All Forum Posts by: Zachary Dosch

Are you finding banks agreeing to take a lein position on the equity of several rental properties in order to secure a loan for an apartment complex?

Basically all of the ones I have been working with just want the downpayment period.

In the name of leveraging other people's money, it would be great to learn a couple tips and tricks. I know it does benefit your sitaution if you have your entire relationship with the bank you are trying to borrow from but I haven't seen any go that far yet.

Sometimes you can get banks that are new to town to basically buy the deal which means that they lower the interest rate or give your more favorable terms because they are just looking to establish a book of business.

I will absolutely keep that in mind. Nothing is more important to me than my time with my friends and family which is why I am doing this in the first place. Depending on my future financial situation, I see this as a very real possibility!

Thanks for the advice - You are right, a situation may/most likely arise that will eat into the cash reserves but I plan to offset that with my own cash injections from time to time to keep the accounts building up for the next downpayment to keep the plan on track.

Are there any other thoughts, comments, questions or concerns?

I have cash reserves to cover emergencies and repairs that I have set aside to address those issues. When I was stating what the property costs me every month, I was including extra to account for repairs.

Also, Its not likely to be vacant any time soon as illustrated by the volume of calls I recieved wanting to rent the place with out even seeing it within a half of a day.

Yes, FHA requires a higher level appraiser and they are much more critical of the property (at least in my experiences).

I have been going through Wells but that is basically because I like having all of my "stuff" together at one place. The underwritting is a little more strict and there are some more hoops to jump through but I have a good relationship with the LO and he knows my situation so things usually go more smoothly than the average transaction.

Unfortunately, Its most likely going to be local brokers that will be able to be the most flexible with their underwritting terms and they just sell the loan right away (most of the time to Wells) so they really won't be held accountable for anything. However, its those same people that are often times the most sneaky and deviant so make sure you get a GFE to compare because that will most times hold their feet to the fire.

Another question, and this is going to sound stupid but the income generated from these properties should be covered by depreciation, interest expense and other write offs and then some, correct?

All -

With the leases I have in place, the tenants are responsible for all up keep and utilities for the first SFH. The place costs me $1020/mo to run including PITI and the rent is at $1370/mo. I realize it isn't the best deal but since I only put 11k down and the house is appreciating, all in all I think its a deal and Im very comfortable with it. I literally received 20 calls from the time I posted the add on line (8pm) to lunch the next day. Needless to say the demand is there and I wish I had more SFH!

The second house that I am currently living in, my costs per month are $920/ mo. and my roomates pay $1120 a month plus a fourth of the utilities so basically my living expenses are a fourth of the utilities and some general upkeep around the house. Once I move out the rent will be at least $1400. I think I am light on the first property's rent because the house is slightly bigger and it has 2bed/1bath more than the second house.

The duplexes that I am considering are in the $225k range which would put be at a PITI of roughly $1300/ mo. with rents being $900-$1100/ per side. I could also get into a 4 plex but I have really found that I like SFHs or possibly duplexes because of the type of renters they attract vs. the type of renters a less expensive place attracts.

Between these three properties, they are going to generate roughly $1200/mo in positive cash flow that I would build up for the downpayment on the next property and snowball it until Im 35 at which point I would swich to principal reduction so I can have them paid off by the time Im 50.

I am getting the 10k/ mo from receiving roughly $1500/unit x 7 units = $10500 conservatively.

The nice thing about my situation is that I am able to do the majority of repairs by myself and with my dad so the cost of upkeep is basically the price of materials.

Im also planning on adding some of my own cash to the down payments as I have found that I don't have much of an apetite for the stock market outside of my retirement accounts. I actually have a good job and so does my soon to be fiance and we live well below our means. We also have no other debt except the mortgages and we both have graduate degrees (thanks to basketball scholarships) so this is something we can really be adding money to. I have cash reserves, lines of credit and an $1M umbrella policy to protect me from liability for the time being until I have more equity built up. At that time I will most likely form an LLC. My Dad has also and is willing to continue to be a cosigner on these deals and Im starting to get spread a little thin because I haven't shown the rental income for two years so the bank can't usually use it.

Basically my goal is to get into as many rentals as I can comfortably until Im 35 then switch to paying them off so I can retire!

I do have a very good mentor and he just so happens to be the guy I go to get my taxes done so I am always bouncing ideas off of him and he knows deals inside and out. He has about 40 properties around town so needless to say he is rolling. The only issue is that he got his start when lending guidelines were much more loose in that he didn't have to put downpayments - he let the bank take a lein on a CD and once the loan was paid down far enough, the bank released the lein and he bought another property and so on and so forth.

The thing about my area is that it market heats up even more when I go to the west due to this Bakken oil field. It is unbelieveable how much oil they are pumping out. There are way too many people and not enough housing. Couple that with the floods this summer and we have a tremendous rental market. There really aren't any great deals on houses as the foreclosures go for market value but at the same time they don't hurt the market and properties still cash flow nicely so it is working out for now.

