Potential Investment -Cash Flow Vs. Appreciation
I recently got a HELOC nad I have realized that I can now invest in a much higher quality investment and wanted to get your opinions to see if I am thinking rationally.
Here are the two investments that I am contemplating for RENTAL(these were just listed and I'm schedule to look at them tommorrow)
Deal # 1 Two bedroom townhouse in blue collar neighborhood (someplace I would be willing to live/ fairly safe etc.Priced at 107K (80 % at 5.75% zero points 30yr fixed) and HELOC for $10K (at 4.5%) and $12K cash from a refinance on my 1st rental. Total PITI = 669/mo with anticiapted rents of 800-900. This area has not been appreciating highly. Maybe appreciating at 3%/yr if I am lucky(its been about 5% recently). Lots of other rentals here. (will need a new roof soon - have to get inside to see the rest- this house is about 17 years old and has elec. heat pump).
Deal #2 Is a three bedroom townhome right on a golf course with a very nice view. It is priced at $163k advertised as new roof and appliances. It is in a very desireable area (about 2 miles from my primary res) that has been appreciating at about 13%. The price is lower than other developments in the area since it is about 25-30 years old and there are a lot of newer homes in the area. People are fixing up the homes here and it is almost all done on this house. The financing is the same as above except more on the HELOC. The PITI is $964/mo with expected rents between 950-1100 (what I have seen varies).
I have typically been going after deal number #1 because the payment is smaller ( in case it was empty or ran into tenant problems - I feel that this is easier to cover) My first rental has an established positive cash flow of $360/mo.
I am leaning towards deal #2 and telling myself that in a year or two I should have a more solid cash flow and the potential for future appreciation is so great that it is worth it. I rationalize it that the cash flow from the first rental will help pay for it if necessary.
Does my thinking make sense? Comments on cash flow vs. appreciation?
I plan to wrap about 3% of purch price in the 80% to cover closing costs. Even though I could have the heloc pay for it . I figure keep the Heloc as free as possible. Is this the best idea?
I also plan to use any positive cash flow to pay down the HELOC. Since I can always take the money out again since its a credit line. Does this make sense?
All thoughts and comments are appreciated.
Thanks,
-Adam
Hi,
Go for deal #2, rents should go up each year the size and the area are much more desirable, better potential class of tenant, less headache but buy a Home Warranty policy on purchase. I have owned both types, deal #1 will definately bring you more headaches and the cash flow isn't always worth it and can be eaten up with a vacancy easily. Congrats on your current cash flow and your thinking of paying down your HELOC to use again is a good one.
Teena
Couple of options for you...a) bird dog for a while and build up a financial base for YOUR first deal b) do some sub-2 c) hard money lenders
There are quite a few creative financing tools you can use. 2K in the bank is more than you think....
Good luck,
PD
Put an ad in your local paper:
"Tired of the stock market? Make 12%
secured by a First Trust Deed."
Your phone should blow up!
Prescreen investors and tell then you are a real-estate investor. Take them to lunch., Offer them 12% interest with 100% financing on your deals. If you can get some private money at your age, the world is yours!
Best Riches,
Jeff Adam
P.S.- You could even offer a point or two.
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Hey, you don't need any money. Just tell the seller you are to purchase the house for cash. Put the house under contract for 30 days with a 10 dollar deposit. Find a buyer for the home and sell him/her the home for a 5k$ profit for u. Go to a title company and tell them you want a double closing. They should know how that works. If you find an ugly, vacant house you should only buy @ about .65 cents on the $(ARV-after repair value). This way you can find a rehab buyer and pass the deal on to him. Just be sure your buyer understands that they have to buy the house, not the contract and everybody should be happy, and you end up with 5k in your pocket. This is how I'm getting started. Once you have a way for finding motivated sellers. Just make low offers untill someone has to sell and you can do 2-5 of these a month no problem. Good luck. Always be carefull whose advice you use. Take what u like and leave the rest. Remain teachable and refuse anything that will bring you mediocrity.
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Quote:
On 2004-02-24 20:39, horrible wrote:
Hey, you don't need any money. Just tell the seller you are to purchase the house for cash. Put the house under contract for 30 days with a 10 dollar deposit. Find a buyer for the home and sell him/her the home for a 5k$ profit for u. Go to a title company and tell them you want a double closing. They should know how that works. If you find an ugly, vacant house you should only buy @ about .65 cents on the $(ARV-after repair value). This way you can find a rehab buyer and pass the deal on to him. Just be sure your buyer understands that they have to buy the house, not the contract and everybody should be happy, and you end up with 5k in your pocket. This is how I'm getting started. Once you have a way for finding motivated sellers. Just make low offers untill someone has to sell and you can do 2-5 of these a month no problem. Good luck. Always be carefull whose advice you use. Take what u like and leave the rest. Remain teachable and refuse anything that will bring you mediocrity. <IMG SRC="images/forum/smilies/icon_smile.gif">
Couldn't I just assign the contract to the buyer for $5K and get the same result (granted that does seem like a high assignment fee)? What I'm asking is why the double close? Won't that add to closing costs?
Dave:
You are on the right track. You could simply open escrow as an "assignment"
collect your wholesale fee, contact escrow and assign to your new buyer.
If the seller gives you any hassle, tell him you are closing in your partners name.
In terms of lining up that money you need. That would be a good game plan to get your retail program going. You can make good money wholesaling and even better money retailing. The key is to do a combination of both and keep a couple of the good ones so that when you are 50 years old, you can laugh all
the way to the bank!
Best Riches,
Jeffrey Adam
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Don't you have to have in writing from the both the seller and the new buyer that they understand you are acting as a middleman and buying at a lower cost than what you are selling it for? I heard you could get sued if not. Is this true or does it depend on the state?
Hey Dave Im a 21 year old in your same situation. I have found a company that will help me with pre-foreclosure deals as well as finance them for me for a 50/50 profit split. Check them out if you want at http://www.omegacity.com/ . I also just learned how to originate a loan so I can make money if the seller wants to re-fi their house. I also am going to try to do wholesale flips
Good luck.
James
Quote:
On 2004-02-26 23:51, Jimbezy wrote:
Hey Dave Im a 21 year old in your same situation. I have found a company that will help me with pre-foreclosure deals as well as finance them for me for a 50/50 profit split. Check them out if you want at****Must Reach Freshman Investor status before posting URL's*** . I also just learned how to originate a loan so I can make money if the seller wants to re-fi their house. I also am going to try to do wholesale flips
Good luck.
James
Hey thanks for that website jimbezy, I'm 21 as well and am just starting. I've spent the last month low balling banks for their forclosed properties. When one accepts my offer Pre-Foreclosure deals cna be an added weapon in my arsenal. Thanks
EDB
Gbayne:
Not if you tell the seller you are closing in your partners name for tax reasons.
Sellers just want to get paid!.
Investors want to buy houses.
Win Win situation for both.
Best Riches,
Jeff Adam
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