I want to start with my first deal out of state, but I've been looking a lot of houses and neighborhoods but the ones I qualified with a conventional loan has to be livable, so I can't buy something that I can gain equity by fixing it up, so I can't meet at least the 1 % rule, max is 0.7% should I buy or what to do??
@Eliel Martinez do the properties cashflow? If they do, who cares if they dont meet some arbitrary "rule".... the 1% rule is just an evaluation tool, it's not going to tell you if a property will cashflow
@Eliel Martinez what kind of property and what kind of loan?
Lenders may have this restriction if they think you’re living in it but will be renting, This may be against the lender’s bylaws
Consider house hacking, live-in flip, and BRRRR strategies (search here for all posts on each of u need); or putting 20% - 25% as down payment...
other option (try this first!), is talk to more lenders until you find one who will work with you and/or consider building in a construction component, Bigger pockets has great people. There is a lender for every deal out there.
Other option could be see where rents could go in theory after Renovation so if the all in cost makes it a much better than a 1% deal once it’s stabilized it may make sense.
Otherwise just keep looking. Because this is good it can take hundreds of deals to find one that works well! Keep grinding though!
Thanks Jordan Callaway, looking SPFH, I'm going conv loan with 20% down, I saw pretty good deals that I can fix it up, and at the end the numbers works and reach the 1% rule but the lender that approved the loans dont let me get those deals, they know that I'm out of state
@Eliel O Martinez-Cano keep reaching out to lenders. Also if local lenders (local to the property) know the area they can look it over and some will make exceptions or adjustments... for instance if you open a bank account there and deposit $x,000 to show good faith they may work with you on construction financing and/or interest only while doing work for 3-6 months etc. or you can ask for a higher interest rate from them in exchange for allowing you to have an amount built into the loan for rehab. also hard money lenders love this type of thing but can carry high int rates. Also consider when you renovate your initial returns in early years are lower bc of up front reno then improve after two to three years depending on what you inject as capital improvements. At that time you can consider refinancing for lower interest rate or cash out refi
Where are you looking for properties? Since you are out of state, it gives you the opportunity to search around and find the right location to find your returns. I'm currently investing in Dayton Ohio, Memphis TN, and we are able to find returns above the 1% rule, sometimes closer to 2%.
Like others have commented about lenders, i suggest Biggerpockets as there are a lot of them out there that can help with this process, and could consider the construction component for the loan.
Jordan made a great point about local lenders, and making some exception or adjustments with showing good faith to these lenders. Having conversations with these people are where it all starts, you never know until you ask
I agree with Hard Money, and why it might not be the best route to go through. Unless you have teams that you can rely on to guarantee the rehab to go as planned, and get rented out at the price you require, and being appraised for refi, its a higher risk due to high interest payments. I personally like using hard money when the time is right, but i'm confident in my teams i have established to follow through on the deal, and make sure everything goes as planned.
Feel free to reach out to me and ask questions, i'm happy to help!
I want to start with my first deal out of state, but I've been looking a lot of houses and neighborhoods but the ones I qualified with a conventional loan has to be livable, so I can't buy something that I can gain equity by fixing it up, so I can't meet at least the 1 % rule, max is 0.7% should I buy or what to do??
Any advise?? I'll appreciate it
Tks
It all just depends on where you are looking. There are move-in ready properties around the Cleveland area that easily meet the 1% rule. I tend to see lots of 1-2.5% in the suburbs on the Eastside. Just a suggestion.
You need to keep researching markets. There are plenty of B homes in B neighborhoods that need little to no fixing, that will rent for better than .7%. Don't give up, research more!
@Nathan Hillier thanks for your advise, and I'm buying in Oklahoma, but when I start looking the prices were fine but now that I'm ready to start, the prices are higher on the ones are pretty much ready to go, they just need cosmetic work.
But cause is my first deal is kind of difficult to take a decision and find the best way to make it, but thanks for your help guys and with all the advises I will make it happen
Not sure about your loan. You should have no problem finding a lender who will loan on an investment property. You should have no problem finding 1% in all the midwest states where Turnkey companies are operating.
Thanks @Mike Huerta any suggestions?? I'll appreciate it
You can probably find properties on roofstock that can beat .7%. Otherwise research online. Pick a state and search fastest growing cities. That will give you a good base to start from.
