All Forum Posts by: Becca F.

Hi James! I've been really busy getting financing together to prepare to put 20% down on a rental (pulling equity out of existing property). I'm talking to my realtor in Indiana. My property manager also keeps me update to date. On a surface level analysis, using the 1% rule, it's difficult to get that. For example if I were to buy a $200,000 SFH, it would be difficult to get $2000 a month rent (1% of the purchase price). I might be able to get $1500 to $1600 rent in Indianapolis metro area. Buying in nice suburb with good schools, my realtor said I'm looking at $300,000 or more home prices, could get $1500 to maybe $1800 rent for a slightly larger home. I really like nice suburban Class A properties but I don't want to be in a negative cash flow so that might not be the best financial purchase. The home prices seem to not be rising and houses are sitting a bit so maybe sellers are willing to give concessions (help with closing costs) since they're not getting 20 offers above list price like 6 months to a year ago.

I'm looking an hour outside the hot Nashville Tennessee market, looking at what industries are in the area, job growth, population growth, proximity to shopping, restaurants, median incomes, etc. One investor and one realtor said buying 2 hours out in a rural area might be difficult because my tenants won't have high salaries that people have closer to major cities. Properties would be cheaper though. 

I started using this calculator but I can't download a pdf spreadsheet. There are limitations but it's free. Here's the rental calculator: https://www.calculator.net/ren...

It also shows you the breakdown over time if you hold the property for 10, 20 and 30 years. 

Here's another free one: https://sparkrental.com/rental...

I bought 2 spreadsheets for $24. I haven't used it yet. It's from an investor who quit her full time job just 2 years after she started investing. She uses private lenders, which I haven't done (using Other People's Money that some people do). I'll send the link soon once I start plugging in numbers.

I have the basic Bigger Pockets membership so I didn't want to use up my 5 free rental calculators yet and start paying for upgraded membership. Have you looked in Kansas City, Missouri yet? I know a California investor who likes that area.

@Mica Moore 

Following this post. My roof is 17 years old (house was built in 2005). My rental is in Indiana. It was last inspected in March 2021 after a hailstorm - the roofer said it was fine and I didn't need to file an insurance claim to get the roof replaced and insurance companies usually don't like to pay for new roofs. The roof didn't get the hail damage that some of the neighbors did (not on my street). In July 2018 the ridge vent was replaced - very small leak with 3 inch water spot on living room ceiling. This was before my renters moved in. I guess it's time for another inspection.

Are you leaning towards replacing it sooner or waiting? Keep us updated :)

@James Hamilton

Congratulations on getting educated and the savings and taking that first step! Lots of good advice on here. I became an investor by renting out my SFH in Indianapolis metro area instead of selling it when I moved to California. I have a property manager who took care of everything, screening tenants, writing up the lease and collecting payments. I pay him 10% property management fees, although I was told the range in Indiana is 8 to 12%.

Property #2 is local (San Francisco Bay Area) and I did major renovations to it. It went over budget so I wound up taking out an equity line to help pay for the renovations. I used Figure Lending - it's a combination of an equity loan and a HELOC, fixed 30 year payments but I can re-draw more money in the future (at current higher interest rates) as I pay it down. Some people don't like Figure but it worked for me (you can't use Figure on a multi-family only SFH). I have a tenant in and am self managing it but trying to get roommates in to maximize cash flow. I'm not sure if taking a small equity loan or HELOC is an option for you if you don't want to dip into savings.

 I'm also looking out-of-state, another Indiana property, Ohio (Columbus), Missouri (Kansas City area), Tennessee (an hour outside of Nashville or Memphis), Florida Panhandle (why are so many people moving to Florida?). I'm also afraid of rehab costs since I just did a renovation so I'm thinking buying turnkey out-of-state or something with light rehab (cosmetic work). 

Other considerations are Class A, B, C and D properties and neighborhoods. I've heard different opinions about this: Class B is more recession proof, you'll cash flow more with Class C, etc. Other investors have told me: buy close to the $200,000 price point because property values are unlikely to take a huge drop (not as far to fall) unlike buying a $400,000 (or more) property but buying the more expensive property you'll less likely have tenant management issues (e.g. someone paying $2500 in rent will less likely destroy your property than someone paying $800 to $1000 rent). I'm taking lots of time to analyze properties and geographic areas. Good luck!

