All Forum Posts by: Eric Tomlinson

Since it looks like you are over the '4' limit on mortgages, most banks won't mess w/ you. Call some small local or regional banks and ask them if they are doing portfolio loans. That or commercial is going to be your options imo.

Good Luck

Hi Suzette-

Here are my thoughts:

Assuming the house doesn't require more than the carpet in one bedroom, it could be a deal. Lets assume 80k purchase. You will bring ~17k to the table before closing costs, so probably around 20-21k if seller doesn't pay any closing cost (which I would try to get them to cover). Even at financing roughly 70k you would still only have a mortgage payment of roughly $435/month. You theoretically are under the 50% rule. Is it an unbelievable deal, probably not. Would it add it to my portfolio at 80k, probably- especially if it was a newer house and I knew it wouldn't be causing too many problems and I believed the true ARV to be over 100k. My biggest concern would be tying up 20k.

Here in Texas there are houses to be bought for around ARC (after repair cost) 65k that will rent for $925 which means a little less money tied up and a little better CF.

Good Luck on your first deal, but don't get caught up in any one deal as there are many out there.

@Jeffrey
Don't want to hijack the thread, but can you elaborate on creating new LLC's per property? Do you Quit Claim the deed to the LLC w/ the note under your personal name, etc? If so, does it cause any problems? Thanks.

Travis-

I have my liability policy for 1MM for under 200 bucks for the year- well worth it. Definitely don't rent your unit month to month while trying to sell. Like Will said, at last resort rent your flip house.

Hi Travis-

Welcome to BP!

Congrats on looking to take the right steps now so that you can dictate your own future. My thoughts: Make sure and keep a chunk of cash set aside for God knows what. Banks of course will want to see 6mos reserve for all your debt payments, you guys can decide if that is enough or not. As far as the LLC, someone more knowledgeable than I should really chime in. I have one and usually flip properties under it, but my rentals are in my name. I make sure and don't skimp on liability ins on the rentals and I keep a 1MM general liability policy in force. An LLC probably won't protect you personally, but I'll defer to experts. You will probably want to find a prop management co soon and interview a few and ask for references from other investors in the area. As far as a tax shelter, I've had luck the past year decreasing my AGI w/ the rentals- the problem then becomes qualifying w/ a bank after you show that you didn't make as much money...double edged sword.

Good Luck and let us know how it goes and your success!

Welcome to BP Chris. As you are already aware, there is an incredible amount of info available from great people.

Congrats on going under contract w/ your first place. The 'rules' probably don't apply when you are an owner occupant. I think you are making a wise decision by having other people to pay for your mortgage on your place of residence.

My only tip would be to question the use of a property management co. Why do you want to give away 8-10% of gross rents when you live right there? I use a pm co b/c my nearest rental is 30mins away and don't want to deal w/ the issues that will arise being that far. If I owned the house next door, I doubt I would use a pm co. Just my .02, but think it would add ~200/month to help cover other expenses.

Again congrats and let us know how it goes and welcome!

Good Luck

Hi John-

To answer your question, it looks like a good deal. Put it under contract and see what your inspector says. Assuming its not a crazy war zone, you would be fine even at those crazy numbers, ie insurance (way high), taxes (way high).

If/After you buy it, then take your HUD1 to the appraisal office and contest the value as David has stated. I also agree w/ his insurance suggestion and numbers.

You might, and I say might, get another 200/month cashflow if the insurance and tax thing gets 'fixed'. Obviously don't count on it, but it should be a real possibility.

The deal is a go assuming there is not 40-50k in repairs needed.

Good luck and keep us posted.

Hi Kenneth,

The property sounds like a good cash flow property. If it were me, I would keep it and pay someone else the 8% to deal w/ the future headaches. Once you've owned it a year, a cash out refi shouldn't be a problem based on appraised value. I would pull out my cash plus a little equity, maybe not max out the 75% ARV, and find another deal. Like Brendan said, I would refi the other props too assuming you have seasoned them 1 yr and pull out some cash and utilize these conventional rates while they are so low....and don't go w/ an arm. Take your 'new' cash and go finance another great rental and take advantage of the conforming lending rates assuming you don't have other properties w/ mortgages.

After your 4, then you might look at cash deals or find a bank doing portfolio loans.

Good luck! I hope the less than desirable area house continues to work well for you.

Dave-

Depends on what you are going to use the property for. Are you going to resell it or rent it. If you are reselling, what does your market look like and what are the comps using. A concrete slab doesn't mean anything when it comes to the flooring. Wood floors go on concrete all the time. Sure you could glue them down, but nice wood floors will go down on top of plywood that is nailed to the concrete and the wood nailed to the plywood. Here in my market I can get scraped hardwoods installed for 6 bucks a foot. But it all boils down to what makes sense for the flip you are doing. Don't get emotionally involved or you will spend too much.

Good Luck.

Scott-

Yes location matters. It depends on what you are trying to accomplish and what you want to add to your portfolio. Mitch makes a good point about the lack of appreciation in the 'hood'. I see an area as having about 5 sections: 'slums', lower middle working class, middle working, upper middle, upper class homes.

I personally would stay out of the 'slum' areas. I like the lower middle class for rentals and that are relatively inexpensive to buy and offer a good ARV. You will still probably have some issues, but it fits my portfolio, and I have a management co to deal with those issues that do arise. Keep an eye open and try to mix in a few middle class homes where most are OO as they will appreciate better IMO.

Good Luck.