All Forum Posts by: Michael Pearse

@Nicholas Polito I recommend reaching out to a local bank and ask if they can offer a portfolio loan to you. Portfolio loans come in handy if your credit score is lower than what most banks take for a standard FHA, Conventional loan, ect.

Best of luck!

@Mark Costa Obtaining a recourse loan with another investor won't slow down your growth rate, even with fluctuations in DTI ratios. Many times banks will start to count rental income as fixed income (usually around 2 years of solid rental return), which will further reduce your debt liability. I am sure you will make smart investment moves that will produce positive cash flow. Hence you should not run into any issues. 

Work with a small local bank and inform them how you and your partner plan to create sustainable, positive cash flowing properties. Have a solid business model that is well thought out. This will build trust over time with your loan officer and allow for more creative loans when the right time is needed for getting the next big investment deal.

Best of luck! 

@Morgan Martinez I would advice not saying you are the owner, otherwise the other renter may ask for leniency when it comes to paying rent, up-keeping the property, ect. If you are not interested in dealing with the other tenant, you could use a property management company to handle everything. I will be doing the same thing if I find a duplex in my local market. 

In terms of adding security, that should be fine as long as you inform the tenant when this upgrade plans to be done. Look up rules in your state on how soon you must notify the tenant of the added security you plan to add.

Best of luck! 

@Scott Kelly After doing a very rough calculation on how much money is in the deal, the projected ROI is around 18% (not including taxes, insurance, interest rate, points, ect). This was done by making a few assumptions.

1. Paid 5% down on 195K = $9,750 into the house

2. Used 30K to rehab = $30,000 into the house

3. Cash flow = Rent-Mortgage (simplification here), $2,100-$1,500 x 12 months = $7,200 yearly cash flow

4. ROI = $7,200/($9,750 + $30,000) = 18%

If you sold the house at the projected appraisal value, you would make ~$60,000 (not including taxes, realtor fees, ect)

The question is, how long would it take to make $60,000 through the projected cash flow. 

$60,000 from selling / $7200 yearly cash flow = ~8.33 years 

Now, this does not account for any tax benefits from passive income. This situation really depends on whether you want to keep the house for cash flow or sell to purchase more homes.

If you really want to hold onto the property, I would highly recommend refinancing the property to get the equity out. This will be an option if you are unable to use a HELOC. If you are eager to sell, consider finding another property you want to invest in and use a 1031 tax exchange.

Best of luck!

@Mike Church The deal will work if both parties are in agreement. I would have everything in writing and signed with how the process will occur. By not being listed in the title, they could technically sell the property without you and keep the profit. Get a partnership agreement in order and talk to a legal professional before going too far into the deal.

Best of luck!  

@Louis Phlips If those numbers are accurate, the return would be ~12%. [575*12]/[220000*.25]   not too bad

Why do you want the property to run free and clear? I would recommend using a HELOC once you have enough equity and use the extra money to earn more money in the form of purchasing another investment property.

Best of luck!

@Joanna Dennis It is all about risk tolerance. Typically lower end areas will cash flow higher, but require more maintenance and management. Higher end areas have more reliable tenants, but the return on investment is usually lower. I would find an area you are comfortable walking through and start from there. You can talk with other investors about specific zip codes and connect with local property management to find out if they have any recommendations that fit your investment goals.  

The hardest investment decision is the first investment. After that things become much easier and you will eventually learn ways to streamline things. 

Best of luck!

@Jared G. Great question. There are a lot of reasons as to why other investors might not pick up a deal you may find yourself. Below are a few solutions that may clarify this:

1. Investors may be stretched too thin and are unable to take on another project

2. As you build up your portfolio, scaling is the next goal. Meaning doing 1 deal is not enough. Often times package deals are of interest, rather than investing in 1 deal at a time.

3. Labor costs increases. This can force rehab rates to go up. However if you are able to rehab for less or do it yourself, this deal could work for you. 

4. Typically there is a portfolio increase and offload season for investors. The market in your area may have more investors selling than buying. 

5. Some may be waiting for a significant market turn. Which could never happen. Make sure to only buy what makes sense when you are able to take on the risk. Waiting forever can lead to lost of missed deals. 

Hope that helps! 

@Daniel Nguyen You could always have several structural engineers look at the property to quote on the estimated cost of repairs. A home with foundation issues can be a gold mine. Just do the extra research and figure out if this is the one.

Cheers! 

@Mat N. Sounds like a great idea. Though I would recommend talking to a local bank and accountant for there opinion on how this could work. 

Best of luck!