All Forum Posts by: Alexander Felice

I'm certainly not an expert on mold, but I would tell you that nothing should be considered an automatic "deal breaker" in my opinion. Everything can be fixed somehow. The only part that matters is if it can still be profitable. 

Find out what it'll take to fix the problem, if the numbers still work then proceed. Many of the questions you're asking can only be answered by a mold expert. Just hire one, even if it becomes a sunk cost I guarantee you'll learn a ton about mold that will benefit you greatly in the future. 

If you can avoid using your cash, it may be a really good idea. Just depends on the loan terms. If you buy a place that will hold equity at time of sale, then save your money!

My first rental was (is) a condo. What a mistake. I would never buy another condo, nor do I recommend it.  

Monthly expenses can be determined many different ways. There are calculators on BP. A popular rule of thumb is called the 50% rule. 50% of your income will be spent on expenses, not including the debt service. You can find tax costs online, and you can get quotes for home insurance as well. Management is usually 8-10% another 8% for vacancy, maintenance should be accounted for, and lastly cap expenditure. 

Good luck!!! These are good questions! 

oh I wish I had your luck! I love my rental but I've had tenants that didn't and watching them mess up my place only gave me heartache! I fundamentally agree with you though! 

Capital is my hardest part too. I don't make much money but I cut my living expenses to the absolute bone to save for houses. 

No cable, I barely use my HVAC system, I don't eat out, I sold my car and bought a beater, cheap phone plan, etc. It's worked REALLY well for us so far. Although I'm buying rentals, not flips so it works a bit differently. Finding private money will probably be your best bet. 

I've heard there are ways to buy homes with little to no money down. Does anyone have more info on this? @Brandon Turner

I'm in a similar boat, with slightly different numbers.

I don't have much to add other than sometimes it's good to know other people are fretting over the same decision. You're right in that leverage is the obvious better financial math, but can you handle the risk stress over that time. Maybe you could do a little of each. As you (we) gain more properties the risk goes down because of diversification. More properties means less overall vacancy. In the beginning it seems quite tricky though. 

I'm basically just inserting my worthless post in here in hopes that someone smarter will come to the rescue. 

I think employer matched 401k is really hard to argue against. 

It gives you tax advantage, it gives you free income, it gives you diversification, and it's generally only a  small amount of your income. 

That money is not really accessible which isn't ideal, but for many people that can be a  good thing. 

As for the math, you're investing say 5% of your income for a 100% instant return (the match), plus whatever the market return is over time. You may possibly beat this in real estate, but the key here is that it's only 5%. I can't see many situation where that 5%, plus guaranteed match, is going to have an opportunity cost so great that you're losing money overall. 

I think the responses in here are right. The bank isn't going to want to take a short on that deal just like you don't want to take the short deal every month on the property. You've made good on loans with them before, they are open to more funding to you in response. If you tell them you want them to lose out just so you don't lose out that doesn't seem like it would facilitate a mutually beneficial continued relationship. 

Without knowing the market or property condition, is there any improvements you can make to the property that will help you come out ahead in the long run? I know it seems crazy to sink money into a sinking ship but perhaps there is a way to increase rents and value that will make sense later. 

Sorry for not providing more useful information. I wish you luck though!

In my opinion it's generally better to hang on to assets, especially those with equity, whenever possible. You have equity in 217, it sounds like you make enough cash at your regular job so its the potential 63k (minus cost to sell & taxes) worth it to lose a long term asset? 

I would post the hard numbers for converting it to a rental. If you can cash flow, keep your equity, get the tax benefits, and have someone pay the note for you then I would recommend keeping it for sure. Just make sure you are thorough with the rental math. 

You can borrow against the free equity in the home. Generally up to 80% of it.

So if you have a house that appraises for $100k and you owe 50k on it, you theoretically should be able to borrow $40k as a HELOC. This will count as a second mortgage.

Any appreciation gained on the property will be factored in at the time of bank appraisal. Also, you asked if you're paying interest on 2 loans and that's correct. You will have 2 distinct and separate loans against a single collateral. They will have their own terms. 

"Satisfaction is Failure"  Just something I've been telling myself for years

"Commit first, figure it out later" - Grant Cardone 

@Joe Saldana the math you posted is the most used. ARV x .65 - reparairs = MAO. I think @Josh Caldwell said the same thing but he just wrote it wrong.