All Forum Posts by: Mike H.

Mokena? Thats as close to me as anybody I've seen so far......

I read that article today too. Hopefully, that will be buy us another 2 years.

I just picked up a house in Monee for 66k that needs about 13k in rehab. Should be closing sometime next month. 3/2 2,100 sq ft, built in the 90's. Should rent for 1,400 to 1,500. :-)

Gotta love it.

Welcome. I'm from Illinois and invest in the south suburbs (actually just south of the south suburbs - Will and Kankakee counites). What area are you looking for?

re: offer
I'd keep looking. If you're looking at stuff that will appraise out at 80k, you should be able to get a much bigger discount than that here in Chi-town. If you are going to put in an offer on a house thats only going to be worth 80k and needs 6k, I'd say 46k-48k tops for your offer. That keeps you under 70% LTV.

But be sure your estimated value is on the money. There aren't many houses in that price range that aren't in some pretty down markets right now so I would definitely get that confirmed with some comps.

I'd try the HUD site, homepath, and realtor.com.

re: attorney
If its a bank owned, I wouldn't bother with an attorney. You're going to have no other choice than to use their contract. I'm not sure what a 2/1 quad is - a townhome unit maybe? If there's an HOA, you might want an attorney to go through the fine print.
i.e. Can you rent it later on it if you want?

Definitely go through a title company.

re: insurance
You need to have insurance in place before you close so
that its paid for and starts on the day you close. Technically,
if you're paying all cash, you don't have to have insurance.

But if you leave the closing the place catches on fire, you're
out all the money. Get the insurance. For $80k house, it'll probably only cost you about $500.

re: bank owning
Your realtor can't go directly to the bank. The bank will have a listing agent for all their REO properties (houses they own thru foreclosing). Just stick with MLS and you'll find a steal.

Give me an idea of what area you're looking for and what type of home/unit and budget and I'll see if I can do some looking. I love finding deals - even if its for other people. :-)

Shoot me a quick email

Just wondering, but have you considered contesting the taxes?
I'm trying to do the math on the your numbers to figure out how much your paying in taxes and I'm not sure it will save you much.

Based on your interest rate (6.375) and loan amt (123k), I'm showing a monthly payment of $767. Add in PMI ($80 for 100% loan?) and insurance (500 so 40/mo?). That means your taxes are next to nothing. I'm guessing on the PMI and insurance but wow, $1,200 a year for taxes?

Still if you can knock that down 30%, you'll be saving $25 a month.

One other thing. Your PMI is due to be removed very soon. You can request it to be removed at 80% of the original loan. But by law, they have to remove at 78%. That should save your PMI in another year or so, I think. (80% of 123k is $98,400 so you're only $1,600 away).

"What's more, when you've paid down your mortgage to 78% of the original loan, the law says that the lender must automatically cancel your PMI."

Tax savings: $25/mo
PMI savings: $75/mo (just guessing on your PMI
Prop mgmt savings: $67/mo

You'll be getting closer. Then if you actually could refi it,
you 'll be in business.

To me, the best motivation is listening to other real estate investors talk about their deals and investing in general. I love hearing about good deals. I drive an hour each way to work so I get plenty of podcast time. But thats how I initially learned and felt comfortable enough getting started.

lifestylesunlimited is the best podcast out there right now to me. And, no, I'm not a member (I live in Illinois). Also listen to Kathy Fettke every once in a while. But she's a little too high falutin' for me sometimes so I tend to listen to her in spurts. :-)

I'd keep trying with the local banks. If your business did generate good profits the first year, you should be able to find someone that can do a portfolio loan (i.e. they keep the loan in house). They have a little more flexibility when it comes to income guidelines as long as you're not trying to do a conventional loan.

If you could show 18 months of solid income from your business and had some decent reserves, I can't imagine a local bank not giving you a portfolio loan for 40k to 45k (you'll probably need to stay around 65% to 70% ltv or better).

You'll be looking at a bit higher interest rate and a 3 or 5 yr balloon instead of a 30 yr note. But at least it will allow you to get your money out sooner. You can always refi it again into a conventional once you get your two years of self employed income on your returns.

For now, the key is to buy as many as you can while the prices are ridiculously low. Even at the higher rate and shorter amort periods, they should still cash flow pretty good. At least thats my advice.

