What should I do ( FIRST POST)
Member since 2023 · 10 posts · 19 votes
Hey Y'all, I had a question on mind. So i found a home, its listed above $400,000 Duplex in the Sunny side Place area, if you are from houston you know gentrification is happening around this are. The home has been on market for a few months, almost a year. I want to offer in the ball park of $370,00o to test waters have them meet me in the middle around 390,000 with a fixed rate 30 year 6.75%. The Mortgage would be around $3587/ month including insurance, taxes, Mortage insurance. Its a 2 unit , 3 bed 2 bath build in both units.
I am a bit worried about the investment as it is my first property any advice?
Hey Y'all, I had a question on mind. So i found a home, its listed above $400,000 Duplex in the Sunny side Place area, if you are from houston you know gentrification is happening around this are. The home has been on market for a few months, almost a year. I want to offer in the ball park of $370,00o to test waters have them meet me in the middle around 390,000 with a fixed rate 30 year 6.75%. The Mortgage would be around $3587/ month including insurance, taxes, Mortage insurance. Its a 2 unit , 3 bed 2 bath build in both units.
I am a bit worried about the investment as it is my first property any advice?
Whats the question? We have no idea if this is a good deal or not. What will the rent be? Also, you are offering way too much, not sold for a year, ok it has issues. You should not offer anything you are not ready. Show it to someone doing deals, let them look at it. Its obviously not a good deal as its not sold. What do the comps look like? KNOW YOUR NUMBERS, that's all that matters,
Good luck
Hi @Bryan Nwokem!
The hardest part is going to be finding a 30-year fixed mortgage at 6.75%.
Hi @Brian Cauldwell I actually already have. My realtor is also a Lender and we worked out a deal
Hey Y'all, I had a question on mind. So i found a home, its listed above $400,000 Duplex in the Sunny side Place area, if you are from houston you know gentrification is happening around this are. The home has been on market for a few months, almost a year. I want to offer in the ball park of $370,00o to test waters have them meet me in the middle around 390,000 with a fixed rate 30 year 6.75%. The Mortgage would be around $3587/ month including insurance, taxes, Mortage insurance. Its a 2 unit , 3 bed 2 bath build in both units.
I am a bit worried about the investment as it is my first property any advice?
Whats the question? We have no idea if this is a good deal or not. What will the rent be? Also, you are offering way too much, not sold for a year, ok it has issues. You should not offer anything you are not ready. Show it to someone doing deals, let them look at it. Its obviously not a good deal as its not sold. What do the comps look like? KNOW YOUR NUMBERS, that's all that matters,
Good luck
Hey Y'all, I had a question on mind. So i found a home, its listed above $400,000 Duplex in the Sunny side Place area, if you are from houston you know gentrification is happening around this are. The home has been on market for a few months, almost a year. I want to offer in the ball park of $370,00o to test waters have them meet me in the middle around 390,000 with a fixed rate 30 year 6.75%. The Mortgage would be around $3587/ month including insurance, taxes, Mortage insurance. Its a 2 unit , 3 bed 2 bath build in both units.
I am a bit worried about the investment as it is my first property any advice?
Whats the question? We have no idea if this is a good deal or not. What will the rent be? Also, you are offering way too much, not sold for a year, ok it has issues. You should not offer anything you are not ready. Show it to someone doing deals, let them look at it. Its obviously not a good deal as its not sold. What do the comps look like? KNOW YOUR NUMBERS, that's all that matters,
Good luck
@Bryan Nwokem If your rents are less than your mortgage payment with no other expenses built in then I would not do this deal. You should expect to put aside at lest 5% apiece for Vacancy, CapEx and Maintenance each month out of the rent which is already negative in this case with rent of $1650/unit.
I know your maintenance costs and CapEx will likely be less with a new build property but you should be prepared just in case you have a hot water heater go out or something else unexpected go wrong.
Home Warranties are nice if you have one on a new build but don’t always cover all costs.
Even if you wanted to lower the CapEx and Maintenance portion to 3% of rent you should still account for some extra expenses.
Hey Y'all, I had a question on mind. So i found a home, its listed above $400,000 Duplex in the Sunny side Place area, if you are from houston you know gentrification is happening around this are. The home has been on market for a few months, almost a year. I want to offer in the ball park of $370,00o to test waters have them meet me in the middle around 390,000 with a fixed rate 30 year 6.75%. The Mortgage would be around $3587/ month including insurance, taxes, Mortage insurance. Its a 2 unit , 3 bed 2 bath build in both units.
I am a bit worried about the investment as it is my first property any advice?
