re: Information for my fellow Real Estate Investors

So I'm looking at a potential first deal on a SFR buy and hold and these are the numbers:

It's a 3/2 in a well-rented area listed for $109,900, which is about $67.40/sqft. I ran some comps this morning and the most favorable comps around run at about $61/sqft, which would put me at $99,430. I'd probably offer like $97,000 and hope for $100k.

With $5000 down (including like 2% for closing costs), I'd be sitting at $94,430 loan balance at hypothetically 4.75% in a residential loan. So:

Monthly payments (P $ I): $492.59

Insurance: ~$180.00
PMI: ~$56
Monthly maintenance + Vacancy fund: $100.00
Taxes: $115
Property Manager: $120.00 (10%)

Total Expenses: $1080.59

It rented last in 2015 for $1350.00, and the lease comps support this. So assuming I could rent for $1350, it would cash flow at about $270/mo, giving me a 65% ROI.

What do you guys think? It seems like it would be a good deal if I could get it. Two things, though. It needs a fridge, and updated stainless appliances would help. I could do that for less than $2000, and may could use that for leverage for a lower selling price.

Secondly, I'm green on financing. Could someone explain to me whether/why I'd be better off doing a conventional mortgage like above, or a line of credit? I'd like to avoid PMI if at all possible. I'm just ignorant on the various ways to finance.

Thanks.


Reposted from the bottom of the last page

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stevengtiger

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YGM

you got mail

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I'm stupid

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obviously not as you are a very successful REI.

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Fat Bastard

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Thanks for the reply and advice. I'm looking at non-owner occupied. I don't particularly want to put 20% down on the property, just because the return is significantly less and it would take away a lot of liquidity I have going forward with investments. But that's focusing on things strictly from a return standpoint.

With that particular property, if I focused on cash flow instead of returns, and put $20k down, COC return would fall to about 28% (assuming no PMI), and monthly cash flow would go up to about $475. I think my target return right now is >25%, so it may still work. Could you elaborate a little on your preference for cash flow over returns?

Again, forgive my ignorance, but is PMI not required for a non-owner occupied rental? That would be great as well.

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Check your email.

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great. thanks.

Thanks! Maybe I'll just wait a bit and go that route instead. My idea here is to have several of these paid off and 100% cash flowing in 15 years or so. I plan to just reinvest the cashflow into the principal except for vacancy and maintenance fees.

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not if you put 20% down. Most traditional lenders won't do it even if you were willing to pay PMI. May not be an option regardless depending on lending restrictions.

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Right. I just didn't know if the non-owner occupied deal affected PMI on its face. When you say "most traditional lenders wouldn't do it," you mean that most traditional lenders wouldn't lend me the money period without 20% down?

I guess the idea going forward would be to pay 20% down on a couple of properties, build up some equity in both those properties and my house, then maybe use that to establish a line of credit that would give me a little more purchasing power. The financing part is kinda the last piece of the puzzle for me to figure out.

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When you say "most traditional lenders wouldn't do it," you mean that most traditional lenders wouldn't lend me the money period without 20% down?

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that is correct!

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any subtle brags you'd like to share?

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Was actually going to post today but never bragging. Since we purchased our last flip property about 60 days ago, we have made offers on about 5 properties and not gotten one of them. Partner was pissed we had nothing going on because we are about to put that flip project on the market.

Long story short, we put offers on 5 properties within 48 hours, trying to land one of them. What happens? All 5 accept our first offer with no counter. 3 potential flip projects and 2 almost turnkey rentals.

All I can think is HOLY shite. We are in over our heads.

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Just out of curiosity, how are you able to have financing or a LOC set up to purchase 5 properties at once

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On most offers, we have to send in a "proof of funds" along with our offer. Our realtor will ask our bank for that, so they usually know we when ask to pull funds that they are going to a certain property. It sounds easy and after you get things going with a good bank, it really is.