Just went to look at my first investment property and had a rude awakening.
Everyone talks about getting houses below market value- my realtor informed me that houses in my county are getting 96-99% of asking price. Strike one.
Based on rents in my area, houses like the one I saw are fetching around $1500/mo.
On a $130k loan (after 20% down), mortgage payment, insurance, taxes, property management, etc, I'd have to pay about $200/mo additional on a 15yr mtge, or break even on a 30yr. strike two.
I need some help or strike three is coming, and I'll be out before I even took a swing :(
If you're looking for properties on the MLS in a hot market, you're not going to find anything below market value. You're either going to have to go off market or a little further out from where you live. If finding a great investment property at a great price was as easy as checking out one house on the MLS, everyone would be doing it. Get to know professionals in the industry and let them know what you're looking for. Network with other investors, wholesalers, agents, and attorneys. Try a direct mail campaign to find motivated sellers. Stick with it and I'm sure you'll find it'll pay off eventually.
Sounds like you need to be looking at off market properties, REOs foreclosure and the like. Be sure to use the analyze tool here on BP.
The 92 to 96% is an average. Some go for more that asking price some go for less, some go for a LOT less. Some are priced below market to start with.
More importantly, that statistic is referring to Listed properties on the MLS. That means they have wide expose to the market and are likely to get market value. I've done well over 100 deals. I have bought perhaps 5% from the MLS. Most of the deals I do are directly with the owner or Investor to investor.
In your scenario, you have a price of $162,500 with a rent of $1,500. This means the monthly rent is less than 1% of the purchase price. Few properties will cash flow after expenses if the don't meet the 1% test. Many here on BP subscribe to the 2% rule (2% test).
You are probably looking at the wrong areas/type of properties. I don't know Tampa but I bet within 90 minutes there are properties that would make good rentals.
Most is a place that you can find deals but not a place to rely on finding deals. PM me and I'd love to tell you about where I find deals. The short of it would be: direct mail marketing, wholesalers, the REIA, and property management firms. Good luck and let us know if we can help.
BTW- a realtor is economically incentivized in you paying more...
I agree with everyone here. Off market are better but you don't always have the time for bank financing. If you're looking within 90 minutes of Tampa for buy and hold I suggest you research Lakeland.
Don´t worry about getting off to a rocky start - happens to everyone.
One thing every experienced investor will agree with is that you have to be very committed to make this work as a career or hobby. In a hot market like Tampa, you might easily have to view and analyse 20 deals to submit 5 offers and get 1 accepted. You need to prepare yourself for that. It also can take time to build the momentum and contacts needed to receive those 20 opportunities.
Investor friendly agents are great, but there is certainly no need to rely on them as your only source of deals. Check out wholesalers, for sale by owners, hubzu.com, auction.com.
Stay optimistic and work hard Carlos - whether you succeed or not is entirely up to you.
Tampa is tough right now. it is a sellers market for sure. Keep looking and you will find a deal. double check most of the wholesalers in the area. some have decent deals and others are no deal at all; no meat on the bone for you.
I'm a Realtor in the Tampa/Sarasota area. I work with several investors, but am in the process of purchasing MY first buy and hold. Its in the Tampa area. It is a triplex that we are getting for roughly 269k. Two of the larger units rent out for 1200 and the smaller unit rents out for 900. The property is going to require a little bit of updating, but is overall a good structure. I feel the property is a good deal, but might not work for everyone. There are good deals on the MLS, you just need to be patient. I think it took me 5-6 months to land this one. Inventory is low. The right thing will come along. Have faith!
Tampa is a strange market at the moment. Where are you looking? S Tampa is near impossible to find deals. But the further you get from the epicenter of S Tampa the more deals available.
Out of curiosity how are Tampa Real estate investors finding the Seminole heights area?
Thank you all for the info and encouragement.
Aaron- how do I find a wholesaler in my area?
Eric- I'm looking in the Gibsonton/Riverview area (about 20-30 min from Tampa)
Tristan- I have no idea about Seminole heights. I drive through there maybe once or twice a week and wonder how they ever got that area trendy. My brother in law bought a house there with some friends at the peak in '06…still trying to stage a comeback.
For my part, I'm going to be patient and keep looking (especially off MLS) and wait for the right opportunity and prepare to strike when the iron is hot.
Thanks again, everyone…What a great site BP is!!!
Good deals happen when you arent looking , you will make a wrong turn while driving and find a house . You mention that you are looking for properties and a year later someone calls with a house to sell . Great deals come around when you just spent all your available cash .
Why take out a 15 year loan to start when you can take a 30 year with a lower payment and once you build some equity refi into a 15?
very good point, Jacqueline. I am philosophically opposed to the 30 year loan, as I see it as a rip off. Practically speaking, however, I see it as a tool that can be used as you describe.
In the end, if I can't at least break even with a 15 year loan, I think it's probably not a good investment, and I should just steer clear.
A 30yr loan is more OPM and less of yours. If you were to buy-until-die, then sure the 15yr is right, but for 3-7yr hold, max out the terms of the load to also max out your cash flow.
Carlos, you have a plan before entering a loan. Follow the plan and it turns out well.
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