All Forum Posts by: Josh Young

@Geoff Pope

I am almost always a fan of holding properties as rentals, especially if you were able to buy it with only 3% down.  Cash-flow, principal pay-down, equity growth, rent growth, and tax savings are all important factors. A 1200 sqft 3/2 in Glendale that's worth $365k will only rent for about $2,000-$2,200/month. If you refi you might be able to get your payment down a little, but not much, so you are going to be negative a few hundred dollars a month. It might still be worth it if there is upside potential (also consider principal pay-down, equity growth, rent growth, and tax savings) and/or if it's less than you would have to pay to sell it.  Getting all the info and making an informed decision for your specific situation is important.

@Janelle Forst

Your highest ROI will be to wholesale it for an assignment fee or since you are agent just sell it and get a commission. You will have no money or almost no money invested so your $10k profit ROI will be infinite.

Or you could buy it with a 90% private money loan and you will have $25k in purchase, $40k in rehab, $10k in carry cost, so $75k invested and sell for $300k (because when ARV is provided it's always 10% high) minus $25k selling cost, and you will net $25k profit in 6 months, so that's a ROI of 30% or 60% annualized.

Or do the rehab and then rent it out and refinance the loan and keep it as a rental instead of selling it. Your ROI will be lower, but you will be adding a rental to your portfolio and can cash out refi later to get your money back out, this isn't the fastest or highest ROI, but it's building long term wealth and is the strategy that I like the best.

If you are looking to network and build connections with local real estate investors then you have found the right group. Whether you are an experienced investor or just getting started this is the right place for you. Attendance is limited, so we can fit at one picnic table together. We are casual and friendly; and the taco's at this place are great if you are hungry.

#1 Seller Financing - I have bought a couple seller finance deals recently and they are great. Making up terms to fit what works for me and the seller is fun, and this strategy can be a win-win, but it's really more about building the relationship with yourself and the seller than anything else.  My deals were both low down payments and break even cash flow with lots of principle paydown on the loans because I used a lower interest rate with a shorter amortization schedule.

#2 Value Add - A few months ago I bought a property below market value and did a rehab with new floors, paint, fixtures, and appliances. I created a lot of equity, but I'm waiting to pull it out until the 12 seasoning period is up so I can stay with a conventional loan, I also want to wait for rates to be lower and/or rents to be higher so it will still cash flow.

#3 Owner Occupied SFH - I am always buying a primary residence every few years and moving into it, it's how I got started, and will always be a part of my strategy.

#4 SFH with an ADU - Most of what I buy has a focus on equity and growing my net worth, but I've been wanting to add multi-family to my portfolio, but what I see is that SFH with an ADU actually cash flow a little better than multi-family, so this might be my next purchase.

What are you buying right now?

Quote from @Vaughn Smith:

Quote from @Josh Young:

@Vaughn Smith Why do you want to sell the home in Scottsdale? I can see leveraging some of the equity in it with a HELOC or cash out refi, but selling properties isn't usually the best way to build a portfolio, especially when you are just getting started and only have one property.

 Hey Josh, we did a cash out refi in 2021 to fund the renovation. I'm sure we gained a substantial amount of equity after It was completed but with my current unemployment from the Federal Government I would be hesitant to take on more debt before I have another career lined up. We would also need to use the money from the sale of the house to cover the 20-25% for the multi-family. 

You might try qualifying for a HELOC using your wife’s income and then use that to put 5% down payment conventional owner occupied loan on a small multi-family property (2-4 units). Then use your wife’s income and the rental income from your current home and the units that you are not occupying on the new property to qualify. Your existing home should be cash flow positive and the HELOC will provide extra reserves, so I wouldn’t worry about adding debt if it’s cash flow positive.

@Vaughn Smith Why do you want to sell the home in Scottsdale? I can see leveraging some of the equity in it with a HELOC or cash out refi, but selling properties isn't usually the best way to build a portfolio, especially when you are just getting started and only have one property.

Investment Info:

Single-family residence buy & hold investment in Mesa.

