Whats the best way to invest in this property? - Posted by Robert


#1

Posted by Carol on November 29, 1998 at 11:00:59:

NOO = non owner occupied.
North American Mortgage Co. has offices all over - but they also have a website … namc.com, I think.
Anyway, please feel to call the office I deal with in Clearater FL, tell them where you live, and they can direct you … or maybe they can handle it from there, who knows? Anyway, ask for Jim Fricke and tell him his reputation has spread far and wide.
Carol Tel 800 845 6916 ext 236


#2

Whats the best way to invest in this property? - Posted by Robert

Posted by Robert on November 28, 1998 at 08:07:41:

Iam new at this but very excited at the propects of real estate investing.I purchased my frist property (3-flat) 2 weeks ago. Bought it using 10%my money 10% seller second mortage and 80% conventional loan.Hopefuuly it will produce about $200 monthy income. I am now looking at another property (3-flat) thats been on the market for a year and the owners live out of state.The price has been reduced from $136000 when it came on market to $106000.The owners are willnig to take back a second mortage to help finace.MY question is what would be the best way to invest in this property for a newbie like me.


#3

Re: Whats the best way to invest in this property? - Posted by Bud Branstetter

Posted by Bud Branstetter on November 30, 1998 at 13:07:08:

Robert, Ed Garcia has been very nice to you. I would say that this approach makes me cringe only for the shock value but the truth is I don’t know the facts. If you were to have someone manage this property you would likely have to pay 10% of the gross. If you do it yourself in your spare time you are stealing that time from finding other good deals. If you were to have someone maintain the property it would cost 8-10% of the gross to do the make readies, grass mowing etc. Do them yourself and your new job is paying you a labor rate of the worker that you could have hired besides the time mentioned above. There is also vacancy. A 95% occupancy rate does not mean that your 3 units will get 95% of the potential income. The bad tenant will live there for several months before you get them out. Then it will take another month to get the place back in shape and rented. Don’t forget about those legal costs to evict.

Jim Piper always brings up a 40% expense factor for multi-units(10% management, 10% maintenance, 10% vacancy and 10% for whatever). If you still get a 200/mo after deducting these then that is great. For those others that are getting 200/mo, on their 10K down with all those risks and jobs the more power too them. I just think there are easier ways to make that same amount without the work or the risks.


#4

Re: Whats the best way to invest in this property? - Posted by Ed Garcia

Posted by Ed Garcia on November 28, 1998 at 13:00:26:

Robert:

Congratulations on doing your first deal.
I think it?s great that you?ve learned how to structure a deal with creative
financing, having the seller carry back 10%.

However to further invest, I think you should put more thought into your
deals as to how do you plan to structure them for profit.
You made a statement, (Hopefully it will produce $200 monthly income).
You should always do your homework. You should know market rents
so well that you are comfortable that $200 a month is conservative.

You also don?t mention the profit structure of the first deal, leaving me
with the feeling that you bought it at market .

Your second deal, seems to be a purchase price of 77% LTV.
But that figure is based on the asking price, and you don?t mention if
you got market comparables. As a matter of fact you don?t give us enough
information about this deal to know for sure how to structure it for you.

For example:

You don?t mention your financial picture,( if you have more to put down).
You don?t mention what the seller owes on the property ?
You don?t mention if the sellers existing loan is assumable ?
You don?t mention what your intentions are with the property, so I am
going to assume you are going to rent it.

The first thing I would do is find out what is owed against the property,
and if the loan is assumable.

The next thing I would do is get comps on the property to make sure I?m
correct about my values.
(don?t forget to get comps on the market rents while your at it).

Robert, I?m a tuff buyer. For me to pay 77% LTV, it would have to be a
fully leveraged deal. Meaning no money out of my pocket, with a
positive cash flow.

But we all look at a deal differently.

Just remember one thing , ( you make your money on the buy).

If I were to do this deal, I would either get the seller to carry, or do a
lease option.

If you decide to do the deal with new financing.
The lender to use would be North American.
They have a NOO program at 90% LTV, as well as a seller carry back
program at 85%LTV, 5% buyer down, 15% seller carry back.

Ed Garcia


#5

Re: Whats the best way to invest in this property? - Posted by Robert

Posted by Robert on November 30, 1998 at 09:39:55:

Ed
Thank you for responding to my question.
Just a couple of follows to your answer.
-What did you mean by, " your second deal ,seems to be a purchase price of 77 % LTV." how did you get that the asking price was 106000.

-Have some money but dont want to use it if possible.

-Dont kown if seller owes on or if assumable.I am going thru my realestate agent to theirs, very hard to get answers and if i do they take time. After I finish typing this Iam going try to get sellers # and call direct.

  • My orginal intentions were to rent it,but are there other options to make some cash.

-Could you please explain or give example of your comment “you make money on the buy”.

Ed,my orginal intentions on this property wrer to buy it using none of my own money and rent it for a $300 monthy cash flow. Is there was a way to buy and turn for. Property is not in most desirable area?

Robert


#6

Re: Whats the best way to invest in this property? - Posted by Scott

Posted by Scott on November 29, 1998 at 08:26:36:

Hi Ed,

First, I always appreciate your great information. It has really helped my REI education - Thanks.

Could you post or e-mail me any contact info for North American (web site, phone)? And, what is a NOO program?

Thanks again,

Scott


#7

Re: Whats the best way to invest in this property? - Posted by Ed Garcia

Posted by Ed Garcia on November 30, 1998 at 12:14:20:

Robert:
The original asking price given was $136,000. You mention that it came
back on the market at $106,000 giving me the impression that you were
going to buy it at $106,000, figuring that the seller dropped their price
$30,000. If so, $106,000 is between 77 and 78% of the original asking
price of $136,000.

That?s what I meant when I said that your purchase price was
approximately at 77% LTV, meaning ( loan to value ).

What I meant when I said you make your money on the buy.
Is that many times investors purchase close to market value hoping that
they will make their profit in depreciation, positive cash flow with $200
and build equity as the payments are made.

This thinking can be deceptive. By the time you pencil out your $200 a
month positive cash flow, back out maintenance, and vacancy you?ll
see you really did not make much for the effort.

(1) Painting a house can cost $1800 or more depending on the size of
the house. That alone is 9 months worth of profit.
There is constantly plumbing problems, and normal up keep on a
house not counting , new roof, garage doors, fencing, landscaping,
and other problems that come up the longer you own the property.

(2) Vacancy, If you rent the house for lets say $800, and you payment is
$600, again having a $200 per mo. Positive cash flow.
The house being vacant for 3 mo. Not counting eviction cost would
cost you $1800. Not counting the loss of profit of $600.

So Robert you can see how fast cost can go up. Don?t get me wrong,
Real-estate investing is profitable, but only if we put the profit in it.
So your answer, is to buy below market.

Robert I just answered a posting titled
(Re: How do I start? Getting $8,000 in 6 months - Ed Garcia)
You might want to go check it out, I give 5 steps for a beginner.

Take Care
Ed Garcia


#8

Re: Whats the best way to invest in this property? - Posted by Erskine

Posted by Erskine on November 29, 1998 at 09:16:59:

Please forward the same information to me…
Thanks!