All Forum Posts by: Nick L.

@Account Closedsaid, the question is whether a deal makes sense. At a minimum it has to generate positive cash flow - meaning that your rents have to be more than all your expenses, including the cost of borrowing, insurance, taxes, vacancy, maintenance, long-term capital expense, management, utilities, and any other expenses that are specific to your area.

After that you have to figure out whether the value of the property is likely to grow over time. If it's likely to boom, you could accept a lower monthly cash flow because you expect to get more appreciation. If it's likely to be static or negative, you would need higher cash flow to compensate. If you can't get good enough cash flow or expected appreciation, you might as well forget about investment property and put your money somewhere else.

@Account ClosedOthers here have talked about the benefits of education and experience over raw drive. I have a different question.

As a UK expat in the US myself, I am curious about what makes you think this is a better environment? There are plenty of entrepreneurs in the UK property market who do very well, from the Candy brothers down to the average Joe who bought a couple of flats in Wimbledon at the right time and lives off the proceeds. If you get a surveyor or other professional licence this can only get better.

There are also a lot of great sales jobs in the UK. Just within the realm of property, there are plenty of opportunities to make money on both the residential and commercial sides. 

For sure the US is noisier about property/real estate. Just take this site for an example. But just because Brits are lower key and more discreet doesn't mean they aren't piling the Lizzes as much as the septics are stacking the Benjamins.

@Lester Appel

Commercial loans are different from 1-4s in the following ways:

- Shorter terms (typically 3, 5 or 7 years) and shorter amortizations (typically 20-25 years)

- Usually have a minimum debt service ratio like @Ashley Pimsnersaid

- Higher interest rates

- Some are more focused on investor strength; others are more focused on property strength. It depends on the lender.

- More flexible and more negotiable. For example you can roll in rehab costs, construction costs or other factors that a conventional loan won't consider.

@Andrew Kala

1. You can strike a deal at any time before the sale. If your offer is more than the bank's payoff it will be easy - but these properties rarely go to auction because an owner can normally sell them first. If your offer is lower than the payoff you will need to start a short sale. The bank may or may not play ball.

2. There is no requirement for the bank to bid the amount they are owed. They can bid lower or (in unusual circumstances) go out of pocket to bid higher. One hidden factor in the bank's bid is whether the property has PMI. If it does they are likely to bid full price even if that is way above FMV, because they will get paid eventually.

General observations:

- Your insurance looks way low at $187. Could this be monthly instead of annual?

- Based on the 1%/2% rules, you are probably in the right ballpark on price. Maybe a little aggressive but I don't know your area. The less you are likely to make on appreciation, the more you need to make on cashflow.

- Single family homes are usually harder to cash flow than multis. Because you have competition from owner-occupants who don't consider rental value when purchasing.

To answer your questions:

1. I don't know your area but generally speaking 1.5% is reasonable for a SFR/

2. Capex is variable, depending on the effective age of the building and what the average tenant expects. 5-10% is reasonable. Don't forget to account for an initial capex hit if there is deferred maintenance.

3. Neither. You need landlord insurance.

Call a title company and have them run a search & hold / preliminary search on the property. They may charge you a small fee but it's worth it. This will tell you which position the foreclosing party is in.

Is the HOA the plaintiff? If so you need to be especially careful. Usually there is a mortgage with a senior lien to the HOA. But not always. Sometimes there is no mortgage, or there is one but it's junior to the HOA lien.

As to the starting bid - you need to call the foreclosing attorney and ask. In my area they typically only release this information the day before the sale. So you have to get your due diligence done before you know the bid.

1. Verify that the animal is actually registered as an emotional support companion. A lot of people claim this without it being true.

2. If your jurisdiction has laws against pit bulls, check with an attorney about whether this takes precedence over fair housing.

3. If it does not, ask the attorney whether having to change your insurance (and pay more for it) constitutes a reasonable accommodation. Hopefully it does not not and you can reject them.

4. During all of the above, try to find some other legitimate reason to reject the applicants. Bad credit, low income, bad references, anything that fails your screening criteria. Double bonus if you can find another applicant who is objectively better qualified.

Properties get pulled from the auction sites all the time. Someone made a pre-auction bid... there were procedural problems with the foreclosure... the house got condemned... PMI kicked in and the bank got paid... the phase of the moon was wrong... there are a million reasons why this happens.

Even for those homes that make it to auction, the reserve pricing can be a total mystery. Some crapheaps have ridiculously high reserve prices while other perfectly decent houses go for a very modest price.

All you can do is keep trying and not get hung up on any one specific property. Eventually one will come around that is right.

@Nick WatkinsIt depends on your strategy. 

If you have a scattershot approach like @Jake Thomasthen for sure, just make a bunch of drive-by lowballs and wait until you get lucky.

If you have a more targeted approach like @David Neelythen making unrealistic offers is just going to piss off agents and sellers. I was once brought a first-look opportunity by an established local commercial agent. I made a lowball offer that she openly considered a waste of her time. Guess who is no longer on her list of first look investors?

@Rebecca KnoxHow do you find SVA's pricing? I realize no good CPA is cheap but I found them unaffordable. With that said, Eric is recognized as one of the best CPAs in the area so it's probably worth it for very complex finances.

@Arthur E.Try Dan Wasserman in Oak Creek.