Our First Deal! Are we missing anything?

Question

So this our first deal and we just found out today our offer was accepted! We are in Green Bay, Wisconsin and put an offer in on a duplex on Friday. We found out today it was accepted!

Here are the numbers:

Orig Listed: $99800

Dropped on 6.9.16: $89900

Offer accepted: $82500

Rent - $1400 ($700 per side)

Taxes - 2258/year

vacancy - 8%

cap ex - 10%

Repairs - 10%

Insurance - $50/month

Assuming a 30 year 5% interest rate, we are estimating cash flow at $437/month and a Cash on Cash at 17%.

Tenants currently pay all utilities

Minor updating is needed in the bathroom and we are considering purchasing new ranges to update the look as they are outdated and old. Did we miss anything?

Scott Weaner · Answer

You can pay off a 30 yr loan in 15 years, but you cannot do the opposite.

Corey Reyment · Answer

Thank you Jordan and Scott for your input and your encouragement! We are currently absorbing as much knowledge as we can about landlording before we take over the property! @Scott Schultz shortly before finding this property we had the discussion about doing 15 year vs 30 year loans. We found a lot of good information on BP supporting both 15 and 30 year, and we agree that it is a purely personal preference based on goals and vision. We appreciate you supporting us in our decision!

Scott Schultz · Answer

the calculations look good, and congrads on taking action and getting your first deal. In my opinion, taking it out for 30 years is way too long, I prefer 15 or less years, but thats a matter of opinion, I would rater have the bigger cash later than now.  a 15 year your payment would only change by $210/mo, and you pay it off in half the time. but your way works too

Corey Reyment · Answer

@Cole Swartz , estimated ARV is $89,000. With that being said, it has been pretty difficult to estimate. We had to draw comps from more than a mile away, and they weren't great comps. We looked more to our realtor to figure out the estimated ARV, if that makes sense.

Cole Swartz · Answer

Curious to your estimated ARV?

Corey Reyment · Answer

Seriously thank you x 1,000,000 @Penny Clark! We feel so fortunate to have our BP community looking out for us! I will definitely update you once we start screening! We don't close until July 28th which gives me time to get really organized!

Penny Clark · Answer

Sure @Carrie Reyment, here's a few tips for you.

1. Start by doing a telephone screen when they apply. Ask them for move-in date, how many people will be occupying the property (as well as those age 18 or older) if they've had any evictions and if they have any animals. Make a note of everyone you call back and write down their contact info along with answers to questions above. State there will be an application and screening fee for each adult applicant.

2. Have a pre-written rental criteria that has been reviewed by a Fair Housing attorney. Certain criteria to include might be (credit score of 625+, 3 x income to rent, no evictions, etc.) Sometimes it is helpful to post the most important elements of it in your ad so it help screens out deadbeat tenants who know you are a professional landlord. Give a copy of rental criteria to all prospective applicants. It is also a good idea to include a paragraph in your app saying, "I have received a copy of the rental criteria for my review." Ask your attorney how to word it specifically so it states they have received it and agree to it.

3. Consider these things when you screen. Credit, Income, and rental history.

-Read credit report and immediately screen out those applicants who have multiple late pays, utility collections, judgments, repos, etc. Ignore medical collections, bankruptcies and foreclosures; these tank credit scores but are usually not a risk for most landlords like late pays.  Look at debt to income ratio - you don't want to rent to someone with a great score but can barely meet their minimum payments

- Income should be stable (employment same field at least two years) and 3 times rent (remember taxes are taken out of the gross). If credit is subpar to your standards then income better be high to compensate for the risk

- Ask both current and previous landlord two questions: Did they ever pay rent late and what were the dates? Were these tenants ever issued three day notices and for what reason?

You do all this and you'll weed out 90-95 percent of the deadbeats out there; they won't even apply.

I have lots of other tips from blog articles I've written but can't fit them all in this post. Feel free to PM me and let me know how it goes with your search!

Corey Reyment · Answer

Thank you @Penny Clark! I have recently listened to bp podcast 83 with Marcia Maynard about landlording and have printed out her phone interview questions to pre-screen tenants before showing them the property. Do you have any specific tips or secrets (besides of course calling references, checking their court records, etc) that have worked really well for you?!

Penny Clark · Answer

@Carrie Reyment, Congrats on your first deal, but I second the importance of screening your tenants well or all that healthy cash flow will go down the drain!

Best of luck to you!

Our First Deal! Are we missing anything?

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