All Forum Posts by: Steve Wilcox

Ibrahim S, I am looking in the Elmora section (which I do not think is a comparable product to most of newark) but taxs on most SFH in that area are around 7-9K and on 2 family or more are 9+. I am curious how the same rule could be applicable, and how it needs to be adjusted to represent taxs in the different area.

I have a question about the real use of the 50% rule as taxs are WAY different in parts of the country or even local markets

I am looking at 3 and 4 plexs in areas like Newark NJ and seeing tax rats of 4-5k per year, and the essentially same units in Elizabeth, NJ have taxs more like 10-12k per year.

While the rental income is only marginally different obviously the 50% rule can not be correct for both of these given the huge difference in tax rate.

Is there any similar rule of thumb we can use that does not lump taxs in. Expenses like maintenance, repair reserves, advertising, ect should be fairly standard regardless of the area, but taxs are way to variable to fit into the formula

If you are looking at listed mls properties then you will have to get used to writing a ton of offers.
Not every beat up house is a deal, especially if you are in a hot market.
Just keep writing the offers, I agree with Will Barnard, the most important things are:
1. Quick Closing
2. All cash, or at least no financing contingency
3. AS IS, no repairs will be requested
4. A real proof of funds
I also always call listing agent upon submitting my offers for feedback, and to try and build a connection so they will present your offer favorably to their sellers.

Dont worry about what people will accept, just write what you can pay.
As far as the acceptance:
Some Will, Some Won't, So What

I have only bought and sold in working class, but am working with another local investor to start building a portfolio of 3 and 4 plexs to hold for cash flow, with the potential upside of selling to end users once the credit markets loosen up a bit. My mother used to date some one who owned a few buildings in the hood.

You have to be ready for REALLY REALLY high operating costs. They will smash all the hallway lights every friday night, break all the windows in the common area, smoke in the hallways, and generally destroy the place. You may not think this is such a big deal because if they want to destroy it and live like animals than you would think you could let them. However other residents will call code violations on you, call the city, housing authority, ect and get you fined, and make you fix things that will be destroyed next weekend.
Also if you live in a blue state then be prepared to have a long time for evictions, and tennant advocates showing up in court to fight for the rights of the tennants who dont pay their rent for one reason or another.

On the other hand you can buy much cheaper, get great cashflow (on paper at least), typically get some more creative finance or owner financing deals, There are alot of people who make a ton of money in tough areas, but you have to have the stomach for it.

When getting a DUNS # they ask for a corrispoinding SIC code number, and I can not find any that have anything do do with real estate investing that are actually shown on DnB site. What have others used when registering to get their DUNS #

I had a similar situation, you are entitled to make a profit for increasing the value of the asset, they just want to make sure you haven't artificially inflated the value of the property, and that something has been done to improve the value. What you paid for the property is public record so they can find out anyway.

BTW the 4k you are kicking in to help the buyers out with their closing costs comes off your end, so while it makes you feel like the real purchase price is 111,000 the bank will not see it that way, as they have no interest in financing your buyers closing costs.

I have even had to submit my HUD-1 from when I purchased the home to get a deal to close.

Type up a very generic list of your repairs and improvements with the estimated cost of all of it and there should be no problem.

Most of these homes are now considered in flood plains, fema is requiring you to raise the level of the living space above a certain height or you will be subject to outrageous flood insurance rates.

What towns are you looking in, and what sections? Many towns have not decided on what the new building codes will be and have not even started to let people rebuild even if they want to.

Also people would need to have a ton of equity in the home to be able to sell just for land value.

Hey Thomas,
As a PSU grad I have a real affinity for the state college area, and have some great memories there. Its a great place to live, and a very unique area. Wholesaling requires you to find other active investors to pitch to and finding really really great deals so there is enough spread for you to make some money and for the person you wholesale it to also to make even more money. Find the rehabers in your REI, see what they buy, as them what their bread and butter is, and what sort of numbers they like to see. Get as many as possible, you can also talk to the landlords and see what they buy. Always find out how many deals the person plans on doing this year, and you should be able to get a handle on who to sell to. If the deal is really a good one then worst case senerio you can close on the property, complete the rehab and sell it yourself for an even bigger profit.

Best of luck to you and your wife getting started, and enjoy Happy Valley!

you must live in the property for 1 year and 1 day before moving out, otherwise you must refinance into a traditional loan for investment property which will require you to keep about 30% equity in the property or be 70% LTV.

Yea if you live there they can be great in that you theoretically don't need much cash to start. However they will not pay out for work until after it has been completed., which means you need a contractor to work for nothing upfront and buy all the materials himself, or you need to pay something and have him reimburses you from the draws (as they do not go to the homeowner, they go to your contractors business). This can leave you in a vulnerable position, or make it tough to find a contractor to work with you. Also even if you are qualified, the bank will not allow you to do the work yourself, you must use a 3rd party contractor. It also ties you to one contractor, and if things get tough and you need to fire him it can be a PIA to find another one and get him cleared by the lender. The other issue from a contractor stand point is that the bank will issue them a 1099 for the work they completed, which upsets many of the lower priced contractors you might be using when starting out.
On the flip side 203k can be great for starting out because it forces you to quantify all the repairs, forces you to take a reserve for issues, and essentially forces you to do everything that you already should be doing, and can be a great learning experience. The bank will even require an appraisal to show what the value of the house will be after the work has been completed.
They are a pain in the ***, take a long time to close, and charge higher interest rate with more points then normal FHA or conventional loans, but if you dont have the money to start another way it can be a great way to get your foot in the game.