All Forum Posts by: Andrew Sampino

Hi All,

I have recently starting looking into buying again and I wanted to get some feedback on the analyses that I'm doing. I am considering living in a duplex and renting the other half out (who isn't). My max purchase price is $275k, but I'd like to be far under that. Due to life related circumstances, I will probably end up staying in the house for at least 2 years, then maybe move maybe stay. Hard to tell at this point.

I essentially just use a spreadsheet that I made to calculate some key metrics. Below are some screenshots of the spreadsheet with a property I was looking at. Its a 2x 1bed/1bath duplex in the Middletown, CT area. I am confident in the estimated rent, but I just threw in 10k into the rehab cost field as I'm not sure how much work I would have to put into it. One of the units is currently occupied for $850/month. In the spreadsheet I have the math done out for both when I am living in it and when I have the property fully rented. Based on this math, this property is not something I would jump on for its list price. Even if I fixed up the units to be very desirable I don't believe I could increase rent by more than $100/month each. My questions about all of this are as follows:

1. Does my analysis look at least semi accurate? I tried to be conservative and overestimate property expenses, but I'm not sure if I went too far (or not far enough!). Is there anything obvious I am missing?

2. I've done some of these analyses before for central CT properties and I am not very impressed with the cashflow numbers. The results for living in one half fall far short of "living for free" and when fully rented they often barely break even. Is this the reality of trying to buy a small MF in CT for less than $300k, or are there substantially better deals out there? I've been relying on MLS searches, is it realistic to expect to eventually see a strong cash flowing property come up? If so, what should I consider a decent deal for central CT, $100/door? More? Less?

3. I like the idea of having a mortgage subsidized by rent, but I'm open to other options as well. I would consider buying a single family home if a "live and flip" was an option or perhaps if I could rent it out for enough after moving. Is there a particular strategy that seems to fit Connecticut's market? Are there particular strategies that in general don't work in CT? Are broad generalizations like this foolish?

4. It seems as though CT is a seller's market at the moment with the flood of homebuyers from NY. Is it wise to wait this out, or is now as good a time as any?

To be honest, I haven't done the math on a ton of properties, so maybe my inexperience is stifling my view of the opportunities out there. However, I just want to know that I'm not wasting my time. I've been discouraged about real estate to some degree because someone I know to be pretty financially intelligent has had a lot of headache and little success with his first few homes. Granted, he lives in a different state.

Let me know if any clarification is needed. Any and all advice is appreciated!

My brother recently bought a house in Conroe, Texas. Single family rental in nice condition, it only needed about $6000 in repairs. He got a hard money loan for 152k to finance the property and repairs. The original appraisal during the due diligence period, which was "subject to repairs" came in at 197k, but the appraisal after repairs dropped to 187k. The second appraiser said the first appraisal wasn't legitimate because the comps were in an HOA and this house is not. Now the bank that my brother is trying to refi through says they need $8000 upfront (includes closing costs) to give him a 80% LTV loan. He doesn't have $8000 laying around, me and my dad may lend it to him if it comes to that but we're trying to find other options first. The only things I can think of is selling now, but this was supposed to be a long term rental so we'd like to avoid that, and putting a little more money into the house so it will appraise for more. The issue with the second one is if it doesn't work as planned then he just digs himself into a deeper hole. Does anyone have any ideas on some other options my brother may have?

@Brian Garcia Here's a link to some info on the upfront fee and PMI when dealing with an FHA:

https://www.whatsmypayment.com/fha-mortgage-insura...

Basically, there's an upfront fee of 1.75% of the loan value, which I believe you can actually role into the loan. Then the annual PMI payment is a small yet significant percentage of the loan value.

Again I've never gotten an FHA loan first hand so you'll want to fact check, but this seems consistent with what I've seen on other sites as well.

As for expenses, I would ask someone more experienced than me since that number depends on a number of factors, especially age of the property. However, from what little I have seen people seem to estimate between 5%-10% of gross rents for a first-off analysis. Of course you'll want to get actuals if you decide to go further with the deal.

This article has useful tips on how to find more accurate data for expenses rather than using a simple percent.

https://www.biggerpockets.com/renewsblog/2014/12/0...

@Brian Garcia It doesn't look like you're putting 20% down, have you accounted for private mortgage insurance? It also looks like you've only allotted 2.5% of gross rents for repairs; this seems low from what I've seen. That being said I'm a full fledge rookie with no experience so take what I say with a grain of salt. I just figured I'd comment on what stood out to me.

@Tyler Hodgson Hm, we didn't realize that it would be different from the loan he has as an owner occupant now. Does that interest rate (the 4.875% you mentioned) come from that fact that is an investment property or that it's not his primary residence or another reason I'm not seeing? The 5% closing cost came from a quick google search. We read that the costs are between 2% and 5% so we were being conservative. We got the taxes and insurance from the MLS.

