All Forum Posts by: Aaron F.

Have you seen the price of lumber lately? I would try to avoid replacement if the wood is in good shape. I just went through this, but not with super thick paint, so take this with a grain of salt. Pressure washer first and then rent the big floor sander to take down the rest and smooth the grain. Ours looked like new. 

Do you have any special strategies for finding REO deals? I have picked up 2 of these that ended up on the MLS but what has been your experience?

At least for one popular guru, this is part of the big sales pitch. Convince listeners it is critical to invest in real estate but foolish to invest in less than 32 units, then mention you have a great fund they can invest in. Come on, maaaaaan!

If I don’t have anything better to do with my cash at the moment, I don’t mind having it in equity. Saving the mortgage interest isn’t exactly productive use of money but it’s better than sitting in the bank while waiting to find a deal. Can be accessed if needed. It also reduces closing costs to pay cash. 

The strategy I have taken is different than those above and takes less cash but more work. I buy cheaper properties for cash with a criteria of 20% net return per year. This means buying significantly under market and doing major renovations to add value. My strategy gets you to $50k net cash flow with $250k cash but you probably have to leave a market with $200k median home prices. You also have to get dirty and learn skills obsessively. 

Example: trashed 3/2 foreclosure, working class neighborhood, $16k purchase and $10k Reno  + 6 months working weekends to fix it up. Current value $80k and rents for $750. The way I work it out is 6k net cash flow on $26k cash. Now there is also the value of my time but I have been well compensated in equity if I wanted to pull it out. See this as an alternative route if you’re trying to make it work with less cash, avoid massive debt, and learn a lot about houses during the process. 

Have you run into liability claims such as injuries that have included you as the title holder? Has showing land contract documents been enough to remove you from those claims?

Every property I have purchased was assessed higher than my purchase price and I appeal every time. Build a good relationship with your township or county assessor. Take some evidence  of value. They may require an appraisal but if they like you they might take a broker price opinion or even closing documents showing purchase price. Now if you paid more than previous assessment, this won’t help. 

Yes, depending on the area, your skills or aptitude to learn skills, and ability to get more cash as time goes by. 

A couple scenarios where I have done this are a $10k cash foreclosure purchase in a poor neighborhood. This took lots of sweat equity and a lot of learning. During rehab I put more money in a little at a time. Another is a 20% down purchase on a $30k home in a working class neighborhood. That’s $6k + approx $2k for closing. Leaves you $2k upfront for starting rehab. 

These purchases are not in hot areas and they’re getting harder to find. Or maybe I just don’t want to do that much work anymore. 

You will need to have more cash coming in to make these work if rehab is extensive (it will be) and for reserves. Also you really need to learn the difference between cosmetic issues and the big structural ones. If you don’t have that knowledge, hire a reputable inspector and go with him for the full inspection. Ask questions and take notes. 

One thing not mentioned is lead paint. You can buy cheap and easy kits to test. I also understand retro insulation in walls can be an issue because old houses are not air/water/vapor sealed and require air flow to dry out the framing and prevent rot. Definitely inspect for termite damage. There is a lot to look out for but, at least where I live, the return is much better with older homes. 

I have only read the first 7 pages of this thread so forgive me if this has been asked. I started applying and came to a point that says using funds for ineligible uses will result in serious fines. This article shows some ineligible uses: https://www.sba.gov/sites/defa...

It seems the money is not able to be used for repairs or further investment and cannot be disbursed to an owner other than for services provided to the company. 

If an investor does not have much in the way of mortgage debts, how useful is this loan? Maybe it can pay taxes, insurance, a fair rate for property management provided by the owner.. but it is maybe not so useful in supplementing all the anticipated lost rental income used for living. Thoughts?