All Forum Posts by: Jason Barnett

The first thing you need to do is to research comparable prices in this area. If you have never done this before (I assume not since you're talking about an FHA loan) then you might consider asking a local appraiser to help you out. If you want to do it yourself then try http://zillow.com or your county auditor's website for recent sales of similar houses.

So after you have the comparable sales data you will want to estimate the cost of repairs to the house. Some General Contractors will give you a free estimate for the work that needs to be done if you promise to use their services for the repairs. Basically, you want someone to go through the house and nitpick for every single small thing that will need to be done and have them estimate the low and high values for repairs.

Then you go to the negotiation table. You'll want to use the low value for the comps and the high value for the repair costs. That will give you a lowball offer that can be justified with your estimates. Don't worry too much about the FHA closing costs; once you agree on a price you can offer to add back the FHA closing costs into the price of the home.

One other item to think about. If there are considerable repairs that need to be done then you should look into a 203k loan from HUD. This is a loan program that specifically gives you money to do the actual repairs on a property.

yeah I get what you mean all cash... I read your response and realized that I hadn't done any of the calculations myself and I was totally going off of someone else's calculations. Woops.

Unfortunately since you have PITI all wrapped up together it's tough for me to estimate what your actual equity is going to be in 10 years. Assumptions:

- Taxes and Insurance make up 30% of each monthly payment, so the implied interest rate is 4.25%
- You have a 30 year note

After 10 years you'll have paid off about 20% of the Principal for the mortgage, so you would owe around 80% on each mortgage. Then you would need to know what the appreciation rate is in your area for the next 10 years... appreciate your purchase price by that amount (remember to compound that interest) and presto, you have the future equity in your home in 10 years.

But you still want to be cash flow positive on the road to get there. :violin:

Soap box indeed... methinks that Takleberry might also be a Linux user. Just a hunch.

Anyways I like your gusto and I applaud the analysis that you have laid out. Not to rain on your parade, but don't you think the folks over at Zillow are thinking pretty much the same thing? I mean if they have venture capital funding then it's safe to say that they have very large plans and they have convinced at least a few people with big bucks that they can do it. VC guys are looking for huge returns and/or equity in the companies that they invest in so it's safe to say they're estimating more than your $48M per year in revenues and something north of 20% return on investment.

Does this mean that some appraisers are also realtors? Or do appraisers get some kind of special golden ticket that lets them review the MLS data created by the Oompa Loompas? Hmmm, perhaps I should look into becoming an appraiser...?

I am glad to see someone else writing that down... because that was a concept I was trying to explain to my business partners just last week! While I tend to agree with your analysis I think you have missed out on one very important detail:

A (traditional) mortgage is a forced savings plan.

Yes it is true that he is earning profit / building equity each month (so long as rents exceed actual expenses). However, the investor still has to plow cash into the mortgage, insurance, etc. regardless of how much paper profit he's making. So yes he will earn a profit, but if you don't have cash then you have to increase your capital base in the property (either through another loan, or by adding equity/cash to the equation).

All of that being said... I tend to agree with all cash's assessment of the situation. A simple philosophy: if it puts cash into my pocket every month then it's an asset, if it takes cash out of my pocket every month then it's a liability. It's all about the Benjamins baby.

Good tips. I would also add that you can sometimes get these demo products at your local REI club

Slight typo... try going to http://properties.biggerpockets.com/

80% first mortgage with a 20% second mortgage. Interest rate on the second mortgage is higher than interest rate on the first, but even with that it is usually cheaper to have the 20% second mortgage than to have a 100% loan with PMI. 80/20 requires better credit scores than a traditional mortgage.

Hello and welcome! You can ask these questions in the general discussion forum.

:lol: :lol: :lol:

You know, that is a great observation allcash. If a scammer uses the USPS to conduct their scam then they can be found guilty of mail fraud (which is a FEDERAL crime with big penalties). If you are interested in testing them out then just tell the company to send it via USPS because you work for the post office and you want them to support your job. Should be a good litmus test of whether or not this is a scam artist that knows how to take your money and run.

Also I'd like to expand on one other point that Prohabber stated. Nu-way claims that you'll get a big 35% take on the back end. But what happens if they screw up (could be real, could be "unexpected high labor cost") and they take a big loss on the deal? Do you have to pay 35% of that loss to Nu-way?

The above post made me wonder about something else. Where do appraisers get their comp information? Do they have access to the MLS as well? If not, then where do they pull their comps data?