All Forum Posts by: Clint Cook

I've got a lot of questions and I'm considering a couple of options:

Background:

I'm looking to buy and hold. I'm looking for long term, passive retirement income, it would be great if I could supplement my current income. My preference is vacation rentals, with a close second, being either single family or duplex units. I'm still developing my business plan, so currently I'm trying to determine the feasibility of VRs. If I can't get see a way to make VRs work, I'll move on to the family units. BTW - I have excellent credit.

Option 1:

The area and type of property I'm looking retails for around $200K. I can get about $40K out of equity in my residence. That puts me at 20% down (more if I can find a bargain). I should note that I have another $10K-15K to cover closing, and to keep things moving during lean times.

Q: Will lenders work with me on this? The property would be 100% financed, The down payment from an equity loan, and the remainder through a conventional fixed rate mortgage. Depending on the selling price I'll only have 20-22% for a down payment, not the typical 25%.

Q: Is this a good/wise way to go - borrowing against the equity in my home? I know a big part of this question is how much income will the property generate vs. mortgage and expenses, and I'm working on getting good solid numbers, to ensure I'll have a positive cash flow.

Q: If you were in my boat, how much positive cash would you need you feel good about the deal I just described - or would you not even consider it?

Option 2:

Try and find a seller willing to to do a "subject to" sell. This is a brand new concept to me, that I learned about here on BP. I like the idea but...

Q: Any recommendations on resources to learn more about buying using "subject to"? It seems a bit complicated. I've been trying to read everything I can find on BP's website, but I would like a really good in depth tutorial on all the ins and outs, pros/cons and how to find sellers and set up the deal.

Q: Sounds like there is a LOT of legal stuff to go with it, and a good lawyer is a must. How much should I plan on spending in attorney fees? Anyone know of a good resource, in Utah, to handle "subject to" buys?

Q: How do you find sellers willing to sell "subject to"? It seems like the only advantage to the seller is they are not making a mortgage payment, at the cost of whatever equity they may have in the property. Wouldn't they be better off just lower their selling price? They also assume the additional risk that if I don't make the payments on time - their credit (not mine) takes the hit. If someone approached me with this deal - first I would be very suspicious of a scam. Second, I'd have to be very desperate.

Option 3:

You know my financial situation. What other options would you pursue? BP talks about partnerships and hard money lenders etc. Maybe I lack confidence in myself - but I don't see that I have a lot that I can offer my side. I have no real experience investing, or in real estate beyond buying the homes my family has lived in (a total of 3). I can do basic upkeep on a property, but I'm not going to be able to do anything extensive. Playing the role of the landlord worries me - because of time (I have a full time job) and lack of experience managing properties (read no experiance).

The whole, how to finance my first property, is one of the biggest things that as kept me away from REI. Any thoughts or advice is welcome.

Thanks.

@Valerie Rogers

Sounds like you're the person to talk to! With VRassist, it sounds like they handle manage much of the work. What would I, the owner be responsible for managing?

@Evan R. Thanks for the response, and I agree. I expected VR to have higher fees for the very reasons you mentioned. Granted, I've only been able to get the fees from 1 company, but I didn't expect them to be, as much as, 4 times higher than those for long term renters. Are they typically that much higher?

I'm a newbie, who is looking to start with a buy and hold of vacation rentals. Being my first time, I've got a ton of things to figure out. One of them is property management fees. Property management fees seems to be around 10% of the rent for traditional homes and condos, but I haven't found a good number for management fees of vacation properties.

I was looking at a property management company's website, who happens to manage several condos in a development I'm interested in. They had a spreadsheet for potential investors. One of the things that surprised me was their management fees was 25% - 40% of rent depending on the size of the unit.

I'm not surprised that vacation rental management is higher, but are those rates typical? If not what is the typical management cost of a vacation rental?

Thanks

Thanks all for the support and encouragement!

@Jenkins Ramon

You're right - I need to "just do it" but I also want to look before I jump.

@Account Closed

It's great to meet someone from my part of the country. I actually lived in Lehi for several years, and just move to AF last year. I'm sure I'll have plenty of questions for you - especially since you live in my market area. I've went through the BP book, quickly. I plan to go back through it more thoroughly. It gave me a lot to think about and some direction.

@Ethan Bowen

Glad to see another Utahan. I'll check out his website. I'm always happy to have another resource to learn from.

@Sundeep Amin

You're right - seasonality of vacation rentals is something I'm very concerned about. Knowing what I've paid per night, it seems like the right property could really generate a lot of income - but vacation rentals won't be occupied every night. That's one of the things I'm trying to figure out - how to accurately estimate the occupancy rate. Month to month, and seasonally.

@Joe Fairless

There are 4 reasons vacation properties appeal to me. 1- They are what got me thinking about REI in the first place. 2- As I mentioned to Sundeep, from my very inexperienced point of view, it seems like they have the potential to generate a lot of income - if the occupancy rate is high enough. 3- I like that the "rent" is paid up front. 4- I thought it would be cool to be able to stay in my own property in areas my family likes to visits. - Granted, that means the property isn't generating income when I'm there, and I know I'll have to be extra careful when selecting properties not to let my personal bias for the area, affect my analysis.

@Paul Timmins

All great advice. I've checked out the BP start here link. I've been going over the eBook, and started listening to the podcasts this morning. I didn't know about the eBook on flipping. I'll have to check it out. Quite honestly, flipping houses scares me. I know there's a lot of potential there, but I think there's a real skill level required to look at a property, accurately estimate rehab costs vs. market potential. Plus, from personal experiance, it seems like any renovations there's always some unexpected cost that pops up.

I'm Clint, a 45 year old electrical engineer from American Fork, Utah. When vacationing my family and we will often stay in a vacation rental instead of a hotel. We find them more comfortable, better suited for our family and often no more expensive than a hotel. I've often thought, it would be great to be able to have some properties like those we stay in.

About 5 years ago a purchased a book from one of the "gurus" who claimed it was easy to make a lot of money really fast. As I learned more about his program, I realized I'd be spending a lot money, and probably no get much out of it. Fortunately I didn't spend any money beyond the cost of the book, but I concluded real estate investment was out of my reach.

Recently, I started researching buy and hold options a bit more, and decided this is something I want to do, or at least learn enough to make an educated decision about if it's really for me, and if I can make it work.

I'm interested in buy and hold type investments. The idea of buying and renting vacation types homes is very appealing to me, and is one of the avenues I'm researching. I'm also considering single family, multifamily (duplex), and possibly student housing. I'd like to generate enough cash flow to supplement my income, and when I'm ready to retire, not have to worry about if the 401K funds are going to last.

I've got a lot to learn, a lot of concerns, and as I work on getting a business plan and team assembled, I'll have a lot of questions. I love what I've found on the Bigger Pockets site, and I'm very excited to get started learning, and figuring out how to buy my first property.