All Forum Posts by: Lathan Cram

Jared Stroebele Sounds like you are at least out there looking so hopefully you discover a property that meets your requirements soon. Just curious, what property features are you looking for exactly? What kind of COC and cash flow #s are you looking for? Me personally I think a 10% COC and at least 100/unit (200 for a duplex) is reasonable. That cash flow is when analyzing the deal as if both units are rented instead of when I am living in one of the units. I am not too familiar with cap rate due to the fact that I have read/heard it is more for commercial properties. COC and cash flow are the major components when it comes to small multifamily 2-4 units. Someone correct me if I am wrong.

Andy D. Thanks for painting the picture for me. I can visualize it much better now. 1 reserve fund that holds the money for all expenses. Some of the funds you have prior and then you set aside a percent for each expense every month. I guess the question then becomes, how much are investors willing to risk regarding what they have in reserves when buying a property. I am happy to learn that it's just one and not a separate account for each different type of expense. Seems that would get a bit tedious especially after acquiring more properties over time.

Andy D. Thanks for the thorough response. So basically If I am understanding you correctly, the reserve fund you have PRIOR to actually purchasing the property is just an overall fund for anything that may happen whether it be minor repairs on day 1 or replacing HVAC 2 weeks after owning the property or the tenant breaks the lease right away for whatever reason. Is that correct? And then additionally, after you officially own the property you start setting aside extra money each month for the different expenses. Where does this money go exactly? Do you have different accounts labeled "vacancy", "repairs", "CapEx, etc" keeping them all separate from each other or does all of the money go in to the one RESERVE account we talked about earlier?

Correct me if I'm wrong but aren't repairs considered the smaller minor maintenance whereas CapEx is the larger expenses like replacing appliances, a roof, etc. So with this in mind why is it necessary to set aside the same percentage for each? Shouldn't you be able to set aside a smaller percentage for "repairs"? Also, when calculating expenses, do you guys have a set amount set aside in advance for your vacancies, capex, repairs, etc PLUS your additional 5% 8% 10% or whatever it is that you save each month for these expenses. Or as soon as the property is officially yours you start putting back the set percentages without having a reserve first. Speaking of reserves, what are people referring to when they say reserves. Are they referring to one reserve for all expenses combined or are they just referring to capex? Just vacancies? Appreciate anyone who can provide some insight to me on these things

Derrick Dill Thanks so much for the very clear and concise response regarding PMI and homeowners insurance. How long did you wait until you refinanced the property to get rid of PMI? Is PMI included in the mortgage payment?

Jared Stroebele Thank you for your response. Especially your opinion on the 2nd question as that's been on my mind a lot. You mentioned you haven't found the "right property" yet. What are the main things you are looking for in a duplex to house hack? Curious to know other people's thought process going in to this.

My goal like many other aspiring RE investors is to get started via house hacking a duplex through FHA. Live in one side for a year and after the year is up rent both sides and roll over profits/savings in to acquiring additional buy and hold multi family rental properties.

As I read all of the articles here on BP I figured I'd take the time to ask a few questions as well. Here are a few questions I have off the top of my head. Would anyone be so kind to provide some clarity on these questions? 

1.) When paying PMI, you pay that on top of what you are paying for home owners insurance? 2 separate insurance costs, correct?

2.) Do you think it is a good idea to purchase a duplex that you can't afford if the other unit is vacant? But when the unit IS occupied it minimizes your expenses. Also Keeping  in mind that the property will cash flow once you move out. 

3.) What is the best way to accurately estimate what you will be able to rent a unit out for?

4.) Is it true that in some areas house hacking a duplex just won't work? If so, in what type of areas is this usually the case? 

I really appreciate any advice. I'm ready to take action and don't want my first deal to be a bad one. 

1.) What was your first real estate investment?

2.) Pros and cons of the route you took?

3.) Would you recommend a beginner investor take the same path you took to get started as a real estate investor?

Thanks in advance from a noob trying to get a game plan together.

With multi-unit property is vacancy a common thing? How much in reserve funds do you all keep stashed away to cover the expenses when a unit(s) is vacant? Also, is it a common thing to not be able to find a tenant for a long time? Say, 6+ months or so? See, I plan to one day buy a duplex with an FHA loan, (assuming I meet the requirements) and living in one of the units and renting the other out so basically my first home will be my first investment as well but I fear that I won't be able to find a tenant and then I'm going to dig myself in a hole of debt. Is it possible to avoid this all together by finding a duplex that I can afford to pay the rent on whether or not I have a tenant or is that a rare case to find something quality and that affordable? Keep in mind I am someone who doesn't make very good money as of now.. (a couple dollars above minimum wage.)

Also, while I'm mentioning multi-units, would you all say a duplex (me living in one of the units) is a good first investment? I originally thought about doing a 4plex so that if a tenant moves out the other units will still most likely have the expenses covered but then I got to thinking if something happens and I can't find tenants, then I'm even more screwed with a 4-plex than I would be with a duplex. Thoughts?

p.s. I'm in Florida, if that helps any.

Thanks,

Lathan

Originally posted by Scott Williamson:

go to your library & get real estate investing for dummies by eric tyson. he's awesome. then, get rental management for dummies. these are the best books to learn; ignore all the others.

also, 1 more, before you even start is personal finance for dummies. if you put $10/week into a roth ira in your 20's you'll be a millionaire when you retire. a lot easier than landlording.

I will go to my towns excuse for a library today or tomorrow and see if they have it. By the way, did you mean "property management for dummies"? If not, who is "rental management for dummies" by? Thanks for the recommendations.