All Forum Posts by: Tim Vecchioni

 Perfect answer. Thank you sir!

Nope, you are correct to a sense. But make sure you know exactly how much the HOA monthly fee is that is paying for those luxuries!

 As stated above, if the family is renting, that means they can't afford to buy or there is a reason they aren't buying. The risk we take with any tenant for that matter. Not saying this would happen to you, but like myself, it has happened and you feel TERRIBLE when it comes time to take action with it. No one wants to start controversy in the first place, let alone with family. 

The 1% rule is based on your monthly income, not your yearly taxes. So at $5,300, you would want to find a home more in the $500k range. Also, your Cap Ex does not need to be 10% because like you mentioned, what if it is a brand new house? Then sure, you could account for 2% there. However, I have found 5% is a good number for vacancy. Let's look at the numbers on that. 5% of $5,300 is $265 x 12 = $3,180. So if one of your units say worst case the 2nd floor that you have listed at $2k a month is vacant. You would be covered for a month and a half. To me, this is just good practice. The Cap Ex on the other hand really is what you feel after an inspection of all the possible major repairs will likely be. An older home should account for 10%, maybe even more. A brand new house, you could get away with the 2%, but long term, I would look to change that as things start to wear. Hope this helps!

This clears it all up! Thanks! So is the 60-70% you mention of the ARV? Or is it of the purchase price? If so, how would you find the remaining 30-40%? Guess this is the hard part eh?

Looks like anything I would say, has already been said. You are correct, some rules have to be broken in a higher market like yours because you can make it possible. But not on properties like this. Your numbers in the initial breakdown are way too low and will drive you broke quick! And I agree with everyone here about renting to the family. It is NOT a good idea. I have already learned that the hard way in life, and luckily it wasn't something major. 

Bashing your deal aside, good luck in finding a great deal!

I am by no means an expert as I am just starting out as well. However, I will do my best!

Assuming you did not include a PMI, would mean you are putting 20% ($20k) down correct? Does the property need rehab/renovation? Did not see that included as well. Also with the deferred maintenance, I am not sure what this is but would you be, after splitting it so say $5k best case including this in your loan? If so, that would lower your cash flow a tiny bit. But if it is coming out of pocket, that could be a cause for concern. Look more into your market rents. Check sites like rentometer, etc to get an idea. If you are planning on dealing with the property management, which being 4 hours away I would assume you are, give them a call as well. They should have a good idea of what the max rent should be.

I am in the same boat as you with the pre-1980 homes. They scare me! Even though they shouldn't. I am looking for advice myself with due diligence, so hopefully, someone can come in and help both of us there! I would not worry about the C grade neighborhood, although I would maybe check the crime rate there. To me, that is more important. 

I would never trust the estimate values of these sites. They are simply there just as a way to keep you attracted to their site! They could get you in big trouble! I also do not think this is a good BRRRR property because you would be purchasing at $100k, assuming you fixed it up (which we don't know how much that would cost) and it was worth $125k. 70% of that ARV is $87,500. So that wouldn't make sense!

Hope this helps but maybe fill in some of the blanks and maybe someone else can chime in to help out!

@Brent Coombs There are no "should-keep" factors. However, we were going to ride this tenant out til he moves simply because the house is in great condition and he keeps it that way. So why not just let him pay down the mortgage in the meantime? We were just looking for a way to POSSIBLY keep it after that. Would you recommend just leaving it as is which, let me run those numbers real quick for you so you can see where it stands as is.  

http://imgur.com/a/LH3Hr

This is why we were thinking of the refi even if he stays for 2 years, I guess it wouldn't make sense if we refi then sell when he leaves if in 2 years since we would lose all the money from the refi. 

@Brent Coombs I was doing 80% of $230k which would be $184k. That is why I added the extra $6k under loan fees. Also, we are not looking to get anything out of this property for a next buy but to just make it cash flowing, as it is not now. So in theory, not a complete loss as it would at least be positive cash flow until we decided to sell it. We bought this house 5 years ago for $220k. So the equity we have built is better than if we would have just paid to sell it back when we moved out! This was never designed to be a rental property, but it ended up one so now we are trying to make the best of it!

Also @Matt Faix , fair market rate in this area I believe is actually like $1580ish according to websites blah blah. So I wasn't sure raising it more than $25 would be a bit much to piss off the tenant, or even worse, make him want to leave as he is a great tenant!

Arg, let me post an imgur of it @Brent Coombs . 

http://imgur.com/a/9FtsD

There we go. Nah, it would end up cash flowing $67.95 after the refi.