Home Buying & Real Estate Thread

[lilchico4life]

Wow, didn't realize this thread existed.

I purchased my first home in October of 2011. Best decision I've made in my life.

I had it built to my specifications. Got to select all the options and everything. I was 24 at the time and learned a lot during the process. Put a 40% cash down payment on the home. The builder was DR Horton.


(Picture of model home which is identical to mine. Will upload picture of mine when I get a chance.)

I also purchased my first commercial property in February 2015. Put a 25% cash down payment. I have to say the loan process was easier than purchasing my home back in 2011. I had a tenant lined up and in place at the time of the closing and have been collecting rent since. Also have a share in the business, where I get a piece of the profit since the tenant was short on capital. Win win situation. Only downfall is it's too far. I'm not too involved in the day to day operations, which bothers me because this has been my biggest investment to date and I need to know what's going on. I put it back on the market 2 months after purchase for $1.145M. Have a contract pending.



And finally, I purchased my first rental property this past weekend at a private auction. Comes with 2 lots. First lot comes with 2 homes. First home is 500 Sq ft and the back home is 600 Sq ft. The second lot is empty which is also buildable. Plan on building a home on it in the near future and renting it out as well. Haven't closed yet. Still in the process of doing a title search and preparing closing documents. I have 45 days to close in case I needed to finance, but since I'm paying cash I'm looking to close before August 1st, since I have tenants lined up for both homes. Both homes need minor cosmetic work.

 

[capital sb]

lilchico4life Wow that's amazing congrats what type of returns are you getting on your commercial property and what made you want to buy commercial?

Also how are you getting these huge down payments?

What percentage will be getting on those 2 home you bought for rentals? Do you follow the 2% rule?
What type of numbers are you running to analyze a deal? Sorry for all of the questions you are the first person I've seen on NT post something in depth about their RE investment

I've started studying areas in my market looking to buy my first property in 2017, but it will be great if I can get something next year.

 

[lilchico4life]

capital sb Appreciate it, man. I'll do my best to answer your questions in a timely manner. I don't frequent NT as much as I used to, as I am always on the go.

 

[lilchico4life]

As for the commercial property, the main reason I purchased was because of the location (as with any real estate you purchase). It is located on an extremely busy intersection and a great future candidate for a major corporation to buy me out. I personally know people who have sold their real estate to major companies such as Starbucks and Wawa and netted $1M+ on the deals. Commercial is the way to go for the big bucks, but there is so much more involved in getting the loan from the bank. Appraisals, Phase 1 and 2, many inspections, income verification, etc. I had to put up $500K in collateral in case the business fails the first year. So far, it's running smoothly.


I feel the 2% rule is flawed. There are too many variables that go into evaluating a rental property to only consider rent versus purchase price. On the 2 rental homes, I am keeping the rent to purchase price ratio at 1.25% ($1,100 rent on $88,000).

 

[flyny]

Quick question,

Let's say the 5% down payment for the home I want is (let's say $15,000)

Of course it's not smart to empty out your whole bank account on a down payment. What would be a good amount to have TOTAL (in your account, aside from any 401k/stocks etc) in your account before you move forward with putting that 15k down and get the ball rolling?

 

[sneaksoy]

Quick question,

Let's say the 5% down payment for the home I want is (let's say $15,000)

Of course it's not smart to empty out your whole bank account on a down payment. What would be a good amount to have TOTAL (in your account, aside from any 401k/stocks etc) in your account before you move forward with putting that 15k down and get the ball rolling?

I would say ~$20-22k. You're likely going to encounter $3k or so in closing costs which you have to figure in addition to the $15k. That'll leave you $2-4k which should be a safe enough buffer. That's just my opinion, I'd be curious to get crcballer55 thoughts as well.

If you can get a seller to cover your closing costs I'd think you're definitely safe around $20k.

 

[crcballer55]

Quick question,

Let's say the 5% down payment for the home I want is (let's say $15,000)

Of course it's not smart to empty out your whole bank account on a down payment. What would be a good amount to have TOTAL (in your account, aside from any 401k/stocks etc) in your account before you move forward with putting that 15k down and get the ball rolling?

