All Forum Posts by: David Bowles

@Dan Froilan that’s awesome you are looking at getting into real estate! I’m in the same boat, and just closed on my first house in June this year! It’s possible! As you mentioned you don’t have alotof capital, I’d recommend you both first get a firm hold on your finances and start building that nest egg. Once you have a few thousand, you can get yourself into a nice little MF property and house hack.

Learn about BRRRR investing and the two of you will be sleeping on cots over OSB and drywall dust, dreaming of your financial freedom just a few short years away!

Make sure to make a plan. Set big goals, and break it down into smaller, more easily achievable ones. Once you start to actually take the steps that investors take, you will figure out the rest. Gotta want it bad enough, and fake it till you make it!!! Good luck!

@Jon McCarron I think for today’s lending market, any heloc you get, you should be happy for, especially if it’s enough for what you need. Lower appraisal now means less payoff in the future!

I think a safer strategy would be to do a cash out refi on the home, and put that equity into your pocket. I just finished mine a few months ago, but was originally looking at doing a heloc. I was able to lock in fantastic 30 year rate, the money is mine now (credit lines get cancelled if the market crashes hard enough), I put 40k in my pocket, and my mortgage only increased by 50 a month. Just some food for thought! Good luck!!!

@Warren Shorter I’d recommend speaking to someone familiar with local RE law specific to evictions in your county. I suspect you will still want to serve “notice to quit” and everything else, even if there is still a moratorium on evictions. You may want to find out what is in your power to do right now before you go pissing off the tenant though!

@Charlie Anne Gotcha! My personal approach I think may be different than most. I only own one investment property, so my opinion is very small minded, but conservative. I just recently purchased my house. Current market value 62k, 650/mo rent. Piti is about 329/mo. Instead of setting aside "X percent", I just put 10k in a reserves account (should be wayyyy more than enough to handle anything) and plan to let ALL monies after PITI build in that account. If I ever need money from that "pocket", I will skim off the top. I'll always plan to keep that in there just in case. I'd rather be on this side of cautious than the other...I plan to always have a MINIMUM of 6 months of carrying costs +5k in a reserve account on each property I add to my portfolio. I'm can't afford to let a crappy tenant, or a flood, or a tornado bankrupt me.

All this being said, I think you’ll find two camps of thought for your situation, either “3% COCROI isn’t enough for me” (that’s where I’m at) or “I’ll buy anything that cash flows positive”. I don’t have a ton of money, so I NEED it to work hard for me for quick reinvestment. Either way it sounds like a solid long term investment, and I doubt you’d ever regret buying it!!!

@Charlie Anne As a direct answer to your question, no I would not buy the house. Here are the two reasons as to why I wouldn’t:

1. The yearly cashflow on that property gets destroyed anytime anything happens that would require even a 1k repair/insurance claim.

2. There isn’t enough “juice” in the squeeze. What I mean by this is that when unforeseen costs arise, and they nearly always do, you may find yourself tight on funding, without having any exit strategy.

I’ll say again those are MY reasons for passing on that. There are better deals out there.

Your situation is your own, and you need to find what your comfortable with. If this deal fits in what YOU are looking for, then go for it! I’m not personally in a place where I can send out 50k indefinitely and still continue investing. My goal is to get into houses for as LITTLE cash out of pocket as possible.

Either way, congratulations on getting as far as you have, and keep it up! Best of luck with your business!!!

@Kole Moore Good on you for starting at such a young age! I only wish I had started younger as I could have been using my VA loan to househack as well.

As far as where to invest, as others have said, it really depends on quite a few things. I found I was much more comfortable investing near where I live because it allows me to be more “hands on” with the rentals while I gain experience in real estate. (I just closed on my first house in June this year) As you’ve mentioned, you’re in a very unique position where you can get into a small MF property for 0 down and start making money on day 1! So in short, assuming you have a firm grasp on your own financials (don’t spend all the money you make at your new engineering job), the plan of attack I’d recommend for you is this:

1. Learn how to analyze properties with specific focus on small multi family. Less than 5 units.

2. Find a property near work that requires 0 maintenance (VA can be fun to pass inspections LOL).

3. Buy the property and get the units rented out.

4. Let your disdain from your day job fuel your passion for real estate.

5. Wait two years and buy property #2 and move into it.

If you manage your money properly, and grow smartly, you may only need that degree for 5-10 years. Maybe even less!

