All Forum Posts by: Todd Aaron

i deaigned my own spreadsheet for analyzing zing based on a few others I had seen. It changed over time to something that worked for me and I made different versions of it depending on whether I was looking to flip or make a rental. I downloaded one the other day from here at bigger pockets for free when I couldn’t locate mine on the computer I was using and I modified it slightly so I could see it the way I was familiar with seeing the results. 

You can (and probably should) account for all of the little things that the analyzers have on there, but when you do, the numbers may get very thin.  My friend who invests goes on less numbers and analysis and I need to see all of that to be comfortable. But she convinced me to back off of putting aside money each month on the analyzers for every little thing. Basically I just look to find a positive cash flow monthly of at least $300 and I would much rather that number be $500. My intention at that point is that if the place needs maintenance and capital repairs then that will have to come out of the cash flow numbers. Because in a very general way, that is what happens anyway. You will get into a place and get a renter in there and whether you are accounting for $100/ month for capital repairs and $50/month for maintenance, etc then a cash flow of $300... or you are looking at $450 of positive cash flow a month without accounting for those things, you are actually at the same place. 

I do try and put back a significant amount of my positive cash flow until I’ve built up a comfortable savings before I allow myself to absorb he cash flow into my spendable money. And if I can live without it, I will put all of it back. 

I have been pretty lucky I think so far in that costly repairs have been few and far between but I have built a cushion using the money from rents so I feel safe now that a repair would not (hopefully) end up digging into personal savings or turning into debt. 

As for interest rates, I ask my lender friend what the current rates are and I buffet that a little just in case. Also, if you are planning a purchase where you will move in because you want to pay a lower down payment, the rate is lower for owner occupied loans... so if you are planning to turn it into a rental fast then you will be putting 20% down and paying a higher rate. So be sure and account for that. 

Guessing rental  rates is tricky. I do some research online. And if there are any rentals close by, I will call and inquire to get the best idea. Also Zillow let’s you look for properties as rentals and they have a rent estimate that you can go by roughly. 

Rehab costs are difficult. If you are capable of doing work yourself then you likely have an idea of what is involved in the rehabbing process. There is a book available from bigger pockets that is about estimating rehab costs. It is very concise and helps you look at things you might not think about. I also got a book on doing home inspections so I could filollow along and kind of have an idea of what inspectors look at. Also helpful to know. 

The book on buying rentals is very good. I have it as an audiobook and I listen to it repeatedly because each time I do, I see something new. 

Hope that was helpful. 

 Hey Brett,
My first was pretty easy... I did a lot of research first... lots of it! And I read Brandon's books on buying and on leasing rentals before jumping in and that was super super helpful!
I already knew the mortgage person because we were already friends before... She already had real estate that she owned and leased and I asked her all sorts of questions to ease my mind going in.  When I found the property I did a quick analysis and also I called her immediately and after I told her the location her response was "Buy it! Make an offer now! Don't wait or it will be gone!"  Well, it was... I had found it offered for $40k and needing a lot of rehab.  But a few months later it was offered for sale again... it was a flip.  So I called my friend again and got the exact same response... so I make an offer on it and we negotiated briefly and I bought it.  Probably for a little more than I was as comfortable with, however it was extremely well done and has options that were above average for the location.  I had a rental appraisal done for it for additional cost during the process and the results were good enough so that 70% of that number covered my Principal, interest and insurance and property tax payments with a little left over. 
I have rented it for nearly $200 more a month than the appraisal said was the max it would get the entire time I've had it.
So all I really met were the title company that we used to close with and that was the seller's choice....  I met the seller who does the occasional flip.... good to keep her number handy in case I am looking for something in the future... and apparently her dad has a small construction company, so thats handy if I need to possibly get a price on some repairs or remodelling that I don't want to tackle myself. 
I met an inspector inthe process because while I was looking for something, I made an offer on a duplex and I had an inspector check it out and I was there at the time and I was able to ask all sorts of questions and he pointed out many things to look for that I could look at before paying a pro to come check next time.
I had just the month before closed on the house I am living in, using the same mortgage company, so I got really familiar with the process and all the documents needed, so this time I was told that I was so efficient with all that that the loan processor would not need to do anything if all the customers were like me.  So learning what the mortgage companies want to see is a big thing on your first one... like that they want to see a savings to offset 3 or 6 months of payments in case the place doesn't rent immediately...  
I met no contractors because I am a little familiar with construction as I was a residential electrician for years a while back, and I have also done a little framing in the past, and I deal with commercial construction some with my current day job, so being a general contractor isn't a scary thing to me at this point if necessary. 
I learned that if you have a ROTH IRA, you can remove all the money you contributed without penalty and without being taxed on it as income as long as you don't remove any of the interest that has been earned on it... That makes it very liquid for doing down payments and closing costs.

