All Forum Posts by: Timothy Nelson

Yes, I am the sole name on the deed since 2011. The property is clear and free of mortgage so this is the sole debt associated with the property.

I inherited a home oat the end of August 2011. The property carries a home equity loan in the name of deceased relative. I have been paying the bill every month since. I never contacted the lender to know about borrower's death. The house is for sale now. Am I legally required to pay off that debt? If so, is it possible to get a reduction in pay-off amount as I am not the borrower?

Thanks J,

As always, I am truly grateful and appreciate your help more than I can say.

So it is sounding like I should not sell my current rental to finance my desire for more income properties. My current rental provides me with $552 profit every month. This includes absolutely everything. It just seems to me that replacing this one property to gain other properties is never going to increase my profit.

I am just copying this post from the post from another forum. As has been explained the 50/50 rule is rent minus 50%. This gives me my maintenance costs on a property. But this does not include PITI. If I purchase a property for 140k with 20% down, the PITI (assuming 5.125% interest) might be $850. If I rent the property for $1300/mo the 50/50 rule says $1300-$650=my income on the property. Then I subtract the PITI of $850 which leaves me $200 in the hole each month. If I were to buy a 30k property with cash and was able to rent it at $500/mo that puts me at $500-$250=my income. As there is no PITI my income really is $250/mo. So, it is preferable to buy a cheaper property for cash as opposed to financing a more expensive property?

Yes, it is me again. As has been explained the 50/50 rule is rent minus 50%. This gives me my maintenance costs on a property. But this does not include PITI. If I purchase a property for 140k with 20% down, the PITI (assuming 5.125% interest) might be $850. If I rent the property for $1300/mo the 50/50 rule says $1300-$650=my income on the property. Then I subtract the PITI of $850 which leaves me $200 in the hole each month. If I were to buy a 30k property with cash and was able to rent it at $500/mo that puts me at $500-$250=my income. As there is no PITI my income really is $250/mo. So, it is preferable to buy a cheaper property for cash as opposed to financing a more expensive property?

After reading above I meant to say an average of 30k out-of -pocket per property. 120k total.

Wow! I am truly more than grateful for everyone's time. Truly appreciate the time taken out of your days to help this novice. I think I need to take some time, more research and more questions about all this. Just to clarify something about why I was/am looking specifically in Indiana and Tennessee. Strongbrook purchases and then sells homes to clients in three 'hot' markets. These being Las Vegas, Phoenix and Orlando. I was told that these markets offer the greatest potential for gaining equity quickly while still returning some modest monthly profits as rentals before ultimately selling. The two markets (Indianapolis and Memphis) offer the investor who is looking to maximize monthly income as opposed to building quick equity. The reasoning being that home prices in Indy/Memphis are low, but rents are about average, thus maximizing the monthly profit from rents. I live in Portland, Oregon and I know that purchasing a property here to make a monthly profit is not going to work within my financial means (as home prices are relatively high). This is basically what I had been looking at. I am selling a home in Oro Valley, AZ that my realtor believes should sell for about 250k. I have no mortgage but I do have a home equity loan that will need to be paid off. The balance on that is around 23k Through Strongbrook the plan was to buy 4 properties with an average total out-of-pocket cost of 120k. As above properties show I could do that. Let's say I were to buy 4 properties similar to the first 4 on the list. My total out-of -pocket for those four would be approx 113k. The monthly income on those 4 would total $1375. That is factoring in taxes, vacancies, repairs etc (i.e. everything). Now that seems like a huge increase for me as currently I rent the AZ property for $1195/mo. I pay $50/mo to Fidelity which covers plumbing/appliance/HVAC repairs/replacement. I also pay $50/mo insurance, $205/mo taxes, $300/mo village HOA, $24/mo community HOA, $75/mo home equity and finally $144/mo property management. This totals $798/mo. $1195-$798=$397/mo income. So according to Strongbrook I could earn an additional $978/mo by purchasing 4 properties through them. Now, not only does that appear to be remotely truthful, I do not know what geographical area would be best and so on and so on… Bottom line is thanks again for all of your professional input!!!!

I have the opportunity to buy income properties from a company called Strongbrook. I have come across BiggerPockets (thank goodness) and have read a forum on Strongbrook that has made me wary. I too have had some really good advice here on BiggerPockets. This being one of them (to post here) from Joshua Dorkin.

These are just some of the examples that Strongbrook provided at my request. I live in Oregon and these properties are in Indiana and Tennessee. They recommend these areas because RE prices are low but rents are average. They have provided 5 yrs of Income/Expenses. I will include second year, as that is the lowest income year. All taxes seem unbelievably low to me & sq footage very small. You'll find at the bottom of each a "*(…)" that I have added for discrepancies as compared to property 1

Assumptions

Downpayment 20%

Closing Costs 5%

Interest Rate 5.125%

Property Mgmt Fee 8%

Vacancy/Repairs 14%

Annual Rent Increase 5%

#1 E Stop11 Road, Indianapolis, 46227 Purchase Price 79,900

Down Payment 15,980

Est Closing $ 3,995

Coordination Fee 3,500

Total Out of Pocket 23,475

PM Setup/Misc 2,500

Yr Built 1984

SqFt 1174

Beds/Baths 3/1.5

Mo. Rent 950.00

Mo. Principal 348.04

Mo. Taxes 54.97

Mo. Insurance 41.67

PITI monthly 444.67

Income/Expenses (Year)

