All Forum Posts by: Nick G.

"In general what is the method that you find the most reliable for estimating property tax?""

[tax rate] x [purchase price], then [/12] for monthly number.

Then call the county and ask how often and how much property taxes are increased. In my county, it's +2%/year.

I believe  the changing number your looking at is the tax basis, by which depreciation numbers are determined.

Hey there @Alex Rojesky. Questions like this are impossible to answer without knowing your whole situation, but here's a few thoughts. 

Personally, I jumped in headfirst, simply because my philosophy is that oftentimes when you leave yourself a Plan B, it never lets you truly and solely focus on making Plan A successful. Obviously there are varied views on this, that's just mine. 

It's worth noting that becoming a successful real estate agent means understanding (or learning fast) how to create and run a successful business, the exact same way you would start a business in the car industry, tech industry, or any other. Most new agents are clueless about that, which is why something like ~75% drop out in the first few years.

However, I noticed in the past month that you appeared to be exploring buying your first property (by the way, FHA all the way for you, period.) Making a major job change may possibly jeopardize or hurt your ability to qualify your income, since lenders typically need to see two years employment in the same industry. You will really want to check on this before doing anything.

Lastly, consider this: the job of a skilled agent, at least in the litigious state of California I work in, is akin to a quasi-attorney. If you ever needed a proper attorney to represent you in court, would you opt for an attorney who did it part-time, or an attorney to whom day in and day out; it's his absolute bread and butter? The answer is pretty obvious, but it's important to know, because people you help will generally feel the same way. You may, in fact, even be doing them a disservice as a part-time agent if you are not working as hard for them as another knowledgeable full-time agent would be able to.

If I were in your shoes, I would probably stick with my current job full time until I had bought my first property. Feel free to earn your license during this time and start visiting brokerages around you to try and find the one that offers the best and most comprehensive new agent training. Don't pay any attention to commission percentages whatsoever for your first year, what you need to focus on is your skill-set and knowledge so you don't screw over innocent people. 

When you find a broker you like, don't try to start working as an agent right away, just spend some time going to the weekly meetings and getting a feel for the real estate agent business and that particular office. Finally, if you decide you're happy with what you've found, I would ensure that I had six months in reserves of my now-higher living expenses, plus at least a few thousand dollars for start-up costs as an agent, and then become a full-time agent.

Hope that insight helps.

Hey there @Nichola Dotson, I haven't been involved in many seller-financing deals so I can't help you too much there, and if I'm understanding you correctly, it looks like the seller gave you these numbers, including the rent numbers? make sure you verify those very stringently on your own - it also concerns me that I don't see any vacancy, CapEx, repairs/maintenance, or management in your projected expenses.

Forgetting about, or under-budgeting for, those items is often one of the biggest sure-fire ways to tank your investing career early on! They all depend on your area and the real numbers may be lower, but you should probably rerun the deal at least using the following allotments:

Vacancy - 8%

CapEx [replacement of major systems like A/C, heating, roof, septic, etc.] - 10%

Repairs/Maintenance [everything else] - 10%

Management [you may want to self-manage now, but what about in 10 years? 20? When you have 100 units? If you don't check this now, you run the risk of your property losing money one day if you need to  switch over.] - 12%

Whether you predict them or not, those missing items alone can and will cost you upwards of 30%-40% of your property's income. While the numbers may be higher or lower for your area, they absolutely exist, so make sure to gauge if the property can still perform with them included! Just trying to look out for you as a fellow newer investor.  

@Chris Purcell Easy, that's because most prequals/preapprovals are worth about as much as the toilet paper in your bathroom. A decent agent who looks out for their seller will always independently verify the ability of the buyer to purchase the property, which means at a minimum looking over their proof of funds, and oftentimes their credit worthiness too.

Just FYI, just because a lender has "preapproved" you doesn't mean squat, you've still got two to three weeks left of real vetting to look forward to before you're actually approved. Obviously this will vary from lender to lender, guys like Chris Mason and other investor-friendly lenders have ways of doing it faster, but the point still stands.

@Benjamin E. 5% down on an FHA loan? That's unusual.

Anyhow, I don't know anything for sure because I don't have enough information, and I'm not even entirely sure what your goal is - do you want out of PMI, do you want to pull $100,000 out, or both, or? - but let's look at the facts:

Your PMI is $275/mo.

We also know that every $100,000 you borrow will cost you around $300/mo.

You can also project that a 1% increase in your rate could result in a payment increase of, maybe, $100/month.

1. If you refi and dump PMI, you will save $275/mo, but lose ~$100/mo due to the rate increase. Profit: $175/mo.

2. If you do a cash-out refi and pull out $100,000, you'll pay another $300/month, but the money you make off of $100,000 once wisely reinvested should more than compensate for that (and this is the most classic way of growing wealth in RE.)

