All Forum Posts by: Andrew Johnson

@Ryan Canfield I think @Kreighton Reed is right on the money.  I know it's 9 months away but I think you should also ask about loan terms, if they have a debt-to-income threshold, if they are full recourse loans, etc.  I don't know that you'll find massive rate/term differences within community banks that service the same area, but you never know.

@Brady Holt Start with one and figure out how much time you have to invest in the property post-sale.  If you want to buy value-add properties it's a different world that buying something that was recently rehabbed.  Not to mention if you expand geographically you end up with different property managers in different cities/states and life can become complicated.  Out-of-state value-add could be even more complicated with multiple rehabs going on concurrently and capital just flying out the door!  Get your feet wet with one deal and then look to scale.  The biggest risk is that you set an arbitrary goal of "1 per month" and then you pick the best deal that month instead of truly looking for the right properties in the right locations with the right cap rate, etc. 

@Peter G. The 1% rule is just a guideline.  It doesn't take into account factors like property age.  A 2% property that needs a new roof next year and has an HVAC systems on its last legs sure won't feel like a 2% property in 24 months.  It can also depend on where you are looking for properties.  If it's in an area where owners want to live and you're competing with buyers that create an emotional attachment to a home (and thus will pay for it) it can be tough to find what you're looking for.  Rather than focus on the 1% rule I try to look at cash-on-cash return and see how depreciation can help me, deferred maintenance might hurt me, etc.

@Abdul Azeez I think what you'll find is that by having home, autos, etc. all under one policy will actually reduce rates on things like auto insurance so the umbrella policy (after discounts) won't be expensive as you think.  That being said, I have a huge umbrella policy because...well...you never know.

@Andrew Gillings This is going to be perceived as overly general and I'm sure there will be success stories out there but I don't think you'll find $5K per door in a good area.  Frankly, I don't think you'll find $10K per door in a good area.  It would likely be a fire sale, need work, and who knows what they would rent for monthly at that price point.  I hope that the BiggerPockets can prove me wrong, I'd love to know where I can invest at $5K per door!     

@James Denon I think it really depends on the market.  Here in California when you had some outer areas of Los Angeles where real estate prices dropped by 50% you didn't see rents dropping by 50%.  However, if you look at some of the areas (I know this is really granular) that boomed up during the fracking craze rents crashed when that industry left town because a huge amount of the workers were there on an assignment rather than permanently.  But in general I'd say that they move in the same direction but you'd get larger swings in home prices.

@Tereal Wilsonn I still think you'd lower the property value so you'd have one mortgage for the same dollar amount as two mortgages but on a lower valued asset.  And you'd have to pay some kind of fee for the rezoning, etc. so you'd actually be paying to do that.  Maybe there's enough benefit to you if you're house hacking but I doubt it.  Others may disagree :-)

@Jesse Kailahi I always ask for the T12 before even bothering to view the property. The challenge is that sometimes the listing agent doesn't have it (which boggles my mind) or it takes time to get. But I deal with out of state purchases so I'm definitely reviewing a T12, building a pro-forma in Google Docs (there are tons of templates around as well as BPs calculator), and figuring out then if it's even worth a trip out. If my value based on a pro-forma I work up from their T12 is 1/2 what it's listed for, I'm probably not going to waste my time. I'll tag it, look for price reductions, and watch it age and then reassess. Like @Kenneth Reimer points out, the often show the property in a more positive light so you should risk-adjust them a little.   

@George Genovezos You can mess around with Zillow and other resources like that but personally I think their estimates skew high so it can be misleading.  What you really want to do is figure out comps from sold properties (not listed properties) in the area.  In the world of subdivisions it's easier because you can find model-matches.  If it's a custom home, in a rural area, etc. that's where appraisers come into play.  Anyway, you can use the Zillow's of the world as an "educated guess" but keep in mind that it's best viewed as a guess (my personal opinion).

@Alan Smith You're 100% right that you wouldn't lose out at the end of the mortgage.  But if the roofing need came sooner than expected (let's say you bought a property built in 1990) you might not have the reserves built up from cash-flow to handle it.  Anyway, your original post was more theoretical but the real challenge with anything in real estate is applying it in a practical way.  Just ask anyone who has had a bad PM!