yes, that's a good area. Had some friends who lived out that way and often parked out there since it's not 4-hour.

Thanks, Brandy!

Another question. It will probably sound really stupid. I haven't thought through all of the angles.

Let's say there is a SFH on the market for $31,000. It's in a good area. It needs some work, but otherwise, it's in good condition. Let's say we rent for $350/month, which gives us a max price of $23,100. We lowball the offer, get it for $20,000.

Does it really matter what the comparables are? If you're buying for such a deep discount from the asking price, then maybe the asking price is reasonable based on comparables? A little fix up, maybe you could say the FMV is $45,000 or so, so you're still gaining $25,000, before the added costs.

So even if you don't know the comparables, assuming the valuation isn't completely wrong, does it even matter?

Yeah I would think its always worthwhile to look at comps, esp rent comps for the area, cos in your example it doesn't even meet spex's investing criteria at a purchase price of 20k not including any rehab which you say it needs a little bit of.

Sure on paper it gives you a 11.5% cap rate but your COCR is lame.

DP 4k
Loan amount 16k at 7% over 20 years
Rent 350/month
NOI/month 192.5 (350-157.5)
Debt service/month 124.05
Cashflow 68.45/month or 821.4/yr
COCR 20.5% (821.4/4k)

Add in just 2k of rehab or something small and it gets 13.7% COCR

So with doing comps you'd find out that units either don't rent for that much in this area or that the previous owner was renting way below market (in which case you could go ahead with the deal)

I could think of worse things than making a mistake and still making a 13.7% COCR but with a little more research and less assuming you would realise you could prob double your returns.

I hope I got that all right and don't look like an idiot

Yeah I didn't check the numbers based on passing for an investment or not. I was just making up numbers to ask about whether FMV truly mattered or not.

I've just been trying to throw ideas around in my head.

The area I come from isn't exactly the most booming town. About 10 miles from me is a bigger area that I would say has a slower growth potential, and that would probably be the best area to look for investments. However, at the same time, I'm thinking there has to be a way to be able to invest in any market, no matter the location, as long as you're getting positive cash flow properties. Maybe require more conservative numbers?

I could really see myself getting some properties for really good prices just because a lot of times the properties aren't well kept. I could in turn bring value back to the area while creating cash for myself.

For example, some scummy people moved into a house next to my grandma, down the street from where I live. I'd say they moved in a little over a year ago. The house had been sitting vacant for awhile and the original owner was old so there needed to be a ton of renovating. They came in, fixed up the inside, which looks fairly nice for them being scumbags. However, on the outside, the front porch was spray painted green with overspray on the roof shingles and the foundation. The main front part of the house was spray painted yellow, and half way down both sides of the house is yellow. They ran out of spray paint so they stopped. It literally looks like a pile of ****. The woman has like 4-5 kids who leave garbage all over the place, the little kids sometimes run around outside with only a diaper. One time my grandma caught one of the little boys crawling through an upstairs window on top of the roof of the porch and was hanging on the tv cables that ran to the house.

My uncle has been trying to get ahold of the owner, which is the mother of the woman, to buy the house from them to get them out of the neighborhood, but they won't take the offer because they get welfare and probably every other state and local assistance.

It's probably bringing down the value of the properties nearby. There are a lot of properties in my area that are just an eye-sore. So my thought is just that I'd like to bring value back to my area and feel like I'm really doing something productive.

my lawyer (who is a partner and has been in RE/done RE law for 15+ years) recommended we transfer title from our names into a trust and then create an LLC to manage the property. he said the bank would probably give me **** for transferring title from my name to an LLC, but that I won't have any problems transferring it into a trust. the trust is set up already, we just have to pick beneficiaries and then start the paperwork on the LLC.

1) REI club is your best bet, get a template and take it to a lawyer for an hour of his time.

2) Title company. Depending on your state you may need a lawyer. Don't forget title insurance (which will be required if you get a loan anyways). An agent isn't the worst thing in the world, especially until you learn the nuances of the area you're buying in. A good one (or a RE investor who knows the area) can save you a lot of money.

3) In St. Louis there's a crime map that you can view to see all crimes. If you don't know what the crime rate is in the area you're purchasing, you haven't done enough research.