3. If you found a loan that would allow you to do both, as I have for my property, you would be able to have your cake and eat it too. 

Here, maybe this will be interesting/helpful to you - I am currently working on doing this right now with my own property, which happens to have a nearly identical loan amount as yours, and there is $50,000 in equity I could refi out. Let me share with you the scenario came up with, as emailed to (and approved by) my lender just yesterday. Her comments back to me are in bold italics.

I owe $405,000 on my house at 3.75%. Right now it would easily appraise for $510,000. I want to dump my PMI now that I have 20% equity in the property, but I am interested in doing something more creative than the classic 80% LTV refi.

Let's say I continue living in the house, and my lender gets me into an 80/10/10 refi to dump PMI (+$290/mo) and refi out the 10% as cash to me. Payment on that 10% [$51,000] is probably $325/mo. The rate on the 2nd is 1.99 over prime so it is currently 6.24%. The interest only payment is $260.00, so at $325 you are paying back the principal which is a good thing.

The way I see it, by doing an 80/10/10 at 4.5%, my net outgo might go up roughly $200/mo, but I'd have $50,000 to use toward another rental. that rate is perfect as of right now.

I find a $200,000 house in Palmdale that I would like to buy as a rental with $50,000 down. With that 25% down at 4.4%, my P&I on that $150,000 is probably $750/mo. The rate today on this scenario is 4.625%, which makes the payment $771.21, but not a huge difference.

Taxes ($210/mo @1.25%) and insurance ($90/mo) are an additional $300/mo. Total debt to qualify for on this property is $1050/mo.Total payment with the higher rate is $1071

Palmdale house rents for $1,400/mo. My income can be credited with 75% of the property's rent, or $1050/mo. Based on the higher rate you are negative $21 a month but that is very minor.

Maybe I'm way off here, but it seems to me that for $200/mo and no additional debt:income requirements beyond affording my primary residence at the higher payment, I just bought a rental in Palmdale. Agreed.

Hi @Benjamin E.. The most obvious answer is to wait until you have 80% LTV on the subject property, then refi out of PMI. In other words, if you believe the building will appraise for $650,000, you'll need $520,000 of equity for the classic refi to dump your PMI.

Less obvious solutions involve 90% LTV loans with no PMI (though the rate is usually a bit higher, it still results in big savings compared to FHA PMI,) or an 80/10/10 loan, which is similar to the first option but involves a second loan (which could also even be cash out.) Both of these are generally only for owner-occupied properties, though 15% down investor loans are offered by some portfolio lenders from what I've heard.

I'm not a lender, so you'll want to defer to one for specifics, but those are options you should at least know about. Oh, and if it makes you feel any better, FHA PMI on your loan actually can come off... but it's not automatic, and it's only after 11 darn years on top of the 80% LTV. Lol.

@Aleejandro Dela Vega It's definitely possible in the SFV - not necessarily without some competition (or creativity), but certainly doable. I've helped a handful of guys do it. Feel free to PM me if you'd like more info or examples.

Hi @Aaron Sutter. Instead of asking about all these different people and if they're "legit" or not, you may want to consider researching and learning about wholesaling for yourself from BP and other already-vetted places. You don't ever want to lean to heavily on any one particular person's knowledge base anyway. As you spend time meeting new people in the business and connecting, your radar for BS'ers will get better and better, and you will become better at knowing who to actually listen to vs. who you should simply nod and smile at. Just my two cents.

Also on the topic of being proactive, regarding another of your posts - it is very easy to search BP members in a particular area or within a certain distance of your zip code, even with a free account. Don't ask for people to say hi to you, because the truly busy ones rarely will. Go get 'em!

Hi @Andy Chen. First off, welcome to BP!

Incorporating/forming LLC's/etc. is a pretty unnecessary expense when you're starting out, and at this point in your career, it does not mitigate risk in any meaningful way in my experience, especially in CA. The absolute best way to minimize risk is to buy smart, and conduct yourself legally, ethically, and thoughtfully.

Use your dollars right now for things that will actually make you money, like marketing, or buying more property.

Good luck!

Hi @Katy Oh. You'll want to defer to an attorney in your own area, however, I can tell you how it frequently works - the listing contract you have is likely an 'exclusive right to sell' listing agreement, meaning that a particular brokerage, and no other, has the right to sell your property during the term of the listing agreement, in exchange for which they will earn a commission. 

The only person(s) who has the power to cancel that agreement would be the broker of the agent.

If you feel your agent is violating or neglecting the duties they owe to you, you can complain to the broker and see if they will cancel the agreement or assign you another agent (though you should be aware that brokers do not typically cancel their contracts very often or easily.)

If you attempted to circumvent the agreement selling the property another route, you may likely end up owing the broker a commission anyways.

Again, this is all specific to my state of CA and you'll want to consult the proper counsel where you're at, but I've not heard of it working much differently in other areas.