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STOP Paying Rent: Live For Free

samuraijack

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Great thread @G_Alexander and nice action by @joefazzolari.

I have no real estate knowledge, so correct me if I am wrong, but the information in this thread is mainly for someone to reduce their expenses by getting rid of having to pay rent, while making some coin in the end. The cash flow that comes from this first property seems to be too small to play a role in further investments (based on joe's thread), so if someone wanted to pursue this as their main income source, is the next step to take out another loan and basically repeat the process, increasing the cash flow bit by bit?
 
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TaylorB

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For any of the Canadian's on the forum:

We have a similar bank loan insurance company called CHMC. They will allow you to purchase your first home at 5% down.

My first home I purchased new as I was making 100K at my J.O.B and wanted a nice place. CHMC will not let you purchase an investment property at 5% down, they will required a traditional mortgage of 80-75% LTV down credit dependant.

So what I did was rent out my first home and live with a girl for a few months. Meanwhile I now purchased my second home as my principle residence with 5% down. My second house I bought is a fixer upper, i have the upper floors 80% done, once that's done I will rent out the spare bedroom and it will finance the renovation downstairs. I intend to flip the house however if that doesn't work I will refinance at the new value and rent it out and look for my next property.

My issue is my next one now is going to require 20% down.. So I rather flip it and take 40-50K and search for the next place!

I'm struggling with number 3 but real estate definitely fast lane...
 

MyronGainz

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Fastlane brothers and sisters, I am here to show you the light should you so accept to see it. I’d like to offer some advice from my experiences and to share the wealth of living rent free.

This is not a revolutionary topic, and I am not a revolutionary human. Living rent free has been done by many. Living rent free with cash flow has also been done by many (including me). It is easy. It will likely end up costing you less than $10,000 (I only brought $5,900 to the closing table on my first property). It’s a no brainer move for those of you who are hungry and ready to forge your own path in life. Ever since I posted about my first 3-flat, members have reached out to me asking what type of financing I utilized, where I began, what books I read...this thread is a basic answer to many of those questions.

This thread is not intended to make you join the apartment investor Fastlane (although cash flow has severely addictive qualities, just ask @SteveO, @AroundTheWorld, @zen*******, @RealOG, @CashFlowDepot, etc.). No, this thread is here to help you make one simple move that can stabilize your life as your pursue whatever Fastlane you choose. Stop paying the man each month (me) and start focusing on your goals. I hope that this thread will help even JUST ONE person on here to live without the constant cloud of having a rent / mortgage payment every month.

No longer will the excuse of “I have too many bills to pay to quit my job and enter the Fastlane full time” remain valid. We are building your shelter. We are building your money tree. We are building the castle from which you will wage your war.

This thread is targeted for those of you who currently have:
  • A stream of income from your lame J.O.B., from your own business (need 2 years of 1099 history for this to work if self-employed), from your full blown Fastlane venture or from your sugar daddy/ momma (whatever) and
  • Currently do not have an FHA mortgage
We are going to learn how to purchase a duplex, 3-flat or 4-flat with as little as 3.5% down that will cash-flow and pay for itself.

Are you tired of paying your landlord your hard earned wage each month and having nothing to show for it? Do you wish you had a money tree in your backyard? Good. Let’s rock and roll.

Let’s break down what you will need to do into a simple list:

1. Contact / engage a mortgage broker
    1. Hop on Yelp! and search for the best mortgage broker in your city. Pick one who has high remarks in their reviews. Don’t get bogged down searching for the perfect mortgage broker. There are thousands in every city. Call a few and pick the one that pays attention to you (answers quickly, calls you back quickly, etc.)
    2. Obtain a mortgage pre-approval (broker will walk you through the steps) for an FHA mortgage (broker will walk you through all the documents they need you to sign)
i. An FHA mortgage is a tool that first time home buyers who will be owner-occupants (move into the property) can utilize

ii. Broker will run your credit (FHA minimum score threshold is around 550 I think, so hopefully you are a responsible, bill-paying-son-of-a-b*tch)!
3. Once you are pre-approved, the mortgage broker will get you the loan you need once your real estate broker (step 2) finds you the property you want. They will charge you a fee at closing (likely 1%, or 1 “point”) which can be rolled into your loan​
2. Engage a real estate broker
    1. Same thing, head to Yelp! and pick based on reviews. Call a few and tell them what you are searching for:
    2. Tell your broker you want to look for owner-occupant Freddie Mac (HomeSteps), Fannie Mae (HomePath) properties that are between 2 to 4 units (our ideal number is 3 or 4 units)
i. The reason we like Fannie and Freddie foreclosures is because owner-occupant buyers have a 14 day window to bid on these properties before investors. This restriction is intended to keep real estate investors from driving up the price of houses on the home buying citizens of America. Which is good for you, Mr. first time home-buyer!​

