All Forum Posts by: Adrian Stamer

If I was determined to follow my expensive dream like this (maybe think of it in terms of wanting to buy an expensive luxury item like a boat or a car) then I would put off acquiring it until I have built a better base of income and savings. Maybe delay the education a couple of years and buy that duplex anyway... then maybe a second and a third. 

With $300k of student debt hanging over your head simply qualifying to buy additional investment properties will be extremely difficult cause your debt ratios will be totally blown out. 

If you love your house I would keep your house not sell it. Get a HELOC and use it to buy properties and then pay the line back down with the cash flow. This is how I personally run things

 Understand completely. That’s why I am saying you aren’t using cap rate properly

 A cap rate of 22% would mean it was an extremely risky deal

 Well again I prefer rents to sales price ratios when doing that quick initial math. But that’s all that it is, quick and initial. Generally it’s aiming for 1% rule and up, so if I glance at a price and see its .5% rent ratio I will skip... but if it’s .9% it’s time to look at the numbers a lot closer. Also if it’s 1.5% then I’m interested but I’m still looking closer because I want to know why. 

Same would apply to 50% rule. If I do the math and the expense ratio to work at the current price would have to be 25% expenses, then it’s generally a hard pass. I look at plenty of offering docs and when an agent tosses together a pro forma and again their expenses only come out to 25%, then you know it’s rather unrealistic which makes the asking price rather unrealistic.

So if you are a wholesaler prepping emails to send to investors, if you are saying 30% expenses then depending on the deal they won’t take you that seriously because your pro forma is unrealistic. Either way, investors always need to do their own numbers, but it’s always a relief when someone sends me a reasonable pro forma versus just the sender thinking they can sell some ********

Well yes of course, the 50% rule is simply taking gross rents, and stating that 50% of this amount is the NOI. Then multiple by 12 (or skip a step take gross monthly rents and multiply by 6) then divide by whatever cap rate you think is reasonable and compare to sale price. Takes 30 seconds and can do it on my phone anywhere right after I get an email alerting me about the property hitting the market

Then if I get a near match then you spend the time to request the real actual numbers, take the numbers you know to be accurate (don’t always trust the sellers), and really tighten everything down exact as possible. 

Rule of thumbs are just a starting point used to save a bit of time and help rapidly filter listings. They are not something you use and take to investors and say “oh this must work because it fits this rule of thumb”

 Okay so write that offer withdrawal somewhere on the Mediterranean and hope I was quick enough lol

 I’m typically operating in a specific geographical location so taxes are always with in a range that is completely corolatted with price. The other numbers are generally within ranges but anyway...

The point I was making when he was saying 30% or 50% rule was you do this to filter through results and then when you find the potentials you actually spreadsheet the numbers and see exactly where they come out. I buy a decent amount of fresh to the market in demand properties so I need to know how much I can offer to beat out competing offers

 I agree, once you analyze enough properties you’ll be able to glance at the numbers and short cut mentally even further. I use rent to price ratios a lot more to filter through deals but I also pay attention to the propert type and class when looking at these numbers and adjust a little each way as needed