All Forum Posts by: Mike H.

Wow. Who knew Denver was such a crazy city?

As for the renter, I don't see why their poor choice should have to cost you. I would talk with the renter and let them know that you saw the plant and it has to go or they have to go.

If you use a standard lease, I'm sure you have a clause in it that forbids them from doing anything illegal on the Premises. If so, that should be enough protection for you to ask her to get it out of there immediately.

If she doesn't, then evict her.

Although you might want to check in with an attorney to see
what your liability would be on that? Can they take your house?
Could the police raid it and then keep it vacant until a trial?

To me, the easiest path would be to tell her it has to go and then play it from there. But let her know you'll be doing inspections on the house going forward until you can be sure there's nothing going on any more.

I wouldn't write off the conventional refi without seasoning just yet. Some banks will do it. I can tell you that even if you can't find one to do no seasoning, you can definitely get a local bank to do one with no seasoning. Rates are a little higher but you'll be able to pull your money back quicker to continue to grow faster.

Be very careful with the business credit cards and where they report to. I had a Capital One card for my business that was reporting to my business only. And then about 2 years ago, it suddenly showed up on my personal credit.

They told me that had changed their policies and were now
reporting the business card on personal credit.

I then paid it off and haven't used it since. The rates aren't as good as my personal so why bother with the card if its going to report to my credit just the same.

My very first deal about 6 or so years ago was a flip.
Made about 20k and thats what got me hooked.
However, about a year later the market turned
and I went solely buy and hold.

I actually bought one about a year ago with the intent
to flip but I didn't have the patience for it. Saw the
missed rent opportunity go by for 6 weeks and I couldn't
hold out. Put it up for rent and rented in a week.

Just not sure I want to part with anything at today's prices.
Seems like the equity capture would be 2 or 3 times what
it is today so why not hold. Not only that but I like
chunking in the cash flow more than the one time hit.

Directly to your question, I don't know that I'd do either one of those. I wouldn't want to pay cash for $50k houses and I wouldn't want to leverage my funds for $250k houses. I'd want to go in the middle.

Try to find houses in the $110 to $140k range (today's appraisals values) that you can be all in for 80k to 90k. Better rental returns with better upside.

50k houses aren't going to appreciate. They're strictly cash flow and a maintenance headache given the type of low end renter pool you'll be looking at. 250k houses don't return you as much in terms of price to rent ratio and, even worse, the high price of rent you'll be at is going to severely limit your renter pool (i.e. more vacancy). After all, if you could afford 2k for rent, maybe you should be buying.

I would leverage your money as much as you can on the mid range houses so you can load up on as many as possible. Put down the 20% and rehab costs out of pocket and you should have no problem getting loans (conventional or commercial with local banks). My guess is you could probably get to about 12 or 13 at those numbers before you'd need to refi some of your properties to pull some money out to buy more.

Though, I'd probably agree with the other posters on here - that you should take that 500k and get yourself a good multifamily building. Then you get the management built in to your cost structure and don't have to do a thing...... I don't think the returns on multifamily can compare to the sfh's though.

I'd personally rather have 12 or 13 great sfh deals than a multifamily building returning 10 to 15% a year........

I think SFH today is more like 30% or more.....

Based on returns, I don't think you will find anything that comes close to real estate right now - provided you're looking to buy and hold as rentals. If you're looking to use your money for flips, that might be a bit more risky.

But, right now, your returns when factoring in net cash flow from rental income, mortgage paydown, and tax benefits, there isn't a single investment that can come close.

And think of the upside later on when the housing market inevitably returns to some sense of normalcy. Your appreciation should start being added in as well. 2 or 3% per year on average.

That doesn't sound huge, but factor in that increase as the total value of the house. But if you leverage your money what is your real return?

i.e. $100k house that you put 20k into.
House goes up 2% a year, thats a return of 10% a year just on appreciation! Add in the net profits from the rental income, the principal pay down and the depreciation benefits and you're in the 30% returns or more.