3. Look at some properties (criteria)
    1. Check out properties you think fit the size criteria, and that are in a good area of your city. Try to stick near big transportation hubs (trains) and try to pick an up-and-coming neighborhood (read: follow the hipsters)
i. Hipster neighborhoods are the next places that will “turn” economically in a given city, and are great spots to realize cash flow​
2. Hop on PadMapper.com (good for checking rents in an area) to see what kind of rents you can expect from the property you are looking at

i. Example (all made up): 3 unit, Seattle with all units having 2 beds 1 bath.
  • Rents in the area are $1,000 per unit on average (same size, quality, finishes, etc.)
3. Take the gross amount of rents and apply a safe buffer of 50% for expenses:

i. 3 units x $1,000 = $3,000 per month gross rents x 50% = $1,500 expenses
  • This means you keep $1,500 in your pocket (your “NOI” or Net Operating Income)
4. Figure out a buffer for your mortgage (and any possible cash flow)

i. If you paid $200,000 for this property @ 4.25% for 30-years and 3.5% down, your monthly payment would be ~$1,500. Voila, no mortgage
  • This doesn’t take into account that most months you will not hit 50% expenses. Some will be 0% (very cash positive), some will be 150% (cash drain) so be sure to keep reserves set aside from the good months for when the bad months come around
ii. You make your money when you BUY not when you sell​

4. Pull the trigger!
    1. I would recommend looking at 15 to 20 properties with your agent and getting a good feel for the market. You will start to recognize trends.
This whole process will only take 2 months or so and sets you up for months of lower-stress productivity. Stop subscribing to get rich quick mindset. Good things require process and take time.

If this interests you, just start calling people! Just because you talk to brokers doesn’t mean you HAVE to buy something. Good brokers will hold your hand through the whole process. If a property was recently rehabbed or isn't more than 10 years old...then use 40% for expenses when you do your quick-check math. If a property has under market rents...don't pay for what the property "COULD" be operating at. Pay what it is currently worth knowing that when you increase the rents you will cover your mortgage and realize equity appreciation. Just use common sense.

If you think you can spend your resources in a better place, or make the “jobless” leap without buying your “castle”, then please do. This thread is for people stuck in a job or who are too timid to take a leap of faith without first building a small form of support.

I did not even touch on the fact that you can utilize an FHA 203-k loan, and get rehab construction rolled up into your loan amount, or the larger fundamentals of apartment investing, but that is because I am not trying to teach you how to be a guru here, I am simply providing a path to ease your monthly financial burden.

If you are going to make this move and want to hit a home run, DO YOUR RESEARCH and take a dive down the rabbit hole. If you don’t want to spend a ton of time learning how to hit a home run, that’s alright because you must remember that singles, doubles and triples (pun intended) still put points on the board in the long-run. Just get moving NOW!

Read some apartment investing books over the course of a few weeks and then plan your path to freedom carefully. Don’t shoot in the dark, but make sure you do in fact shoot. No deal will ever be perfect. The timing will never be right. Pull the trigger now.

Note: I am not a financial advisor or a lawyer and this thread is purely an opinion that I hope you can draw from. Purchase property, or invest, at your own risk.

PS. Buy in the winter months if you want to get lower pricing and less market competition.

G

Great post, but just have to be careful with the whole "3.5% down". If 2008 has taught anyone anything, it's that excessive leverage can sink your ship in a heartbeat no matter how far you planned on travelling.
 

SteveO

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Great post, but just have to be careful with the whole "3.5% down". If 2008 has taught anyone anything, it's that excessive leverage can sink your ship in a heartbeat no matter how far you planned on travelling.

Yes, but extreme leveraging can launch you into massive riches as well. Pick your own risk level.

I took a big hit but don't regret taking the chance. 2008 taught me that there is a time to get in, a time to get out, and a time to hunker down.
 
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MyronGainz

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Yes, but extreme leveraging can launch you into massive riches as well. Pick your own risk level.

