All Forum Posts by: Anthony Dooley

Lease the property for 1 year from the seller with an option to purchase for an agreed upon price. Once completed, exercise your option to buy it and then immediately put it on the market to sell. Or you could do 100% owner financing with the seller for 12-24 months. The deed is in your name and they are the lien holder. Once the rehab is completed, market the property for sale. At the closing, the lien holder gets paid out the balance of the loan due, just like a bank mortgage would be paid prior to the ownership transfer.

Look at it as individual units and it may be easier to make sense of. $350,0000 price divided by 15 units is $23,333 per unit. Calculate the annual income of one unit and determine if you think it's a good deal. Sounds good to me, but I don't know your market or location. If the cheapest unit rents for $600 per month, or $7200 per year then it's a great deal.

CAP rate, or capitalization rate, is the return on your investment if you paid cash for it. The higher number of a cap rate, the lower the price you can afford to pay for it. An 8 Cap property is less expensive/valuable than a 5 Cap. A Class A property will have a lower cap rate, which means you will have to pay more for the property. However, the class A property will most likely appreciate in value and be more desirable to a buyer in the future than an 8 Cap.

To your other point, real estate investing is not a passive endeavor. If you want a truly passive investment, the U.S. stock market is passive. You cannot buy real estate and expect the best property manager in the world to care about your deal more than you should care. You must be involved. The two fastest ways to lose money in real estate is bad contractors and bad property managers.

Here is what I think. You are making a lot of assumptions. If your ideal actually worked, every Veteran in America would have already been doing this. Many have tried and learned what you have not yet learned. You cannot be 100% leveraged on a retail priced home, rent it out for retail price, and expect to make any money after expenses. There isn't enough margin. If nothing ever breaks, if the tenant always pays, if property taxes and insurance don't increase, etc you may make a few hundred dollars per month. This will not make you wealthy unless you can scale it x 10 or more. I don't expect you to follow my advice, but you asked. This plan looks good on paper to you, but it doesn't work. 

The concept is that the Trust owns the property, not you. Banks usually require an LLC for commercial loans, so I don't know why you would say they are looked at negatively.

It's better to have $600 per month in positive cash flow, with low to no taxes, is far better than $60K from the sale of a flip, which you will pay 15% Federal at a minimum plus cap gains at the state level. 

This calculator is terrible. If I used it, I would never buy a property. The mortgage, or debt service, is not an expense. An expense is property taxes. Why? Because you can't avoid it. A mortgage is optional and it ends at some point. Repairs are expenses. Based on this crappy calculator, you should probably buy it because the actual income and expenses are better than this predicts. Income minus expenses is NOI. NOI divided by you down payment is your cash on cash return. Do this on a note pad with a calculator. If you like the answer, buy it. If not, renegotiate or pass.

You are over paying. I wouldn't buy it. What cannot be assessed is the realistic projection and local perception of the location of the property. If you hold it for at least 10 years, you would probably not lose money. The question is, can you invest in something else that will return your money in less than 10 years?

Only you can answer this question. Know your market and farm neighborhoods that you know will cash flow with the type of tenant you are looking for. You set the criteria and then shop your market for houses that meet the criteria. Every investor will have a little different criteria. BTW, I have evicted "white collar" tenants too. The type of job people have doesn't determine if they will pay.

Sounds legit. If I liked them and didn't get a weird vibe from them, I would rent to them based on what you shared. It's an interview and you get to decide if they passed.