All Forum Posts by: Beau Ryan

I would think the easiest way to help out with your situation would contact a real estate agent familiar with the areas you looking in. Get set up with an auto search. You will get emails with listings the day they go on the market, change price, go back on the market etc. You can cater your search to exactly what you are looking for. Price, neighborhood, age, style, size, etc. This should insure you have a chance to offer on the properties at least on mls just as soon as anyone else.

I pay $150 total for both units for water and garbage per month. As far as deals going that don't seem to be that good, you are right. Uneducated people buy up homes everyday for way more than they should. That doesn't mean we should or you should. People are in different situations, some will pay a premuim for a dupelx to live in because it is in a good area, and with rent from one unit, it is far cheaper than a single family home, or even renting a similar home. Others maybe just looking somewhere to invest money with hopes of appreciation or feel a minimal return is better than having their money in the stock market or some other investment. I am constantly looking everyday, and there are not many deals out there to be found on the MLS or anywhere for that matter. Rents are high and going higher and most sellers are aware of this. Your best bet and the only way i buy rental properties are 1. distressed sales, bankowned properties or short sales, those are in short supply these days and are often gone with in days or less. 2. estate sales, also don't come up very often and are even harder to identify than distressed sales. 3. word of mouth, develop a network of agents, investors, wholesalers, etc. 4. Start a marketing campaign, target out of state owners of 2-4 unit properties, also check tax records and find homes that may be delinquent on their taxes, or drive the neighborhoods to find homes that looked unkept or in disrepair, these owners may be willing to sell to you off market and for a good price. Also checking the auction sites can work, but can be very frustrating dealing with the bidding process, unpublished reserves, etc.

Yeah definitely a no go on that. I would expect your insurance on that duplex to be closer to $175-200 a month as well. I have  duplex in sw minneapolis that I purchase a little over a year ago for $300. It is a 3bed 2bath both units. Rents are $1500-$1600 per unit. I pay about $150 for water/garbage combined for both units a month. So that could be where your numbers for garbage are high. The city of minneapolis combines those into 1 bill. But the overall cost is going to be pretty close to what you have. Also I put 20% down on my property. So the cash flow is positive and there is no pmi. My rents are $3100. I pay on a 15 yr note. Piti, tax and insurance run just under $2400 a month. If I knocked it down to a 30yr loan I would cash flow another 400-500 a month though. But to answer your questions for 2 bed units in a duplex your are going need to stay below a $250k purchase price in most similar areas and that's with 20% down and no pmi in order to cash flow correctly. 

Typical terms from portfolio lenders that can be expected are going to be 20yr loans with about a 5% interest rate as stated above. some may be 15yr and maybe up to 25yr.  Hardly any will go to 30yr.  Possible it will be adjustable rate as well.  One of my lenders is 20yrs, 4.875% interest currently for example.  Seasoning is usually going to range from 6months to 1year.  Now sometimes you can get around this by refinancing with a separate lender.  Use one for the acquistion and one for the refinance permanent loan. Although many lenders will still want the seasoning even if they didnt finance the original loan.  My advice is to develop relationships with as many of these lenders as possible and be upfront with your plans and see who is willing to work with you.  This is a very common route to take so there shouldnt be much issue if you have good credit and income.

If you are going to go the conventional financing route you will need 20% down to purchase the rental property.  If there is a good amount of equity in the property currently then this is what i would do.  Buy the rental with 20% down.  Refi or take a line of credit out on the profit in the amount of the equity that is there.  You will have to keep at least 20% equity in the property.  Use that money to purchase the home you want to live in, You can get a loan with 3-5% down for the owner occupant home.  This way you can pick up both properties.

