All Forum Posts by: Dick Maykel Ortega

Like Chris Shipman said above, those rates look pretty high. I definitely recommend shopping the loan around. At the very least you will make some relationships with bankers in your community for your next loan. Ask questions to inform yourself about the lender and the loan they are offering you. I would write some advice for questions to ask your lender, but you will be better served by doing some searches on refinancing and BRRR.

Paying double the amount of principal in interest at that rate sounds about right. Pull up a mortgage calculator and run the numbers. You will see how spending a couple hours negotiating a 1% lower rate can significantly impact the final numbers. 

Finally, it sounds like you are trying to scale your business so I would say to borrow as much as possible as long as your numbers still work. You can always pay it back, but refinancing down the line to get another 30k out will not really be financially reasonable. 

Thanks for the quick response. I am going to do that. I remember specifically making sure that provision was in the contract so I should not let it go now. 

In his defense, he is a very unsophisticated seller and he agreed to a lower price counting on the interest that would be paid over the ten years.

He did not realize that the loan could be paid off sooner. What he really wants is for me to hold the loan for ten years, but his attorney told him that was not reasonable and suggested the penalty to appease him. 

I have been working this deal for about 5 months. It is finally closing on Friday. The seller just realized that I could pay this off next month at a great price. He was also offering seller financing as a tax strategy. Now the seller wants to add a prepayment penalty of 3%, 2% and 1% for the 1st, 2nd and 3rd year, respectively. Which is really just $1,800, $1,200 and $600. 

Our initial contract calls for no prepayment penalty so I can probably hold him to it and he could try to blow the deal up for another reason. In reality, I expect he will grudgingly agree. However, I am signing up for a potential ten year relationship with this individual so I do not want to start with an arm wrestle.

I am just trying to get an outside perspective. For what it is worth I expect to hold this property for 5 -10 years, but we all know things change. 

I am leaning towards agreeing because I do not expect to sell within three years and the fee will not break the bank, but I remember from a podcast that the guest (I think Brian Burke) said to get the best deal you can and not to let up just because you have a good deal.

What are your thoughts?

You have justified concerns and you are correct to plan ahead. An attorney in your area that works on construction litigation should be able to answer all your questions relatively quick. A few notes based on experience in Florida. A contractor will have a limited time from the date that he delivers services or materials to place a mechanic's lien on the property. In my area it is 45 days. Then he will have a limited period of time to file a lawsuit or the lien falls off. The benefit (for the contractor) in that case is that the lien comes before he proves his case so if you sell the house before a court rules his lien has to be satisfied and held in escrow until the case is resolved. I bet your city/county, not the state, has specific and perhaps similar laws on point. Beyond the preemptive lien he can just file a suit against you. He does not need a contract to file suit, only certain contracts (like the sale of real property) have to be in writing. At that point, it becomes he said she said and the court or jury determines the truth. Based on the amount in dispute and the lack of sophistication of your contractor I doubt he will spend the money or have the knowledge to file suit. Finally, keep in mind that you have an unoccupied property and people in his situation might result to self help. In other words he might go to the property and take back what he feels he paid for. So make sure your property is properly protected.

@Molly S Ringer

Thank you, Molly. I actually lived in that zip code for sometime in 2006. They really did get hit hard. A family member, against my advice and almost begging, bought a property there for 289k that is now barely worth 150k. 

If I remember correctly all or most of the lots are acres plus. A quick scan of the area shows properties for 100k - 200k. What particular neighborhoods are you seeing properties for sub 100k? Also are you aiming to be closer to the university or Naples(the beach)?

@Stefan Augustyniak

Thanks. I am generally flexible with the cap rate if the overall deal makes sense. For my goal of finding some true buy and holds that are cash flowing I would like to aim for 10% after the property has stabilized. I have seen some good deals in sections of Miami, but the properties need serious rehab.  

@Lance Sager

That sounds great. Would you say that they are in Class B or C neighborhoods? 

