All Forum Posts by: Mike H.

Wow, 100k at 2%. I would have maxed that out before the short sale hit. Thats free money.

But if you think you're the only one that got cutoff, get in line. And the line forms at the end of road, down the alley, over the hill and through the woods. A lot of people had their heloc's closed out with nothing negative even showing up. The banks were simply cutting those off because they wanted to get rid of the liability.

I had mine turned off a few years ago when BofA was going through that crazy stretch. Luckily I was keeping up on the news and pulled everything out of it but a couple thousand before they did it. I'm at 2.5% right now on it and its the best money I'll ever get.

Sad but in this case, I'm not sure I disagree with their logic. You had 2 short sales which means you effectively had to stick the other bank with losses because you couldn't pay the loans you promised to pay. I'm actually surprised a bank allowed you to do a short sale on the other properties if they would have saw you had a house that was completely paid off and a heloc of 100k with 78k available. Seems like they should have had the right to make you kick in something to make up the difference.

I'd be surprised if it really took 7 years for you to get another LOC. Maybe with them if they're cutting down on the risk. But you should have no problem getting something from someone else fairly quick. I'd bet 2 years tops......

Great post. Its the reason that "Its A Wonderful Life" has always been my favorite movie.

There isn't a scene in any movie that can compare to when George comes home and the neighbors he's helped throughout the years coming in giving him money. Then they end it with the toast from his brother...... "to my big brother George, the richest man in town".

Looks like Rich is the richest man in Utah - now that he's moved back home. Although I'm not sure George Bailed would be able to explain a Viper, Rich! :-)

I was thinking the same thing here in Illinois.
I've been doing mostly HUD deals and, in the past year,
the number of homes has dropped from 1,000 in the system
to now just under 300.

This is normally the time of the year that some really good deals
could be had since Owner Occupants aren't that interested in looking. But the listings are just way down.

I was hoping to add 3 or 4 a year for the next 2 years.
But now I'm ratcheting down to about 2 a year for the next 2 years. That will get me to 18 houses.

My hope is that, as the prices start to go up and sales start coming back, I'll be able to continue buying 2 a year by doing a flip and making 15 to 20k and then using that to pay down a buy/hold deal where the cash flow is still at that $300 a month or more.

Not as concerned with cash on cash return as much as I am with chunking in the net cash flow and continuing to grow.

25 houses by age 45 is my goal. Not sure its doable but we're going to give it a shot.

The only thing I'd add is that I'd be surprised if properties bought at "market" would really cash flow much. I'm in Illinois and if bought anything at market, I couldn't make money.

Then again, it might depend on what the market actually is. If you go to some rough areas, the market prices are essentially investor pricing anyway because they're the only ones buying. So I could see cash flowing at those.

But if you're in decent areas, I think it would be awfully tough to cash flow much of anything paying market rates. The other thing I'd wonder is where you're at that you can't find anything below market.

Typically, there's bank owned homes in every town in the country these days and the bank owned stuff is almost always available below market by about 20% or more.

Very interested thread here.

At the end of the day, I would think you'd have to look at the cash flow numbers before you can say whether it makes sense to pay over market. But I don't think I'd ever say never to anything.

Paying over market but getting 5% interest might be the same as paying market but paying 7% on a commercial loan amortized over 20 years.

I'd want to know what the numbers would look like at the end of the 10 years. How much would you have paid off? If you can add $300 a month cash flow for the next 10 years and end up with a loan that will be 70% LTV of better, why not do it?

But if its risky, then you probably have some room to negotiate before walking away. Lessen the down payment, lower the interest rate or bump out the balloon (from 10 to 15 years).
That might make the numbers work for you then.

But to say you absolutely won't pay more for market on a house that you're not having to get bank financing on isn't something I would do. Just need to see the numbers right.

I'd be curious to know what your estimates are for cash flow on this thing.

If you're paying a 90k note at 5% amort over 30, your payments would be $483. Taxes and insurance? $300/mo? That leaves you with a little over $400 a month for cash flow and expenses. In this market, thats a fair deal. But its a very good deal given you're only having to put down 10%.

