Rental Property Investor · Clarksville, TN · Member since 2019 · 39 posts · 15 votes
Saved about 100k to get into the business. Sent 2k yellow letters with a few hits. Steadily getting more hits, but here lies the problem. Spent 20k on 9 acres of vacant land in the heart of town. Then, made the knee jerk decision to pay cash for a 62k rental once I learned it would need flood insurance. Otherwise would have financed it.
Go figure, now I've got more opportunities knocking, and most of my cash is gone; in the blink of an eye. Of course, to finance, banks require 20% of sale price, regardless how good the LTV is. What do I do?
Thinking of selling the rental and chalking it up as a lesson learned. Then, pursue buying as originally planned.
Lesson learned? You haven't finished. Acquiring is just one part of real estate investing. Any idiot can acquire - it's what you do with it that makes you genius (not to mention rich). Get back in there. You could finance the rental now or even the land. You could flip both. You could bring in a development partner for the land deal. Geez...you got stuff. Make it work for you. And, there will always be opportunities knocking and if you jump at every one, guess where you'll be? Right where you are. Start plotting and scheming on how you make what you have into something that shows you were right all along. I think you might just be...
Start with your goals - what are they? Are you looking for quick cash via wholesaling? Are you looking for cashflow? Etc...
I saw your other posting about the land that you bought. It seems like you got a great deal, why not flip that lot for a profit to get some cash? Or if there is enough meat on the bone, flip the rental for some cash. Need more details, but start with your goal in mind and work from there.
that can happen, but don't let it stop you. What about a cash out refi on the all-cash property? What about a partner on the new purchase? What about going for seller financing on a new purchase? Then again there's a HELOC we might be able to take out on your cash deal. Maybe stop focusing on the problem and start focusing more on possible solutions. Just a suggestion. Good luck with your investing. There's always a way!
Lesson learned? You haven't finished. Acquiring is just one part of real estate investing. Any idiot can acquire - it's what you do with it that makes you genius (not to mention rich). Get back in there. You could finance the rental now or even the land. You could flip both. You could bring in a development partner for the land deal. Geez...you got stuff. Make it work for you. And, there will always be opportunities knocking and if you jump at every one, guess where you'll be? Right where you are. Start plotting and scheming on how you make what you have into something that shows you were right all along. I think you might just be...
I'd be silly not to refi the cash home if I need extra cash. Especially since the only reason I didn't was to save on flood insurance. I'd be spending more on a hard money loan in interest than I would on flood ins.
@Andy Bauman It would be a long road to find enough rentals to replace my income all together, so it seems like wholeselling and flipping is the way to go for now. However, I'm hoping to exit my current job within a year (15 yr finance auto finance mgr). Still trying to formulate my goals to be able to do so.
@Caleb Brown I've been doing around 50 to 100 letters every 3-4 days. Time to circle back and send them all a postcard.
@Patricia Steiner That's why I come to BP. For the encouragement like yours!! Didn't mean I was down and out, just need to find ways to be creative. Truth be told, the vacant land is for long term personal use down the road for another business venture. It's got river frontage which will prove beneficial. So no real income avail there. Not to mention, it too is in a flood zone. haha.
@Marc Winter I've got a meeting with a fella in the morning. Going to see what he has in the seller financing field. He has several properties and is nearing retirement. Thanks so much for your encouragement.
Also, off subject, where can I find a generic contract to sign with motivated sellers. Figured there would be a cookie cutter version on the BP website somewhere.
Is the rental property rented and cash flowing? If you put that money in the bank it's going to earn you 100 bucks a month. You doing better than that?
What's the plan for the city acreage? Is it in demand? Is it polluted? Are there structures on it?
@John Teachout The house should be rented out next week. Had to to paint and do a little maintenance. Rent should bring 850 all profit, since there's no note.
Land is vacant and very undesirable with nothing more than a power line and some trees. As mentioned, it was a personal purchase for later use. Don't want to build anything on it and have to pay flood insurance. Wonder how hard it would be to throw a trailer on it and rent it out for a few years to have some sort of added income.
