All Forum Posts by: Alex Kies

Thanks @Gordon Cuffe, I'll check them out!

Great, thank you all for the insight!

Hey there BP,

I just bought my first SFR with a Conventional Loan (20% Down, 30-year, Fixed-Rate) and will have some great equity through the recently completed rehab of the property.

I've noticed that when the BRRRR Strategy topic is covered on the podcasts and blogs, it seems that the most common practice for the Buy section is to use Cash or Private/Hard Money- I haven't heard or read of anyone buying a property with a Conventional Loan, then after the seasoning period, Refinancing it. 

I would love to start utilizing the BRRRR Strategy on this first property so that I can start picking up more properties- is there any reason I shouldn't convert my Conventional Loan to a Cash-Out Refinance?

Thanks everyone!

Will definitely look into it, @Account Closed. Thank you again and best of luck!

Right on, I will keep that in mind and keep up the search. Thanks for your insight on this, @Account Closed

Thanks @Ray Johnson, for the insight. I've got a great agent in the area as well as a reputable Property Management company. I was born and raised in this area, so I've got other objective contacts with many decades of experience to assist with Due Diligence. I've also got my loan Pre-approval process underway and have been given the above numbers (5%, 1-point) as what my interest rates will be. My minimum Cashflow would be $200/month. 

As for the low end tenants, @Account Closed, I definitely don't want to go down that road- I'd rather not deal with low quality tenants. For that, I am looking closer to the state university in the town and farther away from the quasi-warzone area where all the $20k properties are. I will also be very clear with my property manager about tenant screening (prior evictions, criminal records, etc.). 

Any words of advice for avoiding low quality tenants?

Definitely hear you there @Account Closed, do you have any particular insight on how to avoid this with cheaper properties? Are you directly referring to issues with bad tenants or issues with major property expenses, or something else?

Thank you @Brent Coombs, @Dennis M., and @Elise Hazzard for the insight!

For taxes, I am putting Property ($690) and Land ($1,770) together to get the $2,400/year in taxes (they actually add up to $2,460). I got these numbers from realtor.com because the county assessor does not list these figures online. Would I not be paying for the land tax- only the property?

And yes, after a bit of digging I did find that the insurance would be more in the $40-50 range- so that's good!

After adjusting the Insurance and monthly CapEx, I am cashflowing at about $96/month- if the taxes were not as high, it would definitely help!

Here are the numbers for the property:

Overview

Monthly Income: $900.00

Monthly Expenses: $961.09

Monthly Cash Flow: -$61.09

Pro Forma Cap Rate: 3.54% 

NOI: $2,016.00

Total Cash Needed: $16,225.00

Cash on Cash ROI: -4.52%

Purchase Cap Rate: 3.54%

Property Information 

Purchase Price: $56,900.00 

Purchase Closing Costs: $2,000.00 

Estimated Repair Costs: $0.00 

Total Cost of Project: $58,900.00

After Repair Value $56,900.00

Down Payment: $14,225.00 

Loan Amount: $42,675.00 

Loan Points: $0.00 

Loan Fees: $0.00

Amortized Over: 30 years 

Loan Interest Rate: 5.000% 

Monthly P&I: $229.09

Expenses

Vacancy $54.00 (6%) 

Repairs $90.00 (10%)

CapEx $198.00 (22%)

Insurance $100.00 (11%) 

Management $90.00 (10%) 

P&I $229.09 (25%) 

Property Taxes $200.00 (22%) 

Total $961.09 (107%)

Financial Projections 

Total Initial Equity: $14,225.00 

Gross Rent Multiplier: 5.27 

Income-Expense Ratio (2% Rule): 1.53% 

50% Rule Cash Flow Estimates 

Total Monthly Income: $900.00 x50% for Expenses: $450.00 

Monthly Payment/Interest Payment: $229.09 

Total Monthly Cashflow using 50% Rule: $220.91

Thanks for the insight there, Thomas. I posted one of my analyses here for anyone to check out:

https://bp-v-newproduction.s3.amazonaws.com/uploads/calculators/shared_report/report_file/434f806a-c6c8-4716-9a64-35e61a2397d3/report.pdf?X-Amz-Expires=601200&X-Amz-Date=20180901T024801Z&X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIAJ2DXENEECSJVAAQA/20180901/us-east-1/s3/aws4_request&X-Amz-SignedHeaders=host&X-Amz-Signature=b8857649cd7fde5b88e88972c3c353baa462972317053da4bbc716089aab598a