My property manager uses My Smart Move, for my tenants and his own tenants. He charges the tenants for the background check or includes it in the application fee. It was a few years that he rented out my property to my current tenants. I can find out the exact amount he charged them or what he currently charges for background checks. 

https://www.mysmartmove.com

@Caity B.

Try Figure Lending. It's a hybrid of an equity loan and a HELOC. If you apply for a $200,000 line of credit they will deposit the entire $200,000 into your bank account. Mine is a fixed rate for 30 years but if I draw on it again, I pay the current higher interest rate .Let's say you get the equity line at 7% fixed rate. For example, if you make a $20,000 payment on that $200,000 line, the balance is $180,000. You have room to draw more money. If your want to re-draw $10,000 next week, you pay current rates on that amount, which is over 9% now (not the original 7% rate). The process is all online and you get approved quickly, less than 5 days, depending on if your property has a mortgage and how much. They did a desktop appraisal of my property. I didn't have to submit W-2s, tax returns, etc but your situation might differ.

My lender walked me through the process and you can pay points if you want to buy down the rate - I did zero points. You can do shorter than a 30 year term. My lender recommended getting a little more than I need and that I could always "send the money back" (make a large payment) but if I want to draw on it again, I'm paying higher interest rates. If you pay 10% or more of your principal balance in the future, the equity line re-amortizes and your fixed monthly payment becomes lower. No prepayment penalty also. 

The only thing is that it will show up on your credit report as revolving credit and that you now have $200,000 credit used so your credit utilization percentage goes way, kind of like you maxed out a $20,000 credit card. Interestingly Equifax reports it as a mortgage loan and Experian reports it as revolving credit like credit cards. I have a fixed monthly payment (unlike traditional HELOCs with variable rates ) unless I draw more money in the future, which I don't plan to do, unless interest rates decrease significantly. 

@Warren A.

I'd like to hear more about your turnkey strategy. I found one who has properties in the Midwest (Ohio and Detroit area so far). Their properties are under $150,000. I've been looking at Class A properties in Indiana, Tennessee (Nashville area), Florida Panhandle in $300,000 to $425,000 range but I'm dipping into my reserves to do 20 to 25% down. Not sure if I should look at Class C properties and neighborhoods in California. To me under $150,000 to $200,000 is much better, especially if it's turnkey. 

@Joe Villeneuve

I appreciate the apologies. Thank you. Like the original poster, I became an accidental investor with the Indiana house. It was my primary residence then I decided to rent it out instead of selling it. My other properties fell into my lap so I didn't have to a do a big financial analysis. I'm looking for additional properties but don't want to make a bad purchase, especially at these interest rates. 

@Joe Villeneuve There's no need to be insulting. I passed Algebra and Geometry fine with A and B grades. Many of us were raised to that all debt is bad and to pay off mortgages as soon as possible. Now I know that paying cash for a property isn't a good idea and to leverage debt to acquire more property.

@Jennifer Shen

There's lots of good information on here. I didn't use turnkey companies. I recently did a major renovation on a house that took 5 months - it can be done with a full-time W2 job, lots of running around to order materials for kitchen and bathrooms, buying supplies at Home Depot etc. I had a great contractor who provided the rough materials. It cost me a lot (took out an equity line, a hybrid between a HELOC and equity loan). All new electrical wiring was the largest cost and knocking down a wall. Everything is new in there. I have a tenant in and am getting rent checks now. Good luck!

@Warren A.

I'm in the Bay Area. I'm also wondering about turnkey out-of-state or buying something that needs work. I'd probably use a local realtor and not buy from a turn key company. 

@Mindy Ma

I'm in the Bay Area and finding it very difficult to find anything where my rents would be more than the mortgage payment. I've talked to many investors and everyone has a different opinion. Some people say Nevada (Las Vegas area). Some people say Texas like an hour outside the popular areas (Austin) but property taxes are high. I'm looking in the Midwest (Indiana, Ohio, Missouri) and other states (Tennessee, Kentucky,Florida panhandle area). Other people say no on Florida (definitely no in Miami). Have you considered out-of-state? 

I have a SFH rental in Indianapolis metro area. My property manager quit his full time job recently and has a nice cash flow from his Indiana properties (duplexes and an apartment building). I could connect you to a few realtors and other investors if you might want to investigate Indiana. Good luck!