All Forum Posts by: Amr Omar

If you're looking to invest as a long-term buy-and-hold property, one recommendation is to check the rental listings (Zillow rentals) and see how that market is doing. 

There are a number of investors that went new-construction in DFW in fast-growing areas, like Princeton & Anna, but are struggling now to get their properties rented at the rents they were projecting.

@Lonniel Ingram, @Bill Gulley, @Darrell Shepherd , thanks for the feedback and input!

Darrell, you nailed it. The interest in this deal is strictly via the premium purchase price.. there is no other interest, thus making the 700 monthly payment 100% principal reduction.

Paying the premium is done for 2 reasons: 

(1) Essentially negligible down-payment, which frees up cash for another deal 

(2) Interest-free monthly payments

The final monthly payment would cover the balance, so it comes out to to about 1200 (a baby balloon). 

Bill, sorry if I wrote the initial post poorly... the due on sale clause is explicitly mentioned in the contract, not excluded :) 

The reason I'm interested in pursuing this deal is because I'm getting married in 7 weeks (is this real life?) and a rented out room won't work for us. We've looked at other rentals and the one we're interested in would put us at a 950/mo monthly payment.

The condo is in a great area off of Spaghetti Junction (285 & 85), so it's convenient to get to anywhere in Atlanta very quickly. We don't plan on staying in the condo for less than 4 years and our only exit strategy is to sell the unit when we look to move. If the HOA comes back later on and says they'd like to open the units up for rent, then that's cool, but we're not counting on that exit strategy.

Darrell, I really appreciate your comparison of the premium price to a standard interest rate! Makes a lot of sense and although I understood the strategy, I didn't think of it in the same way. Thanks!

That all being said, how does this deal look? Would you do it in my place? Would you do this as the seller?

Hey guys, I've been looking at duplexes to house-hack in the area, but the owner of the condo that I'm currently renting is looking to sell and we've been negotiating on a possible purchase now. I know condos aren't the greatest investment because of the HOA fees, risk of special assessment and HOA fee increases, and because they don't appreciate too well. The attractive thing about this offer is it would be seller financed with a minimal down payment. The minimal down payment allows me to be able to still invest in a multi-family this coming year with 20% down, except both units would be rented out. Here's the deal: Purchase Price: 94k Down: 1k Monthly: 700 132 Payments Late Fee: 35 No Pre-Payment Penalties Due on Sale Clause Fully Furnished HOA: 249/mo Taxes: 656/annually Insurance: 350/annually (covers full price) Comp condo sold in September for 85k and another is pending now at 75k. I haven't factored in closing costs yet, but most of that will center around title transfer only. Current owner owns title free and clear, no existing mortgages or liens, no back taxes, and currently no insurance on the unit. HOA doesn't allow renting of the units. Only reason I'm able to rent now is because I'm renting a room and the unit is owner-occupied.

Thanks @Logan Allec! Much appreciated.

Yeah, although the deal I'm looking at won't "cash flow" while it's owner occupied, paying $200/mo into a maintenance/capex savings, far outweighs the $850/mo rent that goes into a never-ending black hole.

Thanks @Roy N.! That really helps out!

Yes, I included the Cap Rate here, but I only use it as a comparison between properties, not necessarily part of the decision making of whether to pursue a property or not. Cash Flow & Cash-on-Cash ROI are what I'm really after.

In this scenario, I would be paying $161/month to live in one side. Whereas, if I keep my current situation, I'd be paying $850/month to rent (and building 0 equity).

@Logan Allec, thanks for the rule of thumb! What about for house hacking duplexes? Does the rent of the other unit need to cover a certain percentage of your monthly expenses, say 55 - 65%? Looking at a deal right now that looks great with regards to cash flow and Cash-on-Cash ROI when both units are rented out, but not as great when it's owner-occupied.

Hi guys! I'm looking at a duplex deal right now and will post the details below. When I analyze the deal assuming both units are rented out, I come out with a 6.7% Cap Rate, 10% Cash-on-Cash ROI and $168/month/unit cash flow. Cash flow and Cash-on-Cash ROI being my top goals as a new investor, with a $125/month/unit target and a 10% Cash-on-Cash ROI target.

My goal however is to house-hack and live in this unit with my wife for at least a few years. When I analyze the deal as a house hack, I come up with a 3.2% Cap Rate, -4.8% Cash-on-Cash ROI and a whopping $ - 80/month/unit cash flow. We would be losing $161/month in this scenario... however if we looked to rent, we'd probably be paying $800 - 1000 in the area.

My big question is: How do you analyze an owner-occupied deal? Did I go about this correctly? Does this deal flop since it doesn't cash flow while it's owner-occupied?

When I analyzed the house-hack option, there were two changes I made: (1) rent was adjusted so that only one unit was income-producing, (2) capEx, maintenance, property management (which wouldn't be utilized since we'd be living there, but still included it in the analysis), and vacancy were adjusted to be the respected percentage of the new gross annual income.

Here are the Details:

Purchase Price: 169K

Closing Costs: 3.1K

Initial Repairs Needed: 3K

Down Payment (20%): 33.8K (could also consider going FHA on this)

Monthly Rent: 800/Unit

Gross Annual Income: 19,200 (both units)

Taxes: 170/annually (all data points at this, however I really need to investigate this number...)

Insurance: 400/annually, CapEx (10% of Gross Income) = Maintenance = Property Management = 1,920/annually, Vacancy (8% of Gross Income): 1,536

Annual Expenses: 7,866

NOI = 11,334, Cap = 6.7%

P&I: 609/month

Monthly Cash Flow = 336, Cash Flow/Unit/Month = 168, Cash-on-Cash ROI = 10.1%

Peter Kush , you're right! Cash-on-Cash ROI is right and factors in P&I, but purchase cap wouldn't: Purchase Cap: (1200x12) / 170 = 8.5% My bad for not getting this right the first time. :/

Rob Krach , thanks! Yeah I missed it at first, but caught myself in the replies! Ernest Quallis , I think it comes back to your goals and your market. A cash-on-cash ROI of over 25%, cash flow of $125/unit, and all with only putting down $23.5k would be a good deal for me. Just my two cents.

Looks like this noob is mixing up Cap Rate with Cash-on-Cash ROI :/ Cash-on-Cash ROI: (500x12) / (15k + 6k + 2.5k) = 25.5% Purchase Cap: (500x12) / 170k = 3.5%