All Forum Posts by: Alex Boyce

Hey BP, @Brandon Turner , @Joshua Dorkin!

In a recent Podcast you talked about Gary Keller's "ONE Thing". I've started reading it and am on the Chapter about Discipline, where he advices to form a habit around the ONE Thing that will get you the most success. "The trick to success is to choose the right habit and bring just enough discipline to establish it."

What ONE daily task or habit has gotten you the most success in real estate? 

Will Pritchett good advice - getting my personal finances in order is priority number one so I can be "ready to pounce" Karen S. that makes perfect sense. I'll stick with buy-and-hold! Glad I posted the question - thanks for the responses!

Hey BP, Seeking some experienced advice on strategies when starting... I'm VERY excited about REI but am in the very early stages: getting my personal finances in order and learning as much as I can. Currently renting a townhouse, and not much in the way of assets. My end goal is a portfolio of buy and hold properties so I can live off of the cash flow. If there's one thing that I've learned about B&H, it's a VERY slow game. Which I love, but it's also frustrating because I'm itching to get started investing now. I'm still a year or two away from having enough to buy a house-hack-ish property (looking for a primary residence with a mother-in-law suite to rent). I've been curious about learning to flip to build cash reserves, then use that to buy long-term holdings. But it seems like there's a lot to know and a lot that can go wrong with flipping. Does it seem like a bad idea to learn how to flip just to get started, particularly if that's not what I want to ultimately do?

Welcome Mike Morgan I'm also in the winter garden area. Still getting started myself. I'm always interested in meeting other local investors!

I agree with you. This is how I built my model at first, but then when I tried the BP Calculator I noticed a few metrics were giving me different results

Definitely - I probably should've been more specific in my original post. Sorry!

For example, let's say my pro forma uses the following assumptions, excluding any vacancy:

• Monthly Rent: $2,000
• Monthly Expenses, excluding mortgage: (Taxes, Insurance, HOA, CapEx, etc): $1,750
• NOI: $1,550
• Mortgage Payment: $1,300
• Monthly Cash flow: $250

Now if we assume a 5% Vacancy Rate = $100 and include it as a negative revenue, 

• NOI Margin (NOI / Income): 76.3%
• Cashflow Margin (Cashflow / Income): 7.9%
• Gross Rent Multiplier (Property Value / Annual Rent): 7.24
• 2% rule-of-thumb (Income / Purchase Price): 1.15%
• 50% rule-of-thumb (Total Expenses / Income): 23.7%

If we instead assume the vacancy rate is an expense:

• NOI Margin (NOI / Income): 72.5%
• Cashflow Margin (Cashflow / Income): 7.5%
• Gross Rent Multiplier (Property Value / Annual Rent): 6.88
• 2% rule-of-thumb (Income / Purchase Price): 1.21%
• 50% rule-of-thumb (Total Expenses / Income): 27.5%

I realize it may not seem like a material difference in this example, but I imagine in some scenarios it  could lead you to make different decisions just based on how it's classified. Just figured I would ask for clarification!

Thanks,

Alex

This is legitimately the best post I've read on BP - how inspirational! If a 12 year old can do it then so can I! Thank you for sharing - look forward to hearing what happens next!

Hey BP,

I'm currently renting and looking to buy/house-hack my first property. This particular house has a garage apartment, so the plan is to move into the garage apt and rent out the house. I can also Airbnb the apt on the weekends and crash at a friend's place. 

Purchase Price: $260K 

Downpayment: 3.5% via FHA loan = $9,100

Closing Costs: $7,800 (Asking seller to pay)

Rehab: $0 (House is in excellent condition, with limited/no rehab/upgrade potential)

Total Cash out of pocket: $9,100

Annual Rents: $36,000 (2,200/mo from house [utilities included], 800/mo [8 nights/mo] from Airbnb = 3K/mo)

PITI: $19,417 (30 year fixed @ 5% - estimate, need to find a lender)

HOA: $2,328 (includes cable)

Utilities: $5,160 (Electric, Gas, Water, Trash, etc)

Other: $6,120 (6% Repairs, 6% CapEx, 5% Vacancy Rate)

Cash flow: $4,775 ($398/mo)

Cashflow Margin: 13.3%

2% rule: 1.15%

50% rule: 41.8%

Cash-on-Cash: 52.5%

Cap Rate: 8.1%

Gross Rent Multiplier: 7.22

Debt Coverage Ratio: 1.3

Thoughts? The model varies a lot based on how much I can rent out the garage apt (breakeven at ~4 nights/mo)

@J Scott Great article. This was one of the firsts posts I read on BP and it's an awesome place to start.

I noticed the BP calc's list Vacancy Rate as an expense, and not as negative revenues as you have. This causes a difference in almost every metric that involves revenue. I would think the way you have it is more "realistic" when you experience a vacancy, but the calc's seem to be more "industry standard". Thoughts? Which is better?

Jeff Copeland thank you! That was very descriptive, thorough, and helpful! 👍

Hey BP, I'm new to real estate investing, and wanted to get some opinions on closing costs. I have already bought and sold a primary residence, prior to really getting into doing it as an investment. Made a profit, but was primarily due to market appreciation. The reason for my question is I feel like paid way too much for closing, both when buying and selling. I've seen a few other closing assumptions used and they were less than what I paid: Buying - Purchase Price: $135,000. Closing costs: ~$7,000 Selling - Selling Price: $180,000. Closing costs: ~$14,000 Did I get ripped off? Is this a function of my real estate agent? Should I find ways to lower this or suck it up? I have the final HUD somewhere that shows the detail. I'll see if I can dig it up for specifics. Thoughts?