I took a big hit but don't regret taking the chance. 2008 taught me that there is a time to get in, a time to get out, and a time to hunker down.

For sure. Check out the book "When Genius Failed" by Roger Lowenstein. Great example of extreme leverage going wrong, even when every single indicator was right.
 

SteveO

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You can find data to support any scenario. I tend to not listen to other people and work off of my own experiences. Doom and gloom scenarios are not something I want to live by.

I'm willing to bet that the deal talked about in the original post has a ton of equity and is no longer overleveraged.

Buying "right" decreases that overleverage as well.
 

MJ DeMarco

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Gonna mark this GOLD. Might be the 1st in the RE forum since I started doing it. Thanks @G_Alexander for sharing your wisdom and experience.
 
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TaylorB

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Yes, but extreme leveraging can launch you into massive riches as well. Pick your own risk level.

I think starting out your risk level is super low anyhow. You aren't playing with your own money, if the bank lends you money it can't be THAT stupid. And if all else hits the fan just give the house back and head overseas!

I've spent 5+ years in central africa and love it, that is always my backup plan if it all falls apart here.
 

Chazmania

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This is not a revolutionary topic, and I am not a revolutionary human. Living rent free has been done by many. Living rent free with cash flow has also been done by many (including me). It is easy.

No doubt about it! We own a 3 unit and took the smallest apartment in the back, which is more private anyway. My wife and I are aquiring our freedom from slowlane life through real estate, and also own some good rentals that are throwing off income.

We updated the apt so it looks pretty cool and modern but it's just small, and that's fine with us for now. We love it. We not only live for free but we make about $100 - 150/month on it, depending what the water bill comes in at. We get paid to live in our own house and yes it is fantastic.

Great post and very good advice to the community for those that are willing to play landlord!

Edit: I also see farther down the post that you don't even "play landlord" - even better!
 
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TaylorB

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Another quick thing you can do...

In most of the nice cities to live in Canada with 0-20% down you can't find many if any deals on a single unit property that you could purchase and cash flow any decent amount of money with you living there.

So if you want to purchase a single unit, let's say a house and rent out the basement! I'll use Calgary as an example.

Purchase a crap but livable house 300K. Your mortgage is gonna be ~$1500 w/15,000 down. Renting out the basement will give you about 700-1000 depending on 1br or 2br. So it still costs you 500 to live + bills unless you get your girlfriend to pay rent ;)

But a good trick is rent the UPSTAIRS and live in the basement. Boom. Main floor rentals typically rent significantly higher. So in my area a main floor house gets around 1500-2000 / month. So now you are living for free in the basement. Get your girlfriend to pitch in on the bills and you live for free, or get a roommate and pocket some more cash.

Then if you want to go full throttle which I have been considering. Rent the upstairs, the basement and live in a 5th wheel in the backyard ;) Mini house's are going to be more and more popular in the future anyway.

You are also paying down 6000/year in principle while living for free providing the market doesn't tank.


Just some idea's if you can't get into a multi unit building. Here in Calgary a 3-4 plex is 900k+

Cheers
 

jilla82

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2yllfzo.gif



Excellent post.
Ive been playing with this idea for a few months now...and OP laid it out.

I was looking at apartments to rent (just to live in) and talking to one guy changed my perspective.
He was on his 2nd or 3rd building at the time. I went home and looked up how much he paid and was shocked (he paid 350K in a good neighborhood in Chicago).
Made me realize that buying a condo/house was not the way to go (for me).


@G_Alexander ...is there any chance you own a place on the same street as a High School.
Would be hilarious if this guy was you.
 

G_Alexander

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Gonna mark this GOLD. Might be the 1st in the RE forum since I started doing it. Thanks @G_Alexander for sharing your wisdom and experience.

Thanks @MJ DeMarco , it's an honor. Thank you for this amazing place and thanks to the wonderful @SteveO @RealOG @GLC65 @JScott @AroundTheWorld and others for your real estate wisdom since I joined here in 2008 when I was just 18 years old.

@G_Alexander ...is there any chance you own a place on the same street as a High School.
Would be hilarious if this guy was you.

@jilla82 I have been known to get people pretty amped up, and to preach my thinking a bit. I do in fact own on a street with a major high school. Did we meet?
 