In 10 years, you'll owe 73k. So the question is how much will that house be worth? 120k? If its at 90k now in this depressed market, 120k, might be reasonable.

Thats actually a good deal to me. Although, if it were me, I'd ask to lower my down payment. Give him the over market price, but I'd want to tie up less cash on a deal that I'm overpaying for.

I've got 14 sfh's and based on my tax returns it came to about $125 per month per house for repairs and vacancies, etc. Depends on the age of the homes too. I had some houses that I had 0 turnover and 0 repairs but they seemed to be the newer homes too. They helped the average quite a bit.

The one thing that becomes pretty obvious - turnover is not my friend. The missed month of rent plus the make ready costs can really take a bite out of profits. And an eviction absolutely sucks (had 1 this year) - sucked up all the profits for that house for the entire year.

On the brighter side, I still knocked down about 1k toward the loan on it. So even though my worst case scenario occurred, I still came out ahead. :-)

Well, I agree the rule is a bit silly. The govt should be trying to get as much money as possible for the house. If that means its coming from an investor, then so be it. It was one thing to have the O/O clause in there years ago when the market was booming and the govt was trying to help O/O get good housing. But there are so many deals out there today, there really is no need for the special preference.

That being said. I'd report that guy in a heartbeat. I don't have a problem with the rule. But everyone should have to compete fairly. Thats my business too. I can't compete if I can't bid. And there's no way I'm going to be stupid and bid as an O/O. Thats a federal agency you're dealing with.

If you do it on one, you might be able to at least argue that your intent was to move in. But if you've done it multiple times, that argument goes out the window. You're going to be in trouble.

Here in Illinois, they're very serious about that O/O bidding. The kicker is they used to lock up houses for O/O status for quite some time. Now its next to nothing. And I don't buy anything unless its been sitting for awhile anyway - the discount isn't enough to make it a good enough deal for me.

But I don't see how you're not reporting that investor to every agency you can find. Get your realtor involved and the asset manager and HUD. That investor is going to be in a lot of trouble.

Bryan, its interesting that you say that. I wondered if any of these private investment groups might start recruiting some of the private investors to put together packages of rental properties.

I was reading an article the other day about the bulk purchase program and how all these big funds were looking at buying sfh's for rentals. They were saying how it was going to become a whole other asset class for these big investors.

But who better to help these funds acquire, rehab and rent sfh's than the individual investor?

Property management firms would be a likely first choice but how much do those companies really understand the acquisition/rehab phase? And how much do contractors really understand the leasing and tenant relation piece?

If I had these funds' money, it would be real easy to add about 5-7 houses a month. Not much, relatively speaking, i know for these funds. But very comparable to an apt deal if you think about it.

One 9 mil apt deal vs 75 homes in a year at an avg value of 120k apiece = 9 mil. And your net cash flow and appreciation potential
would be far greater on the sfh's than on the same 9 mil apt deal.

Just something that I wonder if it would make sense to someone in the funding side to look at.....

Any thoughts Bryan on whether you could see people in your industry doing something like that? Would they have the comfort level with an individual investor or is it almost a given that they would have to go with a large property management firm?

I don't know that investing could ever be a full time job.
It would almost be like retiring wouldn't it?

If I ever get enough income to replace my salary, I don't think
I would do real estate full time. I think I would cash in my 401k and buy a franchise and make that my full time job and real estate my supplementary source of income (even if it would be greater).

But the franchise seems like a solid risk. Not going to get rich but at least my drive would be shorter and I'd be my own boss. And if I needed to go meet a contractor or something during the day, I could take off.

Thats my plan anyway.

I think you're going to have a very hard time finding any bank willing to do a purchase loan based off the appraisal value.
Not unless you have a ton of money in the bank.

I have a friend that is buying some condo units cash
and his local bank told him they would refi them
up to 80% LTV with NO seasoning.

Now he also has over 500k in the bank too
so its pretty easy for them to have a comfort level.

You're best bet to tie up as little money as possible is
to buy with hard money and then refi rate and term
after 6 months. You need to find a hard money lender
that will loan up to 100% of purchase plus rehab
so when you do refi, you can pull your money back out.