Real Estate Investor · Summerville, SC · Member since 2014 · 62 posts · 2 votes
ok mentors & guru's here is my question to EVERYONE i just aquired 5 brand new homes in summerville SC (cane bay plantation) from lennar . 1 will be my home & the 4 others will be for investment. all 5 are sfh 4br 3.5 ba. the prices are a avg of $203,0000.00 i am puting down 25% on all of them my credit is good & income also. my question is once i settle in after lets say 3-6 months how can i aquire more homes? most of my $ are going to these 5 homes. programs, tips & tricks , Leverage, etc i want to continue to aquire as many homes as i can get. please advise :)
Also, you're asking the wrong question. Quality of investments is more important than quantity. Would you rather own 10 non-cash flowing properties or 1 that cash flows $1,000 a month?
I'd take the second. I do not invest for appreciation alone. That's speculative.
Investor · Summerville, SC · Member since 2014 · 43 posts · 12 votes
11y
Dang man, 5 houses at one time!? I'm closing on ONE (also my first rental) Townhouse in North Charleston and its been a pain! But its an REO property that was on HUBZU so maybe that's why lol. Congrats and best of luck though!
ok mentors & guru's here is my question to EVERYONE i just aquired 5 brand new homes in summerville SC (cane bay plantation) from lennar . 1 will be my home & the 4 others will be for investment. all 5 are sfh 4br 3.5 ba. the prices are a avg of $203,0000.00 i am puting down 25% on all of them my credit is good & income also. my question is once i settle in after lets say 3-6 months how can i aquire more homes? most of my $ are going to these 5 homes. programs, tips & tricks , Leverage, etc i want to continue to aquire as many homes as i can get. please advise :)
Do they cash flow? At a purchase price of $203k, I'd bet not because they're likely renting for around $1,200 to $1,300 a month. FYI: I buy properties at ~$100k that rent for $1,200+ per month.
Assuming I'm wrong and they do cash flow, you're going to have to wait a bit to build equity then do some cash-out refis to acquire more property.
Also, you're asking the wrong question. Quality of investments is more important than quantity. Would you rather own 10 non-cash flowing properties or 1 that cash flows $1,000 a month?
I'd take the second. I do not invest for appreciation alone. That's speculative.
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
11y
I'm not exactly sure what you're looking for. If you're running short on cash to invest, then it would depend on your rental income and cash flow to generate more down payments. We're finding loans 5-10 are more difficult, as finding conventional lenders to finance 5-10 is hard, but we don't want the higher rates and shorter-term options that we have been finding with the local banks. We travel too much for work to focus on flipping some to get the cash for others, but feel that is a great option when we settle down more. Right now, we are focusing on saving up the cash flow from the others while searching out decent lenders. Not sure that helps you, but that's what we've found.
Rental Property Investor · Indialantic, FL · Member since 2014 · 34 posts · 21 votes
11y
Wow. 5 (almost) identical homes in the same neighborhood? Sounds like you have all your investment eggs in the same basket, no offense.
I'm curious, why this strategy? Why purchase so many at the same time in the same development?
To answer your question; "once i settle in after lets say 3-6 months how can i aquire more homes?" -- I wouldn't. You say most of your money is essentially earmarked for these 5 homes and it sounds like they're not even producing cash flow yet since you state "the rents will be $1600.00 per month" ... not that they are actually renting for $1600/mo.
Real Estate Investor · Summerville, SC · Member since 2014 · 62 posts · 2 votes
11y
I got a great deal and a great community and rentals are very rare there A lot of demand. For rentals there very low supplycane Bay plantation is the hottest area of Charleston South Carolina now. The demographics and income supports it I'm in the lower end of the price range for the area also. Most of the four bedrooms 3 1/2 baths are in the 250kto 275kto 299k range I added an extra bedroom and bathroom to the home to justify the difference and more value to the home. For rental and resell in the future.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
11y
What I am hearing here is that people are thinking you are possibly overextending yourself if you continue buying when you have little cash left and a relatively small margin for error (vacancies, bad tenants etc.). If you have a large personal income then that can go a long way toward protecting you from running out of cash when things go wrong. Good luck.
Real Estate Investor · Summerville, SC · Member since 2014 · 62 posts · 2 votes
11y
Thank you great advice that is why I said in a previous post earlier that I would wait several months before going in for more properties I'm just trying learn and understand how to set myself up for the future great advice thank you very much.
Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
11y
Any chance you can still cancel the deal even if it costs you some bucks? Here's why the first four properties I bought were new ones and they have been a pretty bad investment, granted some of that is poor timing but still. They've probably gone up maybe 20-30% in the last few years after dropping 40% or more. Only one of the four cash flows. I learned my lesson and have never even thought about buying new properties since I bought those four. I now invest solely in foreclosures. Some of them have gone up 100% in the same timeframe as the other properties went up 20-30%.
IMHO you'd be a heck of a lot better off spending your money on foreclosures that cash flow immediately.