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BJBossman

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What works for one doesn't work for all. Hotels might fit your style. I don't know of many members here who have reached out asking for information on hotel living, but feel free to post your own guide on it (sarcasm...in case you missed it).

I am not pitching the real estate Fastlane in this particular thread. I am simply showing people an avenue to pursue their chosen Fastlane with an ease of transition from the slow-lane. Call this strategy a "turn signal".

Fastlane is syndicating a $100mm equity portfolio of broken notes / multi-units with none of your own cash, and recapitalizing into a full ownership position.

Fastlane is writing a best-selling RE investing book.

Fastlane is scaling a fully sub-contracted valet-waste business that services apartment buildings (to increase their NOI) and exiting to the largest waste management company in the U.S. after three years for $250mm

But these are other methods we will save for another day, and another thread.

Not everyone here shares your 'fortunate' circumstances, but soon, some smart ones will have increased cash flow and equity coming in, no matter the road they choose.

Thanks for taking us off topic.

Just curious, would you know a lot about the syndicating option here?
 

mrsilva

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Great thread! Thank you for sharing your experience with us.

This actually fits my needs very well. I still pay rent. I am single, no family members and got used to have roommates to reduce my rent. And I always thought about buying one unit to live in and have a roommate to help me with the mortgage.

I live in Miami and the limits here in Florida are pretty good:

MIAMI-FORT LAUDERDALE-WEST PALM BEACH,
Single: $345,000, Duplex $441,650, Tri-plex $533,850, Four-plex $663,450.

But at the same time the prices are very high. The only problem I see is to get approved for the lowest down payment because of my credit score. It is possible to have the help of a co-signer to get pre-approved?
 

swimkid

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This sounds really interesting, but not sure I would qualify. while I have excellent credit, and a decent salary have only been working at my current job for 6 months. Was working PT for 4 mo before that in a different field (which only lasted 4 months because I needed to move for family reasons, and it's pretty darn hard to live in LA on a 20/hr week job), FT for a summer seasonal position, and the year before that was in school and only working part time. Only a year non-accredited program, so I don't really think that'd qualify as the "graduating from school" as a "steady job" scenario. Technically been working the last 2 years, but it'd be stretching it to call it "steady" although now I have a "good job" (by Slowlane standards anyway)

I guess now I am going to have to get creative. Ideally, what I am trying to do, is increase my net worth by around 50K. I am trying to move to SLC as soon as possible, but don't really want to get another crappy job out there, especially when I would quit as soon as I can manage the net worth increase, because then I can start investing in some other things.. I thought this might be a way to potentially get some equity in a property, not to mention free rent and cash flow, but looks like I may have to find an alternative. Anybody got any other creative ideas?
 
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JAWS

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@swimkid
  • Find an investor - high net worth individual, a bank, or hard money. (High net worth will probably be best for you. Banks require personal guarantees & hard money lenders are best when flipping a place)
  • Find a run-down place, partner with a contractor, and then fix her up.
It all depends how you sell it to the investor - all they want to do is make money. If you come in with a developed rent roll and a solid pitch, than you're fine. Don't psyche yourself out.
 

CashFlowDepot

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Great thread and congratulations on TAKING ACTION!!

My only caution is to NOT buy at retail prices - especially with that low low down payment. If the market corrects just a little you would be totally upside down. Aim to buy at 20 percent below market at least - 30 percent would be better.
 

csalvato

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I just spent all day on the phone with brokers to make this happen but a quick question...

Is this even possible if you are unfamiliar with areas?

I am moving from one place to another to be closer to family, but know jack-squat about neighborhoods and the market in the area to which I intend to move. I don't know what market value is, or even the general sentiment about neighborhoods if they are about to turn.

Is there any way you can do this when you don't really know the area that well? Or is that kind of required beforehand here?
 
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mrsilva

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I just spent all day on the phone with brokers to make this happen but a quick question...

Is this even possible if you are unfamiliar with areas?

I am moving from one place to another to be closer to family, but know jack-squat about neighborhoods and the market in the area to which I intend to move. I don't know what market value is, or even the general sentiment about neighborhoods if they are about to turn.

Is there any way you can do this when you don't really know the area that well? Or is that kind of required beforehand here?

Why would you skip a very important step of this whole process? Is all over the thread and very well explained why and how you should do it.

And this is also called due diligence.

Be patient and do it right! ;)
 

BJBossman

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Great thread and congratulations on TAKING ACTION!!

