All Forum Posts by: Daniel Haberkost

@David Iniguez 

Personally, I like Pueblo West, CO. It's substantially cheaper than the rest of the state, has great healthcare, warm weather year-round, great mountain views, several golf courses, low taxes, and a huge reservoir for boating/fishing. I'm working with several builders/investors down there on a number of projects and am looking to have a duplex built for myself there next year. It's a great place for retirees (A LOT are coming from California and other expensive markets). 

@Jamin Brandt

Whether or not 10k is enough to get started depends on what you plan to do and where you plan to do it. If you want to wholesale then yes that’s plenty, but you said passive income so I’m assuming you want to buy.

What market are you in? With $10k you are almost certainly going to have to do an owner-occupied house hack and even with the low down payment that may not be enough if you’re not in a cheap market.

Where are you located and what do you plan to do ?

@Chris Mylan

Hey Chris, if you have a family member willing to co-sign, (assuming they have proper DTI ratio) then that should solve the issue.

I was in a similar situation when I left my W2 job and solved it that way.

-Dan

@Kayla Boyer

If you’re going to self-manage I can’t stress enough to take the time to get your systems/processes in order. Its only 1 house and 1 tenant but there is a reason that one of the most reliable sources for experienced investors to buy discounted properties is from small-time investors who manage their own rentals.

Make sure you have a solid lease. Always run a background check, verify their income, and call their previous landlords. Do a move-in report that documents the condition of the house before the tenant moved in with pictures and descriptions, make sure they sign it too! If you’re in a hot market, I would not let them move in without first & last month’s rent along with 1 additional month’s rent as security deposit. If you do your due diligence correctly and get a solid tenant this could work well but since it’s only one unit if you cut corners and end up with a problematic tenant it could be a financial nightmare so be very careful who you rent to!

Since the house is that old make sure you have an experienced inspector! I know you mentioned it has been renovated but I wouldn’t take my chances. Get a referral from someone you trust. Again, you mentioned this is draining your savings to buy so you want to minimize the chances of a large expense coming out of the blue in the first year or two of ownership.

And to answer your question, I don’t necessarily think it’s a mistake to stay in your current living situation while renting this house out. If it were me, I would move to the house you are buying and rent out all the bedrooms. But I’m single and don’t have any kids! Everyone has a different set of priorities and I know you said you have a family. So maybe it makes sense for you to stay where you are. That’s ultimately up to you!

-Dan

@Kayla Boyer

Hi Kayla, the main item I wanted to comment on is the rent vs mortgage. You mentioned a couple times that staying in your rental while renting out the new house would lead to extra income.

Okay, but what about the other expenses ? It’s a single family home so the tenant will pay the utilities and mow the lawn so you have that covered. But what about capital expenditures, repairs & maintenance, vacancy, and property management (plus there are always other miscellaneous expenses)?

Capital expenditures and repairs & maintenance will likely be between 5%-10% depending on the age/condition of the house which I know nothing about. So let’s assume they fall in the middle at 7% ($133 a month each). Then we have vacancy, if the house is unoccupied for one month of the year that’s already 8% of your yearly income. But let’s say management is great and it’s only 5% ($95 a month). Then finally we have property management which will be 10% monthly along with numerous fees ($190 not including fees).

So now we have a $1,333 mortgage PLUS the aforementioned expense coming out to $1884. In expenses a month. If you rent it for $1,900 you are breaking even and this doesn't include potential fees that the local HOA may charge, the additional (and inevitable) property management fees, the cost of utilities while the house is vacant, and so on. Those numbers do not leave you a proper margin ESPECIALLY if you would be exhausting all your savings when purchasing the house. One major expense could put you under.

So when looking at properties in the future, make sure you include ALL of the expenses. Would it be possible for you to move to the house and rent out and extra room? Then you would be reducing your housing expense at least!

-Dan

@Andre Kepler

No problem, good luck!

@Ben Feder

Okay, so sounds like you need to learn a bit more about valuations and analyzing rentals. BP

had numerous podcasts, articles, and webinars about this.

If you don’t have money and need a partner, you’re going to need to bring value by doing the leg work and finding deals. What have you learned about finding deals so far?

You will also need to meet other investors with money, have you been attending any local meetups?

@Johnnie Hawkins

Hi Johnnie, “The Most Important Thing” & “Mastering the Market Cycle” (both by Howard Marks) are phenomenal books for anyone interested in any form of investing.

Some of the most valuable books I’ve read (for RE) were not specific to RE but their principles were applicable. “Influence” by Robert Cialdini is also very much worth reading.

@Ben Feder

Hey Ben, what’s your financial situation like? Are you able to qualify for a loan? If you can start with something simple like house-hacking that gives you a clear goal.

There are a multitude of ways to build wealth through RE so you can’t expect to learn everything about all of them before getting started.

What you need to do is decide what your long-term goal is (why do you want to invest in RE?), then look at your financial situation and determine what avenue of investing makes the most sense.

If you find that something like house-hacking is the most logical first step then you know exactly what you need to learn before starting (how to screen tenants, what areas are in the path of progress, etc).

-Dan

@Dahsiem Baylor

Is there a local RE meetup you can attend and talk about the parcel and what you plan to do with it ?

I know very little about the PA market but my local REIA has many land investors and developers, I'm sure there are some at yours too.