Another issue I am considering is I screwed up and put a bigger downpayment on the second property. Basically I succumed to peer pressure from my mom haha. I only owe just over $125k and the place is conservatively worth $185K. Should I take a HELOC on the place for a downpayment on another place? The cash flow would be a little tight but I think it could possibly work in the name of leveraging other people's money!

Thanks again for all your help guys - this site is really awesome and you guys are all very generous with your time and wisdom. I will no doubt pay it forward when I have the chance!

Thoughts comments concers suggestions?

Hi everybody - Long time reader and new poster.

Im 25 years old and just getting started in REI. The more research I do the more Im convinced this is how I want to invest my money. My family has also had success in REI so I figured why reinvent the wheel?!

My goal with REI is to get to a point where it is a full time job and the income it generates is something that can not only take care of myself and my family presently, but also for future generations. My primary strategy will be buy and hold and build up the excess cash flow for a down payment on the next property. I want to keep this going until I get into at least 7-8 properties which when paid off would net at least 10k/month. However, when Im 35, I want to transition from using the downpayments to get into extra properties to paying off the properties and potentially consolidating the equity into 2-3 12 unit apartment complexes, putting them on a 15 year note and having them free and clear when Im 50.

Currently I have two single family residences and I was able to purchas both of them OO (moved out of one and into the other). The first I purchased for 165k and it has $325.mo net positive cash flow. The house is now currently valued at 185K. The second house and the one that I am currently living in I purchased for 160k with $200/mo net positive cash flow from my roomates and the value of the place is currently at least 180K.

Im from North Dakota and the housing situation is very unique. Due to the oil boom and other factors, houses, especially in Bismarck where I live are appreciating at a nice rate. Historically, home values have always stayed at about a 3%-6% steady rate per year. The foreclosure rate is next to zero and the houses that do go into foreclosure basically sell for market value. In addition to that, the rental market has heated up. Its a very unique situation but it has turned out to be very profitable. There is no flipping of homes (the guy tried to flip the one I currently live in.. made for a nice amount of built in equity). To me, this market is calling for buying and holding.

For my next investment, I am eyeing a side by side duplex that I would move into. You can get into a good one for $225k out here with decent cash flow. Either that or another SFH as I have really grown fond of how easy they are to rent and maintain in addition to the quality of renter they typically attract.

My question to you guys is 1.) what are your thoughts on my strategy 2.) what are your concerns and 3.) If you would do anything differently.

Also, Im guessing you will have more questions about the current situation as it is fairly unique and I will answer everything to the best of my ability. Thanks in advance, fellas! You guys are life savers!

You are right - it is far from an ideal situation and I wouldn't be buying it if it was some random house. Im actually getting it for under market value because Im not using a realtor. Its actually my grandmothers house who is moving into a retirement home. My uncle is the one that I am dealing with and he has his realtor's license. I also wouldn't be buying it if I wasn't so confident in my ability to keep it rented out. Im only looking to stay in it for a year or two before I sell it and use the equity for a downpayment on a single family residence. Im just looking for a way in! Do you have any other ideas or thoughts on this deal? Again I think the $1250 in rent is a little light - it may end up being $1350 ish.

Also, the housing market is so solid in Bismarck that there aren't any great deals like there are in bigger cities. Even forclosures go for about market value. However, the rental market is also very strong and there is a big time shortage for single family rentals especially with the flood. Im just looking to get the snowball rolling. I don't mind people being critical - I want to make sure that im not making a big mistake or overlooking something.

Another option that I have is that I could move into the house and rent out my similar sized house that I currently live in. The payment is a lot less because I put a lot more down on the house. It would generate about an extra $150/mo. in cash flow. Would you guys suggest going that route?

Also, what are your thoughts on going with a $2500 HOI deductible vs a $1,000 deductible. Im actually leaning towards the $2500 because it cuts the yearly payment in about 2/3.

So I would need an umbrella pollicy in addition to the home owners insurance? Sorry for the questions - Im sure they are obvious but I just want to make sure I have everything straight.

The utilities are going to be paid by the renters. Im actually in a good position for renters - I live in Bismarck, ND and everything is flooding so there are plenty of displaced families and I have an in with the AD at the local university so they always call me when they hire new coaches because they know I will have a place for them to live. Also, that $1250 number is fairly light - it could be a little more.

I only have to put about $8500 down so I figured it would be a good place to get started. Im going to put it in the contract that the renters have the option to buy it at the end of the contract - hopefully between the principal reduction & the increase in value (The flood is really driving up the prices of the homes that are not affected) I can take the profits after a year or two and get into a multifamily property.

Another catch to the whole situation is that my parents are one of the families that had to evacuate so they are going to be living there for the forseeable future. While the are living there, they are going to be going through the property with a fine tooth comb to see if there needs to be any repairs done so once I get a normal renter in there, the repairs should be at a minimum. I know it is far from ideal but breaking into this isn't easy. Thoughts?