All Forum Posts by: Josh Young

@Armando Carrera what you are talking about is mortgage fraud and it’s a felony that could send you to prison. 

ARV x70% -repairs =purchase price

this formula is good because it helps you cover for things you might not think about like: transaction costs such as commissions, closing costs and holding costs.  It's also helpful because repairs usually cost more and take longer than you think, and you want to make sure you make money.  

I think that overpaying because you "need to flip a property" is how people lose money.

 Find an experienced agent to work with who can help your offer stand out. Here are a few things that I have done before: (these are just examples and ideas and shouldn't be considered advice as I don't know your specific situation)

1. offer a large earnest money deposit, this shows you are serious and costs you nothing extra as it all goes towards your closing costs/down payment and if you overpay it will be refunded to you at closing (but it could be at risk if you get wild with waiving contingencies and/or you back out of the transaction without a contingency)

2. write an offer letter to stand out, but be careful not to violate any fair housing laws, these letters are not allowed in some states because of the possibility of violating fair housing laws.

3. offer a shorter inspection period, but make sure you still give yourself enough time to perform the inspection

4. if you know enough about inspecting a property yourself and you feel comfortable doing a visual inspection when you are viewing the property you can make your offer "as is" and still have an inspection period as a contingency, but you won't ask for any repairs. I don't usualy recommend completely waiving the inspection period.

5. if you have extra cash available and you are very confident in comparable sales you can waive the appraisal contingency fully or up to a certain $amount. I have done this before and then the appraisal came back higher than my offer because I had great sales comps, but I have heard of other people doing this and they had to come out of pocket $50k because they didn't have comps/the appraisal process is not an exact science and can be somewhat subjective.

6. you can write an escalation clause into your offer, so your offer will start at a certain price and increase to beat the highest competing offer by $1k up to a certain max offer amount. 

7. offering cash can make your offer stronger, and then doing delayed financing, if you don't have enough cash you could get a bridge loan to help, but that can also be expensive.

@Jasper Chong you should talk to a lender, they can educate you on what it takes to qualify and they will help you create a plan. Buying a primary residence and renting out the rooms is most likely your best option because of the low down payment.  Once you have an idea of budget you should start researching locations to buy in, you want to buy in the best area that you can afford, better areas tend to appreciate more and it's easier to find quality tenants in a good area too.

 When I was just out of college I was a renter of a mother in law type above the garage apartment. I had the same address as my landlords (a nice older couple) and they just put a very basic wall mounted mailbox next to my exterior door and my landlord would just separate out my mail and drop it in my mailbox. It worked great.

@Griffin Malcolm Lenders have certain rules they have to follow, so talking to a lender to help you create a plan is a very important step.

@Griffin Malcolm you need to talk to a lender, they will be able to tell you exactly what you can qualify for, but yes you should keep your current house as a rental and buy a new primary residence. The lender will be able to lower your DTI by counting 75% of the market rent against the mortgage. I'm not sure they will count room rentals, and I'm pretty sure they will want a copy of the lease, but the lender will be able to help you iron out the details to help you create a plan, so you can keep it and buy another property. As far as raising the rents on your friends, room rental rates can vary a lot, the real question is, if you raise it on them can they find it cheaper somewhere else, and how confident are you that you could fill the vacancy at the higher rate if they do leave.

@Stephen Rodrigues I can certainly understand wanting to invest out of state when you have high prices and high property taxes in Massachusetts, but I would be cautious about investing in an area that has a flat or even declining population, it might look like you are going to get some cash flow right out of the gate in year 1, but you will never get the big win of appreciation which is much greater than cash flow when it happens and if you never get the appreciation you won't get rent price gains, so your cash flow won't appreciate as much either.  If you are looking for a specific market, I'd search the forums in that area and find an agent that is also an investor who is giving good advice on the forums. 

If you have any interest in learning about the greater Phoenix area I'd be happy to chat with you, I'm an investor here and an agent, and I help other investors find, analyze, buy and manage properties.  We have population growth, job growth, and a lot of development happening here.

@Kerns Churchill I would make sure that they are also on the lease as a personal guarantee, I would charge first, last, and security deposit, and I would make sure you are charging a premium of at least 25%.  I would also make them responsible for paying for all repairs under $500, except major mechanical and roof. Think of it more like a commercial lease.

@Alejandro B Yoon it's very important that you read and understand your state's Landlord Tenant Laws, here is a link that will provide your answer https://statutes.capitol.texas... if you scroll down a little you will see that it appears you were within your seven days, plus it looks like you could have had a fifteen day extension for having to order the part, although that extension would require some paperwork.  I don't see anything anywhere about requiring a landlord to pay for a hotel.  You should also research to see if you have any local laws that could affect you.  I would apologize for the delay in having to order the part and let them know that you were trying your best to get it fixed as quickly as you could.