All Forum Posts by: Justin B.

There is no problem with the numbers. This is an SFR, so when it goes vacant, it's 100% vacant. Again, I could put an estimate of vacancy but I chose not to because it's currently rented and not vacant. When I first evaluate properties (what I call my 5 minute analysis), I use 10% as a vacancy rate, $50/month per $1,000/month rent (Over the years I've found that to be very accurate). All the other expenses I have (Taxes, Insurance, PM) are pretty easy to get accurate up front. Even at that, the numbers still blow me away.

You are correct.  that is better.  As good as mine is, I realize there are even better ones out there and that's what we're on the hunt to find.

I truly believe it's the relationship with the bank.  Not only did we have previous personal relationships with this bank (personal loans like car/house over the years), but we now have 5 years of paying every time on time, every month (through automatic withdrawal).  Last year we went about 9 months without buying a property and the bank was actually calling us wanting to know when we were going to buy again.  We also send out balance sheet and P&L to the bank each year so they can see for themselves that we are buying profitable properties.  We didn't start out at 5% down.  We had to earn it.  We started out just like you're seeing.

This is not what I'd call a distressed asset. However there are plenty of homes on the REO list that are in horrible condition, priced extremely low that I'm sure the bank wouldn't finance. There are probably 100 SFR's on the REO list each time we get it (a lot of it is the same from month to month) but we've found 3 in the past 6 months that were not only in great shape, but were already rented out and we just took it over.

Just call the bank and ask for their REO list. You might get bounced around until you hit the right person, but they e-mail it to us monthly without us even having to ask anymore.

Some other people may have covered this too, but the statement "all REO's are cash only" is just not true. I've bought 3 REO's now and actually paid 0% down (100% financing) on the first 2).

I agree.  It is best case scenario, but the house is already rented and has been by the same woman for 5 years.  Unfortunately her credit keeps her from qualifying for a loan to buy the house herself.  So yea, she pays $750/month in rent but the bank won't approve her for a loan that would be ~$400/month with insurance and property taxes all in.  It's messed up but that's the world we live in.  Again, once you get your money back, the Cash on Cash Return doesn't really have much value.  I just think it's interesting than in ~7 months, we'll have all our cash back.  That's the point I'm trying to make.  I'm sure over time their will be maintenance fees.  Also, keep in mind, these numbers are about 3x what our "goal" is.  so even adding 10 or 20% vacancy and $50-$100/month in maintenance (which is high), the numbers are still pretty awesome.

Yes, Mississippi.  a $37k house here in Maryland would definitely something I have 0 interest in :)

It's a commercial loan in the LLC's name. We do have to personally guarantee the loan. Our bank is a smaller bank that only operates in Mississippi and they are just willing to do it based on our history.

Closing costs are a few hundred bucks and they are calculated.  For all those asking about the 5% down, yes, 5% down is what we typically get.  When we first started out we were paying 15-20% down, but we have worked our way to 5% down.  We just asked for it and got it starting with about our 5th or 6th property.