The land would need flood insurance or the rental property? Or both? I'm confused on that.
And just be sure you're setting aside the appropriate costs for your rental. It's not all profit. Take out for capex, taxes, insurance, vacancy, maintenance and so forth. So your "profit" is probably more in the $450 to $500 range. Still about 5 times better than the money sitting in an online bank account. Congrats.
62k is a lower end price point of town. Where is your property? You could probably value add and refinance a portion out... we’ve been able to do some full rehabs starting as high as 77k and be alright. You might not be in a cut your losses situation yet...
Its not as bad as you think. Look, its all yours and paid in full! That's money in the bank that you could borrow against, or rent/sell one or both . The piece of land, whats the surrounding area like and what can you build there that could justify a Need. Maybe a strip mall, commercial residential building, commercial mixed use building. Possibly partner with a developer. How about fixing the rental unit and either hold it or sell it. You have options and the best part is you don't carry a note. Good Luck!
@Marc Winter on a cash our refi. Is there a down payment? I know there are closing fees, I’ve considered this option.
A cash-out refinance is a mortgage on a property you already own. There is no 'down payment' involved. Suggest you study the blogs or listen to podcasts to get better understanding of the different types of financing available to you. Keep studying and learning and you'll do fine!
You get creative. There are other ways to get money to finance properties. You could refinance your paid off property, you could partner with someone else or you could find a deal with seller financing.
Chris - could you sell some of your leads? Share one of the Rental Estimator calculators without the address or any giveaway information and sell addresses and who responded to your letters to interested investors?
You could also sell training to your methods of finding these properties. I'd buy something like that, especially if it was a one on one thing. Or BP scenario training - how to assess good and bad deals etc.
You need to take a step back and re-assess your current situation. Learning how to raise private capital and develop creative acquisition strategies is key for you. Any obstacle can be overcome. It always comes back to personal development and education. Knowledge is how you mitigate risk and move forward powerfully. Shoot me a message if you need some personal guidance as well. I am willing to make some time for you if you're open. If not, good luck and dont stop learning!
@John Teachout The house should be rented out next week. Had to to paint and do a little maintenance. Rent should bring 850 all profit, since there's no note.
I don't know that I would call that $850 a month profit. For the purchase price of $62k rented at $850/mnth that is a gross of $10,200/year. You will make profit after 6 years of paying yourself back for your initial investment of $62K without taking into account any capex, vacancies or repairs, all while self managing if that is your intent. I would leverage some of that into other investments. If you refinanced at 75% LTV you would have $46K to invest in other properties given that the property appraises at $62k. You would also have 25% or $16k equity left in the first house. I suppose the hard part would be finding a bank to do such a small loan and you would have to consider if the closing costs were worth it. But for arguments sake let's say the payments (PITI) were $500 and the rent was $850. You are now cash flowing $350/mth. and it would take you 3.8 years to pay yourself back the $16K investment left in the property.
Chris, listen yes you may have been a bit scattered brain in your approach jumping from rental and then to land and now to these new "opportunities".
STOP
Get back to the drawing board and pick 1 strategy that opens you up to hands-on management so that you can give yourself some time to learn on the job.
Also, get with an accountability partner in that particular strategy you pick.
As for the assets you've acquired, you could sell those even if you break even to get back to your initial seed capital if you think your new goals did not align with the assets.
It's never a good idea to skip the goals-on-paper and WHY AM I DOINGTHIS steps!
@Marc Winter hello my name is Malcolm Phillips I am new to this site interested in learning and networking may I ask for your Assistance to answer further questions reguarding your comment post I’ve noticed.thank you have a great day.
@Anthony Rosa hello my name is Malcolm Phillips I am new to this site interested in learning and networking may I ask for your Assistance to answer further questions reguarding your comment post I’ve noticed.thank you have a great day.
@Anthony Rosa hello my name is Malcolm Phillips I am new to this site interested in learning and networking may I ask for your Assistance to answer further questions reguarding your comment post I’ve noticed.thank you have a great day.
Hi Malcolm, Sure you can ask me questions and I'll gladly help if I can