All Forum Posts by: Andy Collins

I will tell you what NOT to do. I own rentals, so I am constantly getting cards from people wanting to buy a house, most are straight forward, and I appreciate what they are trying to do.

I got one a week ago, it was obviously part of a large printing, that said they saw my house and fell in love, and were looking for a house for themselves.

It had all the signs of a mass mailing, but the "we are looking for ourself and your particular house is where we want to live" just really turned me off,,

I felt like calling them and letting them tell me my address,,,but I just threw it in the trash the last thing I want to do is conduct business with someone that is obviously a big liar.

I keep most of them, I figure they are wholesalers and might be of assistance later

If you can get it as an O&O that makes a lot of difference, the cash on cash return would be much better with 5% down instead of 20-25%, and you'll save about .5% in interest.

P & I on $115k at 4.5% for 30 would be just under $600, taxes are the big question, here they would be close to $4k a year,,that would make the deal not work for me, because cash flow would be very, very low.

Now I am basing this on about $135k in the deal, including buying and rehab,,obviously the price would be the biggest factor,,,but you are in a perfect situation to ask the landlords about buying,,in fact I would approach them saying your considering moving out because you want to own a house. With a house under lease to a good tenant, its hard to sell, if that tenant is moving out, it changes everything.

I have 4 rentals in Mesquite, that are great investments, but I prefer Garland or Rowlett because the city of Mesquite is too hard to deal with

In other areas if I have a tenant moving out on Thursday, and the house is in good shape, I can schedule someone to move in on Sunday (hopefully anyway), in Mesquite that just isn't possible, so it will often cost you a month of rent.

I have had, and this is no joke, a beautiful house with new AC/Heat, all new paint, appliances, etc etc etc, get tagged because there is no strainer in the drain on a tub. Obviously its easy to fix, but you have to fix it, then wait to be reinspected.

If your looking at flipping, Mesquite would probable be a good area (I'm not a flipper), the market is strong, but you really have to look at what school area your in, there is a major difference between schools, and you have to go to the one closest to you.

I will admit, I have one under contract in Mesquite right now, but its within a mile of 2 other rentals I have, and in the area I like as far as schools,,,but I only did the deal because it was a good price,,,,its terrible but I figure it has to be about $10k better deal to be worth dealing with the City of Mesquite.

andy

I agree with @SeanKuhn, I don't see the property cash flowing with rent of $1200 or less, and an ARV of $135k+.

In some areas rentals don't make financial sense, in that neighborhood, they don't.

You will hear people say you should be getting 2% of the ARV for rent, in the neighborhoods I have rentals that isn't possible (the only way you could do that here is in war zones). For a property to 'fit' I have to have a minimium of 1.2%,,hopefully more, but thats sort of my cut off.

I'm in Texas and we have high property taxes, so if you have lower property taxes you may be able to cash flow with a smaller percentage, but always look at cash flow, If a house won't be cash flow positive with a good return on investment, it won't work as a rental. (that's not to say it might not be a prospect for a flip, that's a totally different formula)

andy

I have a couple of houses that you have to go outside to go from the garage to the house, in one I just put a door going into the master (which was simply on the other side of the wall, it cost very little, and in pouring down rain the tenants are glad its there. Some people say they wouldn't rent the house without it, others don't care (I put it in for a tenant I knew who was elderly, now I'm glad I did)

andy

I've never heard of 6 month reserve requirement until you get to mortgages 5-10, then its 6 months of all rental property (not your residence)/

If you are in 5-10 you have to have a 720 mid score

andy

I have a different approach, if there are things I can hire someone to do, I hire it out, I have used the same inspector for years, I trust his judgement and he has 20+ years in all the things needed to be an inspector (so he is better than I would ever be).

I would focus on the financial side, read as many books as you can on real estate investing (not on becoming a millionaire overnight),,the idea about helping investors in your area is a great one,,,anything that allows you to 'rub shoulders' with investors is worth experience you can't get in any book or course.

You mentioned a $100k house in Mesquite renting for $1k,,I own rentals in Mesquite, and I don't buy at 100% of market,,I look for deals.

Most of my houses in the area I am into for about $80-85k, worth about $100k and rent for $1125-$1200,,,,i these aren't 100 year old houses you have in many areas, and my $80-85k includes a total rehab

The cash flow is good, normally about $350-400 per month/house, but the appreciation is great.

If you want to do 2-3% deals, go into bad areas (war zones), you can find those deals,,in nicer areas you won't find them (at least in DFW)

I'm in the process of buying one from an "auction site" now, but its in an area I own rentals, and only about 15 minutes from my house, and I got an inspection period even though the site says there isn't one (remember state law will often overrule what the site says).

I would NEVER buy a house from pictures on the internet only,,,that's a great way to be burned,,investors close to the property have a chance to see it and know what its worth.

Always remember, to "win" an auction you aren't really winning, just paying more than anyone else is,,,you don't know if you "won" until later

you can't get a traditional mortgage (30 year low interest, etc) in a LLC,,,only individuals qualify for conforming mortgages,,,you can have up to 10 mortgages including your own home,,so slowly add a house here and there until you get to the 10 limit,,if done properly you can build cash flow up that will be flowing in and increasing with time and more properties.

After you hit the 10 limit you will need commercial financing,,thats when the LLC will be needed,,,others will say form an LLC and put your rentals in them now,,but by doing so you are losing out on locking in the low rates we have now