As some of you may know I post here a lot. I ask questions about everything, and some of you may think I’m one who is only posting questions, but I a sure you I have been working hard to explore all options that I have as I start my new careere in RE. I’ve looked at over 100 properties and studied my local market for about a year. I’ve looked into rentals, rehabs and shoped for mortgage lenders to find out what I qualify for, (note I have NO CASH, I will use 100.00 for earnest money and 10.00 for my option fee as I get started) I quite my full time job as a resturant manager, Now I throw the Houston Chronical from 230am til 630am and do Real Estate the rest of the day until 5pm. I only bring home 800 month from my paper route and I thought my credit score was 680 but its NOT its only 649. See I will have some challenges but I’m determined to get the job done and I will not quite until I have conqured.
Now we are at the year end and I am ready to spread my wings and fly as I start my new career in RE.
Every month I am going to up date this post to let all of you who have helped me learn this businees know how I’m doing, and to let other newbies see that it can be done if you take action and put 200% into no matter what your situation is, I will be 28 in march of 06 and in march 2016 I will have accomplished my goals.
The following is a list of my goals and action plan that will get me to were I want to go in the next 10 years or less.
I am going to improve my monthly cash flow by $500 month every month(2 properties a month for 10 years)by the end of year one I should have a possitive cash flow of 6k by year end of 2016 I will have a possitive MONTHLY cash flow of 60k
I am going to do this by financing income producing properties with intrest only loan, 100% financing 80/20. starting out with multi family units 2-4
I will flip 2 proprties every year making at least 30k on each. for the next 10 years (60k*10 years=600k) this income will be used to finance larger properties along with paying the princaple of the I/O loans on my rental properties.
Thank you kdhastedt, reoconsultants, tedjar, all others who answered my questions and the questions of other newbies. Thank you.
check back to see how I’m doing.
Your friend
Shadrick Rozela
Shadrick, good luck to you. I believe that most folks who frequent this forum have big ideas and have the knowledge at their fingertips if they choose to use it. Unfortunately far too many fall victim to that that thing we call fear (sheer laziness or inaction). I can see that you have goals set, a plan for financing, and a dollar amount envisioned. Time to take action, call sellers, get owner financing, fix it up, flip it, wholesale it, lease option the property, sell the property, and report back here with your first deal.
My first big leap, Property is 4 units all rented with long term tenants( been there for years), total income is 2,125 asking price is 189k financed at 8% = 15120/12= monthly paymrent of 1260 + 200 insurance +200 tax= 1660
2125-1660 = 465 Positive cash flow (I have a CC with a 2500 limit from Home Depot for repairs)
will know on Monday if its a go.
Look whos smilling KNOW!! ;D
With the numbers alone, this looks like a good deal. Make sure to add in a potential vacancy rate (maybe 8%) and maintenance costs (that darn water heater that goes out in the middle of the night). Will you have closing costs associated with deal or will it go through owner financing?
I have only just started learning the US real estate market and I am having a hard time trying to understand why someone would sell a piece of real estate such as this with the current cashflow on 100% owner finance?
I can understand selling outright if you were capitalizing on appreciation gains but not owner finance. Perhaps I am missing something?
Shadrick, congratulations on your pending purchase and getting out there and doing it, I am just trying to understand the sellers thoughts.
I wish you good luck on your REI career! However, I believe that you made a HUGH mistake in quitting your job. As black95gt pointed out, it is going to be EXTREMELY difficult to get anyone to finance you without a good job. Moreover, how are you going to live on $800 per month? Hopefully, your wife or parents are going to support you.
The numbers on the deal you posted look terrible. Using your numbers:
Income is $2,125
Mortgage, taxes, and insurance - $1,660
Vacancy 5% (best case) - $106
Maintenance $50/unit (best case) - $200
Utillities paid by owner - ???
Using these numbers, you only have a positive cash flow of $159 per month for 4 units (about $40 per unit). TERRIBLE!
