All Forum Posts by: Tim Johnson

Quote from @Jennifer Dargento:

I’d love any tips for speaking with lenders as a beginner investor for the first time.

If you're talking about hard money lenders then maybe @Matt Barth's advice is good. If you're talking about regular bank / credit union loans / mortage brokers, etc..... talk with as many as you can or wish. They make a commission / origination fee off of loans they procure. Even if you aren't ready at the moment with a property or funds.....they should be willing to answer questions and describe their various loans and available instruments. Tell them what you're interested in doing....just like you did for us..... any lender who won't take the time to listen and offer good suggestions and loans probably won't be worth your time when you're ready to jump. And yes, of course, always network with other investors for their knowledge and referrals to good lenders.

Quote from @Joe Villeneuve:

3 - The two most important books you should read, and become VERY familiar with are: Geometry and Algebra...and I'm dead serious. I don't mean a glancing education on it, like you may have had in High School. You need to actually learn it. You need to learn it and be able to do story problems with no problem. REI is nothing but mathe with dollar signs in front,...which is just a very specific type of story problem.

I don't disagree with Joe's comment about math here. He's right....our math abilities often determine our success or failure....and to what degree our investments are actually succeeding. I WILL add though...don't let any fear of math or lack of "mastering algebra" keep you out of the game. Lots of folks have gotten stinking rich just by doing correct addition and subtraction on the back of a napkin.....or counting on their fingers. Sometimes it can be surprisingly simple and obvious. (how much is coming in?.....how much is going out?.....)

As I often tell my buyers -  "you can't buy your dream home on your first outing......that's not how it works." How flexible are you? Are you willing to move? How fast would you like to become that real estate tycoon? We can't see your details from here.....so won't have specific advice..... but most investors would not consider using all of your capital to purchase a first property in San Diego as prudent. You may want to consider out of state options, teaming up with other RE investors (at least for information if not funds). Your plan to save diligently, work hard, and househack are all the right first moves. Stick with those. Does your work allow you to move out of state?

You begin taking depreciation on your investment property, not when you buy it, but as soon as you begin generating income. The IRS refers to this as putting the home "in service." If you rent it out right after purchasing, you don't need to wait or own the property for a year....you begin the depreciation process right away.

Unfortunately, if you've already closed, you've waived any further contingency for inspections, etc. and you would be responsible for this repair. 

The legal implications may vary by location but where I am in WA state, all sellers (there are exceptions like an estate) are required to submit a "seller disclosure" about the condition of the property which is fairly detailed. If seller has made false statements about the property on that disclosure (in this case about a sewer problem that would have been known to seller)...you may have the possibility of remedies in court. But this is rare. If it was sold as an estate, there is usually no seller disclosure required, and additional due diligence is required of the buyer.

Most on this forum would DEFINITELY recommend holding your first home, rather than selling. Tax implications (capital gains) would most likely be worse for selling. When renting, you'll get your schedule E going.....and with all of your expenses (taxes, insurance, mortgage interest, repairs, AND depreciation, etc.) you'll be able to keep your taxes very reasonable. It's even better if you (or your spouse?) is a "real estate professional". Finally, when applying for a new mortgage, having a rental lease in hand is best but many lenders will allow for projected rent income (or a percentage of it). Sounds like you're in a good spot. 

Quote from @Marcos Falcao:

 I know this is just one example, but this is a relatively cheap house so it should cash flow under normal market conditions. 

If homes that seemed "relatively cheap" would all cash flow under "normal market conditions" they would all be purchased immediately.... and then you would have a different market condition. There are always deals to be had but with the markets constantly changing (and hyper local) you may have to work harder for each deal.

High interest rates and low inventory are working against you right now. Droves of realtors are leaving the business because there are limited listings. Lots of arm-chair RE investors will also give up because they can't find easy "cash-flow" deals. But here's the secret: now's the time to bear down and hone those search skills. Realtors that are out there doing the work will easily get through....and with a bigger market share when things return to "more normal" - whatever that is. Investors can do the same. Might be a good time to team up with others.....pool resources......try some off-market strategies.....  Anyway, welcome to the forum Marcos! ....and best wishes.

Each deal stands on its own. What market are you in? REI is very local. What's your plan? Do the numbers work? Do they meet your criteria? Will this purchase be a good investment for you? There are deals in every market. Sometimes you just have to work harder to find them.

Quote from @Josh Milewski:

Is it common to have to offer way under asking to make the numbers work or am I looking in the wrong market? 

Josh, if you're looking "on market", as in this zillow case - many markets in the country simply "won't work". If sellers have already made the effort to contract with a realtor and go through the steps of putting their home "out there" then, yeah, $75,000 under list price will usually not be exciting for the seller. If it's "off-market" and you're helping the seller solve problems - (they need to sell, they don't want to do the work of fixing things up, they have other "issues" that need solving) - then, yes, a low-ball offer may be their salvation. The point is, you'll need to dig and work for real deals.

Having said that, when I run the numbers on this deal (20% down, 7.5 interest rate, 5% for both CapEx and Maintenance, 5% vacancy, 8% for management, 1.5K taxes, $900 insurance, etc.) I can make this home "break even" for just 25K under list - buying at 100K. Can't see photos.....and if the home doesn't appreciate it wouldn't be much of a win. But it wouldn't take long to at least take a peek inside and run your numbers again.

@Kyle Soudalan - definitely find a PM like Nathan and get some sleep at night... you're life will improve!