All Forum Posts by: Jayson Mickle

Hi Jill,

You stated they can afford their current rent payments. You want to make sure they can afford more than their current payments for a lease/purchase agreement.

First you will agree upon a price and determine how much more you both feel they can afford to pay each month. I don't know what your property is worth so I will just make up numbers as an example and you can adjust them accordingly. Say you want to sell the property for $120k and want them to save up a 10% down-payment. You will also usually set an interest rate now for the loan that you will eventually hold.

If they currently pay $1000 a month, with the Lease/Purchase Agreement they would pay $1,200 a month and the "extra" $200 a month would be applied to a down-payment. In 5 years they will have paid an extra $12,000. (10% of the sale price)

Once they have saved up for the down-payment you will execute the sale portion of the lease/purchase agreement and create a note secured by the real estate. Usually your title/closing company can draw up this paperwork for you. Both for the note, and for the original lease/purchase agreement.

You should keep in mind that there are risks for both sides. If for some reason the tenants want to move or they default on the lease for any reason they forfeit whatever payments they have made towards the down-payment. For you, if the property appreciates significantly over the next 5 years while they are saving for their down-payment. You cannot increase the sale-price that you have agreed upon.

Because of these risks I typically recommend that the tenants try to save for a down-payment on their own and work on improving their credit. Once they can qualify for a traditional mortgage I think selling a property to them would create a better "win-win" situation for both parties. I also like to give tenants interested in improving their credit and personal finances the book: "I will teach you to be rich" by Ramit Sethi. This is a great book at an entry level for understanding personal finance and credit.

However, even though I have not gone this route, every investor has different goals and risk tolerance, so this may be a perfect opportunity for you and your tenants!

I hope this helps and good luck!

Hi Aaron,

You can usually call the utility service you are pricing out. They should be able to provide the average bill over a period of time. You should usually ask for 12 months because that will help average out the hotter and colder months.

However, if the units have been vacant for a long time they may not have accurate data and you should reach out to a local property manager that could help you estimate the averages.

Good Luck!

Hi Chelsey,

I am investor in the Williamsburg market. I know that is a bit away from Richmond but still happy to connect. Do you have any specific questions on investing you are looking to have answered?

Hi Helen,

I was able to find your blog posts, but it did take a big of searching after clicking on your profile and following the steps Randy recommended. I agree there should be an easier way to find it for those searching for the information you have provided.

Thanks for the info on the Williamsburg Market! I have had a number of people tell me that you can't be an investor in Williamsburg but just like any other market it just takes patience to find the right deal.

 Hi Osman,

I'm not sure if they serve the Richmond Market but check out GEM Title in Newport News. They have been able to answer a lot of my questions about subject-to. I haven't closed a subject-to with them as I am still looking for the right deal to try out that method of purchasing. 

I have however closed countless deals with them over the years and would recommend them for any investment property.

Good Luck!

Hi Brien,

If you are just starting to consider purchasing an investment property I would suggest that you start by listening to some of the recent podcasts episodes from Bigger Pockets. They are very motivational and informative. 

That should also help you narrow down what type of property you are searching for. There are countless ways to invest in Real Estate depending on your goals and financial situation. If you have more specific questions let us know.

Good Luck!

Shopping your refi at a local bank is great and helps develop local relationships. But I would suggest you also reach out to a mortgage broker that will shop the loan to multiple banks and make sure you are getting competitive rates.

Just like you wouldn't get one repair quote from a single contractor, make sure you get multiple quotes for your refi.

Good Luck!

Hi Adam, Some great advice so far.

If you are renting right now then house-hacking with your VA loan can be a great opportunity.

I actually just sold a three plex to two guys in the military. I think they had a great plan and hearing about what they did could help you with your decision as well. They purchased the property with one of their VA loans. They both moved into an end unit that had 2 bedrooms to save money and get ready for their next deal. They plan to live there for 12 months and do the same thing again with the other persons VA loan. This allows them each to purchase a multi-family property to jump-start their portfolio using their VA loans in just 24 months.

What a great idea. Again as mentioned above just because you are friends with another person that wants to get involved in Real Estate does not guarantee that your goals are the same. Make sure you have similar exit-strategies or long term goals. If not, something like what these guys did could work better than a partnership on each deal.

Good luck on your investing journey!

It sounds like you have done a great job acquiring and paying off your first investment property. This is often the hardest step for RE investors to take so congratulations!

If you have a good amount of equity, which it sounds like you do, I would recommend creating a line of credit secured by your first property. This gives you the freedom to take your time finding the next deal. If you do a cash-out refinance, then you begin paying interest immediately and may feel rushed to put the capital to work on your next deal.

Also, when you make an offer on a new property with a line of credit to fund the deal you can close much quicker than with most traditional financing methods. This allows your "cash offer" to be very attractive to the seller.

If there are deals available similar to your first property, it is always easiest to stick with similar products, as you have already built a wealth of knowledge through your experiences with the first deal. You could try to purchase a 3 or 4 unit property as your second investment because you will still be able to use non-commercial financing when you decide to refinance after your initial purchase and rehab that you will use the line-of credit for.

As you probably know, there are countless ways for you to move forward and that can make the next step seem overwhelming. My suggestions are just one option, based on what you have told the community. This is what I would do if I were in your shoes. If you have your eyes set on a different type of property or want to dive into a much larger multi-family project that is fine too! Feel free to bring your ideas and questions back to Bigger Pockets so we can help you avoid hazards investors in the community have dealt with in our own journeys.

Good Luck!

Hi Reynaldo,

I am actively investing (Buy & Hold) right now in the Hampton Roads market so I know your goals are very attainable. HELOCS are a great tool to use when purchasing because it allows you to offer a quick closing. However consider refinancing afterwards into a standalone 30 year loan on the investment property to free up your HELOC and lock in an interest rate. We all hope interest rates will go down soon but with the chance that they could go up you want to have your interest rate locked in on a long term hold. If interest rates do go down you can always refinance to increase your cashflow or pull out some cash to invest in your next rental.

Let me know if you have any other specific questions about our market. Always happy to talk to other investors in Hampton Roads.