I think I gave more detail above, but 3-6 months of expenses in cash are highly recommended. 401k & stocks aren't recommended as an EF since a 401K has a 10% +your tax bracket penalty for early withdrawals. Equity investments are also highly volatile, so you could easily lose half of it right when you need it. Back in 2008/2009, when home priced dipped by half, a lot of people had their savings invested in equities and were forced to empty them at the worst possible time.

As the saying goes, cash is king.

 

[capital sb]

You can take out a loan from your 401K penalty free up to 10K to buy a home.

 

[pdino]

You mean IRA. 401k you get 10 percent penalty. Although you can rollover your 401k into an IRA

 

[slicknick951]

You mean IRA. 401k you get 10 percent penalty. Although you can rollover your 401k into an IRA

Thats if you do a straight withdrawal i believe.

You can take a loan of up to 50% at least at my company if it is for a home purchase

 

[capital sb]

You mean IRA. 401k you get 10 percent penalty. Although you can rollover your 401k into an IRA

No I mean 401K.

http://www.forbes.com/sites/learnvest/2014/03/28/the-skinny-on-borrowing-money-from-your-401k/

There are a few exceptions to the penalty tax for withdrawals from traditional IRAs, however: If you’re using that money to pay for college for yourself, your spouse or your child; if you’re covering medical expenses that exceed 10% of your adjusted gross income or you’ve been unemployed and without heath insurance for at least three months; if you’ve been severely disabled; or if you’re withdrawing up to $10,000 to buy a first-time, primary home.

 

[pdino]

Here's from your article:

"Generally, a straight withdrawal from a pre-tax 401(k) or traditional individual retirement account is a bad idea–it’s simply too costly. The distribution will be taxed as ordinary income at federal rates up to 35%, there are state income taxes to fork over, and there’s usually a 10% federal penalty too.

But if you’re a younger person buying your first home, a modest out-and-out withdrawal from a traditional IRA can make some sense"

"There are a few exceptions to the penalty tax for withdrawals from traditional IRAs, however: If you’re using that money to pay for college for yourself, your spouse or your child; if you’re covering medical expenses that exceed 10% of your adjusted gross income or you’ve been unemployed and without heath insurance for at least three months; if you’ve been severely disabled; or if you’re withdrawing up to $10,000 to buy a first-time, primary home."

That’s because the law allows first-time home buyers to draw up to $10,000 from a traditional IRA account without being hit by the 10% penalty, so long as the funds are used for a home purchase within 120 days. 

“While your 401(k) provider might tell you that you can borrow the money for free,” explains Blaylock, “it isn’t free. That money isn’t earning anything until it’s back in your account, plus, the interest payments aren’t tax-deductible as they would be with something like a home equity loan. That’s your borrowing cost.”

On page 2:

"Is It a Good Idea to Take Out a 401(k) Loan?

In short: not really. "

So, you actually meant IRA.

 

[capital sb]

Nope still mean 401K. The limit is 50K for 401K , so that 10K limit is for an IRA.

The 401(k) loan, however, typically allows a person to borrow up to 50% of his or her account balance up to a maximum of $50,000 but requires it be repaid within five years—though the repayment schedule may be extended if you’re using the money for a down payment on a home. The loan doesn’t have to be approved by a bank, which means you can usually get your hands on the money quickly and without a credit check. Plus, interest rates may be lower than on standard bank loans.

If you take a log into your 401K and try to take out a loan home purchase should be an option. I know I have the option on my 401K.

 

[utvol23]

Wow, didn't realize this thread existed.

I purchased my first home in October of 2011. Best decision I've made in my life.

I had it built to my specifications. Got to select all the options and everything. I was 24 at the time and learned a lot during the process. Put a 40% cash down payment on the home. The builder was DR Horton.


(Picture of model home which is identical to mine. Will upload picture of mine when I get a chance.)

I also purchased my first commercial property in February 2015. Put a 25% cash down payment. I have to say the loan process was easier than purchasing my home back in 2011. I had a tenant lined up and in place at the time of the closing and have been collecting rent since. Also have a share in the business, where I get a piece of the profit since the tenant was short on capital. Win win situation. Only downfall is it's too far. I'm not too involved in the day to day operations, which bothers me because this has been my biggest investment to date and I need to know what's going on. I put it back on the market 2 months after purchase for $1.145M. Have a contract pending.



