I saw. I liked. I signed.
After three long months, I think I've finally found my next property purchase, and it's Potential Refinance Property #4. PRP #4 is a… hmm. You know what? Let's try something different:
That was Real Estate Agent (REA) John, who will sometimes do video tours of his listings. As far as repairs go, I’ll obviously have to do the basics: paint walls, refinish floors, molding, etc. The biggest expense will be the kitchen, as I’ll have to rip out all the old cabinets and install brand new ones, and then add the appliances (stove, refrigerator, oven range, possible dishwasher). But here’s the cool part:
In the video, REA John said this area was supposed to be a closet, right? Well, he was wrong.
Whoever did work on this little space was obviously trying to turn it into a half bathroom, so why not finish it? I’m gonna fit a corner sink and a toilet in there, completing the half bath and adding some property value for good measure. The property has "good bones” (solid structure), good roof, clean exterior, and comes with central A/C already installed. Handyman Alfonso’s labor price for the entire renovation is $4,000 which is acceptable. Let’s do a quick pros and cons breakdown:
Pros:
Solid structure
Beautiful neighborhood (B+)
High rentability (close to shopping plaza; located on a bus route; off street parking)
Single family homes generally have tenants who stay longer
Central Air already installed
Repair costs under $10,000 ($4,000 for labor and $4,000 for materials)
Cons:
Single family means only one source of income
Questionable property value
Rentability
I tested the rentability of the house by posting an ad on Craigslist. I posted it for a fake property in the same area as PRP #4, but then used pics of less than desirable amenties:
24 hours after I posted the ad, I had 28 responses. This means that, even if PRP #4 had a tiny bathroom and a kitchen with a tiny stove, people would still pay $1000 a month to live in that neighborhood. Rentability is incredibly important, since the place has to produce consistent rent to take care of the monthly refinance payments.
The tax assessment for the place is $80,000, but Zillow estimates its property value between $51,000 and $68,000. In fact, Zillow doesn’t give an estimate higher than 70K for that whole block… which makes no sense. It’s the only thing that bothers me about the place, but I’m gonna take a chance and see if I can get a refinance for at least $78,000 with a 90% LTV (loan to value). Here’s what I’m hoping for:
Purchase for $45,000
Repairs costs $8,000 max
Rent the place out by June and collect a monthly $1000 to offset the repair costs.
Start the refinance in October.
Get approved for $80,000… which comes out to $72,000 LTV
$72,000 - $45,000 - $8000 - $5,000 (both closing costs) + $5000 (total monthly rental income before and during refinance) = $19,000 profit
$19,000. Not the 20K I was hoping for, but I get a solid property in a fantastic neighborhood with high rentability. For my first refi property, I’d say that’s a good start. Now let's ask a question. If I started the year with $37,000, how the hell did I make enough to not only purchase this property but have the money for repairs without needing a rehab loan? Simple. I didn't.
Business Line of Credit
I was getting tired of other investors outbidding me, as I had lost out on at least 4 properties due to not having enough money. At the end of February, the IC (Investor's Club) sent an email to all current and former members to say they were having a banker as the guest speaker at the next meeting. This banker was gonna talk about her bank's lending program that was practically giving money away. I told Damon to go there, and reported back to me the very next day. Apparently, her bank is granting lines of credits for businesses that are very easy to get approval for. So, if someone has an LLC or corporation and good credit, he/she can qualify for a line of credit up to $25,000. I knew having an LLC lying around would be good for something! But I had to hurry, as that particular bank was being bought out and there was no guarantee that the new owners would allow the program to accept more applicants.
So I applied for the loan and was approved for $10,000 the following week. They said the only reason I didn't qualify for $25,000 was due to those fucking 2010 late mortgage payments. I cannot WAIT to get that crap off my credit report next year. Anyway, $10,000 will do just fine. It gives me the added buying power I need to finally compete and go for properties I would've had to wait months for. Everyone else has the advantage of gaining buying power from friends or family or having a good job, not me. So I have to use whatever I can to make things work. Even though there was no Dinner with Damon in March (he was too busy), his information about the business LOC really helped out. I can apply for a limit increase every year, so I'll apply in 2017 once those late payments are off my damned credit report.
I'll be the first to admit that a $45,000 purchase price is well above the $35,000 I wanted to pay for my first refinance property. But I've gotta start somewhere, and the numbers are good for PRP #4.