Whats the question? We have no idea if this is a good deal or not. What will the rent be? Also, you are offering way too much, not sold for a year, ok it has issues. You should not offer anything you are not ready. Show it to someone doing deals, let them look at it. Its obviously not a good deal as its not sold. What do the comps look like? KNOW YOUR NUMBERS, that's all that matters,
Good luck
Terrible deal at 400k,,,,,,, you are not ready to even put offers in. You need to learn. Go to your local RE meeting. Connect with those doing deals,
Good luck
Hi. I know sunnyside. You are calculating around $3600 a month your expenses. Are you including any reserves for unexpected repairs? Some parts are in a flood zone. Will you need flood insurance? I just don't see getting $1800-$2000 a month on a unit in sunnyside. You mentioned gentrification, so I know people are buying and building new construction in the area. But do you see any significant commercial development? New supermarkets? Target/walmarts? distribution centers? If all you see are new build homes but no commercial it may be harder to get the rent you want. People want to live near points of interest to justify that rent in the area.
Hi. I know sunnyside. You are calculating around $3600 a month your expenses. Are you including any reserves for unexpected repairs? Some parts are in a flood zone. Will you need flood insurance? I just don't see getting $1800-$2000 a month on a unit in sunnyside. You mentioned gentrification, so I know people are buying and building new construction in the area. But do you see any significant commercial development? New supermarkets? Target/walmarts? distribution centers? If all you see are new build homes but no commercial it may be harder to get the rent you want. People want to live near points of interest to justify that rent in the area.
Its a terrible deal, max I would pay is 250k, there is a reason its not selling,
So, Bryan, if you have 20% of 370k to put down that means you have 75k around to invest in real estate. To sink that into one deal, your first deal, is incredibly risky. There's plenty of solid markets in the mid west from Pitts, PA to the Rocky Mountains that allow investors to enter the game in the appropriate way. Not overexposed financially, fast projects, easy exits.
If I had 75k to invest and my goal was to scale and build a multi million dollar REI firm, I'd not go more than 20k in transaction costs to close on my first deal. So that's like buying something for 100k - 120k. You never want to deplete your liquidity into a deal. Liquidity is what you leverage to use other people's money to scale. You want to find a project, rehab it, sell it and all in about 100 - 120 days. You want to get the process down to that and then repeat it, repeat it several times, even do two at at time when you can. Making 20k on a flip as a one off is decent, but making 200k on 10 flips in a year is a whole different ballgame. Now you have the liquidity for your 390k duplex and it will not deplete you and you will always be in the game.
One of the keys to winning the game is to always be in the game.
1. Double check the 6.75% 30 year fixed rate. Even owner occupied rates are not at that level right now. Is it at 6.75% due to a rate buy down or some temporary measure? Is it an adjustable rate? I'd urge you to investigate that further.
2. The path of progress is painfully slow. Gentrifying areas are great if you can hang on, but it always takes longer than you expect.
3. As for the investment, that's a little tight for my liking. There's no margin for vacancy, a major repair, increases in insurance or taxes.
@Mike Klarman I respectfully disagree with that take. You're telling new investor to take an out of state flip over just finding a better deal in his own market? That's a terrible idea for a first deal.
One of the keys to winning the game is to live in reality. Buying a $100k-120k house that requires renovation for someone that has no experience renovating or operating in that out of state market is a great way to set a pile of money on fire.
@Bryan Nwokem how do you feel about house hacking? That seems to be the best middle ground here if you are open to it.
I have physical proof that states otherwise Travis. You are as good as your team whether they are next door to you or hundreds of miles away. I just did a first flip for a BP community member that was not our of state but out of market. He was about 200 miles away from it and he made 48k in 92 days. I have others doing their first flip out of state and they stand to make 20k - 70k. I have a deal close yesterday for another BP member. Her first flip ever in life, she is in California and the flip is in Western PA. Can't be farther away from it and the numbers on her deal are:
185k purchase
95k rehab
390k ARV
Rehab timeline: 40 days
Average days on Market in area: 3 weeks
It's in a highly sought after school district, a house down the road was sold in 1 day on the market. She will net 60k in about 100 days.
I'm not sure what a newbie brings to the table during the rehab process anyway. So you go to the site and what? Tell the workers what to do? And if they are only working hard because you visit the house a few times a week then you have the wrong team anyway.
I have a great team, that includes a dedicated contractor that I help to scale his business and now he's loyal to me. Our longest rehab job was 50 days, shortest 28 days. We are keeping it so investors are in and out of projects in less than 4 months.