I learned that lenders do not like any money showing up in your accounts that do not have a paper trail... and making all this easy on the lender will help you get the loan done faster and easier, so no gifts from family or anyone within several month before you start looking to get a mortgage loan. If you do get gifts be prepared to get a letter from the giver formatted to make the lender happy that explains that it was a gift and is not something that has to be paid back. They do not like to see anything that may turn into a loan situation that they are not including in their decision making. 

The most difficult part for this one was that the seller was wanting to close in 30 days and 45 is considered fast these days and 60 is normal if everything goes right... but my lender agreed to it and I had to act very fast each time the lender needed something in order to help make that happen.  The seller had a legitimate reason for wanting to close that fast.... she was adopting a child and needed the money quickly to facilitate that. So the lender knew about it and everyone worked together to help her make that happen... and it did and they are a happy little family now.  

The second most difficult thing was that I had to trust what I had read and trust the numbers on the spreadsheet I had put together as a calculator to show that this would be a cash flowing deal in the end... And trust all that with no previous experience.  That was really hard for me. But once I did it and everything did work out... actually better than my numbers showed because the lender was able to lock in a lower interest rate when there was a dip because it was closing faster, so my payment was lower meaning a larger spread available for profits... once I saw that this all does actually work... and pretty much exactly textbook from those books from Brandon on here... It really gives you a ton of confidence moving forward, that you can actually do this and that there really is no massive secret to it.  After reading the books I was thinking that it seemed too easy.. that there had to be so much more to it... but like my friend was telling me, you just have to jump in and things tend to work themselves out in the process.
Be as prepared as you can but then go for it.  And you have to have a certain amount of trust but then you have to switch from research and calculating to doing it.  

I hope that was helpful   

I have some friends who purchased a property several years ago and the value has gone through the roof now, however rents are not following the increase in prices and they are just now able to get enough rent to cover the payment. 
I wanted to invest there and after seeing that and looking at rents around that area compared to the prices, I can't see being able to cash flow enough to make it worth the effort.  Love the area (Alphabet streets / Hyde Park and Hancock areas) and the 1940's houses throughout.   

I am in Tyler, so just up the road from Jacksonville and not all that far from you guys in Nacogdoches/Lufkin areas.
I got started a couple of years ago and purchased a 5% down property to live in while doing some upgrades and then purchased a 20% down investment property that I am about to resign my current tenants for another year on. 

The first steps are difficult as things get figured out, but it appears that after that it's just refining what you learn and scaling it up to multiple properties.  

My day job puts me all over East Texas. I was just in Jacksonville last week or the week before. 

I have a good friend who is also an investor who is the mortgage person (and branch manager) at the bank branch where she works. So if you are interested in making a move, she can help with portfolio lending as well as conventional mortgage lending of all sorts.  She can also help with getting your credit ready which is something to look into well in advance of looking for financing. 

If you are still looking, contact Holly Ethredge at Citizens State Bank in lindale.  She is the Mortgage person there and covers all of East Texas and she is also a real estate investor herself. She is definitely investor friendly.  If you have a problem getting in touch with her, let me know and I can help. 

Thanks @Gerardo Dominguez! I will check out the link and get to researching the tenant issues to watch out for.

Hi everyone!!! 

I've made several posts in the past where I was looking and making attempts to purchase my first property that fell through due to issues found during inspections or not being able to come to terms I was happy with...

The last one I found actually worked out and I closed on it a month ago. I have been running constantly since then and have not had a chance to post on here. 

The property is a 2 bedroom, 2 full bath with a 2 car almost enclosed carport.  The plan is to enclose the carport into a garage, swap a small den (that I think used to be a bedroom at one point) into a 3rd bedroom, remodel the hall bathroom (its pink tile everywhere!!!) and remodel the kitchen (everything - flooring, cabinets, counters, appliances, possibly open up a wall into living area). 

I am looking at renting the master suite out and stumbled across someone interested in renting a room part time so might also rent an additional room like that to them if we can figure out a price that works.

Then I ran across a FSBO in a great rental area... It is small and on a tiny lot. Its a 2 bedroom , 1 bath, with no carport or garage at all, but has a driveway and a pad for a two car carport or garage already. It was a flip that I looked at previously and the girl who did it has access to her dad's crews as he is a home builder. I actually watched this one being redone because I look in this area a lot for homes for sale and saw the subcontractors there constantly. Everything was replaced in the house with exception of the things that were new about 5 years ago including A/C, Plumbing, Electrical Service, and roof... Inside this place it looks like a brand new house, and the outside was redone and repainted. About the only thing left that could be done is some landscaping and building a carport or garage to add value. I am closing on that one Monday. Apparently there were many calls from the for sale sign asking the owner to consider renting it instead of selling it, so I feel like this will rent quickly.

