All Forum Posts by: Dave Van Horn

Hi @Jose Ortega,

I actually used to live there many many years ago and have invested in the area since '89. I don't know if it's the area it used to be, so I might do a flip there but I probably wouldn't do a buy and hold there today. Then again, my taste in markets has changed over the years especially as I get closer to retirement.

Hope my opinion could be of help.

Best,

Dave

@Varinder Kumar

If the cash flow from both properties covers all three mortgages (including the HELOC), and there's positive cashflow left over than you should be good.

And in my opinion, when it comes to lines of credit (not a Home Equity Loan), I would take out whatever you could get (even if it's above the down payment cost). That way, you'd have the extra HELOC money just in case you needed it. Also keep in mind that property values can fall, so what you borrow out as a HELOC today may not necessarily be available tomorrow.

And lastly, especially when leverage HELOCs or any money for that matter, it never hurts to have plenty in reserves.

Best,

Dave

@Account Closed

I agree that wholesaling a good way to start out without a huge financial commitment. It's also not a bad way to make some quick cash and build your network. You don't need to qualify for a mortgage or have to fork over a down payment. The only issue is, most of the time you're not really acquiring any properties by doing it.

So, my advice? Alongside wholesaling, I would also recommend shadowing a real estate investor on a buy and hold deal or a flip, if possible. Just to learn the ins and outs, and it doesn't necessarily have to cost you anything.

I think the best way to start in buy+hold, is as a first time home buyer. Especially if you can find a multi-unit property. That way you can acquire up to 4 units, with FHA financing. Then after a year or two, you can move out of the property and do it again with bank financing.

I actually wrote an article about this on the BiggerPockets Blog if you're interested:

https://www.biggerpockets.com/renewsblog/2015/10/0...

Best,

Dave

Hi @Karen DiNapoli

Good question.

In my opinion: it's all about the cash flow, not necessarily about the taxes or the other expenses.

So for example, I live in the Philadelphia area and in West Philadelphia the taxes are lower than they would be in the county outside the city where I normally invest. So why don't I invest there?

For one, the rent is lower. Also there isn't as much appreciation in the area, it takes longer to evict (MUCH longer), and they have lien-able water and gas - so if someone skips out on the bill, it's on me as the property owner.

My point is, high taxes are just one consideration but not an end all be all. As long as the numbers work in terms of expenses vs. cashflow than you should be a-okay.

Also, another thing to consider is sewer and trash. Are these part of the taxes? Because that can make a difference as well.

Hope this gets you unstuck.

Best,

Dave

You know the old saying, if your offer doesn't insult the seller than it's too high!

When asked "Is that your best offer?" I've also come back with terms. Sometimes it's finding their hot button: Is it price, terms, or a quick closing?

For example, I'll give someone full price if I can get 0% interest.

And on the flip side of that question, I've had success saying "Is that the best you can do?" up to 5 consecutive times without changing my stance.

Hi @Mikhail Zakharchuk

A lot of great points in this thread. Before I get to the risks/cons, I should reiterate that when you buy an REO, after foreclosure the bank is often still cleaning up the title while they're waiting to sell the REO.

One of the risks that I think has been hinted around at is that the bank will rarely fix anything so it's all on you, the buyer. Meaning you cannot afford to overlook something especially the big ticket items mentioned above. I assume your REO is in California, but if it's in an area with a temperate climate you would have to consider what to do if the property is winterized and/or the utilities have been shut off. It's situations like these which could lead to an investor to missing something on inspection.

Another disadvantage is when you're buying an REO, you have to use the bank's paperwork including their Agreement of Sale. So it's there way or the highway, usually. There's also a per diem charge that's one-sided (in the bank's favor of course). If there is a delay in closing for any reason, this per diem charge (usually around $100-$200/day) is put into effect and it's the REO buyer's responsibility not the bank's. Because of this chance of delay, I'm not sure I agree with the last part of Percy's comment. I've found when I use the bank's title company, it tends to be cheaper (I've had the bank's title company offer me a reissue rate or a discounted rate) and if there are any delays in cleaning up the title or at closing, it would be the bank's fault since it was their title company. And thus, they couldn't charge me a per diem fee. Now there are a lot of different types of title companies out there, so if you do end up using a different one instead of the bank's recommendation, I would make sure they are proficient with REO's.

Best,

Dave

Hi @Dylan Eggers

It sounded like a great deal until I read the property is in a flood zone! Unless you're factoring in the flood insurance (which can be very pricey these days), it could change your numbers dramatically. Not to mention, reserves may be necessary if you encounter serious damage. Flood insurance tends to not pay for everything - I had a place that was seriously flooded 2 times in 5 years and the insurance didn't cover it all so you can be out of pocket for a lot of items (like a hot water heater for example). 

So I would get clear on the insurance cost before moving forward. Insurance on the home in general may be different from a traditional property as well, so I would also get clear on those rates.

If the modular home is on a foundation, is there any lot rent to consider? Financing terms and requirements for a modular can be different vs. a traditional property. So I would make sure you can get the same or similar terms as if it were a regular home otherwise your deposit and application money could be at risk. Sometimes they won't appraise the property as high since it's a modular home or it may not be a Fannie Mae approved modular home, so the down payment could be more for example.

These are just some things to consider. Modular homes can be a great investment and there are certainly properties in a flood zone that are worthwhile too, but I always say a good deal is only a good deal if the numbers make sense.

Best,

Dave

Hi @Alex Aguilar

Many times investors will keep profitable locations to themselves since it can be proprietary information, so it may be tough to get an answer on here for exactly where to buy.

Generally though, you want an area with a college that is expanding in enrollment but doesn't have enough (or quality) off-campus housing or if they don't have enough on-campus housing. And proximity to the university is key.

Although it probably couldn't be duplicated exactly in the same area today, I talk a little bit about my friend's successful student housing strategy in the Philadelphia area in a recent article I wrote for BP:

https://www.biggerpockets.com/renewsblog/2016/06/0...

Best of luck,

Dave

Good point @Steve Babiak!

Congrats on your first deal @Matthew Koch ! And congrats on joining the site.

I'm also based out of the Philly Suburbs (West Chester/Exton but my company is located in Newtown Square) and I've been investing in the area for the past 30 years. 

So if you ever have any questions, feel free to ask.

Also, if you haven't joined already, you should definitely check out our local national REIA group called DIG (Diversified Investors Group). Their main meeting is once a month in Horsham and the first one you attend is free.

I've made a lot of great contacts going there over the years, so I highly recommend it.

There's also a Chester county sub-group that meets in West Chester. You can find out the dates and more info on them and other sub-groups here:

http://www.memberize.com/clubportal/Calendar.cfm?c...

Keep in touch.

Best,

Dave