All Forum Posts by: Rumen Mladenov

@Kyle Gregg 

Owner financing is not easy to find. You need to be very lucky to find it on a house you like and is priced right - I have had no such luck.

It is not common to have the seller cover all closing costs, and is usually not acceptable by the lender. However asking the seller to contribute 2% towards your closing costs is both common and acceptable - for example, instead of offering $100K on the house, you offer $102K and ask for 2% seller assistance. The last few purchases I made with mortgages had this.

I am with @Chris Volkers on this. My own home was built in 1974, most of my rentals too. As long as the paint is not chipping/peeling, you have nothing to worry about - just paint over it. I have some Section 8 tenants, and annual inspections - again, as long as there is no chipping/peeling paint, I have no problem passing the inspections.

Nice to hear that another M.B.A. is not afraid of swinging a hammer :) I do most of my work myself, or with friend/family helpers. Like @Josh D. , I enjoy doing it and find it much more satisfying than my regular day job, even if it is the equivalent of less $ per hour. Although you never know - I had bathtub replacement quotes of over $5,000, and it took me and a helper a couple of days + under $1,000 in materials to DIY.

@Eric Petersen, how did you calculate positive cash flow on a $200k property renting for $1,000?

@Jimmy S. New Castle County DE is similar to your area. $100 k decent condition, $70 k if it needs updating. Rents about $1100/mo.

Of course there are the $10-$20 k properties in the inner city of Wilmington that could hypothetically rent for $700-800. Not my cup of tea.

When I first read about the 50% rule, it seemed ridiculous to me - I factor 20% for repairs, maintenance and vacancy, and a deal would be acceptable to me if rent > PITI + landlord utilities + the 20% repairs/maintenance; anything in excess I considered cash flow.

After reading the post, I decided to calculate my expenses in this manner. Still using my 20% for repairs/maintenance/vacancy, I added the taxes, insurance, utilities, and divided by the rent. Average for my 12 rentals? 41.26%. If I pay the customary 8% management fee (or pay myself that amount), I get to 49.26%. Say what?

One thing you should consider is that you will not be able to get a mortgage if your down payment money is a loan from your parents (or a credit card, or other borrowed funds). If you are using money from your parents, they have to give you a letter stating that this is a gift and no repayment is required (whether this is the case or not is another question).

I started just like you, purchased a house with 80-15 piggyback mortgage back when they still existed (80% mortgage and 15% HELOC, no PMI). I rented one of the two bedrooms, and the rent I got covered just about all of my mortgage payment. When I moved to a bigger house, the smaller one was rented for $300 more than my mortgage payment on it. I bought it at the top of the market, and I am probably still underwater on it, but I have been collecting $300 a month in positive cash flow for years and I do not expect to sell anytime soon, so I really don't care if I am underwater on it. I know for sure that I will own it free an clear when the mortgage is paid off, and I also expect to continue to have positive cash flow until then.

If you really remove the financial aspects, I would say early spring. You can get the renovations done in mild weather, avoid huge heating/AC bills (or burst pipes if you do not keep the heat on in winter), and get it ready for rent at a time of the year when there is a lot of demand for rentals.

Realistically though, you should buy whenever you get a chance to get a great deal. I would gladly deal with the heating bills, winter repairs and a few months of vacancy if I am purchasing the property for $10,000 - $20,000 below market.

Keep in mind that you will be dealing with 3 different tenants. You will have to spend just about as much energy and time screening and handling the tenants as someone who bought 3 separate SFHs, but for much lower return. For a multi-unit, the numbers just don't seem to make sense.

When you say hot water tanks, do you mean water heaters? I have never heard of rented water heaters. They cost about $300 each; I have replaced a few myself, they are sold at home improvement stores. Takes me a couple hours at most. I would be way more concerned with the condition of the heating and/or central A/Cs as they cost thousands each...

5% down and 3%interest for 25 years is SWEET! I wish I could get financing like that in the USA

I am lucky that I do not own any units with neighbors above, but I did have a basement flooded in one of my rentals. After clarifying that my insurance covers damage to the townhouse but not the tenant's belongings, and their renters insurance should compensate them (of course they didn't have one, and there was no real damage to the unit), I offered to pay them the estimated cost to run 10 loads of laundry, the shop vac and the drying fans I let them use for a couple of days. Generously rounded up to $150. With the clear explanation that if they keep clothes on the UNfunished basement floor with no renters insurance, I will not compensate anything the next time it happens.

All my tenants know that I own my rentals. I think the fact that they are dealing with the owner directly, rather than a faceless LLC or a property management corporation makes it much less likely for them to cause me damage or trouble. I give my good tenants gift cards before Christmas as appreciation gifts. No tenant has ever sued me, or even lied at an eviction hearing. I actually get quite a few tenants from word of mouth advertising.