Once I move back to South Florida I will have more time to manage properties, but for the next couple of years I want to target minimal headache properties. I am imagining a rehabbed house (nothing fancy but good appliances, HVAC and roof), in a Class B or better neighborhood, and cash flow positive. I know everyone wants this, but I may be willing to pay a little more and I do not necessarily need guaranteed appreciation.

If the deal does not make perfect sense then I will stick to my current strategy of buying locally, trying to break even and counting on appreciation and mortgage pay down. 

Thanks Robert G.

Your post is exactly what I was trying to avoid. As I said, there are good deals everywhere. I did not specify a type of deal. 

Many of us look, work hard, and are flexible in trying to identify alternative opportunities and types of deals. 

This discussion is intended to identify cash flow areas near Miami, if any, and nothing else. This does not mean that my investment portfolio is limited to the topic of this discussion. I am sure there are many other discussion where we can discuss all the great ideas that you mentioned. 

So do you or any other S. FL members know of any specific cash flow areas near Miami? 

If you do not mind sharing, what cities near Miami are you all targeting for cash flow properties.

I have a property in Miami and I am familiar with most of Dade-County and some of Broward County. I am developing my investment plan and my focus will continue to be Miami, but I am interested in finding cities 1-3 hours away where multis and single family homes cash flow nicely.

For example, I understand that Chicago investors have targeted Milwaukee (1.5 hrs away) for cash flow properties because purchase prices where 1/3 and rents were comparably higher.

Also, what are the issues in those locations. For example, it may be difficult to find a management company or a handy man to perform repairs in Lakeworth. Also, if X location is cash flowing nicely, but everyone in the town works for one company that is a non-real estate risk that I would like to be aware of.

So what are your thoughts on cities like Ft. Myers, Naples, St. Petersburg, Boca, etc.

We all understand that there are good deals everywhere, but this post is intended draw out neighborhoods and cities where it is relatively easy to identify good cash flow properties and the issues associated with those locations. 

If you do not mind sharing, what cities near Miami are you all targeting for cash flow properties. 

I have a property in Miami and I am familiar with most of Dade-County and some of Broward County. I am developing my investment plan and my focus will continue to be Miami, but I am interested in finding cities 1-3 hours away where multis and single family homes cash flow nicely. 

For example, I understand that Chicago investors have targeted Milwaukee for cash flow properties because purchase prices where 1/3 and rents were comparably higher. 

Also, what are the issues in those locations. For example, it may be difficult to find a management company or a handy man to perform repairs. Also, if X location is cash flowing nicely, but everyone in the town works for one company that is a non-real estate risk that I would like to be aware of. 

So what are your thoughts on cities like Ft. Myers, Naples, St. Petersburg, Boca, etc. 

We all understand that there are good deals everywhere, but this post is intended draw out neighborhoods and cities where it is relatively easy to identify good cash flow properties and the issues associated with those locations. 

@David O.

Thanks, I will most likely be doing just that before the end of the year. I am going to refi anyway to remove the PMI and lock in a lower interest rate so I will most likely tap into the equity.

Hi All,

I am new member living in the DC Metro Area, but I am originally from Miami. 

I have been on BP for a month absorbing a wealth of information and knowledge. 

Background: I bought my first property five years ago in Miami, FL (Westchester). The property is rented to family and breaking even. I have built solid equity, mostly due to buying at the right time. 

I moved to DC for work, and after three months, I bought again because I refuse to pay rent. 

Goals: I am interested in investing in Miami because I have a partial team and I know the neighborhoods. I plan to be ready for another acquisition in the first quarter of 2016. Due to distance, the goal is to acquire buy and hold MFs. Cash flow is always nice, but I have a few areas where I am willing to break even for a few years. 

My biggest issue now is developing a finance strategy. I am debating on taking advantage of the equity that I have built and the historic low rates or staying conservative and saving for my next down payment. If I understand correctly, my next home will almost certainly have to be 20% down. 

I am a corporate attorney, but I am also developing an expertise in real estate to cover that part of my team. I would love to meet investors and other professionals in the Miami area. 

Cheers!

Dick Maykel