All Forum Posts by: Scott Nipp

For me personally the reason @Gabriela Gomez is great if you can find that kind of deal.  Otherwise, about the only reason I would intentionally purchase a borderline or negative cashflow property would be to put a parent or grandparent in it.  What I mean by that is my mom is 50 years old and she can afford some rent but I would eat some negative cashflow to get her a house in a good neighborhood near us.  That's just part of my values though in doing what I can to help out family.

I really don't see any other valid reason to pickup a borderline property and definitely not a negative cashflow property.

@Joseph Morell Yes.  We are investing locally in the DFW area, specifically the norhtwest Tarrant county area (Azle, Springtown, Lake Worth, Saginaw, White Settlement, etc.).  We are aggressively looking for deals in these areas currently.

I agree that it's a bit thin, but I don't think that ~ $325/mo is too bad for a duplex.  Obviously it would be better if he could get it down to $90k or less.

I'm with the rest of the crowd.  I would definitely lean towards killing on of the bedrooms.  The trick is going to be what it does to the budget.  It sounds like the current master doesn't have a master bath and I know in my market that is almost a deal killer.  I would probably be most inclined to converting the walk-thru bedroom and the bedroom that is accessed thru it to a master suite.  Obviously though it is difficult to make that call without knowing the exact floorplan.

That is looking like a more complete picture now and it's looking pretty good.  You might want to confirm the typical trash and water expenses just to be safe but calculating about $100 to cover those two these should cashflow north of $150/door/mo assuming you have property management in place.  If you are self managing the units your cashflow looks to be closer to about $210/door/mo.  Personally, I wouldn't completely discount the property management expense that way if you need to place it under management down the road you aren't killing your margin.

This looks pretty good to me. Especially so since the A/C and roof seems to be in good shape. You have time to let your CapEx build up before you SHOULD have to worry about those expenses. Looks to be about a 6 year return to get your initial funds back out of it based upon the $150/door/mo analysis. Obviously that looks better if you are self managing.

If the area is good I would probably go for this unless there were some other factors that aren't being considered.  If you really think that the seller is motivated and willing to entertain a lower offer, AND you don't think you are facing a lot of competition on these properties I would probably make an offer of about $90-95k.  If you can get the deal down to $95k that basically adds another $25/door/mo which would add up to an extra $100/mo if you acquired both properties.

Well...  You are ahead of the game compared to me as we have just pretty much finished up our 1st quarter in investing and still have no deals to speak of yet.  Definitely anxious to get one under our belt but taking the time to educate ourselves and make sure that we get a good deal not just a deal to get one.  Anyway, I can take a shot at questions 1 & 3...

1.  I think the general idea would be to bump the rent in line with inflation and any other factors.  Personally, I would definitely bump the rent unless you are already high in your market.  Your market position will help to dictate what you should do.  If you are already getting $100/mo more than your surrounding units then I would sit tight on the rent for now and be happy.  If on the other hand you are on par or significantly below then I would just let the tenant know that you are bumping the rent due to the increase in condo fees and they shouldn't have a problem with that if they are otherwise satisfied with the property.

3. I think that financing yourself out of your 401k is a great idea. You might want to simply use the 401k funds for the 20% down with bank financing at the outset rather than trying to make the cash purchase then refi with a bank. I would check with your local mortgage broker though and see which route makes more sense for you though. Either way, if you have the funds in a 401k I would definitely tap into that as opposed to other financing options and you can dramatically accelerate you portfolio growth by leveraging those funds. Just analyze your potential investment property and see what your COC return is going to be. If it's a good deal it should be dramatically better than your expected 401k growth.

Good luck.

There are so many unknowns with what you have posted here so far? You say that the rents are about $1300/mo each, but what about the expenses? What does the insurance run in your area? Do you need flood insurance also? Do the tenants pay utilities? HOA dues? Any landlord registration fees? What is the age of the properties, and along with that how old is the roof, A/C, furnace, etc? Is this conventional financing, seller financing, or something else? I'm sure others will chime in with additional questions, but to get a good response to this you are going to probably want to include some more numbers.

Once you have a clear picture on your expenses you will then have a better idea of the cashflow for these properties.  Then you can gauge where to position your offer based upon these factors and what is a worthwhile cashflow for you.

Good luck with it.

Texas does have property appreciation, but it's just not the roller coaster ride that some states are.  You don't see houses rising at double digit rates of appreciation, but the flip side is that Texas definitely didn't get hit nearly as bad as other areas during the crash.  Yeah, we lost some value and some took a sizable hit to their equity but it was nothing compared to say Florida and California.

And yes, in Texas we do have some annoying soil issues and the recent/current drought doesn't help that one bit.  However, I think that most of the foundation issues here are overinflated.  Talking to a local foundation company that works extensively with investors, I was told that many if not most of the foundation work they do is under $5k.  Yeah, that's still a good chunk of money but if you evaluate your properties with that in mind and budget for it, it's not typically a deal killer.  This is also the reason that you don't see basements in Texas.

Yeah, what @Hattie Dizmond said...

Also, how are you handling property management?  That's a LONG way to manage a property remotely.  Might want to factor in another 8% for that and the deal looks a bit on the thin side there.  Property management brings your monthly cashflow down to about $90/mo which would be too low for me to want to take a shot at.

I'm looking at purchasing a quad and wondering about possibly getting a 20% owner carryback and then only putting 10% actual cash down.  I'm not really clear on how to calculate the owner carryback and what to offer as a percentage rate on that portion of the financing.  Additionally, should I do the carryback for the full length of the note or possibly do that portion for only 10 or 20 years instead of the full 30?  

Any advice or suggestions on how to structure, calculate, and pitch this to the owner?

Thanks in advance.