All Forum Posts by: Nathan A.

I don't follow how you're calculating positive cash flow given these mortgage payments and an appropriate allowance for the expenses you mention -- taxes, insurance, maintenance, capital expenditures and repairs. If you aren't intending to self-manage, you'll need to include property management as an expense as well.

This guide to tenant screening might help.

So this is a purchase with conventional financing, followed by a $100K rehab but without refinancing it after the rehab, right? The problem here is that since so much money is left in the deal, the cash-on-cash return is considerably lower than you could get on FDIC-insured bank certificates of deposit right now.

If you are intending to refinance afterward you might want to try the BRRRR calculator instead. And for calculating the ARV, I really wouldn't use comps older than 6 months without a substantial allowance for how the market has changed since then.

One way you can begin finding off-market deals is driving for dollars. Here are some other ways to find off-market properties. Also, keep in mind that the asking price on the MLS doesn't need to be the price you offer. You can always find an agent and start making offers at prices that will work for you.

I would use the "will most likely have problems in the future" bit to negotiate with the seller and ask for a concession. The worst that happens is they say no, but maybe you can get a little bit more off the purchase price because of this.

Another option is to find a partner who's willing to put up the cash. You bring the deal, the partner brings the money, and you split the returns.

That said, either your friend is being really generous or there might be something wrong or undesirable about these properties. Your friend must either really want these off his hands, or there's something about the seller financing terms that's extremely beneficial to him.

Macon, Ga., is indeed on Dave Meyer's list of the top 10 cash-flowing markets. Memphis also meets your 7-hour drive time test, but I would really reconsider whether you want to self-manage something that far away, especially if you're worried about the amount of time you have as a new parent. What about Chattanooga or Huntsville as other options? Regardless, trying to get multiple units as a turnkey for $120K sounds hard in almost any market local enough to you. You might need to loosen your criteria.

"Every Landlord's Legal Guide" is one good starting point. This page by Nolo might be a good overview too.

You need money for the down payment, closing costs and rehab (including a buffer as @Nathan Grabau said). All of that money is going to go out of your account when you close or pay for the rehab. But at the risk of stating the obvious, you need to make sure you aren't draining your bank account to nearly zero and living paycheck to paycheck after the purchase. You need money left over afterward for your reserves and personal emergency fund too.

I would encourage you to run the numbers incorporating rental rates and the cost of the rehab into your thinking and focus less on the size of the mortgage payment or lending terms alone. If the two-unit property is double the mortgage payment but you get two units and it's already freshly renovated, it could ultimately be a better value than only ending up with one unit after you also pay all the rehab costs. But that assumes other things are equal, and maybe they're not. For example, maybe the difference in rental rates between the two areas means the cash flow per unit would end up being different.

That said, if the overall return worked out to be similar on both options I would gravitate toward the one where you are putting more money to work for you.