All Forum Posts by: Brandi Carballo

 You are completely correct, of course. But you have to continually reinvest that money and profit off of each deal in order for that to work. If you don't have a rich friend or relative to loan you money you are left with commercial lenders.

If you are getting a loan from somewhere like Lending Club or using cash advances, interest rates average 17.99%. Lets say you borrow $30,000 at 17.99% for 5 years. In the end of that 5 years you will end up paying $44,735. That's almost $15,000 in interest on a $30,000 loan. 

If you use that $30,000 for one purchase then refinance or sell and recoup your $30k, but don't pay it back - you use it to buy another property instead and continue to make the loan payments. Let's say you do 1 deal a year for those 5 years of the loan, that's 5 deals. You used that $30,000 5 times. and still paid $15,000 in interest, but now that is divided across 5 deals, so you only paid $3,000 per deal in interest on the loan.

I get it, but you are putting a lot of faith in future deals to do that. I, personally, prefer to keep my personal debt down and just roll cash from deal to deal.

I prefer to make an offer before viewing a property. I include viewing the property in person as a contingency, and I can back out of the deal if I see something I don't like. I only go to see the property after it is under contract. Other people have stated the reasons for this.

That being said, I did just go look at a property in person before writing an offer. It is close to my home (I have never bought an investment here, ironically) and I actually don't know this market well. I carefully chose a realtor who knows the area well to show me the property so I could ask her a bunch of questions about ARV and the market in the area. It also had a tarp on the roof, so I wanted to see how much damage was inside. It's bank owned and the bank knew nothing other than "it needs a new roof".

After purchase and rehab if they don't cash flow they are not good deals. At all. Don't buy them.

You have to add the purchase price AND the rehab together and look at the cash flow on the total spent, plus all your expenses like water/sewer/garbage, management, lawn care, regular maintenance, cap ex, etc.

Despite the low cash flow I would buy it. Your new terms help, too. As other people have said it is very low risk, you aren't putting any cash down and you would be able to refinance to get better cash flow, or if you are desperate, you could sell it (for a profit).

I would buy it, rent it for 2 years (so you are considered an experienced landlord and can use the rental income in your debt:income ratio) then refinance into a better mortgage. You should have enough equity not to bring any cash to the table.

Is there anything you can do to the property to get it on the higher end of the rent spectrum? Add a dishwasher? AC? Ceiling fans? Tear up carpet and refinish hardwood floors?

Just remember to save for cap ex. It will come back and bite you later. Consider the age of the roof, appliances, water heater. Is there a breaker panel or a fuse box? Is the electric grounded? Are the windows old, single pane? 

A house built in 1969 likely has led paint and asbestos. That wouldn't stop me from buying it, but it will most likely add to any renovation budgets.

I'm really having a hard time understanding your post. Was there a question in there? Or are you just excited to find a good deal?

As for no money down investing....

Personally, I think using a non lienable loan is a really bad idea unless you have a short term exit strategy or you get a personal loan (from a friend or relative) with low interest. Non lienable loans are based on your personal credit score and come with very high interest rates. Now that I have said that, I have used a loan like this to come up with renovation funds, but I was able to pay it off after a few months and I factored in interest when deciding to do this. Examples of non lienable loans are credit cards, including cash advances, and crowd-fund based lending like Lending Club and Prosper. A personal loan is a better option, asking a friend or relative to loan you money. You should still pay interest, but it will be lower.

Hard money loans can be a good strategy, but it depends on the situation. They also come with high interest rates, but not as high as a personal loan from a business like Prosper. I use hard money loans frequently, but again, factor in the costs. Some hard money lenders will loan you 100% of the purchase price, others want you to have some cash in the deal. It depends on the lender, and the deal. The lender I use has done both, it just depended on the individual deal.

Having a partner with money is a great way to invest, if you can find someone who wants to invest with you. I am an introvert and I'm not good at networking, and all our friends are poorer than us, so this is not really an option for me, personally. Let's say you find a property for $100,000. You find a partner who wants to buy the deal with you, you each pay $50,000. You ask your partner to contribute $50,000 in cash then you get a loan for the other $50,000 (your half). This only works if you have someone with enough cash who is willing to let your part of the purchase be financed. It happens, but not easily. You can put together deals like this with more than 1 partner, too.

Another option is to ask for seller financing. They usually want a down payment, but it is possible for you to talk a seller into financing all of the purchase price, especially if they are losing money. These deals you will want to analyze carefully, or you could end up losing money, too.

Start doing a lot of research - read books, read blogs, search BP, listen to podcasts. Educate yourself about real estate investing in general. You can never know too much.

Good luck!

Do you pay any utilities- garbage, water, sewer? What about property management? Lawncare?

How much per month are you going to save for capital expenditures? 

Does it have any maintenance issues that need to be addressed? How much life do appliances and water heater have left? What about the roof? 

Does it have carpet? Will that need to be replaced the next time it turns over? What about paint? Is there anything else you would do the next time it turns over (change a light fixture, new faucet, new toilet, etc)? You will need to save for those or at least consider them as part of your purchase price.

What is the neighborhood like? What are the tenants like? Is this a low income area with a lot of renters who don't take care of rentals? Or a nicer area with young professionals and young families? They will take better care but only stay for a year or two until they can buy their own place. 

With just the info you provided it sounds like a decent deal. 

I agree with Jack. You need a little more info to know if it is a good deal.

Is the rent on par with market? I"m assuming that it is since they've only been there 3 months. 

Is the house outdated/ugly? Or is there another way to improve it to raise the rents - install a dishwasher or something similar?

Have you factored in management? You don't absolutely need management for an out of the area rental, I have one rental on the other side of my state that I manage. But it can be difficult if there is a problem and you need to be there, such as suspected abandonment. Also, you have to be there to turn over the unit. 

Why is she selling? Does she have a ton of turnover and that makes her lose money on it? Since the tenants have only been there a few months its hard to tell if they will be good tenants or if they will stay.

Your mortgage payment would only be $172/mo, then you have to add in taxes, insurance, any utilities you pay (water, sewer, garbage?), management, lawn care and cap. ex. 

It could be profitable, depending on what those numbers add up to. Or it could be a nightmare. 

I thought I knew the answer to this, but reading through all the conflicting responses made me wonder if I was right or wrong. So...in doing some research I found a great article on the subject...right here on BP, or course.

https://www.biggerpockets.com/renewsblog/2014/07/1...

What tax bracket you fall into depends entirely on your annual income. You can find that info here:

http://www.schwab.com/public/schwab/nn/articles/Taxes-Whats-New 

Awesome! Don't stop there. Start saving $ and analyzing properties. 

We bought our first investment the same way. We got a 4 plex with a zero down VA loan. We lived in one unit and rented out the other 3. We also lived there for free - the other 3 units rent covered mortgage, taxes, insurance, cap-ex, lawncare, water/sewer and electric for the common areas.

5 years later we own 5 properties. Definitely keep investing, it's so worth it.

My advice would be don't forget capital expenditures - things like a new roof or new windows you will eventually have to replace, appliances that are nearing the end of their life, water heaters or electrical upgrades you will need to make. Start saving now for those or you could end up with a bill you can't afford.

Everyone is telling you that the area is the problem. I would do some more checking on the neighborhood, not the deal. Is there crime in the area? A drug problem? That would be my guess. See if crime maps are available for that area. Those can be very insightful.

Also, the "nicest house on the block" is usually not the best investment. I would never buy the nicest house, I look for the worst house in the nice neighborhood. Much better investment.