All Forum Posts by: Jonathan Towell

I'd get a realtor to pull comps and find the value of the home. If you can buy the home and repair it, all for 10-20% (or more) under its value, pull the trigger. If you buy under value, you ought to be able to sell in order to exit should you not be able to find tenants or whatever. It also needs to be able to sustain rents that cash flow but that shouldn't be a problem if you are paying cash. We always buy with the exit in mind.

Sounds like you need the help of a local realtor to find good comps.

If your net operating income calculation is right, that sales price works out to a 16.2% cap rate. That cap rate is so good it makes me think the property is in a D location, has a lot of deferred maintenance, has terrible tenants, and low prospects of raising rents. If I'm wrong about all of those and it is clear that you can increase rents and get good tenants soon after purchase and sustain increased rents over a long period of time, then this property may be a good deal. You might get it under contract with an option period and do a crazy amount of due diligence before closing the deal.

Yes, it is a very good idea. If you structure the deal right, you'll be cash flowing on day one. (Everything else stated above about due diligence is good advice too.)

A couple of ideas...

1. Find an investor(s)

2. Check into SBA loan (I think that would require creating a job(s) so it may require a bigger apartment).

Everything is negotiable, including PM fees. I've seen good investors negotiate PM fees down in order to make the numbers work. You're right that a great property requires less work than a low end property. Just spitballing here, but 10% sounds reasonable for lower end while 7% sounds better for high end (or for more units).

Also, those 50% placement fees are something I've always found to be a head scratcher. Why incentivize turnover? I'd negotiate 50% placement only if the property turns over less than 1 time a year, at minimum.

@Travis Gray Welcome to BP. I'll message you with my number. I'm here in Lubbock and always excited to meet local investors.

It is all negotiable with the seller. We had one seller who just accepted a seller finance deal on a hand shake. We had another who ran credit checks and wanted to look at our tax returns.

Before I refinance the first house, I would check in to using the equity to secure a line of credit. A line of credit gives you more flexibility than a refinance. Or, if you are going to be using a bank to finance the deals (not secondary market) you could check on using your equity to cross collateralize another loan. In short, a refinance would give you the cash but you only want to pull out exactly the amount of cash you need and exactly the right time you need it. Cash out refinances are not great for that.

I think your income and other debt and expenses play into this. But I'll assume you make plenty to pay the mortgage and have no consumer debt. The 30 year FHA loan is the cheapest debt we might ever see. If you want to buy and hold for long term, it is the best tool for the job. I want as much of that debt as possible on good rental houses. The only problem with only putting down 3.5% is the PMI. That said I think PMI is 1% (give or take a few basis points). Even with the PMI, the FHA loan is ridiculously cheap.