To just pick a market and try to put a project together on the fly far away from home, yes, that is a terrible idea. But there are existing networks, existing teams that can be leveraged. Networks with proven results and total transparency. That's more of what I was speaking to, not for him to go out and put it all together on the fly himself, but the honesty of it is some people do not have Cali or Florida Money, they don't have NY or Mass money but that's where they live, that doesn't mean you can't play the game.
@Mike Klarman I agree that it is possible, and it is a great idea if it works. It is just FAR easier said than done. It's just a matter of trust when you only have $75k in cash. It's also not as much about "what a newbie brings to the table" as it is what they are risking. They're ultimately coming into a deal with a level of blind trust.
Some guy on the internet with something to sell says it's a good idea (more of a general statement - not coming directly at you), so they decide to go all in on a flip in a city that they have never visited. That's just not wise. The biggest financial messes that I have seen are from those that do something because they heard someone else say that it was a good idea all the while never actually understanding what they are doing or developing any subject matter expertise.
@Bryan Nwokem If your rents are less than your mortgage payment with no other expenses built in then I would not do this deal. You should expect to put aside at lest 5% apiece for Vacancy, CapEx and Maintenance each month out of the rent which is already negative in this case with rent of $1650/unit.
I know your maintenance costs and CapEx will likely be less with a new build property but you should be prepared just in case you have a hot water heater go out or something else unexpected go wrong.
Home Warranties are nice if you have one on a new build but don’t always cover all costs.
Even if you wanted to lower the CapEx and Maintenance portion to 3% of rent you should still account for some extra expenses.
Thank you so much for the Response Alecia, I think it is important to add that i can use an FHA loan to get this home and do PLAN on living in one of the units since i still live at home as of now.
This was great advice, i appreciate your time
@Mike Klarman I respectfully disagree with that take. You're telling new investor to take an out of state flip over just finding a better deal in his own market? That's a terrible idea for a first deal.
One of the keys to winning the game is to live in reality. Buying a $100k-120k house that requires renovation for someone that has no experience renovating or operating in that out of state market is a great way to set a pile of money on fire.
@Bryan Nwokem how do you feel about house hacking? That seems to be the best middle ground here if you are open to it.
1. Double check the 6.75% 30 year fixed rate. Even owner occupied rates are not at that level right now. Is it at 6.75% due to a rate buy down or some temporary measure? Is it an adjustable rate? I'd urge you to investigate that further.
2. The path of progress is painfully slow. Gentrifying areas are great if you can hang on, but it always takes longer than you expect.
3. As for the investment, that's a little tight for my liking. There's no margin for vacancy, a major repair, increases in insurance or taxes.
Yes Travis, I am sorry, i should have clearly stated that i was house hacking
@Mike Klarman I respectfully disagree with that take. You're telling new investor to take an out of state flip over just finding a better deal in his own market? That's a terrible idea for a first deal.
One of the keys to winning the game is to live in reality. Buying a $100k-120k house that requires renovation for someone that has no experience renovating or operating in that out of state market is a great way to set a pile of money on fire.
@Bryan Nwokem how do you feel about house hacking? That seems to be the best middle ground here if you are open to it.
I know dozens of investors that not only live OOS they live out of the country. They do nothing, but close. It's all about your team and knowledge. Heck, I live on the beach in FL and have been doing all my business in OH for 10 years. 100s and 100s and 100s of deals. I just locked up 7 more last week, all 80kish, with 1200- 1400 in rent. I may keep them all or flip a couple, TEAM is the key.
All the best
@Bryan Nwokem if it is a house hack, then it changes the calculus of the decision. I don't hate it but you need to and likely can buy it lower than the numbers that you are suggesting. Don't sleep on renting by the room in a single family home if it gets you a property in a better part of town. Something like EaDo, midtown, maybe a small fixer around the heights (more heights adjacent than heights proper due to the budget) that is not betting on the neighborhood turning make the investment work. It's far less comfortable day to day having roommates vs your own side of a duplex, but it would allow you to own an asset in a more desirable neighborhood that will likely see greater appreciation over the long term.
I hope that helps. Feel free to shoot me a message to discuss further if you think that I could be a resource. I have nothing to sell and would be happy to help if you think that I can.
@Bryan Nwokem if it is a house hack, then it changes the calculus of the decision. I don't hate it but you need to and likely can buy it lower than the numbers that you are suggesting. Don't sleep on renting by the room in a single family home if it gets you a property in a better part of town. Something like EaDo, midtown, maybe a small fixer around the heights (more heights adjacent than heights proper due to the budget) that is not betting on the neighborhood turning make the investment work. It's far less comfortable day to day having roommates vs your own side of a duplex, but it would allow you to own an asset in a more desirable neighborhood that will likely see greater appreciation over the long term.