4) I'd be less ambitious with your first purchase.

5) Comparable sales, zillow, pay for a broker price opinion, in the end, there is no substitute for experience. If you've been RE investing in the same area for a year and you can't tell about what a property would retail/wholesale for, you're probably doing something wrong.

6) A good screening process catches most people. The ones you don't, you have to be quick to evict. If you catch inconsistencies in their application, just deny it immediately.

7) It's bad, honestly, but it depends on the main industries that provide jobs in that area and the potential growth. If it's in decline for many years with little hope of a sudden revitalization, I would definitely consider another place.

8) If you are buying SFH's for 20k, you probably should be trying to fund it all or have a friend that will finance it. When you get into bigger properties, prequalification is a good idea.

9) Every mortgage is different and every financial situation is different. You can do the math.

10) Just figure out what works for you. Remember, if you are searching for a cap rate of 10%, and retail in that area is a 12 cap, you won't have a very good screening process. Decide your own criteria for investing and go from there.

Hey I need some advice from some RE vets. Please assess my situation and give me an upfront answer on what I should do. I am really looking into getting into this business within the next few years; and I have read about 20 pages of this thread and it is very intriguing. I am currently a 22 yr old working full time at a midsized bank in which I can receive a lower interest rate on loans then regular people; they will give me $5000 as a limit to pay on a downpayment in addition to any money that I have, the catch is that I have to remain employed wit them to maintain this rate(The rate changes often so I cannot tell you the rate right now.)

I have one child and a fiance in which we are getting married soon. I have no financial history and when it comes to credit the only thing I have is student loans so basically I have no credit. When I comes to current liquid funds I am really low; due to the fact we moved into an apartment and had to buy furniture,tvs, bills etc.

To get started in this business what would recommend? How much money do you think is a starting point in which I can begin investing?

Thank you in advance.

Much thanks to all contributors to this thread. I've read this thread so much more than any other threads on 2p2, and am going to do my best to put what I've learned to work in the near future.


Tomorrow I'm meeting with a REA to make an offer on a house on the block I grew up on. I have watched this market closely for the last several months, and have a good idea of what houses are selling and renting for in that neighborhood.


I have $30k liquid set aside for REI

Buy(with my cash), fix(with my cash), rent, then refinance is what I'm trying to do with this house. I have 2 different lending companies ready to refinance me up to 75% of the equity of the house. So I know I can borrow what % of my $ I need to maximize my COCR.

So here's the deal:
The bank is holding the foreclosed property.
$29k asking price
1554 sq ft
3 BR
1.5 bath

$58k tax assessment for 2009 and 2010. No assessment yet for 2011
The property last sold in 2000 for $49k

My appraiser(personal friend) walked through it with me and said he'd appraise it for 58k as long as it were cleaned and touched up(it was filthy then... the bank has since cleaned it up quite a bit). I'd estimate FMV to be $45-50k as-is.

Rent $650 * 12 = 7800 Gross
-5% vacancy
-45% expenses = $3900 NOI
3900/29000 = 13.44% cap rate

This property will sell for <$24k within a week. I base this off of the dozens of them I've seen sell like this over the last several months.

Here's the rub: The roof and furnace were both replaced 20 years ago, so could be on their way out soon. The roof is bubbling on certain spots, but there are no indications of a leak and the previous owners claim there are no leaks. New roof ranges from $5k-$8k depending on materials. I have someone giving me an official bid on the roof tomorrow. New furnace $1500-$2k. So potentially there are $7-$10k in capital expenses right there. Also, one room has a couple holes in the walls. Other than that the property needs cleaned up and touched up.

So here's my questions:

How do I account for those capital improvements before purchasing?
Is this house out of my range given my investment roll(obviously I'm going to lowball and not pay near the asking price)?


If I win the bidding, my deal will look more like this:

PP 23000
NOI $3900
3900/23000 = 16.95% cap rate


I know this is a super noob post. I apologize for how disorganized it is. Also I appreciate you reading, and/or your input/advice.

http://i1232.photobucket.com/albums/...g?t=1300422260

house looks a lot bigger than a 1500 sq ft... though the pics are small. most 2 story homes are 4BR and up... is it a duplex?

