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On 2004-03-14 16:37, jbinvestor wrote:
Ok well, if you haven't read the other posts I have talked about this, I am getting ready to buy 6 section 8 rental units, all SFH 3bd/1ba . I am paying $39k each, each needs about $7k in repairs. FMV $75K
The city ( I am guessing) has blocked off the entire street and marked it as a construction zone. Every house on the street (which there are only 20 to 30 of them) is going to be rehabed, some are going to be for sale there is a big sign on one side blocking the road placed by a contracting company, selling them for $75,000 each(after rehab), so that's what I am going by FMV $75K. Ok I don't know why this was important....back to my situation.
The wholesaler who I contracted with told me, I should be able to cash out about $10k per house at closing (when I refinance after rehab) with a 90% FMV mortgage.
Well, I'm having a hard time getting the numbers to work, with the analyze tool on this site. Section 8 pays $650-$700 for 3bd homes...since the entire street is being rehabbed I'm hoping for the best ($700). I don't know for sure what interest rate I will get, I am guessing 8.5% , which is what I have been quoted for on my other transaction. The taxes on each home is about $720/yr I am figuring $500-$600 insurance (do they offer discounts on insurance with for muliple properties?). Ok and that is about all the info I have off the top of my head. Oh management company is 10% of rent. I may also try to bargain down to 9% or 8.5% . I have been trying to figure out a way to cash out and still get a positive income.
Would you suggest just financing my costs (price of home, repairs)? They way I look at it, $60,000 at closing can allow me to do more promising deals. But I would like to at least be ahead with some pos cashflow with my rentals.
I guess I could try to figure a way to do both, refinance for less than 90%.
I have posted this quite a few times in this forum, not in such detail, but I'm hoping to hear something from someone
who has been in this situation. When I am accounting for expenses on a rental, I am accounting for mortgage, taxes, insurance, and management. As far as reserve, I am willing to throw a chunk of my cash out into an account for a reserve.
What would be the best way to go on this? Cash out 90%, cash out less, or finance the costs to fix and buy?
Do you see anything wrong with the way I am accounting for expenses on this?
JB
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Ok I think I figured out how I am going to go about cashing out some money on this and also generating a positive cashflow at the same time. Using the same numbers above, the only difference is I will refinance at 75% of FMV..... my total cashout would be $19,500 and I figured I would generate anywhere from $250 to $520 total(all six added) a month. Which covers all that I need, I don't get to leave with $60,000 , but my
property will pay for itself and for my $19,500, that I can use to invest on more properties. Plus it will pay me everymonth.
Now...I wonder if there will be a problem with getting a 30 yr fixed non-owner occupied mortgage at 75% of the FMV ? And if I did would there be a lower interest rate than with a 90% loan of the FMV?
I had the origional question in the wrong forum, so I quoted it so you could get the whole story. Actually this is all just me thinking with a calculator, so if you guys have a more accurate answer or have anything to add or correct me on in this post, by all means!! That is why I typed 80 pages of this so I could get as detailed for you as I could, so maybe you could help me out.
Hope you can. Thanks Guys
JB
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Naturally, you are going to have to talk with a mortgage broker to find out what your best deal will be and what interest rate you can get. However, if you have decent credit you should be able to do much better than 8.5% on a cashout. I was offered 6.75% on a 80% cashout 30yr several months ago when rates were actually higher. I would be more concerned with keeping my rehab costs to a minimum. This will increase cashflow and give you more wiggle room if things don't work out as well as you are expecting. Don't overdo the rehab if they are rentals. As one person mentioned before, you can literally spend every penny of profit you will ever make on any rental property with continuing improvements. Knowing where and how to draw the line is crucial to making it work. Read a lot and ask a lot of questions.
Thanks davmille
JB
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