All Forum Posts by: Jeff Bridges

looks like 35% Cash on cash return each year assuming your repair estimates are correct (that's even assuming 8% vacancy). Doesn't look bad at all in my eyes. Beats the stock market with consistent returns by alot too:) nice job! Consider building reserves for the anticipated repairs you mentioned, then a 6 month operating reserve for that property, then using all proceeds above that for your next investment. just a thought...

If you're doing proper screening, you should be calling her prior landlords in the first place. at least 2 of them. When you happen to call this one for a reference (review of the tenant other than that specific incident, such as on time rent, confirm amount of rent, any problems, level of cleanliness of apartment etc). Ask them about the incident and how it went down (see if tenant or landlord was lying) and whether you think you should rent to them (golden question to ask). Right now you have no idea if landlord or tenant lost their keys, intentionally gave their keys to a shady dude to rob the place or what went down.... You have one side of story. landlord however will be less likely to lie to fellow landlord and I weigh landlord references over all credit reports, and tenant provided information etc. perfect credit doesn't really matter if the last landlord told me the applicant was a nitpicker, always late with rent, dirty, or [insert nightmare issue here].

please be sure to reference the screening primer to make sure you have all other aspects covered:

http://www.biggerpockets.com/renewsblog/2011/3/31/screening-tenants-primer/

condos area great: I have 2, one as a rental. Someone else is responsible for mowing the lawn, doing exterior maintenance etc. The key part is pulling in the condo fee into your cashflow projections and future increases into those projections as well, because they WILL happen. I pester the condo management firm with pleasantries before I decide to buy to try to see how bad delinquencies are, how their financials are and how well they are able to pay current and future bills, because you want get those answers in the condo docs you order at closing, which will also be too late in the game...

Just remember that the time a relationship dissolves will not always be the ideal time to dissolve a business partnership and sell. Make sure the language is such that one partner can't force the other partner to sell before a certain timeframe has passed, after which case either partner can request a sale or mutual agreement is required to continue holding.

That's great you got your girlfriend invested in your cause, but be extremely careful about partnering and the complications it may bring. Finding a partner with the same mindset and investment timeline is hard enough, partnering with someone you are emotionally involved with AND not married to can also lead to strife. I don't know you're relationship but assume the worst when thinking of issues that may arise if you were to break up. Create scenarios where you two are no longer together and see how that may play out in a business relationship of owning a house together. You'll still have to work together despite being broken up, which can be tough for either or both depending on how it happens. Finally, have a lawyer draft a partnership agreement between you two that outlines exit strategies and requirements specific for each property you buy together (before you even reach closing). It will have the nitty gritty so that if things go south, she can't force the immediate sale out of spite, but must wait 5 years or for mutual agreement amongst partners to sell as an example paragraph based on the pre agreed exit strategies. It will have pretty clear rules for how to act like mature business-minded people so that emotions don't overpower original intentions.

@Thomas T. unfortunately I have no golden advice for you for being a successful investor in the NOVA area at this point in time except to be patient and have low expectations. NOVA inventory is currently very low, as is the rest of DC metro, and buyer demand has resumed for the few properties that hit the market, often with multiple bid situations that guarantee you aren't going to be getting a good deal, let alone anywhere close to 70% ARV that BP members strive for with their investment properties. Prices are much higher relative to the low point in 2009, so you'll find even worse "deals" at this point in the market cycle. these conditions create a seller's market. So it's a good time to sell your house, but you'll also have to find a "deal" for your next place as well, which will be very difficult. You're also artificially narrowing your area to a very limited neighborhood area, which is fine for your primary property, but expect to pay a premium for that privilege. There is a reason why people sell and move farther out to loudon, farther south in Fairfax, etc. for bigger or more affordable houses. It's not always desirable but its the only solution for those that want to afford a bigger place in such a hot area.

You can look for off-market properties or distressed properties such as shorts and REOs for a more reasonable price, but even these are highly sought after for their land and sometimes are so valuable that they are completely demo'd and rebuilt by a developer. You wont find much or any discount for these distressed units. You'll also have a hard time financing these and finding money for the rehab regardless of project based on what you told us. Less than one percent of the properties you find on MLS in the NOVA area will allow you to obtain 70% ARV or a cashflow opportunity considered a good investment deal. Falls church; probably lower. Sorry to be the bearer of negative news but I want to set your expectations for reality.