Is the siding in good condition? Does the house have an A/C unit? does it need to be replaced? What about the ducts? have to make sure you plan for all renovations. in my limited experience, there's always crap that pops up that you never accounted for. plumbing, electrical work, hvac, appliances, etc

wow... 3 BR house is going for 24k. where do you live? when was the house built? why is real estate in the area so cheap?

probably looking at 15 to 20k in renovation. 24+20 = 54. Monthly rent of just above 10% of that. Sounds about right.

In your case, the renovation cost is a large % of your total investment so you have to make sure you have an accurate figure for it.

i'm no expert, but hopefully i gave you some things to think about.

yes it's a two story. formerly duplex converted to sfh. the upstairs does have a storage area that used to be the upstairs kitchen, but now just acts as storage.

the siding looks good to me. those pictures were taken within the last couple weeks. there are a couple spots on the garage where the siding is missing. all the siding on the house seems to be there and looks presentable. A/C are window units. two of them that i'm pretty sure work, although i have spares that i don't use anymore bc my home has CAC. the fridge(can't be older than a few years) and stove work, but i'm not sure about the washer and dryer. the previous owner(who is actually a carpenter) says the duct and plumbing is good to go. he told me about all the repairs/renovations he made on the house while he owned it. he did do some plumbing work in the bathroom upstairs. he mentioned that the windows(wood frame/glass) are drafty and COULD be replaced, and that one of the bathroom faucets needs replaced.


i live in the mississippi valley in the midwest. the house was built in the early 1900's.. i wanna say 1910. they are selling so cheap because the banks are snapping up cash offers for less money than financed offers. so basically cash buyer(s) are coming in and low balling and snapping them up.

24k PP(hypothetical) 20k start up expenses = 44k which i can come up with, but is more than i'd like to spend. if such is the price of getting started though i'll be just fine to do that before my refinancing goes through.

i put my bid in which i was told beat the other investors bid. since i got it in at the end of the week i'll find out monday whether they accept/counter/reject. the agent told me he expects them to counter my offer. i'm leaving after this post to pick up my official bid on the roof. that should help me quite a bit on figuring expenses. also, other than my tax, insurance, and lawyer NO CLOSING COSTS!!!!

you definitely gave me a lot to think about. i wish i read this last night. i was still up... was way too anxious to sleep. i just assumed no one would read this and post until well after i left this morning. thanks for your response.

Well looks like this thread has slowed down significantly over the past couple of months.

Want to say thanks to spex, tien, bwana, gittyUP, fun160, and everyone else who has made extremely valuable contributions to this thread. Just read through the entire thing completely in the last 48 hours, gonna make a second pass through soon to pick up anything I missed and then will begin looking around for places in my county.

Got no real source of income currently, but about 100k in capital to work with, as well as a decently well off relative who will possibly co-sign any of the mortgages with me, so hopefully that will be enough evidence for them to give me a loan on a duplex or triplex even though I have no landlording experience *crosses fingers*

Assuming I was a total newb and wanted to get into real estate investing:

1) What are the best options for things under 100K?

2) How much money would you suggest someone with no real estate background should have saved up (aka might possibly lose) if he wanted to buy something for around 200k?

Hey guys, I've posted once or twice in here and have read over half of the thread and am still reading parts every week. Just wanted to say thanks all the knowledgeable people who are sharing info ITT.

I work for a company that is investing in several properties, each in their own LLC, and am trying to help them out with their tax/accounting. One of the partners was looking to get someone with more experience to answer some questions about some of the accounting issues they are coming across. They're essentially looking for someone who has experience with accounting for small single property LLCs, that can answer some questions and be a teacher of sorts for a few hours.

What would be the best way to find someone qualified this? They aren't looking to break the bank, but don't want to put themselves in a position to get scammed. Also anyone with experience feel free to PM- we would obviously work out a compensation for your help. I don't think it should take more than a few hours.

Hey Guys-

This is a question for everyone. I have a unique opportunity to get into an investment with a VERY respected and large investor in the area. To put it into perspective, he owns over 1000 APT units and over 200 single family houses, all at above 99% occupancy.

He proposed an offer to go into a deal with him where he will put down 80% to my 20%. We would continue to buy, renovate, and rent. then we would pull out money and repeat the process. he wants 200k from me to get started. I dont have anywhere near that. I would then be the manager of the operation while he provides most of the cash and advisory services.

