All Forum Posts by: Jim D.

What is the existing lease agreement they had with the previous owner? You have to honor whatever that lease says.

 
Yes, that scenario would work as you described.

Only problem is that your odds of buying a property at 50% of current value that needs no work, while bidding against other investors, are about the same as me scoring a date with Jodie Foster this Friday night.

Ghosts are not real.

You don't. 

If you do a cash-out refinance and pull that equity out, then you'll be paying interest on it all the time because you've permanently pulled it out (until the loan is fully paid off).

If you do a HELOC, you'll only be paying interest on it while you're using it.

In my experience, it is quite rare to actually get all your money back out of a BRRR once you account for interest, holding costs, loan closing costs, etc. But having $15k into a $150k purchase is still fairly attractive compared to the usual 25% down you would have to put in. Here are a few additional notes you can factor in:

1. LTV on a cash out refi is typically 75% for single family and 70% for 2-4 units
2. I cash out at 6 months, not 12, so that saves me a good amount of interest
3. If I am able to finish the rehab and get it rented, I would also factor in that rent received. If I can finish rehab in 3 months and get it rented for $1,200/month, then that's $3,600 of income that helps offset all the holding expenses. This is one reason speed is critical and it's not worth it to do your own work and move slowly.
4. Most private money lenders will be more affordable than hard money, if you're able to find one.

No doubt, it is a more labor intensive way to grow a portfolio, but that's the tradeoff if you don't have a lot of capital available.

You're legally bound to honor the existing lease when you buy a property. You'll need to either wait for the lease to end, or agree with the renters to end the lease early.

When introducing yourself to the renters in this situation, you can let them know that if they are looking to move, they are welcome to end the lease early at any time if they give you 30 days notice. Frame it as a favor to them and sometimes they'll take you up on it and move early if it's convenient for them.

That's about the spread I get on mine regardless of the lender.

It's one more reason house hacking is a really profitable investing strategy.

I wouldn't buy a rental property without first improving your income. If you're not able to handle a major repair or vacancy when it comes up, you could end up worse off than before.

I think your first move has to be to get that income up higher! There's no way you can support 5 kids on $13/hour and have money left over to invest. Look into the skilled trades. I don't know a single plumber or electrician who makes less than $35-40/hour at the minimum. Once you have more income, you'll be able to address your credit score, build up some savings, and then you would be ready to buy a rental. 

Keep on listening and posting!

In my experience, retail buyers AND appraisers overvalue nice kitchen and bathrooms, and undervalue less visible items like plumbing, electrical, age of roof, windows, etc. I have spent a lot of money upgrading old plumbing, but know that no appraiser takes in into consideration when they do their 10 minutes walk through the property. 

You'll find the best spread on properties that already have good bones and layouts, but are really ugly or dated cosmetically.