All Forum Posts by: Mark W.

That's a good idea.

It will be the second time picking up properties from a guy getting out (if it all works out).  

I meant to add about the 2% rule, this deals will be a below my average.  More like 1.3-1.4%.

Thanks for the replies.

The guy is someone I have bought a properties from before.  He is walking away because he bought theses properties during the crash for 15-30k each, refinanced, and took the money to help finance a deal in another state.  When he first approached me, he wanted me to manage them, but legally I can't.  I said I would be interested in buying them if he would owner finance (I am currently trying to do a flip and don't want to burn up all my cash).  He proceeded to tell me he had loans on them and then introduced me to the banker who has the loans via email and the banker was interested in meeting. 

I have 40 properties right now and 24 of them are Section 8.  The rent increases come from my knowledge of how much I know I could get from section 8.  

I typically use the 2% rule as my initial evaluation for buy and hold, but honestly, most of mine properties are around 1.5-1.7%.   

I am not really familiar with eviction process having only had to do 1, so I don't know all the legal loophole, but I imagine in a purchase there are several a tenant could pull on.  Good tip.  I will have to ask the lawyer about that.

Thanks again for the replies.  I try to keep emotion out of deals, but it has the the feel of too good to be true and just wanted to here some other people's thoughts.

I have been approach by a person who knows that some of my investments are in C-D class areas and that I am familiar with Section 8 properties. He is leaving the area and selling off his properties. He has offered for me to take over the loans and there is 25%-30% equity in the houses. I have a meeting with the bank this week to discuss the deal. The idea is that there will be little to no money down as the required equity is already there for loan. Here are the numbers:

5 Houses

Price: $420,000

Total rent: $4950.00

One of the houses has no loan on it and was stated it is the only one that can be negotiated on.

What I am trying to get my arms around, is the pros and cons of the deal.

Cons

1. The rents are definitely lower returns than I am use to

2. In an area that has very little chance for appreciation

Pros

1. No/very little money down

2. Collectively there is around $500-$600 of rent increase that could be made.

3. Should be able cut the price of the 1 house by 25-30k.

It is the No money down that has messed with my emotions on this.  Even though the returns are lower than I am use to, I could sign some documents, pay closing cost and start cash flowing +/-$2000 a month (not including maintenance cost).

I didn't see your last post, so I will give my 2 cents to your questions.

Evaluating properties is the bread and butter of real estate investing and there is no one way to do it.  Everyone has a different formula they use.  I like the 1% or 2% rule for my initial evaluation.  I never go below 1% and I am always striving for the 2%.  To find rental rates, you can use any of the online sites to find what houses are renting for or at least what landlords are asking.    

I think the evaluating rules are a little loser when house hacking (just my opinion).  For me, the great thing about house hacking is you don't have to have positive cash flow.  What you are looking for is a way to off set your cost.  If your mortgage payment on a duplex is $1000 and you are renting the other side out for $500 then you just cut your living expenses by $600 (using the $1100 rent).  That extra $600 a month can be put directly into an account to grow into your next down payment. 

It will be difficult to find a property in Richmond that will covers all of your mortgage allowing you to live for free.  If you are able to do it, then you have found a really great property.  

A big advantage to being a first time buyer, is that there are properties that are available to you that are not available to normal investors.  Another benefit for a newbie to house hack is that it allows you to get your feet wet not only with normal issues of home ownership, but also all the craziness of property management: tenant relations and property maintenance.

Hope that helps some and shoot me a message if you have anymore questions.  

If you stick around and keep posting on BP, you will get an endless stream of people saying, "I wish I would have started right after college".  I have been investing for 10+ years and now have over 40 properties.  The 1st couple of years were definitely difficult, like drinking through a fire hose.  There is a lot information to take in, but it will been well worth.   Several of my properties I house hacked and I believe it is the best way to get started.  One of the things you have going for you is the support system you can find here at BP.  When I was starting out, I didn't have anything like BP and everyone I talked to about real estate investing told me I was crazy and would loss tons of money or worse (I was absolutely not asking the right people).  Getting into real estate was one of the best decisions I have made in my life and, I believe, has helped to make me a better person.

Dianne,

I am glad to hear someone else is having a hard time finding deals for flipping. Every time I find a good one, there is already a contract. I have found an agent I really like (my second in Richmond), but the problem lies with my partner. He is very comfortable with buy and hold, but nervous about flips without me being there.

We are closing on our 5th rental next week, but our first flip still eludes us.Our focus is on Northside, Church Hill, and Jackson Ward. I like Northside for the cash flow and I think there are still plenty of good rentals up there, but I do not expect to see much appreciation. Jackson Ward I know is a bit trendy for investors, but I do like the idea of constant stream of students and the appreciation is almost guaranteed (although I am in the camp of relying on appreciation is speculation). Church Hill, in my opinion, is a combo of the 2: decent cash flow, decent appreciation and close to MCV.

I do not have a good feel for real estate south of the James, although my wife and I just bought a lot close to the south side of Huguenot Bridge for when we move down.We are really excited about our future in Richmond and my wife is not only happy about being close to family, but not having to move every 3 years.

I am definitely looking to complete some projects before I get back, so if you know anyone who might have problems financing a deal or is wholesaling properties to flip we are definitely interested.

I look forward to meeting you as well,

Mark

Paul,

Thanks for the reply and info.  I have found all downloaded books off the Biggerpockets to be well written and well worth the price.  I have had good fortune in finding and buying houses in Richmond in the last 6 months for buy and hold, although houses to flip are harder to find.  Is this the same in your area?  I might have to wait until I get home to start flipping houses, but I will continue to hunt for deals.

Thanks again,

Mark

I am not exactly a Newbie. I have been reading articles and enjoying the podcasts for a while now. I am currently in the Army and deployed in Afghanistan, but I am officially moving to Richmond next year. While I have been buying and fixing up rentals for several years, it has been great to read and learn new ideas (new to me) about real estate.

One thing that I have been very interested in is wholesaling, but not in the way most people talk about it. I interested in talking to people who are wholesaling properties. I am not afraid of a complete gut job, but just like it when the numbers make sense. I have the beginnings of a pretty good team formed in Richmond and am ready to get started on some new projects.

Thanks to everyone who has contributed to Biggerpockets and helped me to expand my understanding and vision.