All Forum Posts by: Jon Lafferty

\Thanks everyone for such great responses. I know I am just beginning however I am excited to finally get some skin in the game.

@Chukwudi Motanya these deals can be found in the C- to C neighborhoods. I am focusing on the edge of C- in a C neighborhood. I am willing to pay a slightly higher price to get a different class of tenant. None of these areas will appreciate, however they will cashflow all day. I'll still be cashflowing @ approximately 150 after a 15 year 50k cash out refi if that is the route I take.

I'll mix a starting out and success story in one post. I met the bigger pockets challenge and negotiated my way into my first buy and hold investment. Today was my closing. The property needed some plumbing and electrical fixes however I decided as a true buy and hold to get the plumbing `100% redone and converted to PEX. That set me back 2k. So much for almost turnkey :)

Here are the stats:

purchase price 45k 100% cash

rehab price 3k

Rental price 1k / month

NOI - approx 5500 / annually

cash flow 450 / month

So my goal is to keep the ball rolling and I am eying up two other similar properties. My question is what is the preferred way to get cash out of my home, cash out refi or heloc? The value of the home is approx 75k. I'd like to take out another 50k to purchase a home that needs a more extensive rehab. I believe I'll get a better long term value purchasing that way.

My game plan was to try and find loans from a semi local lender that does portfolio lending. I dont need it for my first few loans but why not start building relationships now.

Thoughts?

Welcome aboard, you will find many like minded individuals here. I see you are already enjoying and hopefully benefiting from the podcasts, I am beginning round 2 of listening myself. My advice would be sit back, learn all you can, enjoy the ride and when the time is right for you make your move.

Good luck!

@Tim Miller I'm on the fence about 401k funds at this point. I guess I should clarify that when I say I raided my 401k, I really only cashed out around 30% and left the other 70% in tact. The best thing about my 401k is that my company matches 100% up to 4% on contributions. The thing that really bugs me about 401k's in general are that even though it is my money I can't take it out unless I change employment or reach 59 yo. I get that it is for my own protection and compound interest over time has been amazing for my 401k but it just bugs me not being able to access my own money when I see fit.

Thanks so much for the comment.

@Mike D'Arrigo thank you so much for that information. Should I go forward with this deal you just saved me some serious time and interest.

@Mike D'Arrigo thanks for the information. I always thought a line of credit based on equity needed minimal if any underwriting. Are you suggesting I season the property for 6-12 months and just do a cash out refi? That would definitely get me a lower interest rate and payment @ 15 years. If I did this I would need to put the 13k in repairs on a seperate line of credit, (credit cards).

It feels like I am close but maybe pushing the envelope a little on this deal.

Thank you everyone for you insight into this first deal

@Jordan Thibodeau I am planning on a buy and hold. This location has a large rental population and would be considered a depressed smaller town in our area. Most folks in this area either work in a nearby city (30 minutes away) or are HUD tenants. Since I was purchasing property 1 in cash and paying in full I thought I would be able to get a line of credit @ 5-6% interest for 10 years within 0-6 months.

@Paul Timmins thank you for slowing me down and advising me to smell the roses a bit. :0)

@Mike D'Arrigo this is a cash only deal so and I would hope to pull a line of credit from the homes. This just seams easier than a mortgage refi although a few interest points higher.

I guess my biggest question was because I am buying property 2 at close to retail numbers to sweeten the deal on property 1 am I making a newb mistake?

So here is an interesting newbie deal to analyze. It seems that as I run the numbers the first one seems to be the toughest.

So I have a small savings and raided the 401k because I want to start an REI business. Here is a deal I am analyzing and would like others input.

This is a two property deal. The way the deal is laid out I am getting a good deal on property1 and I am getting a retail price on property 2. This is the only way I could get the good deal on property1 with the amount of cash I have. The plan is to take out a line of credit on property 1 asap and pay off the note on property 2. This would leave me with a $350 / month payment @ 10 years.

Property1 – Purchase @ 45000 paid in cash

Turnkey property with 0 rehab cost

Rented @ 1050 (currently occupied)

NOI - $5259

Cash flow - $438 / month ($92 after 10 year line of credit)

ARV – 65-75k

Property2 – purchase @ 40000, 5k down and owner holds 35000 @ 18 months.

13k rehab cost, 8k of this is oil to gas heat conversion. Brand new gas system.

Previously rented at $950

Once paid in full it will have an NOI of $3854

Cash flow - $321 / month

ARV – 50k

All NOI are after taxes, 6% vacancy and 10% repair costs added in.

So for someone trying to get started what do you think? My gut tells me there are better deals out there but they may be tough with my small amount of startup capital.

How about if your rental has an oil heat system and you are concerned they will consistently run the system dry. I was looking into a property with oil and thought I would need to build in the cost of oil into the rental to keep all systems up and operational until I can convert to gas and push it back to tenant.

@Annette Hibbler you got right to the point of my question. I have really had the OPM epiphany lately and realize it may be best for me to use my little chunk of cash to spread myself across the board as much as possible, ie: 1-3 rentals.

@Abel Vazquez I agree with you that a duplex can offer more cash flow however at my stage in the game as an early investor I like the exit strategy an SFR give's me.