Here is my take on your situation.  Wholesaling isnt as easy as just making it happen.  There is a lot of work and time involved in building a buyers list and knowing how to evaluate properties, rehab costs, arvs, etc.  This can be very tricky especially to someone new to real estate.  Also you mention buying a duplex living in it for a year and refi and getting cash.  This is likely not an option.  Sounds like your plan for this is a low down payment, 3.5%-5%.  If the property is turn key it isnt magically going to have 20-25% equity in it within a year.  You wont be able to just take any amount of apprecitaion out of the property.  No lender will allow you to take a dime out of the property with out having at least bare minimum 20% equity in the home.  Now as far as a straight cash flow prospective it is a great idea to buy a duplex to live in and rent the other half out.  Same goes for a tri-plex, 4-plex, etc.  I def think you should try wholesaling, find a mentor in your area possibly to show you the ropes but dont count on making 10's of thousands of dollars right off the bat.  

So the issue here is that the property actually doesnt cash flow.  You would need a much larger down payment for the property to do that.  I would advise never ever buying a property below the1% rule for rental purposes.  Your proposed cashflow of $150-$200 is gone and actually negative when considering actual expenses of vacancy, general maintance, capital expenditures etc.  Typically 40-50% of gross rent will go to expenses and then add in principal and interest from mortgage. Total expense for property will likely be in the 1100-1200 range.  This is assuming the property is actually turn key and there are no large expenses actually needed, windows, heating/cooling systems, shingles, siding, etc.  Practically no property will cash flow that is bought under 1% rent to purchase price ratio, even with 20%+ downpayment, let alone a smaller downpayment.

You mentioned the sale fell apart due to financing, was it because the appraisal didnt come in high enough, also 1 bath homes do not sell very easily, stick to a min of 3bed/2bath homes.  Make sure you aren't comparing your home to 2 bath homes.  Also make sure you are being honest when comparing properties that they are in similar locations, similar lots, beds, baths, etc.  It is very easy yo ignore some or most of these variables.  Also in my experience Zillow very rarely is low on price, usually quite high.  Even their range of 104k-116k doesnt reach your list price.  Now Zillow is def not the best way to value a property.  Im not familiar with the area but sounds to me it is over priced by at least 10k.  Lower it get it sold and move on.  A newly renovated home should if priced correctly sell immediately and have lots of showings.  

Easiest way would just to be to purchase the property with a "contract for deed".  Give her the 20k as a down payment.  The property is then yours.  You pay her the exact amount of her mortgage payments.  She continues to make her payments to her lender.  Can have the contract have a balloon payment due in 6 months, or 1 year, or whenever you are comfortable.  You can fix the home up, as she will be gone, then sell it, her loan gets paid off and you get the profit.  Only risk in this is that the lender calls her loan due if they find out the home has been sold, this is very unlikely to happen as long as her payments continue to be made.  Really no risk on your part, it would be to the current owner as they would need to pay off the loan if it is called due. But if you were going to fix it quickly and sell it then that wouldnt be an issue either.

House hacking really means you buy a property as an owner occupant and live in the property while you remodel it, than sell or rent for a profit.  This is a great way to do things if you dont mind moving every few years.  You are able to buy properties with lower down payments, 3-5 percent down typically vs 20% down most non-owner occupant borrowers would have to pay.  The profit is tax free as well if you occupy the property 2 of the last 5 years.  Not many ways in life to avoid paying taxes on income.  This is the best I know of.  Now if this is the perfect home for your family, in the right area, school district, etc. than it might not be the best decision to move.  You mention you have 40k equity.  Now is there actually more money available if you were to sell, for instance all of your intial down payment funds, and all of the money you used to fix the home up.  Im not sure what these numbers are but if these numbers are substantial and say you have 100k total to walk away with, you would have a nice chunk of change to invest in out of state rentals that could generate a good monthly cashflow.  Now you will likely also have cost when selling, real estate commissions, your closing costs, and often the buyers closing costs.  costs would typically range from 6-10% of purchase price.  Also when investing in rental properties out of state there are many issues and problems that arise, and if you have no experiences in the rental property business, this may be a major headache.  If you have someplace in particular you are familiar with, and maybe even have connections, real estate agents, contractors, friends or family this can ease the burden substantially.