All Forum Posts by: Matt Morgan

What is your projected utility cost?

The 50% rule includes taxes and insurance, therefore the debt service is actually closer to $350. (assuming a 5% rate) 350x12/21500 = 20% or so. Not a bad deal.

It's not all about look and feel, although that is a plus. There is no such thing as deferred maintenance in a new home, so long as it was built right, and there's something to be said for not having to worry about replacing the water heater or the furnace or the AC unit or the roof within the first 5 years of owning the home. Along with the satisfaction of owning something "new", the value in paying a premium is that it's usually less of a headache.

Ya I don't think you should have an issue. Typically they just ask you about your monthly income on credit apps. There isn't any verification involved.

I would add make sure you are using the cards for credit building, NOT spending money you don't have. If you do that, you'll be putting an end to your real estate investment career before it begins.

@Nicole A. Just to clarify, credit utilization is 30% or so of your credit score, so saying it's not going to matter much that you carry a full balance on your credit cards is false. Maxing out your cards can have a significant impact on your score.

@Matt C. There are several sites offering credit scores out there, and most are pretty inaccurate. The closest you can get is through myfico.com, which uses true Fico scores.

What are you doing to build your credit? I would recommend getting a credit card, maybe two. Keep a small balance on it, but lower than 9% of the limit. If you have family or friends with credit cards in good standing, they can add you as authorized users which will help substantially.

note: this is actually a quad plex so the above is a bad example.

I would say there are a lot of factors that come into play when evaluating a property so not sure there is a gold standard per se. Cap rate tends to be the metric most often used to find a value for multifamily properties.

To me, cash on cash return is the number I will give the most weight to because I'm looking to maximime the return potential of my dollar, and if I can get into a property with an 8 cap with only 10k out of pocket vs a property with a 10 cap that requires 30k out of my pocket, the advantages of leverage may be more appealing to me than the higher cap rate. This is one reason I don't like the $100/door requirement in a lot of cases, because there are 50k duplexes than cashflow at $100/door just the same as this 150k duplex. So the return is the same, yet the actual money invested is much less with the 50k duplex. All other factors being the same, which would you rather have?

Regarding the 2% rule - that is a very general rule of thumb and really shouldn't be used as an apples to apples metric across multiple price ranges and property types. Assuming a 10 cap, the property value is closer to 120k. 2k/2 x 12 x 10 = 120k. I don't know the area so cap rates could vary in either direction which would skew the value a bit.

Regarding the HELOC, so long as you have adequate cash reserves and can pay for your HELOC along with all your other properties in worst case scenarios, I would say you're not overextending yourself and should be fine.

I should add that www.aimloan.com services investor loans as well as cash out refinances for loans with a minimum amount of 25k. They are an online lender and service many different areas.