Hi everyone, I recently posted about a deal that my friend was considering in Dallas, TX; that post is below and labeled "original post". We've looked at the numbers a little more closely and changed up the strategy a bit and would like to know what you all think. Here's the revised deal: Purchase Price: $340,000 Down payment: $68,000 Closing Costs: 5% $13,600 Square footage: ~2500 Bed/bath per unit: 3/2 for both Current rent: $1375 and $1300 but we would raise them both to $1500 each over 2 years Monthly taxes and insurance: $525 Estimated monthly mortgage payments on $272,000 30 year loan (80% LTV) with a 4% interest rate (which he is confident about): $1300 Estimated monthly maintenance costs: 5% of gross rents ($150) Capex: 3% of GR ($90) Vacancy cost: 5% of GR ($150) Management fee: 2% ($60) (he will manage it himself for 5-7 years when he sells it) Garbage/heat: $0 lawn care: $100 Misc expenses: $75 Total monthly expenses: $2450 Monthly cash flow before rent raise: $225 Cash on Cash return before rent raise: 3.3% Cash flow after rent raise: $550 Cash on Cash return after rent raise: 8.1% We've only alotted 3% for capex because he plans on selling it now in 5-7 years. I got him to account for vacancy, lawn care and maintenance as well. Let me know what you guys think. I know rationalizing away expenses isn't the way to get a good deal but these seem reasonable to us. Let me know if this is a realistic projection or if we're making bad assumptions. Also thank you to everyone who replied to the original post, there was some very helpful info in there. Andrew =============ORIGINAL POST============= I have a friend who is considering purchasing a duplex in Dallas TX. He refuses to budget for vacancy and capex. I'm trying to convince him to be more conservative but am having a hard time since I really don't have much experience, so I decided to turn to the collective wisdom of the nice people of biggerpockets. In his defense, this is my first analysis, so please let me know if I miss anything. Here's the deal as he wants to do the analysis, any input is appreciated: Listed Price: $360,000 Square footage: ~2500 Bed/bath per unit: 3/2 for both Current rent: $1375 and $1300 Monthly taxes and insurance: $525 Estimated monthly mortgage payments on $288,000 30 year loan (80% LTV): $1500 Estimated monthly maintenance costs: 5% of gross rents ($134) Capex: 0 Vacancy rate: 0% Garbage/heat/lawn care: 0 (not sure if tenants pay these. Is it realistic to push these off on tenants? If not what are average costs for this area?) Total monthly expenses: $2159 Monthly cash flow: $516 Cash on Cash: 8.6% We don't have actuals on expenses yet, so for now we're trying to hammer out a good estimate. I believe tenants pay electric/water. They are long term tenants and he would plan to keep them and maybe increase rents slowly over the next couple of years. Let's just assume he pays full price. I'm concerned with the deal because the expenses he assumes are low especially since he plans on keeping the property for 20+ years. Additionally the property yields negative cash flow with the 50% rule. Does anyone have any thoughts on this?

James K. Haha, yes I suppose won't look back on my investing career and count proper spelling among my most valuable learned skills. Hopefully at least.

Thank you everyone for the responses, it is much appreciated. It was also quickly pointed out to me that I don't know how to spell tenants. Very embarrassing! My apologies.

Greg Routen Thanks so much for the reply, Greg. We're trying to be safe and not get into a bad deal here so I appreciate the input. If you don't mind, could you elaborate at all on your analysis? What exactly are we missing out on? Any info would be helpful.

Hi everyone, I have a friend who is considering purchasing a duplex in Dallas TX. He refuses to budget for vacancy and capex. I'm trying to convince him to be more conservative but am having a hard time since I really don't have much experience, so I decided to turn to the collective wisdom of the nice people of biggerpockets. In his defense, this is my first analysis, so please let me know if I miss anything. Here's the deal as he wants to do the analysis, any input is appreciated: Listed Price: $360,000 Square footage: ~2500 Bed/bath per unit: 3/2 for both Current rent: $1375 and $1300 Monthly taxes and insurance: $525 Estimated monthly mortgage payments on $288,000 30 year loan (80% LTV): $1500 Estimated monthly maintenance costs: 5% of gross rents ($134) Capex: 0 Vacancy rate: 0% Garbage/heat/lawn care: 0 (not sure if tenets pay these. Is it realistic to push these off on tenets? If not what are average costs for this area?) Total monthly expenses: $2159 Monthly cash flow: $516 Cash on Cash: 8.6% We don't have actuals on expenses yet, so for now we're trying to hammer out a good estimate. I believe tenets pay electric/water. They are long term tenets and he would plan to keep them and maybe increase rents slowly over the next couple of years. Let's just assume he pays full price. I'm concerned with the deal because the expenses he assumes are low especially since he plans on keeping the property for 20+ years. Additionally the property yields negative cash flow with the 50% rule. Does anyone have any thoughts on this?