What are my options here?
I want to get involved but I dont know what to propose
Can I borrow from anywhere?

I am quite adept in RE investing and my profession is in Commercial RE so I have a good deal of market knowledge going into this.

-Will the % splits be equivalent to the capital contributed?
-Is there opportunity for your % to grow?
-Do you get any ownership in his current portfolio?
-Will you be paid a guaranteed salary or based off of net income?
-Why does he need you in this operation?
-Your going to manage but who pays for employees?
-Do you have access to his current employees?
-What happens if you need more capital?
-Who will decide what to buy and for how much?
-What happens if you disagree on something, who gets the final say?

Just some thoughts.

SInce you like low income housing, I have a question.

I've had rental properties. I've always stuck to "good" homes in good neighborhoods that will attract good tenants (couples and young families.) In fact I'd come to the conclusion that there's a threshold of sorts in terms of risk - once you get over a price point, you attract a less risky clientelle. This had always worked well.

Sure enough, one time I let my guard down and let in 2 seemingly "upstanding" grad students. They completely trashed the place to the tune of $12,000.

My fears are that with low rent units, I'll have problems collecting, evicting, and fixing major damages. Adjust my thinking....

As for low rent units, sec 8 will guarantee you your rent. I don't mind paying 25K for a house and get $650 for rent

Section 8 also provides for powerful disincentives that discourage tenants from engaging in bad behavior.

Apparently I live in the wrong end of the world as I have no clue how you guys can get a duplex or a SFH for 31k.

Run down, bottom of the barrell fixer upper duplexes start at about 175k where I live. Seeing these 31k SFH figues and rents for $300/month make me want to cry

I can't even begin to fathom houses that cheap or rents that small

same here...

my plan is to become a foreign national investor in the usa through i think it will take hard work and a lot of good planning to do this successful

You can make a lot of 175k duplexes pencil, assuming the rents are there.

In my area the ghetto duplexes are 70-90k, but I find a decent amount for 100-150k that meet 25% cash on cash through redfin alone... however, I haven't actually checked them out, but I'm taking their word on the rents. A few of those that have penciled (at list price btw) were already occupied as well... I'm hoping listing agents aren't dumb enough to inflate the rents on a leased property, but who knows?

Agree 100%. Rookie investors think if they lower the asking rent to keep their units full they'll have people banging down the door to get in, which they will, but it'll be the wrong type of people doing the banging. An old timer investor told me to ask more for units I was having trouble renting. Tried it and lo and behold, my tenant roster got a lot better and easier to deal with. Good people looking to spend $X in a particular location, don't even look at similarly located apts that cost $X minus.

I learn more about a prospective tenant by spending 15 minutes with them during the viewing than I do from anything they put on an app or from a background check. Bums tend to expose themselves within a 15 minute conversation. Having a realtor show your rental units will eventually bite you in the ass. I violated this rule recently, will explain in next post.

Not to make this political, but the sect 8 program is a joke with a high percentage of the people scamming the govt, and govt employees perpetuating the scam. Its not a housing program, its a social program that makes underachievement generational. It does make sense when running the numbers for a purchase, but when it comes time to sell, your buyer is going to run the same numbers. You are buying income if you concentrate on 8's, you are also selling income when you sell.

If I were in my 20's again, I'd try to convince a portfolio lender to help me buy the most units, in the best location, as possible. The worst performing property I own is a duplex in a town that is ranked top ten in the state for public schools.

a friend sent me a property that looks like it has good numbers.

listing for 150k. it's a 3-unit multi-family building in massachusetts.

each unit rents for 800 per month, so 2400 per month or 28.8k gross rents per year.

assuming 45% for maintenance, taxes, insurance and vacancies, that's 1320 per month. with 20% down, a 30yr fixed rate loan would be about 800 per month. right now all 3 are filled, but one is filled by the owner who is moving out when he sells.

My friend has seen the property in person and says there aren't any major problems that he sees.

Anything I'm missing?

I'm confused, so you'd try to find help buying the the most units in the best location as possible, but follow that up with saying the worst property you have is in a great location.

Could you clarify on "best location" possibly.