Investor · Rock Hill, SC · Member since 2014 · 122 posts · 33 votes
11y
You'll have to go to a portfolio lender after 4-5 houses with mortgages. Slightly higher rates, etc.
To get cash back out of your rentals, you'll have to wait a year for renter history and you might get 75% LTV for your refi's.
Another option is to partner with another local investor, create an LLC and let him/her buy investment property using their good DTI, where you still invest cash to help cover the new property purchases.
Or use the snowball theory and focus on paying off a property and then have the ability to mortgage new properties.
Disclaimer: I'm by no means an expert. I just closed my 1st property with a partner this month.
I'd like to know where you found a lender to lend you $700k+ on these 5 houses (I'm guessing based on your figures). Not trying to pry, but your income must be pretty hefty to get the debt to income ratios to work out.
Also, how sure are you that you'll get $1600/mo for these. That's more than I would have guessed for Cane Bay but it's not been my area of focus so I'm open to being surprised.
Have you figured out what your taxes will be? They're pretty high up that way and could easily run $300/mo for the non-owner occupied properties.
On brand new homes, your maintenance should be lower. In that neighborhood and at that price point I'm guessing they're vinyl siding which is nearly maintenance free... Are you figuring on a property manager or will you self manage?
I think if the real estate market in Charleston continues the way it is now, that you'll do ok and may even come close to your expected cap rate but if there's a hiccup or anything like 2008, you might need some deep pockets to stay afloat.
Charleston, SC · Member since 2013 · 380 posts · 157 votes
11y
Sorry, I realized that I didnt' answer your original question but I think Kevin Nichols pretty much did. I know a real estate attorney who isn't low priced but has leads on some pretty creative financing possibilities if you're interested.
Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
11y
Thomas,
You can get up to 10 properties financed and fannie mae will use your rental income now. You don't have to wait 2 years or any other period of time so no portfolio lenders are needed until you get over the 10 mortgaged amount.
I would hold off on getting more homes though for now so that you don't over extend yourself. Feel out your assets and then expand after you have a more than a year under your belt.
Also remember that after one year you won't be able to use 75% of the lease agreements. you'll have to go off your schedule E. So even though it's nice to write off a lot just also remember that the potential negative income could hurt you depending on how much you make per year. You're going to need to work with a Loan Officer who understands your income from A to Z.
I wish you the best of luck and have a great night Sir.
Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
11y
You should still be able to get loans 6-10 from most regular banks. After that, you'll need a portfolio lender. I know of one if anyone needs a contact.
I think you are not calculating your NOI correctly. I am assuming you are financing $152k at 4.5% which is about $1,050.00/month, $400/month ~2% Taxes (I don't know what are the taxes in SC, ive heard they are 4%. If so, double that - use $800), insurance $80. This leave you with $1,530/month with expenses. Assuming you don't have any problems with them (because they are new, but they always do) and you don't have any vacancies (you always do) and your ability to get the asking rent (you probably would not), you are making about $70/month.
Now, let's be realistic: 12%(one month) for vacancies, 10% for repairs and $50 less rent per month to attract renters fast (this builder probably sold a lot of homes to other investors) you are having the following expenses: $1,871.00 = $186(12% of 1550) + $155 (10%) + $1,530. NOI = NEGATIVE $321.00. I'm assuming you are going to manage them yourself.
And to make the matters worse, here is how the bank sees your income:
RENT = 75% of 1550 = $1,162.50
expenses = $1,685 = $1530 + 155.
NOI = NEGATIVE $522.5 - per property. With one property as primary residence and 4 rental your monthly expenses are: $3,775 = $1,685+ 4*$522.5
To qualify for your 6th property (assuming you have no other credit expenses) you'll have to make over $9,207.00/month (or over $110.5k/year). $3,775 = 41% of $9,207. In addition you will have to have as reserves 6 months of expenses which comes to about $50,550.00 = 5 properties *$1,685 * 6 months.
Actually with this calculation you cannot buy another property. I forgot to include the purchasing price and servicing the loan on the new property. Lets redo it for the same exact property as those 5: expenses = $4,297.50/month. Income $10,481/month($125.8k/year). reserves: $60,660.00 = 6 properties * $1,685 * 6 months.
I didn't calculate your return on investment because you have none. As they say, the money in real estate are made when you purchase the property but you realize it when you sell.
A lot of people get swindled by unscrupulous builders into thinking they got a great investment when in reality they don't. For $249k you could have gotten this fourplex: 2636 Fassitt Rd, North Charleston, SC 29406 that isn't even a great deal but brings about $2,200/month which is about $5,975.00 more than what you have now.
Real Estate Investor · Summerville, SC · Member since 2014 · 62 posts · 2 votes
11y
thanks for the view points,
the rent will be 1625 pm.i have done 3 months research in the cane bay plantation and demand is very HIGH & supply is LOW.my all in monthly cost is 1,345.00 pm inc tax,p&i hoa, ins etc. 152kx360 & 4.5 apr. & yes my income supports all 5 without rental income.& credit is good. & as i said before i will be looking to aquire more homes" after i settle in" i need to gather info now to set myself up for that time.