My only caution is to NOT buy at retail prices - especially with that low low down payment. If the market corrects just a little you would be totally upside down. Aim to buy at 20 percent below market at least - 30 percent would be better.

Does that matter as much if you're cash flow positive?
 

csalvato

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Why would you skip a very important step of this whole process? Is all over the thread and very well explained why and how you should do it.

And this is also called due diligence.

Be patient and do it right! ;)

Sorry, I don't mean to sound like I am taking shortcuts. I am just trying to understand what "due diligence" means here.

Like, in the SEO world, DD would mean doing keyword research, understanding the content you need to bring to the table and researching your competitors. It can all be done online in a few hours.

With REI, it sounds like I really need to get my boots on the ground and visit each area and understand them totally before I can make decisions. This seems like a massive part of the due diligence process.

If that's so, I need to probably move to the area, rent for 6-12 months and get an idea for properties. If it's not true, I can likely buy within the next 3 months from where I am...I just need to make a couple of trips to my target location.

So, in the case of REI, do you really need to put your boots on the ground? Or are there online/offline tools/metrics you can use to gauge areas?

If you have a good resource on this topic I would read it cover-to-cover in the next 12 hours.
 
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Harry321

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Amazing thread, very inspirational.

I live in the UK and would like to do something similar. Over here we have a "help-to-buy" government scheme which enables first time buyers to use a 5% deposit. However there are a lot of limiting factors with this such as terms that state no renting out to tenants.

We also do not have many multiple unit properties, just standard houses and flats (apartments).

I'm wondering if anyone from the UK has experience with achieving what the OP has done in the UK? Or knows a similar way to do it?
 

csalvato

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Amazing thread, very inspirational.

I live in the UK and would like to do something similar. Over here we have a "help-to-buy" government scheme which enables first time buyers to use a 5% deposit. However there are a lot of limiting factors with this such as terms that state no renting out to tenants.

We also do not have many multiple unit properties, just standard houses and flats (apartments).

I'm wondering if anyone from the UK has experience with achieving what the OP has done in the UK? Or knows a similar way to do it?

I don't invest in real estate in the UK, but my wife owns a home here and we are in the process of selling.

The UK definitely has multi-family dwellings. Essentially, you would own a block of flats or multiple single family homes. They could be semi's in a terraced/mews home. We have a lot of investors looking at our home for Buy-To-Let purposes.

There are different schemes in the UK and I know there are a slew of private "help-to-buy" and "ez-buy" schemes. These tend to differ from lender to lender and builder to builder. My wife put down on this house with Shared Equity, meaning the lender only gets 15% of the appreciated value.

For example, she purchased at, say, £100K and the lender put in £15k of that. Now that we are selling at, say, £120k, the lender is only owed £15k + £3k = £18k (Their principle + 15% of the £20k equity).

Under this scheme, she would have been able to rent out to tenants without transitioning into a Buy-To-Let, but only for 2 years, IIRC....but it seems every scheme is different and has different rules. There may be a gov't option available that is better defined.

EDIT: It's also worth noting we did AirBnB and rented out a single, spare room privately for a short time and that covered her entire rent.
 
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SteveO

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It is always best to get to know the area. This can be done quickly, it just takes some diligence on your part. Talk to people, get demographic reports (I usually get them from real estate agents), drive around, look at traffic patterns, check schools, etc... Look at the prices for the homes in the areas. The picture should become clear real fast.
 
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CashFlowDepot

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Does that matter as much if you're cash flow positive?

Yes it still matters even if you have positive cash flow today. Markets change. Prices can go down quickly. Rents can go down quickly. So you need enough margin that you can sell the house, at a discount if necessary, quickly.

If you buy AT market prices today but the market changes later, you could be stuck owning a house that is worth much less than your mortgage. That is what happened to tens of millions of investors and homeowners in 2007 - 2009.

If you buy for $X today and sell for $X tomorrow, you will still have closing costs and perhaps realtor commissions so you'd have to come to closing with money to get rid of the house.

Even for your personal residence, I would not advice buying at market prices.
 