And finally, I purchased my first rental property this past weekend at a private auction. Comes with 2 lots. First lot comes with 2 homes. First home is 500 Sq ft and the back home is 600 Sq ft. The second lot is empty which is also buildable. Plan on building a home on it in the near future and renting it out as well. Haven't closed yet. Still in the process of doing a title search and preparing closing documents. I have 45 days to close in case I needed to finance, but since I'm paying cash I'm looking to close before August 1st, since I have tenants lined up for both homes. Both homes need minor cosmetic work.

Nice stuff. What the sq footage on your home? I love the second floor balcony

Are there any basement homes in FL or is that not feasible

 

[pdino]

Nope still mean 401K. There isn't a limit though , so that 10K limit is for an IRA.
If you take a log into your 401K and try to take out a loan home purchase should be an option. I know I have the option on my 401K.

I'd rather point first time home-buyers in the direction of taking out a tax free, penalty-free withdrawal from an IRA that doesn't need to be paid back than a short-term loan (to go along with your mortgage) from your 401k as options. 

 

[crazy caballo]

I'm still struggling to find a job and my savings are almost done.

I was looking into courses to be a real estate agent, glad I seen this.

For those on the job, how long to get your liscense? what's the work schedule? I know money depends on what you sell, but how is that split in an agency?

 

[capital sb]

I'd rather point first time home-buyers in the direction of taking out a tax free, penalty-free withdrawal from an IRA that doesn't need to be paid back than a short-term loan (to go along with your mortgage) from your 401k as options. 

I'm just laying out options that's it. You said it couldn't be done and it can I'm just putting out information. I wouldn't recommend it either, definitely not for a large amount.

 

[lilchico4life]

utvol23 Appreciate that! Home is 3,813 Sq ft. Don't think there are any basements in homes in Florida.

 

[SneakerProSr.]

utvol23 Appreciate that! Home is 3,813 Sq ft. Don't think there are any basements in homes in Florida.

3818 sq ft?

That's not a house that's a small castle

 

[Kaleo15]

Really depends on the layout of the house though... sometimes, square footage can be deceiving.

But by the look of that house! That's a damn mansion!

 

[crcballer55]

 
I'm still struggling to find a job and my savings are almost done.

I was looking into courses to be a real estate agent, glad I seen this.

For those on the job, how long to get your liscense? what's the work schedule? I know money depends on what you sell, but how is that split in an agency?

There are so many variables in your question. Basically the work schedule is whenever everyone else isn't working. Most successful agents prospect in the morning, then show homes, write contracts, negotiate with other agents in the afternoon, evening, and on weekends. When you're first starting out, there will be A LOT of hard work including getting your online presence set up, making contacts for your database, building relationships with lenders and vendors, and going to classes (if your broker offers them).

The split with the agency will also depend where you end up. A lot do a 70/30 split, some take a 70/30 split and cap at a certain amount, some take a flat fee off the top and charge for certain services on top of it, while some like Redfin will pay you to show homes. Ideally, in the beginning I wouldn't worry too much about the split. Think of it as a training fee you'll pay for more knowledge and experience. Even a 50/50 split under a good agent and team will be well worth it in the long run to get you started on a good foot. If you start off with bad habits in the beginning it's pretty hard to recover. Something like 3/4 of new agents drop out within 5 years so if you're not learning chances are you won't be in the business long.

If you want to start on the right path, real the Millionaire Real Estate agent by Gary Keller. He literally wrote the book on how to be successful in Real Estate and why a lot of top agents gravitate to Keller Williams because of the training and resources they offer.

 

[jay are]

lilchico4life are you still in the atm business?

 

[lilchico4life]

lilchico4life are you still in the atm business?

As a matter of fact, I still do own a handful. Just one of the many things I do. Nice to see someone remember that thread.

 

[capital sb]

As a matter of fact, I still do own a handful. Just one of the many things I do. Nice to see someone remember that thread.

Link to the ATM thread? I can't find it?

 

[pdino]

I remember reading it a while ago. It's under something "side hustles" iirc