All Forum Posts by: Ryan Flanagan

Way to go Nathaniel! What is the plan to add finished square footage? Looks like you have some attic space - is it walkup? 

Justin,

Here are my thoughts:

I would talk to a lender and start the process of getting a pre-approval but moderate your expectations about making any moves  in the short term. A good lender will be willing to run some scenarios with different property and financing characteristics for you. Once you have some actual numbers in front of you, you can make better decisions. Obviously DYODD.

I know you said you just bought a place you love and don't want to move, but I would encourage you to research house hacking and be open to changing your mind if you are serious about getting started owning rental property. IMO you just can't beat it as a first move. Maybe you and your family want to try living a little closer to work/school/relatives/amenities, buy a 2-4 unit with low or no $ down (talk to a few lenders and find all the down payment assistance / low down loans available to you based on the specifics of the property and your family), decide you don't like it after a year, and move back to the 8 acre dream home. That said, @Evan Kraljic and @James Hamling are right that $7,000 is really tight. Raise your income and lower your expenses. Or inherit, if you're smart. Anyway, acquire some capital. To own rentals you need to be able to weather big out of pocket expenses. Maybe 3 of them in the same week if you're unlucky. Essential systems (plumbing, electrical, mechanicals, etc.) are expensive. Bad tenants are expensive. The mortgage is due every month. If you buy a property without adequate reserves an implicit part of your investment thesis is "nothing will go wrong".

Another way to acquire capital is to force appreciation in the asset you already own. Add finished square footage in the house. Add Bedrooms or baths. Update ugly old rooms. Add additional units or outbuildings if you can. Find projects that have a relatively higher labor component vs. cost of materials and DIY as much as possible (after consulting local code/regs). Again DYODD with what will actually increase appraised value given the specifics of your property so you don't spin your wheels on low or no-return projects. If you force enough appreciation, you could finance out some of the equity you created and use it to buy non-owner occupy rental property with 20-25% down, or sometimes less if you can find a seller who is willing to finance on different terms.

That said, there is no reason your flavor of real estate investing needs to mean buying rentals right off the bat. An 8 acre hobby farm sounds like a heck of an asset to me. Find a way to use that asset to generate cash flow. Do you have outbuildings that you could rent? Can you build additional dwelling units that you could rent? Could you split the lot and sell to someone who wants to build a dream home on a 4 acre hobby farm? Do you have extra space where someone could park vehicles or store materials or equipment (trailers, boats, heavy equipment, icehouses, construction materials, tools, etc.)? Could you rent billboards on part of the land that is adjacent to a road? Would some organic farmer or CSA type grower want to rent some of your land for cultivation? Horses? AirBNB? Event venue? I don't know. Sky is the limit. It's all real estate investing. Obviously find out if zoning, etc. will allow for anything you come up with. 

Good luck!

@Evan Kraljic yeah it's a drag :( If anyone is interested, US Bank & Wells Fargo have proprietary low-down loans that compete with Freddie Mac's HomePossible, but they do have different underwriting requirements, income limits, etc.

@Evan Kraljic @Samuel J Claeson

Freddie Mac recently changed min. equity to 15% down (85% LTV / 95% TLTV) on their HomePossible loans for 2-4 unit owner occupy properties. You can still do 5% on single family.

https://guide.freddiemac.com/a...

I have come across a few different deals where the seller expressed some interest in a contract for deed sale - some with terms that seem pretty compelling, others that look more like a last resort for buyers that couldn't qualify for other types of financing. I am interested in contract for deed due to the potential for lower equity financing and being able to purchase something that doesn't have a clean TISH. Also open to learning about other deal structures with similar characteristics - aren't there a few guys around the cities that post here that do master leases..? Who has some experience and would be willing to field questions? 

My wife and I owner-occupy a duplex in North that we purchased January 2020. We are very happy with our decision to live in North both financially and in terms of lifestyle. Happy to chat if you shoot me a DM. 

https://www.biggerpockets.com/...

Current rent =$1100 x 2 = $2200 Monthly Gross / $295000  Purchase Price = 0.74%. “Market” rent = $1300 x 2 = $2600 / $295,000 = 0.88%. Non starter at that price. 

http://www.citypages.com/news/attention-stoners-hennepin-county-wont-prosecute-weed-cases-under-100-grams/507281601

Recreational marijuana use in the Twin Cities is awfully common, particularly in areas with younger renters. My "velvet glove" approach would be to light-heartedly tell them it's getting too loud outside and it is time to buy a vaporizer. That said, it is your property and you need to decide with what you are ok with going on there. Read the neighborhood and read your tenants. If you think that their activities go beyond recreational use (large quantities in the house, visible scales or bags, people coming and going in excess) it's time for a more serious conversation. If it's bugging neighbors you could get 311 complaints. If police show up it can affected your rental tier status (1-3) and make it more expensive for you to renew your rental license. 

Good luck! 

I am going to comment in here mostly to track replies from people with more experience.

...however, I think it's important to remember that there is a wide range of situations that can lead to the missed payments causing a home to show up as "pre-foreclosure" and different approaches would be appropriate for each. Probably best practice is to try to gather more information about the specific property and owner's situation prior to reaching out with an offer. For example, I recently drove past a property that caught my eye, decided to look it up, and saw it listed as a pre-foreclosure. I then used my county's property information search tool to find the taxpayer for the property and did a google search of their name which returned a recent obituary. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $252,500
Cash invested: $15,000

2,400 sq ft 1925 stucco true duplex - 3 BR down, 2 BR up. Currently doing a live-in remodel on the 3 BR first floor unit which was in more immediate need of updating.

Scope: New kitchen, new bath, refinished the 95 year old white oak (front of house) & birch (hallways & bedrooms) floors, retrimming some areas to remediate shoddy work that had accumulated over the years, lots of cracked plaster repair, restored painted door & window hardware, and fresh paint throughout. Pictures to come!

What made you interested in investing in this type of deal?

We felt that a duplex on the MLS with significant but mostly cosmetic deferred maintenance, a relatively clean TISH, and at least one least one group of tenants that we could keep in place provided the right balance of risk and return for our first investment.