Im having a bit of hesitation and doubt

[Adam K]

As everyone knows im new to the RE Investing field. I went and bought my first place in January 2008 it was a forclosure single family house 5 bedrooms 2 bathrooms. I went and knocked down the entire top of the house down to the foundation. Im rebuilding the house bigger and better than what it was im also building my garage.

Ive been looking around at properties up for sale and in foreclosure looking mainly to hold and cashflow. One ive been looking at is I hope ive done my thinking right here it is:

Its a 3br 2bath townhouse
Priced at $91,600 (Foreclosure needs a little work paint, rugs, etc)
im doing this at no money down first to see if it would work I am planning to put some money down.
taxes $1994.00/$166.17 a month
$42 dollars for HOA fees
30 year motgage at 5.75%
$491.73 plus $208.17 for taxes and HOA..... Total $699.90 a month
Rental price comps in the area is $1250 to $1497 via Zilpy.com

It looks to me like the numbers will work and I will cashflow nicely. BUT im having alot of doubt and hesitation of actually pulling the trigger. I keep hearing my families words in my head of not going to far or over extending myself. Or how RE investing is to risky grrrr issed:. I dont know should I wait till my house first house is ready? Should I do this asap right now? I guess im scared I dont know what I should do or how to get pass this feeling of self doubt and nervousness.

 

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[I85]

What are your plans for the property? Are you able to get financing with zero down? Can you afford to carry both homes? Do you have money for rehab? Are you doing the work on the homes? If so, do you have time to work on both?

 

[Adam K]

The plans for the second property is to hold and rent. I can get financed with 0 down but I am going to put 20% down. Honestly im not sure if I could carry both homes. Yes I have money for the rehab my uncle owns a construction company in VA he will do the work for me. He does have the time to do both

 

[MrPink]

Think about all the variables involved - including the numbers you posted and time (mentioned by I85)

Once you think (maybe a list would help) about the variables then there is no reason to have self doubt since you have addressed everything that should be considered (I am guessing you posted here to get outside help with those variables?)

(at least for me when I am dealing with 100,000 dollars am nervous, but probably once you move to 1mil dollar deals then 100k doesn't seem that bad)

You had the 'guts' to demo a house, you can do this if you want (ie. being a landlord etc..)!

Mr. Pink

 

[andviv]

I found I work better when I focus in just one property and put all the energy there. When I try to do multiple things at once I get frustrated and stressed out. I like to pay attention to details. So, my message is, it depends on how you perform better.

 

[Corrado79]

The plans for the second property is to hold and rent. I can get financed with 0 down but I am going to put 20% down. Honestly im not sure if I could carry both homes. Yes I have money for the rehab my uncle owns a construction company in VA he will do the work for me. He does have the time to do both

%0 down financing? Please elaborate.

 

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[rcardin]

I am curious as to how you can get financed with 0 down on an investment property. If you can that is great if not why put more than 10% down unless that is the only way it will cash flow.

 

[MrPink]

I think the reason for considering zero down is that it is a more conservative estimate of cashflow. I don't think that Adam K is expecting to get a zero down loan at 5.75 percent.

 

[Adam K]

I am with Navy Fed Credit Union I spoke to them and I was told with my credit and payment history if I wanted to do 0 down it would not be a problem of course then the rate would go up. I am planning to put 20% down I dont have to put the 20% down it will cash flow either way.

As everyone notices on my first post I never said I was going to do 0 down I was just doing the numbers with 0 down to see if it would cash flow with or without any money down. I just wanted to clarify that.

 

[Adam K]

Its a 3br 2bath townhouse
Priced at $91,600 (Foreclosure needs a little work paint, rugs, etc)
im doing this at no money down first to see if it would work I am planning to put some money down.
taxes $1994.00/$166.17 a month
$42 dollars for HOA fees
30 year motgage at 5.75%
$491.73 plus $208.17 for taxes and HOA..... Total $699.90 a month
Rental price comps in the area is $1250 to $1497 via Zilpy.com

I just wanted to explain a little better I dont want everone to think im going for 0% down or anything. As MrPink said it was a conservative cashflow estimate to make sure it made sense because if it didnt cashflow with 0 down then in my opinion its a bad investment. In this case being it will cashflow with 0 down if I put 10 or 20% down that will make it cashflow more and that was my reason for doing it that way.

