All Forum Posts by: Account Closed

We would live in it for a year. Maybe two. A house in the LA area for 225,000 (what the 50% rule will allow) puts us in the worst possible neighborhood. Compton, Watts, etc...

But I believe you're right. If the property is to carry itself long term, I am probably being too optimistic. The desire to acquire has me considering deals that may not pencil out, justified by the fact that we will occupy it for a bit, and that it's in a strong neighborhood lots of character, good schools, etc...

I do not see the 300.00 per month loss. Can you show me how you get that figure? Or are you just saying, when I eventually get bad tenants, major repairs over the long term those expenses will end up being the equivalent of a 300.00 per month loss ?

Originally posted by Jon Holdman:

50% of gross rents for expenses. 7% interest for 30 years. 100% financing. $8,100 cash out of pocket for closing costs and loan origination fee.

Assuming 35% for expenses is very optimistic, even with you manging it. Using your high end rent of $3000 is optimistic. 6.5% may be OK, since you're going to get an owner-occupied loan. I assume your intention is to actually live in it, in which case I'm not sure why you're evaluating it as a rental.

A more realistic scenario might be 7%, 40% for expenses and $2500 (low end) for rent. Those assumptions also get you to a $300/month loss.

When a deal only works using the most optimistic assumptions, its not a deal. Because you might get one of your assumptions on the optimistic end. But, you won't get ALL of them. Be realistic, not optimistic. Otherwise, you'll be one of those investors saying "I own $270K on a house that's worth $200K and its costing me $300/month. How can I get out of this without ruining my credit and being on the hook for the deficiency".

Originally posted by Shari Posey:

Am I reading the newspapers correctly that the government will provide financial backing to refinancing loans at 90% of the current appraised value IF the current lienhold agrees to the short payoff and if the homeowner agrees to split any future profits 50-50% with the government?? This actually sounds smart.

I hate the idea of government intervension but I now believe that unless the banks or the government does something for homeowners my prediction is that the majority of homeowners who bought using 100% financing from 2005-2007 will let their homes go and anyone who pulled out a bunch of equity during those same years will let go of their homes. That's a lot of people who still might be considering walking away from their homes!

Yep. Apparently it's not a new idea. It was big about 40 years ago according to a segment I heard on NPR last week.

How are you calculating that?

Using a factor or .35 times gross rents (3000) for operating expenses since I am managing. That = 1950 per month rent

With 6.5% interest amortized at 30 years I get a PV of 308,511

It seems like I'd have 1050 a month left over to cover Taxes, Insurance, Vacancy, Repairs, and Maintenance.

It does seem tight still. But what assumptions are you using?

Originally posted by Jon Holdman:

A $270K house that rents for $3000 loses $300/month even with optimistic expense assumptions like no management costs.

A $38K down payment will get you to break even for cash flow. But that's a $38K investment with no return.

Originally posted by Jon Holdman:

When you cosign on a loan, you should assume you will end up having to pay it off. After the other person misses several payments and damages your credit.

$400K for a 3/2 doesn't sound like a good deal for anything except a flip. What's your upside here?

We wouldn't pay 400k. We'd find a fixer. This would be a long term buy and hold that we would reside in for a year or two (girlfriend), and perhaps sell in 10 to 15 years. Rents in the neighborhood are currently 2500 to 3000. One of us would probably manage it when we exit. It should carry itself at around 270k as rental if I managed it.

I am considering co-signing for a loan. The borrower may qualify for a government backed zero down first time buyer program. We will both own the house 50/50. (This is in a area where a good deal is a 400k 3/2 house. Which is the only reason I would consider this.)

I discovered this would count as one of my 4 maximum allowable conventional loans.

What are some other things I should be aware of?

With good credit, I am looking for all worst case scenarios. The score of the borrower is ok (high sixes)

Thanks

Originally posted by Will Barnard:

Matty,
I do have a great questionaire as well as a system Michael and I have developed over the years which has been very effective. We also are very demanding of PM's in how they run their business, as essentially, it is "our business". If they do not like that, then see ya!
The information you are requesting can be found in our educational program, "investing out of state or your own backyard" which also includes forms and checklists which are derived from years of experience, mistakes, education, etc.

The forms & checklists CD is the one we often give out at Rosie's events as well as other RE events. Since we have already met in person and developed a relationship, I will get that CD to you.
Do I have your direct email? Are you on our join our investor list database? If not, send me so I can send to you.
My email is found on our website.

Great. I'll pm you my email address.

Originally posted by Will Barnard:

I have been very successful and that is due in large part to my knowledge and experience with interview, hiring, and negotiating contracts with managers in my favor giving me the protection I need to be successful.

Learn how to "build" your team with quality personnel. Of course it is not a full "hands off" approach. You must manage your PM and having the skills to do that can also make the difference between good and bad experiences with PM's.

Will, can you let us know how you qualify property management companies and the other team members? What questions you use to interview a property management company? What is it that makes you say 'yes' instead of 'no' to a certain PM. That could make this thread gold.

I once asked Marshall Reddick how he screens his property management and team members: He said "most property management companies are terrible", so he "prays" that the property management company will be good. It sounds you have a better screening system than this to qualify a property management company.

Please let us know about it!

I enjoyed Real Estate Math Demystified. It's available at any Barnes and Noble, Borders, and I am sure Amazon.

If anything, it will get you fluent with a financial calculator. It's not perfect. But I liked it.

Originally posted by Tim Wieneke:

I'll settle for the next smart hot single conservative gal who can field dress a moose. Very much my kind of woman.

I think Tim may have a point here. The conservative Texas meat eating gal could be a sweet choice over the vegan cynical hippie gal. I am probably with you there. I've heard things.

As far as Joe Plumber - and the fact that I am a libertarian - you'd think I'd be leaning towards the least amount of Government possible no matter what. Yet from my perception, given the choices we have, the lesser evil in November 2008 is distancing ourselves as far as possible from almost everything that represents the current administration, even if that means going more socialist for eight more years.

Under different circumstances - one's that will be here down the road - I'll vote more aligned w/ the libertarian philosophy (much more closer to the philosophy our founders had than the current left or right)

Originally posted by Tim Wieneke:

It has weakened with the rise of liberalism out of the ashes of the burnout hippie experiment

I'd have to disagree. I consider myself a libertarian. Go Ron Paul. The state of our country has me sounding like a "burnout hippie" lately. I think we need to go back to actually making stuff. Quality stuff.

I do like high IQ vegan hippie girls though. I'd like to move to Santa Cruz

James, I bet Tim thinks you and I should get together and eat some pot brownies.

Steve Jobs for president