All Forum Posts by: Matt Slakey

In episodes 54 or 55 of the AskBP podcast, Brandon called the 1% rule more of a "test" than a "rule." I think that is a better way of thinking about it. It will vary on the market about what percentage test to follow. In my market, 1% (or 10% cap rate) is rare. In big cities, cap rates are shrinking. BPers from their areas can chime in to verify but I read that the going cap rates in LA, NYC, and San Francisco are something like 2-3%, which would translate to the 0.2% rule/test! Yowzah! The only way of determining your market is to see what property is selling for and to see what the going rates are for rents in the area. You can ballpark that the cost of expenses, without the mortgage will account for half of the rent (the 50% rule/test). And then you have to pay the mortgage. So then you can figure what you would be making a month in cashflow. I have a spreadsheet that does this all the math on one screen but you could use the BP calculator or write it out by hand. Once you have the cashflow, you can see what people are roughly getting (with a lot of assumptions), and see what the local market is doing

 I recommend checking out The Ultimate Beginner's Guide, if you haven't already. I found it to be a helpful, quick read.

Because 3.3% is such a good interest rate, you could just apply the extra $560 a month to what you are paying now. Typically there are fees with refinancing, which would eat away at your savings. Paying an extra $560 a month lets you pay off 250k in 16 years 4 months, pretty close to your goal (it would have to be about $670 extra a month to meet 15 years). Plus not committing to the new payment will give you flexibility if you need money for an unexpected expense.

As far as getting money for a rental, I would look into a HELOC. The amount available is based on your equity.

Another option would be to save up that $560 or $670 per month, preferably in an interest-bearing account. 

What does the rental agreement say? Are you on month-to-month? You could ask him if he wants to renew his lease. If he doesn't, you could let him know that a tow company will be putting up signs (hopefully saying property of James and hours of enforcement) on the spots. Tow all their customers away.  That would motivate me if I were him.

The tow company should do this for free (for you). Verify the frequency of the tow company's drive-bys.

I was under the impression that you could get a heloc on 70% of whatever equity you had in a property. Mixing a self-directed 401k and "personal" or business money may get a little murky for taxes/accounting. That would be one of those things I would talk to a CPA or lawyer who specializes in self-directed IRAs. Mainly because I know very little about the intricacies of doing one. 

I would refi to get rid of that PMI. Are you getting $1300 a month in rent or cashflow? Either way, you could use some of the cashflow to pay back friends (or family) for downpayment assistance. $1300 a month cashflow gives you a lot of ammo, unless the new place not a good deal. You could use a HELOC on your current residence and use that. You move into the new place, get an FHA loan on it and rent out your current house. You could move any IRA contributions into a self-directed IRA and use that. You could partner up with someone who has money (or equity in a property they can borrow against). I would talk with a traditional or small business lender to see what tools they have. They can probably give you more applicable info for your specific situation.

You may have to be more specific in your question to get useful answers. I would check out blog posts and podcasts about wholesaling. These would probably answer questions you didn't know you had.

Make their job as easy as possible by give them comps that are in worse shape and sold for what you are aiming for, or more. To contest or verify replacement costs, one of the ways of valuation, you could check around with contractors to get an idea of what it costs to build a new house per square foot. (There may be too many variables to get an estimate, but worth asking)  

Or you could go a step further and do an appraisal yourself and give it to them. I had a high school teacher who told me to write my own letter of recommendation and he would sign it. (Oh the possibilities!) I think you could do the same here. It would be a bit of a learning curve if you've never done it before (it was for me!) and open to interpretation about the condition of a house. But there is also a definite value to one material over another, i.e. vinyl flooring vs. marble. You may be able to get information on how certain materials factor into the value.  I can send you a copy of a professional appraisal that I in the process of looking at a duplex. It would shed some light on the appraisal process and how they reach numbers. It would also probably help with choosing building materials in the future (assuming up-front cost of the materials is the same).

Podcast 83 I thought had some pretty good info about screening tenants, attracting good tenants, and keeping them.

Possibly asset based lending like B2R. Should verify, but from what I understand there is no personal credit criteria.

@Gilbert Dominguez  I think the $825 would be for the 3 bedroom.

@Dawn Anastasi, what is the before and after square footage? Sweet deal! Looking forward to pics/updates.