500,000 cash windfall?

[HighPoint]

Buying 1-4 unit properties at great deals that bring in $100 a month is great. But it would be difficult to own 80 units ($8,000 a month) to have both my wife and I not work full time.  Plus it would take a while to build up the necessary knowledge and 80 units.

If you are willing to work 3-4 hours per day, 3-4 days per week doing the management and maintenance yourself, you don't need 80 units  -  you only need about 40 to make $8,000 per month.  In my opinion, paying someone else to do the managment is the biggest rip-off going.

Mike

for an apartment that rents for 700.00 a month, your looking at spending $2.30 a day for property management on average. I guess it just depends on how valuable your time is. To me, that is worth its weight in gold, because while some are wresling with tenants, I'm putting more contracts together.

[Roger J]

High, you asked why 80% LTV properties don't usually cashflow.  Using real world numbers (as discussed in length on this site and practically ALL landlord specific sites), approx 45-50% of a property's rent income is used for taxes, insur, vacancies, repairs, maintenance, etc., leaving only 50% for the mortgage.

Using 80% of $100K, you'd borrow $80K @ 7% = roughly about $535/month payment.  To cashflow, you'd have to get $1000-1100 month in rent.

If you are at the point where you can quit your day job and still make a living, then it makes sense to become your own property manager.  If you aren't, or you aren't willing to quit your day job, then once your number of rentals gets past a certain point (which will be different for different people), then hiring a good property management company is a better idea.

Another point on quitting your JOB.  Make sure that you are making alot of money in REI (or whatever business) before quitting and/or your spouse keep their "real" job.  First, it takes alot more income from a self-employeed position than from a paid job to actually earn the same amount.  Second, lenders are in the box thinkers.  They don't like self-employeed applicates.  They usually can't read a tax return.  So unless you have (easily) provable income (ie 1099's, check stubs) make sure that you have some kind of employment.

Raj

[Roger J]

I am currently buying multiple pre-construction properties at a discount myself in Charlotte NC WallaceHobbs

About to miss this, Wallace.  I hope you've done your homework carefully, friend.

Charlotte has one of the highest foreclosure rates in the state, a very high rate of real estate/investor fraud, and one of the lowest in the state for value vs. rents.  Generally speaking.

Raj

[propertymanager]

I guess it just depends on how valuable your time is. To me, that is worth its weight in gold, because while some are wresling with tenants, I'm putting more contracts together.

That's ridiculous!  If you work 16 hours per week to make $4,000 per month, that leaves 152 hours to "put more contracts together".  If you can't do it in 152 hours, that extra 16 isn't going to help!!!

It would be difficult to find properties where the units make $200 a unit positive cash flow. Especially when the rents are only $400-600 a month on average to start with.

You're not making $200 per month positive cash flow.  You're still only getting $100 per unit positive cash flow and you're earning another $100 per unit per month by doing the management and maintenance.  That's why you don't need 80 units to make $8,000, you only need 40 units IF YOU DO THE MANAGEMENT AND MAINTENANCE. 

First, it takes alot more income from a self-employeed position than from a paid job to actually earn the same amount.

I totally disagree with that.  In fact, I think it takes considerably less income to be self-employed, especially in the rental property business.  If you get a paycheck, the government takes a considerable portion of your money right up front (someone's gotta pay for all those section 8 tenants).  When you own a business, you get to spend the money first and then get taxed on what's left.  In addition, there are a TON of deductions.  The bottom line is that you get to keep a LOT more of the money that is earned. 

Mike 

[gilbequick]

I am currently buying multiple pre-construction properties at a discount myself in Charlotte NC WallaceHobbs

About to miss this, Wallace.  I hope you've done your homework carefully, friend.

Charlotte has one of the highest foreclosure rates in the state, a very high rate of real estate/investor fraud, and one of the lowest in the state for value vs. rents.  Generally speaking.

Raj

Where did you find this information?

[Roger J]

From a rental business perspective on income, Mike, you may be right.  From a strictly self-employeed perspective, I'd still say it takes more income.

There is self-employment tax to consider.  End of year taxes (even deductions are merely tax DEFEREMENT.  They have to be paid sometime), Business insurance (general, liability, etc.), and the usually much higher health insurance.  Just to name a few.

Additionally, it takes more income from a self-employeed vs. W2 to usually qualify for lending, ESPECIALLY when you consider all the tax advantages of being self-employeed (as lenders generally don't know how to 'undo' those tax advantages to determine 'real' income).

gilbequick,

It comes from reading the Charlotte Observer and having a working knowledge of the area, as well as getting to read up on all of the great legal cases currently filling up the dockets.

Raj

[fmrrmbkr]

LOL Rich

[mw]

Want to make more money than a HML, have less risk and faster turn around time, like say 48hrs and earn anywhere from 10-15% in that time frame..

I can tell you how??? With 500K, you can triple that in less than 1 month..

Here is a old emerging side to real estate that is getting harder and harder to find, but knowing mortgage brokers in your area is all you need to do..

Lend people money for their downpayments only.  Say I find a home for 200K and it is worth 275K. The buyer needs to put down 5-10% at contract. So he writes the contract with 5% down and the seller pays back the downpayment thru his proceeds to you as a lien postion. TOTALLY LEGAL and all paperwork which is simple is filled out 72hrs prior to closing date by buyer/seller and title company.

So say buyers need 20K, you charge him 10% interest..that is $2K, so on the day of close you wire 20K into title co accout for close. Loan is funded and the title co will wire you back 22K that day and you earned 10% interest on your money.

How can this be done. Well buyer does loan using a no seasoning downpayment and the title company knows how to do this. Important you tell broker about this so they can make sure its not a loan where title needs to show a cleared check, etc.  Many banks allow this.   A few forms are filled out and its all done. 100% secured since the money is always with title company really. No worries about the home not selling as a HML or rehab going bad.  As for the 20K you lent the buyer.  That goes to them as a 1099 during tax season and you just earned 2K in interest which you report of course.  But you need to talk with a CPA on that topic..

Well my 2cents....better than a HML..easier..less risk and more profits..So companies charge as much as 15%, and one I know charges 10% of the money borrowed and 1% of the total purchase price of home plus $380 processing fee and they actually make you an employee how they do it..

I would like to hear more feedback about this post...