All Forum Posts by: Ali Chami

I'm not a real estate expert by any stretch of the imagination. The only reason I have had success in the short time I have been seriously investing is because of local market conditions, both sales of existing homes and rental markets.

REOs can be purchased and completely rehabbed for 20 to 30 cents on the dollar, and renters are lining up. But what does this indicate for the long term? I notice that around the country, the new thing is negotiating short sales, but in my local market it's a waste of time. Just wait for the house to foreclose and you can pick it up for a fraction of what the bank will approve for a short sale. Rent has gone up significantly, by over 20% in many areas. While this is great, are these conditions usually a prelude to something bad for someone who is holding properties?

Hello all, I was looking for some advice or input on a RE transaction. I began buying SFRs and rehabbing them with the intent to hold them for a return (also, I always keep my options open). So far, so good. I have 5 under my belt and the renters are lining up, thankfully. On average, my final cost after acquisition and rehab is just under 20K per property (all appraise at 60 to 70K). I am collecting 800 to 900 monthly rent per property. Taxes and insurance range from 2,500 to 3,500 annually on each. The return is very good (25 to 30% ROI on each).
On one property, a prospective tenant wants to purchase it. We agreed on 55K purchase price, with 10% down. When I ran the numbers, however, on a 30 year note it does not look very good for me if I hold the note. Of course, there is the option of selling the note later on, but there is no guarantee. Renting it out would be a much better return for me.
Then I re-ran the numbers based on a 15 year note at 9%. I proposed this to the tenant and he was quite pleased (even at a 15 year amortization, his PITI would still be lower than the 850 rent). The monthly payment on the note is a little less than what I would net if I rented it, but not by much.
But is my return now 9% (the finance rate)? If not, how do I calculate the ROI? If this works out, I would be in a position where I probably would not want to sell the note. Any insight or advice? What are the perils of seller financing? Part of the requirement for financing (assuming it is allowable) is that I draw the payment directly from the buyer's bank account every month (spoke with the branch manager at my bank and she told me that we can do this at no cost).

Thanks,

Ali

There are not many recent sales (other than other REO deals). The numbers I gleaned from realtors were very aggressive in my view, but perhaps they are just telling me what they think I want to hear. On average, home plus (complete) rehab is around 18K (all brick, 3 BR, full basements). They rent out for 850/mo, with taxes and insurance appr 3400 per year. Doesn't take a rocket scientist to see that I am getting them well below market value. BoA did a desktop appraisal for a HELOC I was going to take out on one (came is at 66K). These homes could possibly retail at 66K or there abouts, but who's lending to the average Joe?

Thanks for the reply and helpful link. I guess I just experienced an epiphany. The more I think about it, it seems the best thing is to sit on them and rent them out. The ROI is very good, and the value is likely to increase in the coming years (once the mortgage industry is revamped and loans are again available there is a good chance values could increase more rapidly). The cost is realized in 3 to 4 years net returns.

I have purchased a number of REOs at very good prices (no appraisal was ever needed because they were all cash deals). I have rehabbed them and rented them out. How can I get a fairly accurate value on each? Is it even possible? I used some of the links on this forum to get values and if these are correct, then I'm a very happy man. I spoke to different realtors and their numbers were all over the board. Should I even spend the money for appraisals?

Thanks

Hello. I am looking for some help with numbers. It seems like there are REI who speculate on an increase in values, and those that invest for cash flow (and both together would be nice). From an investor's perspective, what return would you want to see if you bought a property using cash. And would that be net return? For example, if a SFR costs $25,000 (purchase and rehab) and it brings in $800/month rent, and taxes and insurance amount to $275/month, is this something worth parking your money in? In addition to this, the $25,000 paid is maybe 40 to 50%. Obviously, there is no guarantee to rising values, so would you borrow against it, or be content with the ROI?

Thanks

Thanks for the warm welcome. I have purchased and rehabbed enough homes to where I have the important things under control (acquisition costs, labor and material are all kept well under control). In fact, when I really began in earnest recently, I had planned to pick up as many homes as I possibly can (all free and clear) rehab, rent, and wait.
As I began seeing how effectively I can do it, and when I began looking at the numbers from investors' perspective, I see there is great potential for me to pick them up and sell them to investors (the margin is there for me to deliver them to investors at good prices). This is what I am planning to do next. I think I can appeal to investors looking for cash flow.

Not many, 10 so far. I see (or at least I think I do) potential to reap financial benefits in this market. Knowledge and information are key, and that's why I'm here.

Thanks

Hello all. I am located in SE Michigan, where I purchase and rehab SFRs, both holding on to some and selling others. I'm glad I stumbled on to this forum. It seems there is quite a bit of info and very knowledgeable people eager to dispense advice and share experiences.

AC