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I love allll this info but how would someone go about this process if they do not have credit. I also read up on a investing for dummies and they agree to live in is the way to be due to its ample tax benefits. but wouldn't one be wiser to rent out that last room and if able, still live with their parents. You OWN the building and the cash flow but expedite the money flow. rather than say 3 units at 200$ a month net yielding 600 bones. it would be 4 units at 200$ a month....thats a pretty solid up sell. all those numbers are made up but doesn't that make more sense? then you end up losing that live in tax benefit..... hmmmmm.... again, main question is NO credit...
 

rexxkai

Lazy Noob
Read Fastlane!
User Power
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37%
Apr 1, 2011
247
91
Vancouver, BC, Canada
Hmmm.... i was wondering how you would get this to work in vancouver...

house prices $700k+
apartment - 1 bed, 1 bath - $100k

5% for first time buyers.... $5k

$800/month rent

$800*50%=$400 expenses in case

100,000/800=125 months = 10 years+interest

100,000/400=250 months = 20 years+interest

hmmm.... does this work?
 
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Last edited:

Jamesdoesmith

Bronze Contributor
Speedway Pass
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Value/Post Ratio
111%
Aug 14, 2014
207
230
29
It is always best to get to know the area. This can be done quickly, it just takes some diligence on your part. Talk to people, get demographic reports (I usually get them from real estate agents), drive around, look at traffic patterns, check schools, etc... Look at the prices for the homes in the areas. The picture should become clear real fast.
I have been reading up on all your posts and threads and have since created an account on bigger pockets as well. My degree plan is marketing with a focus of management, but after talking to a very go getter guidance counselor, she took all my previous work experience into consideration and told me that degree would be a waste of time. She said that previous employment had already taught me things like handling customers and teamwork. So I have since shifted to marketing with a focus of real estate. All goes to plan and my express degree options (makes it all faster and sticks easier) I should have a real estate license by late 2015 or early 2016. Your posts get me excited and make me move. Thanks for being here and sharing so much knowledge. A compilation of insurance business and selling homes does a few things. Covers people financially, gives them a place to live, and produces two forms of passive income. Small fast lanes streams that may one day grow to rivers.
 

HighestVantage

Contributor
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93%
Dec 13, 2014
40
37
32
Ukiah, CA
Fastlane brothers and sisters, I am here to show you the light should you so accept to see it. I’d like to offer some advice from my experiences and to share the wealth of living rent free.

This is not a revolutionary topic, and I am not a revolutionary human. Living rent free has been done by many. Living rent free with cash flow has also been done by many (including me). It is easy. It will likely end up costing you less than $10,000 (I only brought $5,900 to the closing table on my first property). It’s a no brainer move for those of you who are hungry and ready to forge your own path in life. Ever since I posted about my first 3-flat, members have reached out to me asking what type of financing I utilized, where I began, what books I read...this thread is a basic answer to many of those questions.

This thread is not intended to make you join the apartment investor Fastlane (although cash flow has severely addictive qualities, just ask @SteveO, @AroundTheWorld, @zen*******, @RealOG, @CashFlowDepot, etc.). No, this thread is here to help you make one simple move that can stabilize your life as your pursue whatever Fastlane you choose. Stop paying the man each month (me) and start focusing on your goals. I hope that this thread will help even JUST ONE person on here to live without the constant cloud of having a rent / mortgage payment every month.

No longer will the excuse of “I have too many bills to pay to quit my job and enter the Fastlane full time” remain valid. We are building your shelter. We are building your money tree. We are building the castle from which you will wage your war.

This thread is targeted for those of you who currently have:
  • A stream of income from your lame J.O.B., from your own business (need 2 years of 1099 history for this to work if self-employed), from your full blown Fastlane venture or from your sugar daddy/ momma (whatever) and
  • Currently do not have an FHA mortgage
We are going to learn how to purchase a duplex, 3-flat or 4-flat with as little as 3.5% down that will cash-flow and pay for itself.

Are you tired of paying your landlord your hard earned wage each month and having nothing to show for it? Do you wish you had a money tree in your backyard? Good. Let’s rock and roll.