Article about NOVA market volume and price changes recently:

http://dc.urbanturf.com/articles/blog/the_dc_housing_market_recovery_in_graphs/6871

http://dc.urbanturf.com/articles/blog/downtown_falls_church_staying_the_same/4552

sign up and read urbanturf emails too to keep an eye on the DC/ NOVA markets and recent sales so you are aware of the state of markets... It's interesting to boot...

@Thomas T. Falls church has very high property values relative to rent values since it's part of the DC metropolitan area. Properties there command a very high premium for their proximity to the city. I live in DC area and am very familiar with the markets here, and it's very hard to find and purchase a cashflowing unit even though rent is much higher in the metro area vs. suburbs.

Your idea of renting out the first property to be used as secondary income to show your lender you qualify for a 600k property will not work as you intend, despite what promises your loan officer might have offered. Based on your figures you listed above, your cashflow on paper is $4200 for the purposes of showing your lender. @Mark Ferguson smartly pointed out that your missing costs such as management, repairs vacancies etc. will easily erode that cashflow past the breakeven point into negative territory in reality. So all that effort to rent out your beautiful primary home might allow you to break even, but will most likely have negative cashflow due to its very thin margin of error, and you can't even enjoy it on top of all of this since its rented out. But back to your goal to get a 2nd property: the bank underwriters might only see the mortgage/ insurance payments as a wash with your existing rent since it hasn't been rented for 2 years yet. So you might not be able to use that rental income (on paper only) to boost your mortgage qualifications. You'll also have new rent payments for your own rental which you'll have to disclose and will be deducted from max monthly payment to put you back in the same spot. Talk to your officer again and ask them what will happen if you added a $2500 rental payment to your liabilities and see how that changes things with your mortgage eligibility.

Yes, single family homes are safe and easy to finance relative to the other options, but this doesn't automatically make them all safe and easy investments. Creating a scenario where you are earning negative cashflow is not going to help your already low cash reserves. Finally, betting on appreciation is the riskiest method of real estate investment and doesn't give you any other alternative strategies if you can't sell for more than your mortgage. Can you take 5 years of losses on a rental before you can sell? You can more safely trade up by selling your existing home because you are doing something for your family and not investment related and purchase another at your loan limit or invest in a actual cashflowing deal, which is much harder said than done. Don't mix your effort to find/ move into a more ideal home with finding a legitimate investment opportunity. They should be considered separately based on their own merits and only rarely do they work together.

I'm starting out my direct mailing campaign and was able to use my trusted real estate agent to get me a customized list in excel form based on my criteria. I asked him nicely to provide a spreadsheet from his MLS access portal with targeted zip codes, absentee owner only properties, my house specs, and separated each column representing property owner mailing address, owner state, owner zip, first name, last name etc. so that it could be easily used with mail merge in Microsoft office. You can manipulate the list further to sort by out of state absentee owners and get it to the mailing size you're comfortable with. Finally, I do some cleaning up of the all capital letters or you can forward that list to a direct mail processor and they'll clean it up for you and do the mail merge. The best of all, this is free, albeit a little more time consuming (only by a bit, especially if you just forward the list to a direct mail processor to generate letters using your list).

This might be of help in your search. I am not a NJ landlord so I've never used this before...

The only professionals needed are your trusted buyers agent and a sellers agent that is experienced with short sales. He will be responsible for submitting paperwork for the seller and interacting with the bank on the sellers behalf in order to facilitate the sale and get bank approval for the contract you submit if it is accepted by the seller. I typically have my agent ask how many short sales the selling agent has closed in the past to gauge how smoothly the process might go and sometimes think twice about submitting an offer for an inexperienced agent to submit. While experience is one aspect, the bank approval process is another aspect that can't be changed and can take from 30days- 9 months depending on the systems the bank has in place and doesn't guarantee you get squat after those 9 months. Always have low expectations that a short sale will close and be pleasantly surprised if they do.