All Forum Posts by: Chad Ballard

J Scott or Ben Leybovich, Can you elaborate on this idea a bit further?

Nothing is stopping you except maybe the postmark on the stamp. There are some ethics questions you might want to ask yourself. As much as I love the post office you might want to rethink this a long term strategy.

Are you asking about a stamp to a letter that has been returned?

Keep the updates coming, we appreciate your time and effort on this thread J. I would also consider what you have done so far as pretty good for stepping out of your comfort zone as well. I am sure I would have made quite a few more mistakes.

Well, an FHA loan is an owner occupied load so you will have to move into one of the units and be the landlord. That is the trade-off for getting a low down payment but is a great way to get started.

Interest rates are still great but rising but do not let that worry you into rushing into a bad property. It is better to pass on an OK deal than to get stuck in a bad property there are plenty of houses around.

I would start by reading the beginners guide here on BP (http://www.biggerpockets.com/real-estate-investing) it is a great starting point to learning more about what you can expect in real estate investing. Notice as well that finding properties is all the way in chapter 5 not chapter 1. It sounds like you have already thought about your goals. The first step in to learn and make a plan then you take action to put that plan into place.

Don't be put off by how much you currently make. The less expenses you have the quicker you can accomplish your goal of quitting your job.

FHA likes to see history of your rental income before counting it towards your DTI ratio. Is this your first property? I think typically it is two years proven by your tax returns (Schedule E) or 30% equity in the property. Lending rules are pretty tight now a days. Do you have a property in mind or just getting pre-approved. Great job on getting started and taking some action.

Running your credit multiple time may bring your FICO down a little but I wouldn't worry about it too much. Usually the credit bureaus consider this rate shopping as long as it is within 30 or 45 days or something like that and count it as a single inquiry instead of multiple.

@Mala S., just to bring things back to your original question. How I determine if a property is a good buy and hold really has more to do with cash flow rather than the property value itself. Of course I will check to see what similar properties in the area are selling for using comps (even duplexes) but if I am holding the investment long term this is less of a priority for me.

What I do and a lot of other investors here on BP suggest is apply the 50% rule as a quick way to see if you have a deal or not. From the total rent of $2300 per month 50% of that will be considered expenses over the long term (operating expenses and vacancy). With the remaining $1150 subtract out the debt service and hopefully you have a few hundred dollars in cashflow. If you are negative then you probably don't have a deal. You can use this formula to backtrack a walkaway number for the deal.

Corey Jacobs, the 100 I think was meant to be the cap rate of 4%. Maybe the formatting came in funny. NOI of $12300 divided by the cap rate of 0.04 is $307,500.

Mala S., Another thing to add is that cap rate is a way to analyze a property regardless of financing (Cap Rate = Annual Income/Total Value). The point is to remove effects of financing and compare properties at a high level view.

I agree with Mike B., Flood insurance is a bit tricky since there is not a lot of places that are moderate risk that purchase flood insurance. Typically you are either federally mandated to purchase because you are in a high risk area or the homeowner does not pay for it. It is hard for an insurance company to have a stable business model if there are only high risk homes insured.

I see advantages and disadvantages to who is responsible for the water bill but overall I do agree and like that the landlord and tenant are not forced one way or the other.

Titus Osborne, @Mehran Kamari is exactly right. You cannot start without having something of value to exchange in the market. Whither that is money, credit, time, website programming skills, etc. Really can be many things to many different people. Even wholesaling takes money to correctly market for motivated sellers although less money than lets say a down payment on a buy and hold.

Keep educating yourself but then take action on what you are learning. Even if it is just pricing out a nearby house for sale to see if it will pencil as a buy and hold or flip. Learn different acquisition strategies and exit strategies and work out a plan that fits for you. If you have questions about anything search here on BP most of the time there is a thread already. Keep it up, learning never stops.