Help with First Deal
Two young, 20 year old investors here looking for help with our first potential deal.
Here's the outline of our strategy thus far:
-Seeking a house with motivated seller for an Owner Finance deal (we have extremely limited capital)
-Looking to (best case) finance a house in the 100k-120k range with no money down.
-Own house under an LLC for obvious reasons.
-House will be a rental property for cash flow
-Expand business aggressively after first deal. (Buy more rental properties)
That said, we have found a house that potentially meets our criteria and looks promising. Here's a rough outline of the property and the CMA we (think) did correctly using KellerINK's worksheets.
Home is FOR SALE BY OWNER
List Price: $123,000
Fair Market Value: $118,000
Discount (%,$): 10%, $11,800
Purchase Price (Max Offer Price): $106,200
Percent Down: 25%
Down Payment Amt: $26,550
Amount Financed: $79,650
Interest Rate: 6.94%
Cost of Repairs (Make Ready): $11,000
Length of Mortgage (Years): 30
Payment (Monthly)
Monthly Mortgage Payment: $526.71
Rental Income (Monthly)
1 Tenant: $1000
Gross Rental Income: $1000
Vacancy Rate: 5%
Net Rental Income: $950
Expenses
Maintenance Reserve: $50
PropertyTaxes: $59.58
Insurance: $88
Total Expenses: $197.58
Net Operating Income: $752.42
Mortgage payment: $526.71
Total Cash In: $37,550.00
Net Cash Flow: $225.71
With all of this information, I have several specific questions.We filled this out using super conservative numbers. So a 25% down payment would be extremely pushing it for us capital wise.
1. Did we fill out this worksheet with reasonable numbers and is this a deal that can be done with less conservative numbers. (No, or lower money down)
2. I have started the process of forming the LLC. Submitted a request to reserve the name. After I get the name approval, and file the paperwork to form the LLC, how do I obtain a Tax ID number to open a bank account under the LLC?
3. From my research, it is my understanding that we need 3, possibly 4 different contractors to do the deal. The Real Estate Lawyer, Home Inspector, Estimator, and Buying Agent. Which contractors are absolutely necessary and which ones can we get away with not using and just do the work ourselves? (For important things like submitting an offer)
4. Do we even really need a buying Agent? (Kind of the same as question 3)
5. If so, should we (as in my business partner and myself) contact the seller directly, or should we have a buying Agent contact the seller and come with us to look at the house?
Personally, I have the tendency to want to be really aggressive with this and just call the seller right now, but I want to do this the right way. We are SUPER newbs to this and are not afraid of admitting that we have NO IDEA what we're doing, which is why I'm here to learn. Thanks in advance for the help.