I hope that helps. Feel free to shoot me a message to discuss further if you think that I could be a resource. I have nothing to sell and would be happy to help if you think that I can.
The deal Bryan posted is crap no matter how you spin it. There is a reason it has not sold in a year. Its worth about 250k. Bryan is not anywhere near ready to put offer in on anything ( not attacking him ) He needs to get to a local meeting, or connect with you, learn then apply what he learns,
All the best
I always recommend to start small. I usually talked to very excited people, especially of they are just starting. The best way to start is small. If you are pulling a HELOC or taking family money, leveraging credit cards, using personal savings it took you years to accumulate, whatever the source of money is - unless the source is endless - start small. If you have a 100k in capital, don't go more than 20k investment in any one deal. There will be plenty of time and opportunity to step it up after you've acquired some experience and profit.
You wanna stay liquid as much as possible at all times. So you should have a flipping arm to your REI company. You should always be making money, building cash wealth. You wanna be the investor with 10 projects under their belt last two years, great credit, and that bank statement with 200k+ in cash in it. Lenders will chase you down and offer the world. Cheaper points, cheaper rates, fast closings. You are what they are looking for: Liquid, with great credit and lots of experience.
Cause at the end of the day most of these loans are securitized and sold off to groups of investors who actually hold the paper. And the paper has to be graded before it gets sold. Loans involving investors like I describe above get an A grade and get gobbled up on the open market. But if it is a new investor, minimum liquidity, just ok credit, what grade will that get? That's why there has to be a huge rate of return for the investor/s who holds the paper so that's why newbies have to deal with those 12.5% - 13% rates. because the paper will be a C grade at best.
Lenders get in trouble when they hold too many loans on the books, can't sell them, no one wants them and then while your books are over leveraged the market takes a stiff downturn and now as a lender loans you hold start defaulting and people missing payments. Missing Payments is up 20% - 25% across the industry. This is what happened to Civic.
6.75 is not available anywhere with any buy down today. $390000 sales price with a owner occupied FHA loan and borrower FICO of 695 $3671 is PITI plus PMI of $309 and maybe flood insurance another $280 so close to $4000- 4280. a month. Rent the better larger unit for $1650? You need income of $6300 or more if you have a car loan/student loans/credit cards. This assumes you have $22000 plus or minus for down and closing costs. Plus another $3000 for security lighting, cameras, barred doors, etc..
Crime stats are three times higher than Houston, you need to add security to have a good tenant and not have car windows smashed in. Your vehicle insurance will increase, get it bundled with the house. Do not drive a nice car and never leave visible shiny things in the car or yard.
I see others saying you should buy in cheaper area but they missed that you intend to occupy one unit, I assume your job is there and you can't move to Cleveland or Philadelphia.
Things to consider: this is your first purchase I agree with others to not use all your cash.
Get your loan with an underwriter signed pre-approval not from your Realtor. Know exactly what you are planning.
Federal flood map here put the address in and find out if you need that extra cost
https://msc.fema.gov/portal/home
Get an insurance quote for hazard and flood if required and know exactly where you stand before making an offer.
A property listed for sale almost a year is overpriced. What did the seller pay for it? (this is in the very bottom of the listing).
@Bryan Nwokem since I don't know nothing about real estate since I'm also new the fact that you said this is a new build and based on the rent I would just go $1,700 a month that would be me if I was in that position but then again I don't know numbers. Are you house hacking this since this is your first property?
I would have your agent reach out to the listing agent and ask for more background information. Was the property under contract before and it fell through? If so, why? Do they have an inspection report available they can share with you? What's your ultimate goal with the property? Are you looking to cut your cost of living and house hack? Are you renting both units? Are tenants already in place and if so, are they current on rent? There are a lot of questions that need to be answered before anyone can provide more guidance.
@Bryan Nwokem Great question Bryan. As others have said, this deal doesn't make much sense unless there is some special angle none of us have yet considered that you're aware of.
I would caution you to not jump into a bad deal just to get started. Yes, you'll hear gurus talk about that the first deal never works and that you just need to get some experience, but this will not help you much when you're all out of money, negative cashflow every month, with tenant complaints for some reason, and now you're stuck saving for 4 years again just to get back to the same spot you were in.
This is a really tough market, especially for buy and hold. I keep searching for a better deal and just know that it will take much more effort than it has in years past. You may need to make 50 legitimate offers before you get one accepted. To shorten this, you can try reaching out to every local wholesaler, getting on their list, taking on a rehab project, or something else to force value or buy equity.
Best of luck!