Jimbo. I've been interested in this for awhile now, just haven't had the help or knowledge to get started. Just a couple of ?'s for you and scot, Do you need lots of money to get started? I'm only 21 and don't have tons of money to put down. I do have a full-time job right now as well. Jimbo, are you in school or have you graduated?

Greg

 

I am the big old stupid "controller" for a manufacturing company.... not very rewarding...but it pays pretty decent......

We bought the first house in February 2000 for $15k cash...put $5k cash into it...then went to our credit union and got a line of credit on the house....it was based on 80% of appraised value......it appraised for $30k x 80% = $24k Line of Credit..... so at that point the house had been rented to easily cover the $24k credit line and we had $4k extra in our pocket.

We did the same similar thing with 2 other places.....then they stopped doing the Lines of credit at that credit union.

so...yes.. we used our own $ up front... you could maybe get 80% financing...so you would still need some $ of your own.

Scot

 

i have not bought any houses yet but if it all works out i plan on it. on think is that i have to sell my S2000 to start this. it sucks and i am going to miss my car but i think it would be for the best.
i am 22 i work full time 36-40 hours a week. i am out of school and out on my own.

 

from what i have been told so far is that you will need 5-10% down to buy a house. depending on your credit history.

 

Even better, incorporate your own property management company and write everything off for your taxes. You probably make enough money that you could stop working your day job and concentrate on realestate all the time. OR, if you love your job, then stick with it.

 

i dont know how scot got his properties for so cheap. it has to be the area or something. housing is so expencive here in ithaca and cortland areas.

 

doh, I posted the above befor reading the second page. Opps.

Scot, I have a question. As you mentioned, these calculations are based off homes that have been completely paid off.

"Average income $600 mo x 12months x 20units = $144,000 annually

Average utilities 70 mo x 12 months x 20 units = 16,800 annually
Average maint 85 mo x 12 months x 20 units = 20,000 annually
Average prop taxes 100 mo x 12 months x 20 units = 24,000 annually (expensive for crap houses)
Average insurance 20 mo x 12 months x 20 units = 4,800 annually"

What do you think the net income would look like if the properties had been acquired over time, but not paid off yet?

It seems like...your expenses might exceed the rental income. Would you still have positive cashflow on every property?

 

Good question, I wont be able to buy a house straight up here in Ithaca/Cortland area. A basic cheap duplex is atleast 50k. A shitty 4 unit 2bed each house is 129k. I am definitely going to need to finance.

 

Section 8 to be house... paid $19k and it needed some work.... i f'd up alittle.... it needed windows, bathroom work and some misc stuff.... $25k when done...... I did pay cash, but if i had gotten a mortgage for the entire $25k.... 25k @ 8% @ 180months (15 years) =$239 / mo.

Rent = $600
Mortgage = ($239 8% @ 180months 15 years))
Utili - $70
Taxes - $110
Insu - $25
Maint - $85 (estimated at $1k per year per unit).
------------------------
$71.00 per month postive cash flow.... based on 100% financing at 8% for only 15 years.....

So.... if you had 20 of these... that would be $1420 per month $17k positive cash plus you financed 100% plus you are paying them off in 15 years........plus...with depreciation, etc.... your tax return would probably show a loss for each of them.....creating tax savings as well..... you can deduct mileage (which adds up at .$36 per mile..or whatever it is).


I have the luxury of finding "ok" houses for $15-$25k and "very nice" townhouses for $30-$40k here in Harrisburg...... I have Zero "multi units".... they seem to be priced way way too high, even around here... especially an all brick 4 unit type place.... they will sell for $160k and rent will be $500 per unit (only 2 bedrooms)..... that just doesn't work out very well.....


Some College Towns (i went to Indiana, Pa - IUP) have similar deals to Harrisburg.... get a house for $30k, rent it to 3-4 idiots for $700 per month....... If I did not live so far from there, I would probably do some of that. As long as the local college has consistent enrollment, there will be a demand for off campus housing.

 

you offer $120k for the 4 unit... the return on your investment assuming you would have paid cash is 11.8%.... not bad for an investor....... but.... you cannot pay cash......

Rent - $450 per unit? x 4 units = $1,800
Vacancies 5% -$90.00 (almost all 2 bedroom multi units will have vacancies)
insurance - $50. (guess)
water sewer trash - $280 ($70 . unit)
maint $200 ($50 per unit per month)
--------------------------------------
= $1180x12= (14,160 / $120,000 = 11.8% Return).....


Net income from above - $1180

1st Morgage - $863.00 (80% @ 8% @240months ----20 years)
------------------------
$317 per month Net income (assuming you put 20% down + closing costs).

$3804 (317*12) /$30000 (the amount of cash you would need for 20% financing + closing cost) = 12.38% return on your $.....plus you are paying off principal.... .not really a good buy for a beginner.