan, for some reason BP isn't letting me see your BP report. That doesn't matter. Based on what you've said, I would strongly suggest that you include 8% vacancy, and at least 5% maintenance, 5% capex, and 10% management in your calculator. C neighborhoods tend to have higher vacancy. Everything, no matter how new will need maintenance, in a C neighborhood likely even more than in an A or B. Even with 2 of 3 remodeled, capital expenditures will be needed down the road. You will want to have the reserves built before you need them, so plan ahead and set them aside starting from day one. Being an out of area investor means you will definitely want to factor in management. Even if you get it at 8% of rents, most management companies also charge for placing tenants so 10% should be about right. I want you to win on your first deal. Don't fall in love with the property, follow the numbers. Resist the temptation to do eraser magic to make numbers work and you will save yourself a world of hurt. Warren Buffet's #1 Rule: Don't lose money. He recommends being optimistic when finding a deal and pessimistic when running the numbers. In my opinion, he's a pretty sharp guy when it comes to investing and worth listening to.

Did you get the property?

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