What’s more, this doesn’t tell the true story. The truth is that the $50/unit maintenance is low and will only work if you do all the work and not much goes wrong. If you subscribe to “the less I do, the more I make” theory, you will spend a LOT more on maintenance - at least double! Moreover, the maintenance figure only includes routine maintenance expenses and not major repairs such as roof replacement, apartment trashed by tenant, etc. These expenses are real and do occur on a regular basis - especially in apartment buildings.
Finally, I would not recommend interest only loans for long-term rentals. With rentals, you want the tenants to pay down the mortgage for you, thereby increasing your equity.
I’d recommend looking for a better first deal. You can’t afford too many “deals” like this one!
I’m putting a contract on a rehab property on Monday,
Asking Price 105k seller paying 3% of buyers closing costs
current appraised value of 135k, Holding cost and rehab costs of 50k on the high end, after repair value of 235k will list at 198k
105k + 50k = 155k minus 198 = 43k
As for the rental property I’ve already got the financing approved on a stated 80/20 IO
I might have to have a total of 3320 in my checking account as reserves for the first 2 months but still waiting to hear from lender. but as for all other cost no it will all be in the loan, purchase price, inspection and appraisal, as for the earnest money I havent put any up yet but when I do I’ll tell them they must give me my check back if I close, and for the option fee I’m only giving $10, no big deal.
Good morning everyone thought I better update this thread. The 2 properties I was working on are gone, the rental property sold to a higher bidder, and the flip property was taken off the market so I’m back to square one.
Sounds like you have the ambition that you will need! After having been in the mortgage business for an extended time, I have run scenario after scenario on the 2 to 4 unit properties. I caution you to be extremely careful with an interest only 80/20. Generally the rates are extremely high on both loans, and there is generally a prepay. Especially on a stated NOO property. Additionally, there are very few properties where you are going to make good money on 100 financing. Please be careful on your first deal!
I agree. I won’t even consider quitting my job until my REIs start paying me more than I was making working. Gotta have a little buffer over my old salary before I am comfortable quitting, this will at least protect me some against hard times or unexpected expenses.
Bummer that everything didn’t pan out this time. But as a newbie who has studied to the point of developing a big time case of “paralysis of analysis” that damn near crippled me, I do admire you and have been following this thread with much interest.
Islander, do you think the areas of REI that you’ve chosen for now are appropriate for your current situation? Since I don’t know your entire personal financial situation, I’m not commenting either way, it just seems that with a low monthly income it would be difficult to get the funding you need to really turn some good deals around. I could be way off base here, seeing that many successful REI’s got into this whole thing because they lost their job, you are in no different a position than many of them (attention grumpy flamers, notice I said “many of them”).
With REI aspects such as wholesaling and lease options/purchases which seem to be more manageable in that you don’t absolutely need alot of money to make them happen, shouldn’t you consider looking into them in the short term to get some cash in your pocket or (even some modest cash flow if you get some sandwich leases working). Then you will have more money to work the kinds of properties you want to do long-term.
Remember this is not advice at all; these are just observations from a newbie who barely has her toes in the water.
Wow, what an experience. I’m a newbie too and I just attended my first REI Association meeting last night and was very enlightened and motivated by the many experienced investors at the club. I really, really want to do this. I have been looking for something to do and I found what I think is my passion.
Background: I’m a single mom with my only child starting first year of college. I’m retired military and have a full time job. I own my house for 5 years. I have alot of time on my hands after work so I feel I can really put my all into this as a part time endeavor. I really want to take this as far as I can. However, I’m very cautious and want to start off with something small and safe. I have no money and my credit is o.k. (650). Would like something to bring in cash flow (to help pay for college) Suggestions please. I’m an eager learner.
thanks
Good evening Investors, I’m glad to see everyone following my story, here is this weeks up date. I have found my leads… at least 15 new leads every week of wholesale properties in my area all having a spread of 15k or more. I have the financing in order and now I must descide witch property I will proceed to rehab and flip. all leads are provided by other investors in my area!