Hi BP! I finally did it! I closed on my first house and I wanted to share some of the details, as I feel like I got an amazing deal. Let me know what you think!

The story: @Bradley LaBrie mentioned to me a friend of his was selling one of his small 2/1 houses as he needed a quick buck. I reached out to the seller and after a few contacts, we agreed upon a purchase price of 43K cash. This was right around the time COVID hit, and I got a little worried about spending ALL of my life savings on one small house. I went back to him and asked if he would be willing to allow me to use conventional financing to secure the purchase to which he agreed. Bradley and I were thinking that this particular property would be worth probably around 50-60K current market value. The property has long term tenants in place (650/mo) with what looked like only minor repairs needed (less than $500), and for sure carpet/paint/beautification on the next turnover. The inspection revealed what i thought were MAJOR foundation issues (sagging plates/inadequate support, fungus, dry rot). These turned out to be a super easy fix for the seller as he is a builder! The seller fixed the issue in a day, and post inspections looked great! I was able to secure a 20% down loan on the property at 60K (appraisal came in at 62K). I should mention that we ended up creating an addendum that the seller would reimburse me after closing for any additional funding he received above and beyond the 43K we discussed.

The numbers: 

Purchase price: 43K -- Loan Amount: 60K

Out of Pocket Cost: 1K Earnest Money -- $725 inspections (well/septic/water/home) -- $18,320.64 down at closing -- $125 in repairs (still need to replace a shower surround at some point)

Money back into my pocket following closing 15,640.65

Total out of pocket cost: $4529.99 (with 14K in equity on day 1!)

PITI: $328.65

RENT: $650

Monthly CF: $321.35

Yearly CF $3856.20

Cash on Cash ROI: 85.12%

**The cashflow numbers above are only estimates. I do understand that I didn't account for vacancy/capex/maintenance/management, but as I was able to keep my initial capital so low, I set aside 10K in a reserves account that will replenish itself from rent payments. This will allow me to use ALL of my profits above and beyond the initial 10K to move on to the next deal**

I am currently managing the property, and used the biggerpockets Michigan landlord form to get the tenants into a 12 month lease. The current rental rate of 650/mo would easily increase to 750-800 on the next turnover. If my tenant stays, which would be ideal for me, I may raise the rent to 700 next summer.

This turned out way longer than I thought it would and I probably missed some things as well. As I said, I feel like I hit a real homerun! Not a "get rich overnight" homerun, but a fantastic cash ROI/equity deal for almost nothing down!!! Let me know your thoughts!

@Ryan Hazelwood Hi Ryan, I just turned 35 and actually just closed on my first SFR!!! I just began getting interested in real estate about a year ago, and started much the same way as you described.

Learn all you can, but don’t let it slow you down from taking some real action! Once you’re comfortable enough with analyzing deals, and you understand your “starter investing strategy”, TAKE THE LEAP!!!

Good luck in your new business!

@Arsen Atanasovski ELGA credit union will do small loans. I current have my first house under contract with them. 60k market value, 43k agreed sales price. Total down at closing should be around 17.8k (after the 1k earnest money) and I am getting 17k back from the seller after closing.

Long story short, there are a few good lenders in the genesee county area that will loan small. The two best lenders I was working with locally are Dort Financial, ELGA credit union. Any large loans I need will go through Rockwood mortgage. Rocky (the owner) is a true rockstar!

@Bastian Kneuse Septics aren’t that big of a deal. Where I’m at in Michigan, there are literally thousands of homes within 15 miles of me with them. The biggest problem people have with septics are generally hygene product related (sorry ladies). The property I have under contract has a septic that’s something like 30 years old. I had an interNACHI inspect check it out for 200 bucks. He told me that as long as I only flush things I should be (fluids/gray water/human excrement), it will last indefinitely.

I think getting the inspection is the key. I get that it’s scary for investors because we don’t know anything about them. We need to hire good people who do to let us know what to expect!

I’ve been living in my home for 6 years now, and I’ve never seen my septic tank. I’d also like to echo a few other comments about wasting money on septic products. It’s all a “load of crap”, pun intended!

Good luck on the house!