All Forum Posts by: Trent Stone

Depends on if you love the place and you just want to lower your mortgage or if you are looking for an investment. Personally, I would run it strictly as an investment and make sure it's solid. I'm sure you don't plan on living there forever so see what it will look like if you move out. Feel free to run the numbers through the BP calculator and send them over to me and I'd be happy to give you my opinion from an investor standpoint.

Great question, but unfortunately not. They will only lend on the appraised value of the specific property you are looking to buy. If you want to include rehab costs then you can still go through FHA, but it's called a 203k loan. There is a lot of paperwork and appraisals that go into it, but depending on your situation it can be a great option. Let me know if you have any other questions, good luck!!

I agree with @Guifre Mora, but at the same time if your ROI is 1%, it's gonna take a hell of a lot of cash flow lol. They are both important, that's why investors require both when looking at an investment. $100/mo seems low, but if you only have to put in $100, then sign me up all day long. Look at the risk reward as well. Getting a 5% return in an A class neighborhood is fine, getting that same return in a D class neighborhood is idiotic. Also, unless you have a ton of capital and you are playing long-term appreciation, then you need a decent ROI. Inflation is usually around 3%, so if your ROI is 2% then you are essentially losing money. Treasury bonds are typically considered the safest investment. They are at the floor with the crisis right now, but usually offer about 2%. Real estate usually involves more risk, so why would you accept a lower ROI anyways? Even very conservative mutual funds will offer you 4% and you don't have to do any work......SOO, yeah, both are important.

Absolutely. Here in Utah it's not fantastic because we don't have a ton of distressed properties and we do have a ton of wholesalers and investors so they get snatched up pretty quick, but it can be done. My parents live in DFW so I know there are tons of wholesale opportunities there. Pick an area, target market, target property type and go nuts. You can hand write letters and leave them on the door, knock the door and talk to the owner, skip trace the address and call and email the owner, Send letters in the mail, use something like Deal Machine(though it costs a little bit to use). You must become an expert with your numbers though so you know exactly what you can offer your sellers and know that you are still providing a good deal to your buyers. If you get a property worth $100k under contract for $97k, you are going to fail in a hurry. There are several methods for determining what to pay, but generally speaking you will probably want to be getting your properties for about 65% of ARV. Know what your cash buyers' numbers are so you know that you are providing them with value. If they want to flip a property and they want their purchase price plus rehab costs to be under 75%, then offering them a property for 80% of ARV will do them no good and you will be stuck holding it yourself.

Also, if you are going to start wholesaling, you must build your cash-buyers list ASAP. Way too many people get stuck with contracts and can't perform and screw over sellers. Jump on the podcast and listen to all the episodes with wholesalers, there are some good ones. Also get the book by @Brandon Turner "Investing in Real Estate with No or Low Money Down". It was one of the first I read when I was starting out and it helped me a TON.

Good luck, let me know if I can answer any other questions for you!!

USDA offers amazing loan products for certain areas for certain types of properties, might be worth checking their website. Cities, states, and counties will often offer incentives, loans, and grants for certain properties in certain areas. Check their websites or call their offices and they should be able to let you know if they have anything available to you. Good luck!!!

Depends on your risk tolerance and financial strategy. If I were in your shoes I would put 20% down, which eliminates the PMI on your mortgage and allows for a pretty huge market swing without you going underwater on your home. I'm an investor, so if I can borrow money at 3.5% I know I can turn around and invest for at least 10%, it's a no-brainer for me. $650k * .8 = $520k to invest. I would get a 30 year fixed mortgage because you will never see rates this low again in your life. If your monthly payment causes too much stress on the budget then you should buy less house or figure out a way to increase your monthly income, don't ever spend more than you make. If you invested that extra $500k you could be bringing in an extra $4k/mo, 2k/mo if you are VERY conservative. Leverage is a powerful tool if you use it correctly. If you haven't read "Rich Dad Poor Dad" that would be my first recommendation before doing anything lol. I think paying cash for a liability, like owning a home, would be a mistake....Unless you are a Dave Ramsey groupie.

No matter what, I say the 20% down, the 30-fixed, and spending less than you make are musts, but just my 2 cents, but you gotta do what fits your life and do what you are comfortable with and what fits your financial strategy. Seems like you've been doing pretty well up to this point :) Best of luck to you, sounds exciting!!

Yeah, honestly, your numbers are looking decent. Make sure to increase your financing costs. Take whatever the average base rate is for the area and make sure to add an extra percent. Investment loans are always about a point higher than traditional home mortgage. Of course you can house hack and get a better rate with a 2-4 plex, but you always want to be conservative with your numbers so you'll probably want to go with at least 4.5% for financing right now. If it's a rough neighborhood then your repairs will probably be higher too, so again, you'll want to increase your capex and repairs. If you get some great tenants and they take good care of the place, then great, you'll have some extra cash sitting around, but if not then at least you will be prepared with reserves for if something goes wrong.

Yup! He better have taxes, receipts, bank records, leases, etc. to prove everything he is telling you. You would not believe how many "p&l's" I have see thrown together in 5 minutes with excel. If he wants you to believe it, he better be able to prove it. "Trust but verify". You can also talk to PM's who work the area and ask them what expense ratios are for that specific area. ie. all your operating expenses (does not include financing costs) should add up 40%. I'm not an expert in markets in the south, but I would imagine your expense ratios would be pretty low. I imagine somewhere in the 35-40% range, but don't quote me on that.  

That's rough Stephanie, I'm sorry! Unfortunately you are just at the mercy of the comps and the appraiser. I'm sure you are aware that an appraiser will almost never change their report unless it's some grave error. With the fact that you don't have enough data points to determine supply vs. demand and how it equates to value of the basement, I think you'll have a hard time getting him to budge or proving your case. I know an appraiser who says anytime he gets challenged it's almost a competition just to prove that he knows what he's talking about but will sometimes raise his appraisal by a couple hundred bucks just as a slap in the face because he knows it won't make a difference. Fact of life, some appraisers just suck!!

Easiest way is to just call the city and the county, they will be able to answer your question in 5 minutes. Good luck!