Purchase price: $410,000
Cash invested: $39,000

Purchased using seller financing with a $38k down payment so the seller could pay off their mortgage and cover their closing costs. The seller wanted a payment over $2k per month and a 36 month balloon, so we did 2% interest on an 18 year amortization schedule with a 36 month balloon payment. This property didn’t need any renovations and the seller let me advertise it for rent before we closed, so I got it leased out with a lease starting 3 days after I purchased it.

What made you interested in investing in this type of deal?

I own several properties in the area and it fit my buy box perfectly. No HOA, no pool, no solar, 10% down payment, and break even cash flow.

How did you find this deal and how did you negotiate it?

I found the deal on the MLS and negotiated directly with the seller. I found out what she wanted and I worked the numbers to make it work for both of us. At first I offered her $370k with 5% interest, but she wanted $410k, so I lowered the interest rate to 2% and shortened the amortization schedule to keep the payment roughly the same, it did increase the balloon payment a little bit, but I think I can still be at 75% LTV when I refinance.

How did you finance this deal?

Seller Financing. My cash flow is break even, but my principal pay down on the loan is significant at about $17k per year. I should be able to do a rate and term refinance at the 36 month balloon payment and be cash flow positive with an LTV under 75% and over $100k in equity.

How did you add value to the deal?

I really didn't do any rehab other than adding pulls to the kitchen cabinets and re-caulking the tub and shower.

What was the outcome?

I added another great asset to my portfolio and now I'm on the hunt for my next deal.

Lessons learned? Challenges?

The seller let me know that she had a lot of other investors try to buy this house from her and she said they all sounded like they were reading from a script or trying to low ball her. She said she went with me because of my collaboration where all parties felt mutual respect. I tried to figure out a way where I could pay her as much as possible and still have it work for me, so it could work for everyone.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am an agent, so I found the deal myself on the MLS.

Investment Info:

Single-family residence buy & hold investment in Mesa.

Purchase price: $410,000
Cash invested: $39,000

Purchased using seller financing with a $38k down payment so the seller could pay off their mortgage and cover their closing costs. The seller wanted a payment over $2k per month and a 36 month balloon, so we did 2% interest on an 18 year amortization schedule with a 36 month balloon payment. This property didn't need any renovations and the seller let me advertise it for rent before we closed, so I got it leased out with a lease starting 3 days after I purchased it. My cash flow is break even, but my principal pay down on the loan is significant at about $17k per year. I should be able to do a rate and term refinance at the 36 month balloon payment and be cash flow positive with an LTV under 75% and over $100k in equity.

What made you interested in investing in this type of deal?

I own several properties in the area and it fit my buy box perfectly. No HOA, no pool, no solar, 10% down payment, and break even cash flow.

How did you find this deal and how did you negotiate it?

I found the deal on the MLS and negotiated directly with the seller. I found out what she wanted and I worked the numbers to make it work for both of us. At first I offered her $370k with 5% interest, but she wanted $410k, so I lowered the interest rate to 2% and shortened the amortization schedule to keep the payment roughly the same, it did increase the balloon payment a little bit, but I think I can still be at 75% LTV when I refinance.

How did you finance this deal?

Seller Financing.

How did you add value to the deal?

I really didn't do any rehab other than adding pulls to the kitchen cabinets and re-caulking the tub and shower.

What was the outcome?

I added another great asset to my portfolio and now I'm on the hunt for my next deal.

Lessons learned? Challenges?

The seller let me know that she had a lot of other investors try to buy this house from her and she said they all sounded like they were reading from a script or trying to low ball her. She said she went with me because of my collaboration where all parties felt mutual respect. I wasn't trying to steal the property from her, I honestly tried to figure out a way where I could pay her as much as possible and still have it work for me, so it could work for everyone.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am an agent, so I found the deal myself on the MLS.

Join us at the Gilbert Real Estate Investors Meetup Group. Network with fellow investors, ask questions, and gain valuable insights with a deep dive on two recent deals that the host (Josh) has bought this year; one is an off market BRRRR and the other is a seller finance Buy & Hold.

@Justin Fantazier are the points, fees, prepayment penalty, balloon and amortization schedule all the same and just the rate is lower? All of those other terms and details can make a big impact on the rate..