I truly believe that the people that are picking up houses at
these prices are really going to make a generational change
in their finances that most of us wouldn't have the opportunity
to do any other way.

To me, real estate investing is one of the few remaining "blue-collar" ways to get ahead financially.

Good luck and stick with it. Its a little daunting at first
when you've only got one or two houses. And its hard
to see the light at the end of the tunnel sometimes. But
if you stay on track, they start to build up fast.

I'm a little over 4 years in and have 16 houses (plus my own)
and am closing on #17 next month. If someone with
my limited construction/housing background can do this,
everybody can.

I can tell you one that is very good: Recasa

I think that 50% rule is a bit overblown in terms of real estate. Yea, you might need to factor in the cost of a roof over its usable life and appliances, etc. But those will be purchased in future dollars when my net income will be even greater with the increase in rents while my loan payments stay the same.

My belief is if I can pickup 25 houses making $350 per month when I first buy them, then I know I'm going to be sitting pretty in 10 years even when the roof's, appliances, etc, come due. Mostly because the net income by then will be around $500 or $600 per month per house which is more than enough to handle the occasional big ticket repair.

The one thing I will say I understand is that I wouldn't want to have to count on my real estate income to replace my job income at a 1 to 1 basis. Real estate income is definitely not predictable enough.

I would want to make at least double my take home before I would even consider quitting a job. Not only because of the reality of the repairs and vacancies that tend to bunch up when they do hit. But, even more importantly, because it would be awfully tough to qualify for loans without my w-2 income.

And what fun would it be if I couldn't keep buying houses? :-)

btw: I'm also in the chicago area - far south suburbs (mostly will and kankakee counties, with some early souther cook county purchases). I'm curious how you've factored in evictions in your model?

Thats one of the key reasons (property taxes being the other) I stopped buying cook county properties. My understanding now is that the evictions can take up to 5 months to get someone out of a unit.

Haven't had one yet but thats a huge risk that I would be very hesitant taking on in cook county. If it happens to you, I'd recommend offering the tenant a big chunk of cash to move out. Saved me several thousand with the one bad tenant I've had to date. Offered them 1k to be out in 3 weeks and they took it. Was a heck of a lot cheaper than paying the attorney 1k and waiting the 5 months.

Yes there are. I've used them (not sure if I can name, but starts with an R and ends with an A) on about 6 or 7 of my deals so far and its true 100%, no money down financing.

The only catch is that they cross collateralize against other properties you own - including your primary residence.

But they close and are very thorough.

Their appraiser and rehab inspectors are very good too. They'll catch things you might miss.

You'll pay in points but the interest rate is pretty good (9.5%). What I really like is that its a 9 month term instead of 6 compared to most HML's.

When I look at how much I pay in points with them, I definitely wouldn't say its "too good to be true". But it really is a great way to maintain your capital.

Oh, btw, my aunt also does 100% financing and she only charges me 7% and 3pts. She heard what the HML was doing and had a nice HELOC at under 2% sitting there going unused and she decided she'd use the bank's money (the HELOC) to make the float (5% diff plus the 3pts on every deal.

I have a question on MHP's maybe you can answer.

Aren't you giving up a huge benefit of real estate by going with MHP's? Specifically, the lack of depreciation.

Do you get any depreciation at all for MHP's? Seems like there's a big difference between figuring out rate of returns when adding back depreciation and the tax savings with that.

Closed on two rental properties in a good area thats 5 minutes from home. And just had got my 3rd one under contract today
in a nice area thats only 10 minutes from home.

The third one will bump me up to 17 sfh's.

The financing seems to really have opened up some recently.
Not getting anywhere near as much pushback from the local
banks and I think I finally found a broker that can do 5-10
again - although I only have 2 conventional sports left.

This year is on pace to be a fantastic year. My goal was
to add 3 houses this year and I believe I'm going to
lock up 5 at the rate I'm going.

If I can get to 25 houses before the prices start returning
to normal, I'll be pretty happy. I know I'm going to look
back at this time period and pinch myself for seeing the
opportunity and jumping on it.

I can't imagine where I'd be in a few years had I not
done this. There is a light at the end of the tunnel
and its being powered by real estate. :-)