I’ve been reading the boards and trying to decide which way I want to go in REI. I was thinking for my first couple of deals, I would like to buy properties which were undervalued atleast 10%, (prefer 20%), then selling them for 10% above market and carrying the paper. I have good credit and can get conventional financing. (Being a mortgage broker helps).
The question is this - How much of a cash reserve should I maintain for repairs, vacancies, ect, assuming a 150k property.
It would be nice to have about 3% of the purchase price in reserve. That should make 3 mortgage payments or replace major componants like AC.
May be able to get some of that money from your tenant/buyer. My friend bought a deal where he got the seller to pay him a Realtor fee to buy the house and sold it for 0 down. Hope this helps a bit.
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
I have always been cash poor and real estate rich. I have lost the wheels and even the whole car. If you buy right at the bottom of the market you have no where to go but up. I bought Ok the first time but too early. It was nearly 5 years before any signs of recovery in the market. Inflation will cure a OK purchase but only if you can sell it.
If you have $10,000 put aside you will do great. Your idea of buying at 20% discount sounds great too. There are a lot of no equity deals but it takes some looking to find what you are looking for but they are there. Everyone wants a 50 5 equity deal with nothing down and presold for a profit and just handed to them. If you work hard at it you can get what you want.
How do I plan on making money? Well, the property is a brand new house at 15% below market. I’ll buy it, and get a tenant/buyer to purchase it on a lease option for 10% over market. I will have a slightly positive cash flow while he leases, and hopefully he will exercise the option allowing me to take my 25% profit out after 1 year.