I want to start with my first deal out of state, but I've been looking a lot of houses and neighborhoods but the ones I qualified with a conventional loan has to be livable, so I can't buy something that I can gain equity by fixing it up, so I can't meet at least the 1 % rule, max is 0.7% should I buy or what to do??
Any advise?? I'll appreciate it
Tks
It all just depends on where you are looking. There are move-in ready properties around the Cleveland area that easily meet the 1% rule. I tend to see lots of 1-2.5% in the suburbs on the Eastside. Just a suggestion.
Definitely agree on the Cleveland east side suburbs thing. It will be pretty easy to find a property that meets the 1% rule (or better) in the cities of Maple Heights, Garfield Heights, Warrensville Heights, and certain parts of Bedford, Euclid, Cleveland Heights and South Euclid. To really get the best value I would recommend looking for a house that is already "livable" and will not cause you any issues with financing, but has some outdated fixtures and finishes (picture something like a little old lady's house, with green carpeting from the 1970s and old but functional fixtures throughout). You can often get houses like these at a pretty substantial discount compared to the flips that have freshly painted agreeable grey walls and laminate floors. And this substantial discount can give you room to do a quick light refresh (fixtures/finishes) and come out ahead.
I want to start with my first deal out of state, but I've been looking a lot of houses and neighborhoods but the ones I qualified with a conventional loan has to be livable, so I can't buy something that I can gain equity by fixing it up, so I can't meet at least the 1 % rule, max is 0.7% should I buy or what to do??
Any advise?? I'll appreciate it
Tks
It all just depends on where you are looking. There are move-in ready properties around the Cleveland area that easily meet the 1% rule. I tend to see lots of 1-2.5% in the suburbs on the Eastside. Just a suggestion.
Definitely agree on the Cleveland east side suburbs thing. It will be pretty easy to find a property that meets the 1% rule (or better) in the cities of Maple Heights, Garfield Heights, Warrensville Heights, and certain parts of Bedford, Euclid, Cleveland Heights and South Euclid. To really get the best value I would recommend looking for a house that is already "livable" and will not cause you any issues with financing, but has some outdated fixtures and finishes (picture something like a little old lady's house, with green carpeting from the 1970s and old but functional fixtures throughout). You can often get houses like these at a pretty substantial discount compared to the flips that have freshly painted agreeable grey walls and laminate floors. And this substantial discount can give you room to do a quick light refresh (fixtures/finishes) and come out ahead.
@Eliel Martinez the deals are definitely here! I've seen hundreds of investors come here in just the last year. Let's connect and I'm happy to answer questions!
@Eliel Martinez to clarify I mean the types of deals you're looking for. Honestly, the best moves in OKC right now are existing rentals, so properties that are already cash flowing with a tenant in place. Sellers aren't distressed enough here for you to buy at a point where you've got room to do a flip anyway. So don't feel too bummed out that you can't flip right now, the market here isn't really supporting it anyway!
@Eliel Martinez do the properties cashflow? If they do, who cares if they dont meet some arbitrary "rule".... the 1% rule is just an evaluation tool, it's not going to tell you if a property will cashflow
@Alyssa Dyer I'll be in touch with you for sure. I went last week I just arrive to LA last night I went to see a lot of houses and I saw some good deals but they go fast an as a beginner I need some help like yours, I'm with an agent but I think she dont work with investor , I feel she works more with regular clients and is not really aggressive on the deals, I left an offer and if it doesn't work I'll reach you
@Jason D. So what's the best way to evaluate?? I know that I have to go for the cashflow so I trying to don't go wrong cause is the first deal and I don't want to lose money, and I know that the first deal is the more difficult
@Eliel Martinez cashflow is a simple "money coming in minus money going" equasion. You have to know and run your numbers to determine cashflow....
Take your gross rent
Subtract expenses and reserves
Subtract mortgage payment
That's your cashflow.
You may find that properties in your market that hit the 1% rule are great cashflowing properties, or you may find that they arent worth even looking at. That is where the 1% rule gains some value for you. As you learn your market you can use the 1% rule to quickly eliminate properties or dig deeper. You'll need to do some groundwork before the 1% rule can help you.
@Eliel Martinez, if you need an experienced real estate broker in Oklahoma City, I am your guy. I own & operate approximately 140 doors myself plus I do acquisitions & property management for investors. Prices are rising in Oklahoma City, but we are on the front end of that trend, which is a good thing.
@Richard McLain tks I yes for sure I'll be interested in talk t you, let me just wait in an offer on a property and if doesn't happend anything I'll reach you