These prices won't last forever. The people that are able to snap up 2 or 3 properties at these prices are going to be pretty happy. The people that are able to grab 10 or more properties are going to be absolutely ecstatic in the nex 3 or 4 years.

So, if I had to give my opinion on being diversified or being 100% in real estate, you can guess where I'm coming in at. Take every penny you have and put it in real estate. I stopped contributing to my 401k over 3 years ago and haven't looked back.

And it only applies for investors that have 4 mortgages or fewer. Once you get that many, you can no longer qualify for that loan.

Ok. thanks. Good thing I didn't push back too hard with the realtor then. I was doing everything I could to bite my tongue. But I really wanted to say that rule didnt' jibe with what I was hearing about the deals on short sales.

82% of a BPO isn't any kind of deal to me. Why in the world would I want to wait 6 to 9 months in some cases to get 20% off the market value of a property?

I can get a lot more than that off simple bank owned stuff and those are houses the banks have already eaten all the foreclosure costs.

If I'm saving them the foreclosure costs, I should be getting a much bigger discount, shouldn't I?

For the most part, I've really only been doing hud deals and a couple of bank REO's. I went to look at a short sale property the other day and it needed quite a bit of work. I told my realtor I wanted to put in an offer but she gave me some speech about Freddie being limited to getting 82% net of market value.

i.e. She's saying that if the BPO comes in at 100k, the lowest offer they can accept is 82k plus the closing costs and any unpaid liens (i.e. taxes).

This doesn't sound correct to me but I have no way to know if
thats correct.

This house is listed at 75k and probably needs 30k in rehab to make
it right. I want to offer 50k so I can be all in at my number (80k). The house, if done right, would probably come in around 125 to 135k which is right in my sweet spot for properties - although I don't typically consider houses that need so much rehab. But I am willing to make an exception to pick this one up since its so close to home.

Should I put the offer in? Is my realtor off her rocker?
I've never heard anyone mention this crazy 82% rule before but
I don't do a lot of searching on short sales either.

Suggestions????

I got started in my garage at a 4th of July part I was having about 5 or 6 years ago. We were talking and drinking and I was told that one of my sister's neighbors was losing their house. They supposedly owed about 90k on the house and it was worth about 140k. They didn't have the money to fix it up to sell it so they were walking away.

I went in with my brother in law to talk to the guy and he said they'd do it. Come to find it out from the bank they owed 110k. My brother in law walked from the deal. I closed on it, did the cosmetic stuff myself and closed on the flip 2 weeks after I listed it.

Made 20k and thought I won the lottery. This was when the market was booming mind you.

About 6 months later, I went in on a new construction spec home with my brother in law. He took forever to finish it (18 mos) and, by then, the market had collapsed and I had to turn it into a rental.

We were both supposed to go into rentals from then on because of the way the market was headed. But, at the last minute, my brother in law had an opportunity to build a new construction house for someone and bailed.

I now have 16 rentals and closing on #17 this thursday.

And almost all of my deals are no money down although when you really run the numbers, I end up paying 3 or 4k out of pocket on every other house.

No funny business. But I do have to really cherry pick my stuff to get the LTV"s to work for the end loan financing.

As far as being "more aggressive", I'm not sure what you're thinking there is. Do you mean you have some money to spend and are willing to go "all in" with it?

While all my deals are essentially no to little money down (3 or 4k tops for financing costs), you still need to have some money to really grow the right way. The hard money lenders and banks are going to need to see cash in your bank for meaningful reserves.

Once you get over a certain amount of cash, I don't think they apply that 6 month rule for all properties. For me, the 50k mark seemed to be the magic number.

As far as advice in whether to do it or not. I can say unequivocally, there is no better investment than real estate today or any other day. These prices aren't going to last forever. So, if you have the means, I'd buy every single property you can find a way to get the financing for.

Also, I'd recommend sticking with the lighter rehabs though to keep your turns quick and avoid the more significant risks. The deals are out there.....