My total mortgage a month is looking to be 699.90 and because I always like to over estimate to cover myself lets just say 800 dollars a month mortgage just incase I didnt think of something. If I rent it at low end for that area at $1250 a month I will cashflow $450. Am I thinking the right way here or am I missing something?
:thankyousign:

 

[Runum]

I also would be very interested in hearing about how you got 0% down and 5.75% interest on investment property. Adam you and I definitely look at risk from two different directions. I would never buy a REO and demolish it, too risky. On the other hand I would jump on this deal quickly if the numbers are as you presented them. As others have suggested, go over the worst case scenarios. Figure out if you can live with your worst cases and go forward. Only you can decide what is right for you. Good luck.:cheers

Edit, sorry you posted as I was posting. The only major unanswered questions I see are what will insurance cost? Also, if this is an REO how much under retail are you buying it for?

 

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[^eagle^]

yeah what about insurance and vacancy rate. Didn't see repair costs either. These nickels add up. I'd imagine your vacancy rate to be a little bit higher because it is a higher end rental. These tend to be vacant longer.

It doesnt look too bad though. I think even with these added in you will still be positive.

10 percent vacancy and 100 dollars a month insurance. maybe 50 a month in repairs.

that will give you a more realistic expectation of cash flow.

 

[I85]

My total mortgage a month is looking to be 699.90 and because I always like to over estimate to cover myself lets just say 800 dollars a month mortgage just incase I didnt think of something. If I rent it at low end for that area at $1250 a month I will cashflow $450. Am I thinking the right way here or am I missing something?
:thankyousign:

What is 699.90? Your PITI? PITI+Association fees? Mortgage is 699 alone?

What are you planning to offer on the home? What will the rehab cost? Are you sure the rentals numbers you have are correct? What will your other expenses average... Insurance? Maintenance? Insurance? Vacancies? and so on

If you are not 100% sure on your numbers...figure them out before you go any further.

 

[Adam K]

What is 699.90? Your PITI? PITI+Association fees? Mortgage is 699 alone?

What are you planning to offer on the home? What will the rehab cost? Are you sure the rentals numbers you have are correct? What will your other expenses average... Insurance? Maintenance? Insurance? Vacancies? and so on

If you are not 100% sure on your numbers...figure them out before you go any further.

I85 your asking questions I think ive already answered. With the exception of not including the insurance, Vacancies, and the rehab costs. I have already said what the price of the home is going to be. The rental numbers are from Zilpy.com I also spoke to my real estate agent who does rentals aswell and she agrees with the numbers I have. Im in the process of getting insurance quotes, and my uncle (Contractor) will give me an estimate of what the repair will cost me. Its only going to be for one family being its a Townhouse so is vacancies that important. Im thinking that I will make sure to have 6 months of mortgage payments in the bank so if it sits vacant. Then I will just replenish that account to get ready for if it goes vacant again.

 

[Runum]

Sorry Adam. I didn't see that it was a town house. Please clarify that. Does that mean it's like a condo?

 

[Adam K]

Sorry Adam. I didn't see that it was a town house. Please clarify that. Does that mean it's like a condo?

A townhouse is like a single family home that is connected to a whole group of homes.

http://www.flickr.com/photos/wmarkdyer/61998409/ <-- Townhome pic

http://www.vacationatlitchfield.com/Quickstart/ImageLib/Front_of_Condo.jpg <-- Condo pic

That link was the best pic I could find to show what a townhome looks like. Because a condo to me is in a bigger building with multi levels.

 

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[Runum]

Thanks Adam. In my market I would pass on this. If I couldn't buy the whole building I wouldn't want to buy just part of it. I don't think the market in my area is very strong for selling that kind of investment. Your market may be better.

 

[Adam K]

Thanks Adam. In my market I would pass on this. If I couldn't buy the whole building I wouldn't want to buy just part of it. I don't think the market in my area is very strong for selling that kind of investment. Your market may be better.

I understand that but im not looking at a condo (2nd link pic) im looking at a townhome (first link pic). They are very popular in northern va

 

[I85]

I85 your asking questions I think ive already answered. With the exception of not including the insurance, Vacancies, and the rehab costs. I have already said what the price of the home is going to be. The rental numbers are from Zilpy.com I also spoke to my real estate agent who does rentals aswell and she agrees with the numbers I have. Im in the process of getting insurance quotes, and my uncle (Contractor) will give me an estimate of what the repair will cost me. Its only going to be for one family being its a Townhouse so is vacancies that important. Im thinking that I will make sure to have 6 months of mortgage payments in the bank so if it sits vacant. Then I will just replenish that account to get ready for if it goes vacant again.

