Real Estate Investor · Orange County, CA · Member since 2009 · 19 posts · 0 votes
I bought a property at foreclosure sale for all cash. I would like to do some more but I run out of money after 4 or 5 of these. I paid 113,800 at the sale and spent around 8k rehabing it. It rents for $1,350 per month. Association dues are 305, taxes 120 or so. My total investment is around $120,000, all documented. I have excellent credit (813 middle fico) and no debt other than my house payment. My income is not great so my rations would be kind of high. I'm guessing around 40% based on my house payment. The property would show cash flow even with the new loan. Right now lots of cash flow since it is free and clear. I won't get my first rent check until December 15th. I just got done rehabbing and that's when the tenants move in. I would like to get around 70% of my 120K back. MY interest is in holding it for around five years...but who knows?
Real Estate Lender · East Longmeadow, MA · Member since 2009 · 176 posts · 21 votes
16y
Mirko,
Your ratio is within criteria for a refinance. You can go to a local or national lender. The national lenders usually will give you longer terms and amortization. You will be able to obtain the 70% LTV you're looking for based on the purchase price and cost of rehab. Or, you can wait until you own the property six months and obtain 70% LTV (cash out) from a new appraisal. Rates should be in the 6's now or later.
Real Estate Investor · Orange County, CA · Member since 2009 · 19 posts · 0 votes
16y
I would be a very happy camper indeed if I could do that. I have an old friend in the mortgage business and I will try to apply with her. She's the one that told me about my (amd my wife's...she pays the bills :-)) fico scores. When we talked a couple of months ago it was about purchase money, not c/o refi. Funny, I was in the mortgage business 30 years, before it got weird, but I am so out of touch now and don't have the time to re-educate myself just to do my own loans.
On a similar matter, it took a lot of labor and time, which I don't have now, to buy the foreclosure at the courthouse steps. The area that I want to buy in is limited and I want condos on bread and butter yet nice complexes. They are there, they just take a long time to come up. A lot of time is wasted attending foreclosure sales only to have cancellations or postponements on the few properties I am interested in. Fun at first, but it eventually gets old. Now I am not able to go to foreclosure sales at all since I am a school teacher as a second career. I would like to find a "runner" that can bid for me with a power of attorney to endorse my cashier's checks but have not found anybody I feel confortable with. I had a guy that was working for another investor and willing to put in my bids (we have different interests, so no overlap) but his investor now has him attending sales in a different area.
In any event, I'm thinking of putting in a few offers on short sales even it they take a long time. I'm thinking all cash will help me get the deals. It will be nice to buy something without having to call a locksmith to go in and see what I really bought.
If I don't have any luck with my broker friend (I trained her), I'll leave a message here.
Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
16y
You need to purchase at a better price than that if you plan to cash flow over the long term.
I know it seems like cash flow to you at this point but when you consider the 50% rule as a landlord you will find that your 1350. rent nets you 675 that you need to put away for expenses and leaves you 675 to pay the PI from.
Assuming the 120K at only 6% that PI would be 719.46 which means you are in the negative cash flow each month of 44.46. This is without even considering the association dues which makes it even that much worse!!!!!!!!!!!
Even if you were able to apply all of the rent back to your cash account (which means you have no repairs over that 5 year period, which is very unlikely) that would only be 81K ( again not considering the association fees that you will have paid out over that 5 year period) returned to your cash account, which is only 67.5% of your initial investment (no ROI).
Read up on the 50% rule in the landlord section and you will understand.