I have found my first property. It is a Fannie Mae Home Path Renovation. I am going to make an offer of 50K with 10K renovations (to make it pretty.) This is what the contractor said it should take. The renovations must be included in the mortgage. Home inspection to follow, however them home seems to be in good shape. New roof in 2002. Break down....
Loan Amt 45k (30 yrs)
Down Payment 15K (I will have to use a HELOC)
Mortgage $256 a month
Taxes and Insurance $200 a month
Payment on HELOC $200 a month
Property Management 10% of rent
This house should rent from $950-$1000
The homes in the area are selling for 100K +
I do have 10K in money markets if I needed for expenses, ie, loss of rent, repairs, ect.
ANY thoughts, Ideas, help, or just a vote of confidence to help me get into the buy and hold game. Looking for passive income so that I may retire :)
Have you discussed this with a lender yet? Very few lenders will loan $45K on a property you're purchasing for $50K as an investment.
Sounds like an okay deal if you can get it financed. I'd make sure you've got the financing figured out before going too much further. It sounds like you'll probably be break-even on this property until the HELOC is paid off. So maybe netting about $200/month, but that $200 will be going to pay off HELOC instead of in your pocket. Be prepared to not make much money if you're financing at 100% like this.
Thanks Michael! My plan is to refi with cash out in a year to pay off the HELOC. I did speak with a Loan Officer last week when the property was 10K more. The price has dropped since then so I will call him back today. Last week there did not seem to be a problem, however, we all know how things can change.
In the learn section there are some very good internal controls to allow you to monitor your expenses. Don't forget time is your enemy. Don't let the contractor drag his/her feet. Start you marketing preperations while the house is under cosmetic surgery so you can start showing ASAP. The quicker you rent it the better off you are. Have your renter agreements and screening materials all lined up ahead of time. Congratualations.
@Lorie Mizell I'm thinking that the easiest mistake You could make, is to Under-capitilize this First property. If this is a Fannie Mae Home Path Renovation deal, I would go for reserves in the renovation part of the mortgage.
I think it's up to $35k for Renovation funds. Think long and hard how much this is going to cost. . . Then add 25%. Please don't get caught short, it's no fun at all.
Keep us updated, John
Hey @Lorie Mizell welcome to BP!
Hi Lorie, and welcome to BP! I’m a ‘fix and hold’ investor from the Bay Area in CA, and loving it! But you’ll find a variety of every type of investor on the site, and everyone is amazingly helpful. Some pointers for you: The "Learn" link across the top navigation bar has lots of great info, and so do BP members! You can click on the ‘vote’ button if you like someone's post or is helpful, and there are ‘awards’ to earn on your profile. And you can tag people by typing @ before you type their name, then clicking their name at the bottom of the message box. Welcome to the site, and good luck in everything!
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