All Forum Posts by: Jay Dewberry

Hi Will. To answer your question, depends on your exit strategy. Like you mentioned, you want to buy/hold for long term cashflow. If you’ve run the numbers and it cashflows at $800+ per month, which is pretty good, I don’t see the negative equity as a major issue. However, if for some reason your strategy changes and you need to sell, then that negative equity would be of concern. Also make sure to run the numbers and take out for property management regardless of if you manage or not…unless you plan on managing for the next 30+ years. Just my quick thoughts. Good luck.

Aleksandra, perhaps I was misunderstood. To answer your question on if $65,000 was too much to pay for the condo you want to purchase, it becomes necessary to compare that condo, with other recent sales of condos near your area. By doing so, one can reasonably determine if a purchase price is too high, or average, or perhaps a great deal. Can your agent give you the latest sales comparables for your area? If so, use those to make your decision if the price is high or not.

Hi Aleksandra. Welcome to BP. You're going to find that many BP members are on both sides of the fence when it comes to condo investing. Many don't like them as investments due to the dictatorial nature of many HOA's such as the restrictions, assessments, and management. So make sure to read up on any HOA guidelines. As for the purchase price of the unit being an investment, would depend on the numbers, some of which are missing. For instance, what is the ARV(After Repair Value) of your unit? In other words, what are other condos around your worth/selling for? This is a factor in deciding if the asking price is too high or not. Perhaps running your numbers through our BP Calculators will give you a better idea. Check out this video as a guide. Hope this helps.

Hi Jim. Welcome to BP. I will try to come back and elaborate on my post, however here is a quick couple of points. Getting a duplex in order to live in one and rent the other can be a good way to get into investing. It’s the “House Hacking” method talked about widely here on BP. If the duplex deals are hard to find, perhaps marketing for “off-market” deals would help. Using sites like Listsource, you could market to, let's say, absentee owners in your area and ask them if they are willing to sell their multifamily unit. Many times they become tired landlords and are looking to get the property off their hands. Sometimes, you can get a great deal and nobody knows it's there, so no competition. As for the SFH, just make sure you perform good analysis using the BP Calculators, so the home won’t become a financial problem in the future. Either way, good luck.

Hi Carlos. Welcome to BP. Let me see if I can go through this point by point. Where did the wholesaler get his rental comps?...and yours as well? I ask as $500-$650 is a huge swing in rental comps and can affect your analysis greatly. Perhaps checking craigslist, an agent, or a property management company can get a more accurate estimate. Next are the sales comps. Are there any comps more recent than 2015? The market change from 2015 to 2017 can make it an issue if you decide to sell, or as you wanted to, refinance in the future. Your squatter situation can seriously delay that 3-month timeframe for getting the units tenanted as well. I’m not sure what the housing laws are for Florida, but in some states you can’t just kick them out if they decide not to go.

Okay, now rehab. Unless you have a background in rehab estimating and/or inspection, never underestimate the rehab work. What you think may be a $5k rehab job, can turn into a $25k rehab job very quickly. Once you contract, make sure to have your contingencies in there, and perhaps get a qualified professional in there to give you an idea of what the true issues are.

Now on to financing. With an 806 credit score, why use a HML…and where did you find one at only 7%? With your score, lenders should be lining up around the block to give you competitive rates. Utilizing the 203k seems like a decent option to get the rehab work done, but make sure you understand the rules, as you'll have to be an owner occupant, which will play a significant role on your cashflow.

Lastly, I didn’t see a budget for vacancy, repairs, and property management (even if you decide to self-manage). These and other figures can (and will) affect the overall picture of if this is a good deal, or potential nightmare.

That’s my 3 cents. Good luck and keep us posted.

You’re absolutely correct Hilary. Depending on your exit strategy, there can be many ways to obtain wealth…including the 15-year mortgage strategy that builds up equity quicker with less interest accruing over time, and being able to speed up the process of having higher rent returns as well by paying down the principal quicker. If your goals match that, I say go for it.

As for the 25% down, I only asked as most traditional loans would ask for 20%, thus showing you have some "skin" in the game and eliminating PMI. I am a fan of using as little of my own money as possible to acquire properties, thus getting my initial capital back as quickly as possible to invest again, and again. But either way, do what's comfortable for you and meets your goals.

Firstly, Greg, welcome to BP. Secondly, it’s not foolish at all in wanting to help a friend if their family is interested in selling the grandmother’s home. Many times the family wants to keep property in the family for legacy/future generations. But many times, they want NOTHING to do with it. They think to themselves just give me what you feel it’s worth and let’s move on. So if you can offer to make it as less of a headache as possible, that may work out…for both parties.

Let me ask you some questions: What would you like to happen if you bought the property? Live in it? Sell it in the future? Sell it immediately? Rent it out? These questions would be important to answer to yourself before approaching the family with an offer. Perhaps, partnering up with a seasoned investor/mentor and offering a percentage of the deal would help. Lastly, there are many probate investing topics, podcasts, videos, and blogs right here on BP. Reading through many will help to familiarize yourself with the pros and cons.

Nevertheless, be as fragile as possible with the family. Make your offer a win-win for both you and the family. Good luck.

Hi Hilary. Taking a look at your numbers, the first things that come to mind are:

• 1)Financing. Is there a particular reason for putting 25% down over 15yrs, instead of 20% down over 30yrs? Putting 20% down at 30yrs would increase your cash-on-cash return. Perhaps you're looking to refinance and/or sell sooner than later…which begs to ask, what's the ARV?
• 2)Offering 60k is fine with me, however perhaps offering lower such as say $51,700, along with a $1000 EMD, would not only show the owner you're interested, it also shows your serious in buying and/or opening up negotiations.
• 3)I agree with Ross that your vacancy seems a bit low. Perhaps check with your agent for comps.
• 4)Lastly, and what could be the most important is the rehab work. If you decide to contract with the owner, make sure to include your contingencies and get some inspectors and/or contractors in there to give you the real scoop on what’s going on with the property. You can go from $5k in rehab to $25K if not looked at properly.

Either way after looking at a couple of calculations, it looks as though you ‘may’ have a possible cashflow property. Hope that helps. Good luck.

Hi Michael. Welcome to BP. The $1500-$2500 for closing costs on the BP Calculator is just a general guideline. It has a drop down menu if you want to itemize closing costs. However the amount will generally vary with financing and/or location. Perhaps you'll only spend $1800 in Orangeburg, SC...or if that same property were in Connecticut, it could be $5550. If you're concerned with the breakdown contact your local title company or closing attorney(depending on state). 

Well...Judging from Forbes and other publications, THIS, THIS and THIS might not be a bad starting place.