Having 1 unit out of 10 vacant=10% vacancy. Having 1 unit out of 1 vacant=100% vacancy. I would say vacancies are even more important in a single family.

I don't see any of my questions answered earlier, maybe I'm just blind. One time you say your mortgage is 490 something, then you say it's almost 700 :smx4:. So, I asked which is it? I assume it's 490...but making assumptions can be very foolish. You also state the ASKING price...what is YOUR OFFER going to be? Your answer didn't help to clarify any of this.

I understand that but im not looking at a condo (2nd link pic) im looking at a townhome (first link pic). They are very popular in northern va

The homes still touch, which I think is what he is talking about.

 

[Runum]

I saw the pic Adam and I still wouldn't buy a part of a building. You need to plan your exit strategy for this property before buying it. What is the resale market like in your area for this type of property? In my area I only deal with the whole building or SFH's.

 

[I85]

I saw the pic Adam and I still wouldn't buy a part of a building. You need to plan your exit strategy for this property before buying it. What is the resale market like in your area for this type of property? In my area I only deal with the whole building or SFH's.

Also, what is current construction like right now? How many townhomes are going up right now? Around here, they are building them everywhere....which is why I wouldn't be interested in them(unless they were extremely cheap).

 

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[Runum]

I85 your quote is correct but your reasoning is flawed. He is only buying 1 unit. If it is vacant he has 100% vacancy, same as SFH. Also, he did answer your question:

" $491.73 plus $208.17 for taxes and HOA..... Total $699.90 a month"

:cheers:

 

[I85]

I85 your quote is correct but your reasoning is flawed. He is only buying 1 unit. If it is vacant he has 100% vacancy, same as SFH.

I know he is buying one unit and I know the vacancy would be 100%...not sure what you are saying here. 😕

Also, he did answer your question:

" $491.73 plus $208.17 for taxes and HOA..... Total $699.90 a month"

:cheers:

I saw that earlier...but I also saw this, which is why I asked.

My total mortgage a month is looking to be 699.90

 

[Runum]

Sorry I think it was one of those internet misunderstandings. I thought you were disagreeing with me. Turns out we were on the same page.:cheers:

 

[Adam K]

Originally Posted by Adam K

My total mortgage a month is looking to be 699.90


Im sorry about that that was my mistake the mortgage is looking to be 699.90 plus insurance (after I get the insurance company to give me a quote) I am putting aside 6 months of mortgage payments to cover vacancies.

Also, what is current construction like right now? How many townhomes are going up right now? Around here, they are building them everywhere....which is why I wouldn't be interested in them(unless they were extremely cheap).

From what ive seen most construction that had started totally stopped as of now. I am not seeing or heard of any new developments or beginnings of developments.

You need to plan your exit strategy for this property before buying it.

I dont have an exit strategy. Maybe I should educate myself a little more before doing another property.

 

[I85]

Originally Posted by Adam K

Im sorry about that that was my mistake the mortgage is looking to be 699.90 plus insurance (after I get the insurance company to give me a quote) I am putting aside 6 months of mortgage payments to cover vacancies.

Just to clarify one more time...your mortgage(principal and interest only) will be 699.90...meaning this does not count association fees, or property taxes.
So your PITI would be 699+taxes+insurance, correct? Sorry to ask the same question twice, I just want to double check because it makes a big difference.

 

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[Adam K]

Just to clarify one more time...your mortgage(principal and interest only) will be 699.90...meaning this does not count association fees, or property taxes.
So your PITI would be 699+taxes+insurance, correct? Sorry to ask the same question twice, I just want to double check because it makes a big difference.

No my principle and interest will be 491.73. Plus property taxes and HOA fees (Property taxes $1,994 divided by 12 months is 166.17. And $42 for HOA fees equals $208.17. $491.73 plus $208.17 equals 699.90 + insurance.)

 

[andviv]

townhouses are VERY common in this area. They treated almost as SFHs.

 

[Runum]

Question Andres, if you buy one of those how do you handle exterior repair and maintenance and lawn care? Is that a HOA thing?

 

[andviv]

yes, HOA. It also has some common grounds insurance, or at least that has been in the places I know of (if the property is old then the HOA is probably high due to the insurance)