I have never rented anything before, so this is my first couple of steps into this, so I may be asking massive amounts of questions about that soon. 

I have purchased a house last month and moved in (partially) and stumbled across someone who needs to rent a place in town for a few nights a week. .. 

The house is a 2 bedroom, 2 bath but there is a room that looks to have been converted into a small living area from what appears to have been a bedroom previously that I am going to turn back into a 3rd bedroom. I purchased it as an owner occupy, 5% down so I have to live here one year.  I plan to do work on the house in several rooms during that year, but it would be nice to have the additional income to offset costs from renting a room or two. 

The situation is that she is a school teacher who lives an hour and a half from here but was hired to work here locally this year.  School started this week so she is making the drive daily and would like a place locally to stay during the week... apparently not every night of the week but she doesn't want to have to drive home every night... 

I have no idea how much to ask for rent for a room she will only use half the time or so.   

Not sure if she would want the room tied up the time she is not here but I was thinking I would treat it as taken during the time she was not here... but suggestions?

It would be a second or third bedroom with shared use of the hall bathroom (which is HUGE), kitchen, living area too I would imagine. I am reserving the master bedroom for another person who is considering renting that full time (and happens to be a tutor so that might work into a helpful situation for them both), and I would stuff myself into the last bedroom and share the hall bath with the part time tenant.

Additionally something to consider is that I will be doing work on the house over this year including the kitchen, the new 3rd bedroom, and the hall bathroom.  

Again, I am new to renting and this would be my first step into it.  Any ideas on how much to charge for something like that? To give an idea of price, I am considering $500-$600 for the master suite plus like $100 to cover partial utilities. 

Thanks!

Todd

Thanks @Steve Vaughan! 
... sorry for the long delay in replying... I couldn't' find my post for a while.

I actually have run across one more that is empty and was quite unloved about a week ago with the city posting a notice on a tree in the front yard that if trash and debris was not cleaned it would be done by the city.. then yesterday drove back by and it was cleaned up pretty well... but shrubs still out of control, etc... 

Looks like the deal on the 2/2/2 at the top of this thread is going to go through.  I tried to haggle with them on price due to the inspector finding some damaged shingles and the water heater having flame roll-out and not being vented properly and overall coming back in poor condition, additionally the A/C was 26 years old and was sized smaller than it should be for that square footage... I had some quotes done for the A/C and the Water Heater and forwarded them to the seller.  They agreed to lower the price another $2000 to offset the Water Heater replacement cost, and to have the roof repaired by a qualified roofer. They wouldn't budge on the A/C because it was working "adequately" according to the inspector and they claimed that they have had no problems out of it at all.... plus they are providing a home warranty that would cover repairing it if it failed.

I have about 2 hours left on my option.  So it looks like all systems go, and I will officially be off and running at $121,900.00 

Additionally I found a FSBO that is currently rented for $945/mo and they want $87,500.00. It is a 2/2 with no garage or carport. The interior has been redone already and is nice. The yard needs landscaping help and I can build a two car garage to add additional value and add a privacy fence and it should command a bit more in rent. I was thinking about offering them $80,000.00. I can buy that with 20% down (from retirement money) and based on the current rent I should be able to clear $340/mo. (with 5% vacancy rate, 10% property management, $100/mo repair reserve and $100/mo maintenance)... and that should increase that with the garage, privacy fence, and nicer landscaping to enhance the curb appeal. Not sure yet about adding a 3rd bedroom, but 3 br/2 bath is more the magic number in this area.

Only issue is that house to the immediate right doesn't seem to keep their yard and shrubs trimmed regularly and might scare off some potential renters... I wonder if that owner might consider selling... hmmm

 Thanks Steve.
I am keeping my eyes open for an off market deal... I have possibly found one but I don't want to rock the boat with the lender on this one, so I am holding off and waiting until this one gets to closing before contacting the owner of this other one.

It has a lot of indicators that the owner either doesn't have the funds to repair it or doesn't care to do anything for it.  Its vacant and unloved (shrubs out of control, grass out of control, enclosed porch has collapsed roof, soffit was falling down in one place but has since been put back in place with the help of a 2x4 nailed to the outside of it, places on the roof with some type of tape on them, etc...) and I looked up the appraisal District info and found that the owner lives here in town.  I would assume that others likely have already contacted her in the past, but I might be the lucky contact that she decides to say yes to.