P.S.: I really love writing posts. I had a few doubts about purchasing this place before I started writing. Now I feel good knowing that this is a solid investment.
 |
| Single family home in a nice and quiet area, located on a bus route and close to a shopping plaza. It's about damned time |
That was Real Estate Agent (REA) John, who will sometimes do video tours of his listings. As far as repairs go, I’ll obviously have to do the basics: paint walls, refinish floors, molding, etc. The biggest expense will be the kitchen, as I’ll have to rip out all the old cabinets and install brand new ones, and then add the appliances (stove, refrigerator, oven range, possible dishwasher). But here’s the cool part:
In the video, REA John said this area was supposed to be a closet, right? Well, he was wrong.
 |
| A closet with a ceiling vent? I don't think so |
 |
| Place to put the light switch |
Whoever did work on this little space was obviously trying to turn it into a half bathroom, so why not finish it? I’m gonna fit a corner sink and a toilet in there, completing the half bath and adding some property value for good measure. The property has "good bones” (solid structure), good roof, clean exterior, and comes with central A/C already installed. Handyman Alfonso’s labor price for the entire renovation is $4,000 which is acceptable. Let’s do a quick pros and cons breakdown:
Pros:
Solid structure
Beautiful neighborhood (B+)
High rentability (close to shopping plaza; located on a bus route; off street parking)
Single family homes generally have tenants who stay longer
Central Air already installed
Repair costs under $10,000 ($4,000 for labor and $4,000 for materials)
Cons:
Single family means only one source of income
Questionable property value
Rentability
I tested the rentability of the house by posting an ad on Craigslist. I posted it for a fake property in the same area as PRP #4, but then used pics of less than desirable amenties:
 |
| Fake house exterior |
 |
| Fake house's bathroom, small as shit |
 |
| Fake house's small kitchen with the tiny stove |
24 hours after I posted the ad, I had 28 responses. This means that, even if PRP #4 had a tiny bathroom and a kitchen with a tiny stove, people would still pay $1000 a month to live in that neighborhood. Rentability is incredibly important, since the place has to produce consistent rent to take care of the monthly refinance payments.
The tax assessment for the place is $80,000, but Zillow estimates its property value between $51,000 and $68,000. In fact, Zillow doesn’t give an estimate higher than 70K for that whole block… which makes no sense. It’s the only thing that bothers me about the place, but I’m gonna take a chance and see if I can get a refinance for at least $78,000 with a 90% LTV (loan to value). Here’s what I’m hoping for:
Purchase for $45,000
Repairs costs $8,000 max
Rent the place out by June and collect a monthly $1000 to offset the repair costs.
Start the refinance in October.
Get approved for $80,000… which comes out to $72,000 LTV
$72,000 - $45,000 - $8000 - $5,000 (both closing costs) + $5000 (total monthly rental income before and during refinance) = $19,000 profit
$19,000. Not the 20K I was hoping for, but I get a solid property in a fantastic neighborhood with high rentability. For my first refi property, I’d say that’s a good start. Now let's ask a question. If I started the year with $37,000, how the hell did I make enough to not only purchase this property but have the money for repairs without needing a rehab loan? Simple. I didn't.
Business Line of Credit
I was getting tired of other investors outbidding me, as I had lost out on at least 4 properties due to not having enough money. At the end of February, the IC (Investor's Club) sent an email to all current and former members to say they were having a banker as the guest speaker at the next meeting. This banker was gonna talk about her bank's lending program that was practically giving money away. I told Damon to go there, and reported back to me the very next day. Apparently, her bank is granting lines of credits for businesses that are very easy to get approval for. So, if someone has an LLC or corporation and good credit, he/she can qualify for a line of credit up to $25,000. I knew having an LLC lying around would be good for something! But I had to hurry, as that particular bank was being bought out and there was no guarantee that the new owners would allow the program to accept more applicants.
So I applied for the loan and was approved for $10,000 the following week. They said the only reason I didn't qualify for $25,000 was due to those fucking 2010 late mortgage payments. I cannot WAIT to get that crap off my credit report next year. Anyway, $10,000 will do just fine. It gives me the added buying power I need to finally compete and go for properties I would've had to wait months for. Everyone else has the advantage of gaining buying power from friends or family or having a good job, not me. So I have to use whatever I can to make things work. Even though there was no Dinner with Damon in March (he was too busy), his information about the business LOC really helped out. I can apply for a limit increase every year, so I'll apply in 2017 once those late payments are off my damned credit report.
I'll be the first to admit that a $45,000 purchase price is well above the $35,000 I wanted to pay for my first refinance property. But I've gotta start somewhere, and the numbers are good for PRP #4.
P.S.: I really love writing posts. I had a few doubts about purchasing this place before I started writing. Now I feel good knowing that this is a solid investment.
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