All Forum Posts by: Giles Smith

Nathan,

Thank you so much for your reply and analysis. Your interpretation of my situation is correct.

Given my criteria for having a more finished house it seems like the 1.5-2% rent is unattainable and I have found that to be true in the markets I am looking in.
-The 50% estimate appears appears accurate. I forgot to switch my taxes from homestead millage and they would be closer to 3k, increasing the NOI to around 8k as you projected.

With this situation and my purchasing requirements, what are options for turning this into a reasonable investment and at the very least not a liability?
-I understand one path to a finished house with profit potential would be to do a fix and flip but I think a fix and flip is beyond the scope of my time and expertise and therefore something I couldn't do profitably at this time.
-I am able to wait longer to find a better deal with a discount from market value but I find that these more finished homes often sell at close to fair market value(This one will probably comp at about 120k based on my estimates). In addition I would be paying rent on a place while I search for a home and essentially lighting that money on fire.

-My thoughts at this time are that if I purchase this house I would try to rent it when I am finished at 1400-1500 and if I am unable to generate rentors immediately I would concomittently have it for sale, hopefully to break even. This would seem to be a better situation for me than to rent a nicer house for around 1300 for the next couple of years.

Thanks again for your time and expertise.

Hey guys,

Questions at the bottom, some background for why I am purchasing such a house at the beginning.

I am currently trying to buy a homestead and in need of a relatively quick move. For me this requires a 3/2 in updated, rehabbed, move-in condition.

I can do FHA on this house and put down 3.5% My loans will be at 3.9% +/- depending on when I close. I think I will go this route as the PMI will not add a significant % to the interest when compared with interest I would pay to get that 20k by other means (student loans not paid off).

I have found a house listed at 125k that is a 3/2 1000 sq. ft. ranch with nice updates (granite countertops, hardwood refinish, cherry wood cabinets, finished basement, modern bathrooms, etc.), garage, deck, and an 800 sq. ft., finished, basement. It will be a nice house for me to live in for a couple years and should make a reasonable rental property, for which I have a good niche/market to rent in, and should be able to rent at 1350 +/- 150bucks.

I anticipate getting the house for 115,000 all in w/ seller reimbursing closing costs.

@3.5% down = $4,025 down

@1400 rent/month
taxes = 2350 (previous year at 55k SEV)
insurance ~800? (quoted 450 by 8 companies for homestead taxes)
maintenance ~ 1500?
property management ~ 1400 (~10%)
vacancy ~ 1200 (~8% with good niche market of students)
Debt service w/PMI assume 4%, 30 year fixed = 590x12 = 7080

Total expenses w/ debt service = 14,330
Total yearly profit = $2470
CoCR@1500 = 86%
CoCR@1400 = 61% (pm/va values changed to reflect rental price)
CoCR@1300 = 40%
CoCR@1200 = 17%

I have two questions regarding this deal.
1) Are my estimates for expenses ballpark for your average house of this nature
2) Does this deal make sense to do in light of the fact that my investment options are somewhat restricted by my requirement for a move-in-ready-homestead?

Thanks for taking a look!

Ed,

It would moderately suck to do this and get moved but I am comfortable with the situation for a couple reasons.

1) There are many good programs in SE michigan which are all going to be ranked at the top of my list. Staying in MI is consideration #1 with my family and girlfriend of 3 years rooted here.

2) I am ultimately buying this property to cash flow as a rental in 1-2 years, with no intention of managing it myself. If I move (which wouldn't be more than 4 hours by car away) my girlfriend can live there or I can simply rent it out and have a management company deal with it.

3) I want some equity in something as opposed to renting for another 8-12 months. I feel that it is time now to start building assets instead of incurring more expenses.

These things being said, I have hit nothing but brick walls with regard to getting financed. One lending agent mentioned that she thought med student programs existed but I have yet to discover one. I would hate to have to do hard money at 10% for the next 8 months until I qualify for physician loan programs.

Hey guys, I'm just getting involved in the real estate game and trying to figure out how to finance deals. Here is my situation.

I am currently a fourth year medical student with ~$150,000 debt, some of which is at 6.8% deferred, some subsidized/deferred. I do not have to begin paying off loans for another 15 months and will consolidate them for a better rate at that time if possible. My sources of income are as follows:

1) Online poker. Was earning about 50k a year for past two years playing online, payed taxes, played ~500 hours/year, have tons of documentation. Recently online poker has been shut down to US players and is having legal issues so I have retired from that and don't consider it a fixed/stable income anymore.
2) Land contract. I bought a house for cash and sold it on land contract. I will be receiving a $613 each month from this. The house is probably worth about 40k
3) I have about $35,000 in the bank.

I am now looking to finance a house for somewhere between $50,000-100,000 all in. I would be living in the first house I purchase for 1-2 years. I would also be interested in purchasing other investment properties but starting with the homestead would be a good start.

I have found some great programs for resident physicians who have secured residency positions but I am about 7 months away from being in this position. I have been told I won't qualify for conventional or FHA loans based on my debt/income ratio. It is possible I could get family member to help cosign but my family is currently looking to sell their own house and possibly take out their own mortgage on another house in the near future.

Do I have any options for getting financed? Thanks a lot guys!

Hey guys, I'm trying to get started in real estate and had a couple questions for the gurus here. Please let me know what you think of my plan.

I am looking to purchase a house that I will live in for 1-2 years and then move and rent out the house. I currently live in the Royal Oak area and would love to purchase in the area if it is a good investment market as well. I would be willing to spend up to about 100k if the house will cash flow. I have done some research on houses I think I could get into for 75k.

Let me know if these numbers seems reasonable based on my research and if there are much better areas to do this in SE Michigan.

Purchase price - $75,000 (3bed,2bath,1,000 sq. ft.,bsmnt,reasonable condition)
Rent price - $1200 (comps for this house were $1200-1300)
NOI - $14,400 rent - 3,000 taxes (millage 50 for investor) - 800 insurance, -1200 maintenance, -1200 property management-800 vacancy = $7,400
Cap. = $7400/80000 ~ 10%
CoCR = assume 20% down, 30 year fixed @ 4.5%, $325 payment = (7600 - 3900) /16,000 = 3700/16000 ~ 23%

Cliffs: Are cap rate of 10% and CoCR of 25% reasonable in SE Mi for an investment rental or are my strategies off?

Thanks for taking a look guys!