*New Investor Looking for guidance*
Investor · Conyers, GA · Member since 2018 · 21 posts · 2 votes
I have a property that I am looking into for owner finance. The property's ARV is $200k. He wants $150k. Repairs would be $15k.
Rents are conservatively $1350/month. I want to buy the property and fix it up. I’m trying to figure out if these numbers are good for my first rental.
Can I get some type of loan to get the repairs done, and also get the owner to delay payments.
Im also confused on how to setup payment terms that would work on my favor and also makes sense for the homeowner.
@JaMario Price
No problem
Just keep at it, it's a marathon not a sprint.
Better Knowledge = better investment
Ignorance = bad investment
Also keep learning, always ask for help, and never assume anything you dont have to and you get were your going.
@JaMario Price
What is you strategy do you plan to rent or flip?
If renting will it cash flow after paying taxes, insurance, principal and interest, and accounting for some vacancy and reserves.
If flipping can you pay realitor fees, capital gains tax, rehab and carrying cost and still clear enough cash to make it worth the headache. You need to gather information and run the numbers first.
As far as negotiating deferred payment on owner financing this can be done easily if the owner has confidence in you and your business plan. I usually present the argument " you want me to succeed right? You want me to rehab this property and make payments to you and or get a loan to buy it out right. Allow me to defer payments until I can make the property generate cashflow or increase its value. Which will insure my success and make sure you get your money."
It seems to me you have the cart before the horse. I wouldn't worry about financing yet. It is very easy to get money for a good deal. In my experience people will start to line up to give you money if you can consistently find good deals.
Start with your underwriting and business plan make sure you can make money on this deal then worry about how to negotiate financing.
@Ryan Webster hey Ryan thanks for your help. I plan to add this to my portfolio as my first investment property. I’m sorry for the lack of information. I have been in contact with the seller for over a year now. I have tried to get him to budge on his price in order for me to wholesale the deal, but after listening to BP PODCAST, and wanting real wealth and not a job as in wholesaling. I decided to put on my big boy investor pants. I want to start building my portfolio. So I thought why not give the home owner the $150k asking price and add my first property with little or no money down to start!
Now if you could explain in 5 year old terms. What do you mean when you say business plan and underwriting?
@JaMario Price
I like the ambition I agree buy and hold is the superior strategy. I summarize the under writing and business plan but I reccomend you read some books on the subject to gain a more in depth understanding which will go a long way in helping you build your portfolio in the future.
I start my business plans with market data.
You need to find out the following about your market/ sub market
Averge rents
Are rents trending up or down
Is it cheaper to rent or own a home
What is the median income in your market
What is the average occupancy
What is average appreciation in your market
What are the laws that may apply to your rental investment in your area ie rent control, optional property tax increases.
Once you know these thing you can get a good idea as to the supply and demand of rentals in you market and start to make educated assumptions about how yours will perform in the future.
Next under writting
First understand real estate investment is primarily to things rolled into the same investment firstly an asset( the physical building and the land it sits on) and the business in the building (the tenent/s, cashflow, expenses, and managment.)
Not all business make money, and not all investment are winners it's you job to make your business/investment make money. No one will do this for you, in fact almost everything is working hard to take money out of your pocket. You have income and expenses as long as income is greater than expenses you have a good investment this part is common sense . Where most people lose there way is not understanding all of the expenses in running your business. Typically the larger expenses in real estate are taxes, insurance, debt, maintenance, and vacancy. Yes you need to account for the property being vacant some of the time. Income is usually just rent sometimes pet rent there are some other minor contributions you'll learn about later.
Make a list of expenses every possible one you and think of and then balance that against your income and see if you have a positive or negative number. Also start reading every book you can on real estate investing
@Ryan Webster thank you for taking time out to give me a great detailed response. I’m on it. Thanks for the boost.
@JaMario Price
No problem
Just keep at it, it's a marathon not a sprint.
Better Knowledge = better investment
Ignorance = bad investment
Also keep learning, always ask for help, and never assume anything you dont have to and you get were your going.
@JaMario Price
I start my business plans with market data.
You need to find out the following about your market/ sub market
Averge rents
Are rents trending up or down
Is it cheaper to rent or own a home
What is the median income in your market
What is the average occupancy
What is average appreciation in your market
What are the laws that may apply to your rental investment in your area ie rent control, optional property tax increases.
Once you know these thing you can get a good idea as to the supply and demand of rentals in you market and start to make educated assumptions about how yours will perform in the future.
Where would someone go to get answers to these questions?