All Forum Posts by: Lucas Mills

Do I need enough cash reserves to cover any possible capital expense at the onset? For example, what if the roof goes bad (somehow) a week after buying the property? Or the water heater? Or both? Or are there better alternatives? I've heard you could use a partner, but how might this work? A roof goes bad and you hit your partner up for 10k - how do you pay them back and how do they benefit? They get paid some interest with monthly payments? Just looking for some ideas as to how to approach REI in the wisest, yet most practical way in the beginning.

If I'm wrong then please correct me, but it seems that you can't edit posts with the BiggerPockets app?

Additionally, it would be very nice to be able to access the calculators on the app, but I'm not currently seeing a way to do this.

I live in Springfield, Missouri and am looking for some recommendations for insurance providers for not only my primary residence, but also for rental properties.

I wish my posts got this much attention

@Gena Kirkwood - I would hope to put myself in the best situation possible by screening tenants well. I am aware that it is certainly not an ideal situation, but do we not have to do less-than-ideal things when we're first starting out?

Using FHA to get my first decent rental property seems to be an intelligent choice since I am currently paying $664 per month for rent before utilities. In this scenario, provided I had a tenant, I would be paying only ~$200/month to live in that duplex. That immediately gives me ~$600 per month to put towards my next real estate acquisition.

So back to much original question - does this look like a good, cash flowing property to invest in, given the provided analyses? Do my numbers make sense or am I being too conservative or too liberal with any of them?

@Marko Cvetkovic it's within 1 mile of an elementary and high school. As far as the area, it's a somewhat lower income area but it's not embedded in a ghetto or anything like that. In fact, it's possible that this area may see future development because it's a couple/few miles west of Missouri State University. Personally, I would feel comfortable living here, but this is just based on my perception of the area and the apparent quality of the nearby units/yards/etc. Pretty anecdotal, but it seems like a halfway decent area. There's a really nice house across the street which you can see if you look at street view on google maps.

On Zillow it says the property has been listed for 85 days, which seems like kind of awhile. But as far as I can see, it's a decent buy even at asking price. One of the units was recently renovated, the other isn't in much worse shape based on the pics. Both units appear to be more or less immediately livable - certainly the renovated unit.

Here is the property with me living in it: https://bp-v-newproduction.s3.amazonaws.com/upload...

And here it is after 5 years when both units are being rented and the MIP has dropped off: https://bp-v-newproduction.s3.amazonaws.com/upload...

Does this look like a good first investment? This is also assuming that I get the property at asking price, though I'd probably offer a bit less. Do my CapEx and monthly repair numbers look reasonable?

@Rick Pozos that makes sense.

Let me ask another question - do you think that it makes more sense to get houses with 20% down, or a combination of 3.5% and 20%? In other words, every year I could do another house at 3.5% (FHA "house hacking" style), but the cash flow will be less (somewhat substantially so) on these rentals in which I've only paid down 3.5% of the mortgage. However, that does mean that by year 5 I should have more rentals than I would've otherwise.

Also, as to your point about paying off the mortgage at a certain time -- at what point does it make sense to start paying off mortgages instead of buying more houses? I'm not sure what the math looks like for this as it seems there might be many variables - it's kind of tough for me to wrap my mind around.

@Odie Ayaga thank you for the suggestions. In the past 6 days since I originally made this post I have already learned much, though I still have a ways to go. As you can see I've even purchased a pro subscription so I could begin using the deal calc to analyze deals in my area.

Thanks again @Edmund Ricker

This is some good stuff to think about. What I'm primarily trying to ascertain is the best way to begin this journey.

I'm ok with potentially having 30 units. However, to buy my first one I may need to drop 20% for the down payment if it's a SFR (since I couldn't use an FHA loan).

Doing that will almost wipe out my current cash reserves, which means it will be a slow grind back to another 20k or so (probably 10-12 months).

Conversely, I suppose I could try the fix and flip strategy to earn some cash at a faster rate, and then be able to buy more rentals at once, but I am more averse to this strategy because I lack the requisite knowledge/skills/tools for rehab and because it seems a bit more risky going into a potentially problematic property (obviously any property could be problematic but with a fix and flip you KNOW there are going to be problems).

So I guess what I'm looking for are some thoughts as to the most intelligent way to utilize my current cash reserves (about 20 - 25k) in a way that doesn't immediately stunt my growth but also with respect to my risk tolerance and knowledge/skills (or lack thereof). I.e, does it make sense to deplete my cash reserves for a rental that cash flows $100 or $200/month and then just rinse and repeat every 10 months or so? Should I really hold out for a multi family to come available for better potential cash flow? Should I really consider educating myself and gaining the skills necessary for a rehab in order to do some flips or create greater cash flow in a rental? Currently, I would much prefer to contract that stuff out, but can you still make money this way? These are some of the thoughts running through my head. I just want to use my 20k as intelligently as possible, especially at the beginning.