All Forum Posts by: Jonathan R.

@Douglas Rice I say great idea. You have the potential in Wichita to achieve greater than the 1% rule. Wichita is the biggest city in Kansas. Taxes are very low. There are plenty of renters. You can't go wrong with a 3/2 single family here if following the BP standards. I'd recommend getting with @Jared Viernes if you are a serious investor. He understands the BP lingo and the investor mindset. Good luck.

I agree with @Christine Swaidan.  Placing a tenant takes some crafty navigation. The case workers will very rarely answer the phone, so leave a message. At the end of the day, send a polite email. Two days later, drive to the Section 8 office to politely get in front of someone. You will find that a different person handles the paperwork initially than the person that schedules the inspection/re-inspection than the person that does the lease and etc. No one will tell you who to go to next, but you have to keep the process moving, so you want to touch base with who has the ball if you want to get the unit rented in 30 days or so. That has been my key to getting things done timely. Always be nice to the Section 8 workers, especially the inspectors, you want those people on your side if you are going to do a bunch of deals. Totally worth it though once you penetrate the bureaucracy.

I work for an electric utility company and this sounds ridiculous to me. Get a bid from an electrician to wire your property to its own electric meter. When you are saying "city," I am guessing that a power company sells their power to the city and the power company delivers the power to the customer; the "city" handles the billing. I wouldn't take the owner at what they are saying about not being allowed to add a meter; my company loves installing new meters, we get to charge a basic service fee for each one. I would have an electrician give you an estimate and call the "city" and ask them to create an account for you and get you a new meter in 2-4 days after the electrician has finished their work. Perhaps the owner got confused somewhere along the way. If you do get your power from an actual power company and the city is saying no, it is because of a safety issue, at which an electrician is able to fix that too.

Every time I rent a home, I want to take a shot at a long term tenant. I will also say, it depends on your plans. If you are a true buy and hold investor and are not overly concerned about appreciation per say in the neighborhood, go with the Section 8 tenant. If the home is in an up and coming neighborhood and you are only planning on holding the property for a few years and want to bring up the value of the neighborhood, go with the young buck. I would also look at how much you have invested in the property. I own a Section 8 rental and am all in at 32k. If my renter stays for 5 years, the house has paid for itself. If they tear it up a bit, oh well, there is more where that came from. :)

@Hunter Johnston If you are having to get a loan to buy your desired property, I might be crazy enough to buy it before you leave the Marines so you have a w2 income and can get the loan. I'm not sure how VA loans work, but I suspect you need a w2 income to take one out. I'd take a trip to your target area and see if you can buy before you leave your job.

I did an investment while getting an MBA, it worked out great. You might get a feel for the program and make sure you are investing during a class that you know you will be fine in. I was terrible at Accounting and Statistics but could coast in the soft skills classes. If you are bold enough, you can use student loan money to help you with your real estate investing, perhaps using extra loan money to rehab a property. The loan terms are as good as you'll ever get, just make sure you are following the lessons you are learning on BP; buy it right. Getting into real estate will strengthen what you are learning in your MBA program. Go for it.

I agree with Mr. Johnson on this matter up until suggesting you to ask yourself why someone hasn't paid 14k for that home yet. I think the hint is that it is a bad investment. One of the main reasons I have come across on why people aren't buying cheap properties in my area is that they don't have 14k and the money to rehab the property; they would rather put down 5k or 10k on home in a 100k neighborhood and make poor returns until their 30 year mortgage is up. Outside of a portfolio lender it is difficult to get financing on a property that needs some work with a low price point; now, after the work is completed, you can finance it by all means. Hopefully this 14k property you mention has a county appraisal of 40k-50k. People run from inner city neighborhoods because they don't understand them. Ghandi taught us to be the change we want to see in the world. Money put in an inner city property goes so much further. I'll call it like it is, there are some racial fears that come into play too. This goes both ways too which favors the investor, many people in these inner city neighborhoods don't want to move to the suburbs, they want to be around their family and friends, people that are like them. These neighborhoods have a history. I am not suggesting to buy a home around several vacant houses unless you are going to buy the whole block and change the neighborhood, but buy on the fringe (corner lot maybe or by a major street or highway). I bought a home for 18k in a low class area this year and it's been a cash cow, I did go with Section 8 and I would suggest doing that (In my area I get above market rent even because there is such demand for affordable housing). I would never buy in an A or a B neighborhood because I am looking for cash flow. I hope people keep looking over these 14k properties because I'll buy them one by one. Salmon swim upstream.

I think you are on the right track with a cash out refinance or a heloc on your primary residence. The 4plex sounds like a good idea to me too if you can find something that cash flows extremely well and is in an area you are comfortable with. Upon reading about the first rental you bought in 2011 that rented for $600-$650 and appreciated before you sold it, I would suggest sticking to what you do best. If that deal wasn't a home run, it was certainly a double or a triple. A purchase for 30k that rents for that amount is a 2% rule deal. I would not shy away from buying a few more of those instead of a 4plex if the numbers make more sense. There are tons of homes in the Wichita area that need a little tlc and will meet the 2% rule criteria. As it relates to your old primary residence that is rented to family, I would look at the cash flowing numbers on that property too, maybe not while you have a family member in it, but if it turns over, I would consider selling it if you can put the money to better work in a different property/properties. It sounds like you have enough equity floating around to have a very attractive rental portfolio, a great position to be in. Good luck.

Excellent discussion topic. I like urban over rural. If you are going to buy in a "warzone," buy a corner lot. :) I know you may think that was a joke, but it wasn't. I bought in a C- to D area but bought on the fringe near a highway. It has been a cash cow. I bought it for so cheap I could fix major plumbing and put in new central heat and air so I won't have to worry about major issues for 15 years (hopefully). If you do decide to go urban, let me whisper in your ear about the leprechaun and where the pot of gold is- It's Section 8 housing. Government direct deposits, and for the most part, tenants who want to stay in the program so they don't trash your house. I don't think I'll ever sell, but when my grandchildren do, hopefully the big city investment has come full circle and they make out well.

I would see if you can find a portfolio lender. The one I use in my area will loan to people that have a W2 income and the only criteria necessary is that the borrower can get a credit card too if they wanted. They will loan to people with credit that is not great. I would also try and get a loan with a credit union, they are pretty easy to deal with. Crowd funding might be an option if you write an introduction to your problem, I think people will get behind this. I would also apply for a credit card with Home Depot and Lowes (they are pretty easy) and swing that hammer myself if need be. If you have a 401k, take out a loan on it. I'd love to keep all three properties if I could, but I'm a greedy pig.