Newbie... Am I getting in over my head?

General Real Estate Investing
1

I’m getting ready to purchase my first rental property–well, actually two of them maybe. Half of me says jump on the deals, the other says one at a time. I guess I’d just like some advice or your past experiences so I can feel better that I’m not getting screwed–twice.

Here’s what I’m looking at:

Both are SFR in SW Denver, in ok (not great) neighborhoods. Both are finished complete rehabs that have been on the market for 3-4 months. Both are probably above average than surrounding properties because they are fixed up pretty nice.

2br/1ba/2car garage list: $156, appr: $175, offered: $147
3/1 $150, appr: $184, offered: $150

I structured each deal so the sellers would pay 3% closing costs and 3% to my down through one of those grant programs. I’m tyring to only pay $500-1000 down each.

I am pretty sure that I could rent or long term L/O each of them for around $1100-1200/mo, based on looking at what other places are going for.

At that rent I can cover my mortgages, taxes, ins. plus $100-200/mo.

I have an LLC set up with my partner.

I’m going to get the appraisals verified or re-cert (whatever) by another appraiser in case they’re being a little to nice to these guys.

I plan to get inspections, of course. And probably home warranties (is this a good way to prevent huge repair bills?).

From what I understand, appreciation around here is 6-8%.

*So, can you answer these questions for me?..

-Is it bad (for appreciation) that they are nicer than surrounding homes?
-Is it being rediculous to make your offer to purchase subject to finding a renter prior to close?
-Is my cash flow too small to mess with?–I’m really after the equity (refi or get a second in 6 mo) to get some cash to keep on investing.
-I know I can do gift funds as an O/O, but can I even do that for an Investment Prop?
-I’m about an hour out of Denver (when there’s not a foot of snow on the roads), and have a flexible, but pretty much full time job–should I get a PM or not waste what little flow I’ve got?
-Is there an advantage of doing 2 at once, or should I slow down and get some experience from 1?
-Is there anything else that I’m missing?

Thanks in advance for all your help, advice, and experiences. I’ve been reading a lot in the message boards, you all seem to really know your stuff!

2

Nice finaly another Denver investor! Right on!

3

Howdy Pip:

The only trouble I see is the grant to investors. You should check this out before going too far. If this is not available without fraud what other ways can you get the down payment needed.

Making the earnest money contract subject to finding a tenant is a bit different.

The cash flow is a bit slim but there is a trade off for higher appreciation I believe in the Denver area.

Being nicer than other property in the area should help the appreciation in the area. As others are remodeled that will bring the area up even further. Your being nicer will help them sell faster.

I would do them both. There are economies of scale. It would be nice to do 10 or 12 and not just 2. In that way the cash flow from the others could help cover the vacancy of one.

LOL

4

Thanks Ted,

According to my mortgage broker I can get 100% NOO (80/20 actually), which would work too. I think thats probably pretty though to get approved for, so I guess we’ll see what happens.

I figured putting that subject to clause in the offer was stretching it, but these guys were both investors themselves (just to flip) and all they talked about was how easily I could rent it, and for how much. So, I figured, if they’re so confident–lets see if they’re confident enough to make the whole deal dependent on it! Besides, the worst they can say is no and counter-offer, and if you don’t ask, you’ll never know if you could have gotten it. (One of the few things good things I learned from the car business!)

So, I’ll continue to pursue both, and hopefully my broker can get me approved.

5

are you doing this full time? come on give us a bio!!!

Ok, briefly :slight_smile:
I’m in the Boulder area. I work a full time “normal” job, but have been thinking about REI for a long time now. I’m about to move within the local area but want to hold on to my current place and convert it into a rental after the move. Then once I build enough equity in it… well, we’ll see where things go from there. I’d like to start looking at some duplexes or 4-plexes around here (likely Longmont, Boulder’s prices are too inflated). Eventually I’d like to give up the “normal” job, but am trying to have realistic expectations about that :slight_smile:

So I’m just a beginner, lost and confused, but fortunately have found places like this to help me along. I also have one friend who has a SFR he rents out, so he’s given me a bit of guidance.