Let’s break down what you will need to do into a simple list:

1. Contact / engage a mortgage broker
    1. Hop on Yelp! and search for the best mortgage broker in your city. Pick one who has high remarks in their reviews. Don’t get bogged down searching for the perfect mortgage broker. There are thousands in every city. Call a few and pick the one that pays attention to you (answers quickly, calls you back quickly, etc.)
    2. Obtain a mortgage pre-approval (broker will walk you through the steps) for an FHA mortgage (broker will walk you through all the documents they need you to sign)
i. An FHA mortgage is a tool that first time home buyers who will be owner-occupants (move into the property) can utilize

ii. Broker will run your credit (FHA minimum score threshold is around 550 I think, so hopefully you are a responsible, bill-paying-son-of-a-b*tch)!
3. Once you are pre-approved, the mortgage broker will get you the loan you need once your real estate broker (step 2) finds you the property you want. They will charge you a fee at closing (likely 1%, or 1 “point”) which can be rolled into your loan​
2. Engage a real estate broker
    1. Same thing, head to Yelp! and pick based on reviews. Call a few and tell them what you are searching for:
    2. Tell your broker you want to look for owner-occupant Freddie Mac (HomeSteps), Fannie Mae (HomePath) properties that are between 2 to 4 units (our ideal number is 3 or 4 units)
i. The reason we like Fannie and Freddie foreclosures is because owner-occupant buyers have a 14 day window to bid on these properties before investors. This restriction is intended to keep real estate investors from driving up the price of houses on the home buying citizens of America. Which is good for you, Mr. first time home-buyer!​

3. Look at some properties (criteria)
    1. Check out properties you think fit the size criteria, and that are in a good area of your city. Try to stick near big transportation hubs (trains) and try to pick an up-and-coming neighborhood (read: follow the hipsters)
i. Hipster neighborhoods are the next places that will “turn” economically in a given city, and are great spots to realize cash flow​
2. Hop on PadMapper.com (good for checking rents in an area) to see what kind of rents you can expect from the property you are looking at

i. Example (all made up): 3 unit, Seattle with all units having 2 beds 1 bath.
  • Rents in the area are $1,000 per unit on average (same size, quality, finishes, etc.)
3. Take the gross amount of rents and apply a safe buffer of 50% for expenses:

i. 3 units x $1,000 = $3,000 per month gross rents x 50% = $1,500 expenses
  • This means you keep $1,500 in your pocket (your “NOI” or Net Operating Income)
4. Figure out a buffer for your mortgage (and any possible cash flow)

i. If you paid $200,000 for this property @ 4.25% for 30-years and 3.5% down, your monthly payment would be ~$1,500. Voila, no mortgage
  • This doesn’t take into account that most months you will not hit 50% expenses. Some will be 0% (very cash positive), some will be 150% (cash drain) so be sure to keep reserves set aside from the good months for when the bad months come around
ii. You make your money when you BUY not when you sell​

4. Pull the trigger!
    1. I would recommend looking at 15 to 20 properties with your agent and getting a good feel for the market. You will start to recognize trends.
This whole process will only take 2 months or so and sets you up for months of lower-stress productivity. Stop subscribing to get rich quick mindset. Good things require process and take time.

If this interests you, just start calling people! Just because you talk to brokers doesn’t mean you HAVE to buy something. Good brokers will hold your hand through the whole process. If a property was recently rehabbed or isn't more than 10 years old...then use 40% for expenses when you do your quick-check math. If a property has under market rents...don't pay for what the property "COULD" be operating at. Pay what it is currently worth knowing that when you increase the rents you will cover your mortgage and realize equity appreciation. Just use common sense.

If you think you can spend your resources in a better place, or make the “jobless” leap without buying your “castle”, then please do. This thread is for people stuck in a job or who are too timid to take a leap of faith without first building a small form of support.

I did not even touch on the fact that you can utilize an FHA 203-k loan, and get rehab construction rolled up into your loan amount, or the larger fundamentals of apartment investing, but that is because I am not trying to teach you how to be a guru here, I am simply providing a path to ease your monthly financial burden.

If you are going to make this move and want to hit a home run, DO YOUR RESEARCH and take a dive down the rabbit hole. If you don’t want to spend a ton of time learning how to hit a home run, that’s alright because you must remember that singles, doubles and triples (pun intended) still put points on the board in the long-run. Just get moving NOW!

Read some apartment investing books over the course of a few weeks and then plan your path to freedom carefully. Don’t shoot in the dark, but make sure you do in fact shoot. No deal will ever be perfect. The timing will never be right. Pull the trigger now.

Note: I am not a financial advisor or a lawyer and this thread is purely an opinion that I hope you can draw from. Purchase property, or invest, at your own risk.

PS. Buy in the winter months if you want to get lower pricing and less market competition.

G

One of the best, most concise posts I've read yet on Fastlane forum. Awesome, thanks so much!
 

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