Gross rent 11,970.00

Taxes 679.39

Insurance 500.00

Property Mgmt 957.60

Vacancy/Repairs 1675.80

Net Operating Income 8157.21

Net Mo. Cash Flow 333.38

#2 Milwaukee Ct, Indianapolis 46217

Purchase Price 79,900

Down Payment 15,980

Est Closing $ 3,995

Coordination Fee 3,500

Total Out of Pocket 23,475

PM Setup/Misc 2,500

Yr Built 1983

SqFt 1080

Beds/Baths 3/1.5

Mo. Rent 950.00

Mo. Principal 348.04

Mo. Taxes 25.00

Mo. Insurance 41.67

PITI monthly 414.70

Income/Expenses (Year)

Gross rent 11,970.00

Taxes 309.00

Insurance 500.00

Property Mgmt 957.60

Vacancy/Repairs 1675.80

Net Operating Income 8527.60

Net Mo. Cash Flow 363.35

*(this has lower taxes, yet higher operating income than #1 with higher Net mo. cash flow)

#3 Ginger Snap Cove, Memphis 38125

Purchase Price 145,000

Down Payment 29,000

Est Closing $ 7,250

Coordination Fee 3,500

Total Out of Pocket 39,750

PM Setup/Misc 2,500

Yr Built 1993

SqFt 2253

Beds/Baths 4/2.5

Mo. Rent 1300.00

Mo. Principal 631.60

Mo. Taxes 111.00

Mo. Insurance 60.00

PITI monthly 802.60

Income/Expenses (Year)

Gross rent 16,380.00

Taxes 1398.60

Insurance 720.00

Property Mgmt 1310.40

Vacancy/Repairs 1310.40

Net Operating Income 11,640.60

Net Mo. Cash Flow 344.00

*(error in that prop mgmt & vacancy/repairs are =, also that

vacancy/repairs on this property are just 8%)

#4 Vestry Place, Indianapolis 46237

Purchase Price 87,900

Down Payment 17,580

Est Closing $ 4,395

Coordination Fee 3,500

Total Out of Pocket 25,475

PM Setup/Misc 2,500

Yr Built 1998

SqFt 1038

Beds/Baths 3/2

Mo. Rent 975.00

Mo. Principal 382.88

Mo. Taxes 50.00

Mo. Insurance 41.67

PITI monthly 474.55

Income/Expenses (Year)

Gross rent 12,285.00

Taxes 618.00

HOA 132.00

Insurance 500.00

Property Mgmt 982.80

Vacancy/Repairs 1474.20

Net Operating Income 8578.00

Net Mo. Cash Flow 333.45

*(Vacany/Repairs 12%)

#5 Lauren Dr, Bartlett, TN 38133

Purchase Price 140,000

Down Payment 28,000

Est Closing $ 7,000

Coordination Fee 3,500

Total Out of Pocket 38,500

PM Setup/Misc 2,500

Yr Built 1997

SqFt 1562

Beds/Baths 3/2

Mo. Rent 1300.00

Mo. Principal 609.83

Mo. Taxes 149.42

Mo. Insurance 60.00

PITI monthly 819.24

Income/Expenses (Year)

Gross rent 16,380.00

Taxe 1,182.65

Insurance 720.00

Property Mgmt 1310.40

Vacancy/Repairs 1310.40

Net Operating Income 11,156.55

Net Mo. Cash Flow 327.36

*(again error in that mgmt is same as vacancy/repairs-hmmm, same mistake twice is worrisome, also vacancy/repairs are just 8%)

#6 Millers Glen Way, Memphis 38125

Purchase Price 105,000

Down Payment 21,000

Est Closing $ 5,250

Coordination Fee 3,500

Total Out of Pocket 29,750

PM Setup/Misc 2,500

Yr Built 2004

SqFt 1348

Beds/Baths 3/2

Mo. Rent 1050.00

Mo. Principal 457.37

Mo. Taxes 80.83

Mo. Insurance 50.00

PITI monthly 588.20

Income/Expenses (Year)

Gross rent 13,230.00

Taxes 999.10

Insurance 600.00

Property Mgmt 1058.40

Vacancy/Repairs 1058.40

Net Operating Income 9514.10

Net Mo. Cash Flow 337.90

*(AGIAN same error in that mgmt is same as vacancy/repairs- same mistake three times is really not so great, also vacancy/repairs are just 8% again)

If you've taken the time to get through all this, I can not thank you enough!

@Adam Gerig Thanks for responding. Your reply is of great benefit to me. When I look at what they are calling 'financed proformas' the rents minus PITIs range from approx. $461 to $535/mo. They then show monthly cash flows after projected periods of vacancy, repair costs and management fees. The numbers then are reduced to the $327 to $363/mo range. They project cash flow to increase in subsequent years based upon 5% rent increases annually. I am thinking I need to do at least 3 things. I need to call them and see if they are leaving anything out, say HOAs as an example. The thoroughness of their charts make everything seem copacetic, but of course I still do not have the knowledge needed to know whether enough info is being provided or not. It seems to be. Anyway, I also need to look at the included information about the properties to look up comps. Although, as I have no access to MLS I believe I may not get accurate prices as all I will see is sellers 'hope to be' purchase prices. I will not know what 'sold for' amounts are. The info Strongbrook includes: street addresses, city, zip and state. Also included is year built, square footage and #Beds/Baths. After looking up that information I should look up rental prices. Maybe I should print up info they sent me to real estate agent/owner and/or financial advisor for input. Do you think that I would then have enough info to make a wise decision? Also, I need to find out if they guarantee such properties are not anomalies but the norm. If not I should get my 6k back. I just want to again say how grateful I am that you are taking the time to help a stranger! Really kind of you.