All Forum Posts by: Josh D.

@Loic Billiau You are not wrong. Cap rate is exactly what you are looking for if you want to describe NOI/Purchase Price. $10K NOI / $100K Purchase Price = 10% cap rate. At first glance I look at the cap rate, location, and condition/quality of construction to narrow down properties I'm interested in. You can calculate your cash-on-cash return once you know the details of the financing that are available. As @Dean Letfus pointed out the "market price" is irrelevant to calculating  your yield if you are paying a different price (hopefully below market price).

@Alan Davidson I'm still looking for real estate to buy but I think you have to be more creative and create value. The days of easily buying real estate below replacement cost are long gone. We're looking at doing small townhouse developments, partner with builders or developers with track records. I don't think the housing market is going to crash any time soon but the high prices are what they are. I still think you can find diamonds in the rough, off market deals. So I'm focusing on trying to find those off market deals, looking at the MLS is almost certainly a waste of time but I still have searches set up to let me know what is going on in different neighborhoods. Having cash is always good so you have dry powder when you find a good opportunity.

Talk to potential investors, tell them what your business plan is (rehabs, wholesaling, target market, etc) and then bring them a deal.  You'll have a very difficult/impossible time raising a fund without a track record.  The legal costs of setting up a legitimate fund or even limited partnership type structure are also much greater ($20-25K) than starting with a great deal and finding someone to back you on it.

@Alan Davidson I understand what cash-on-cash return is but I think cap rate is a better metric because it reflects NOI relative to purchase price regardless of the type of financing that is used. Cap rate focuses on what you are paying for the cash flow. You can always refinance a property with better terms, i.e. loan to value or interest rate but you can never change how much you paid for it . Tampa has been a good place but we've seen a lot of price appreciation the last couple years which has pushed yields way down. I think the overall economy in Tampa will continue to do well in the future as people continue to move to Florida but I can't find deals like I did a few years ago. I'm actually selling most of my houses because the return on my unrealized equity (pretax) is around 4%.

I agree with @Alex Craig that cap rates are a good metric to start with.  The cap rate is the unlevered yield on an investment property and is useful in determining a property's cash flow regardless of financing used.  Properties can be purchased with cash, or financed many different ways but the operating fundamentals remain unchanged.  This is what makes the capitalization rate a good metric to compare different investments.  Many advertised cap rates on properties being marketed are overstated because income is overstated or expenses are understated, but this is not because there is anything wrong with how cap rates are calculated.  The true income and expenses (and true cap rate) can be flushed out during due diligence.

I don't understand your question. What do you mean by cash on cash deal?

The fundamentals and bottom line definitely matter when buying and holding.  The yields I'm seeing on a lot of residential and multifamily properties in and around Tampa are depressingly low 5-6% caps.  No doubt there are still off market deals to be found but pretty much everything marketed by a broker gets priced to high.  Don't buy a property for the sake of buying a property, you'll lose money.  The real estate market always moves in cycles and it appears to me that we are nearing the top.  I'd be picky and wait for the right opportunity.

@Ekaterina Stepanova

I would fire this TK company fast.  Keeping a tenant's deposit their 2nd month in is very poor business at best and against the law at worst.  As @Ben Leybovich pointed out, those are escrowed funds. If they did not get the tenant to sign something waiving their rights under Florida Statute 83.49 this is against the law (disclaimer: I am not an attorney and none of this is legal advice).  A tenant that has been evicted and owes you thousands of dollars can actually sue you for the deposit and win if the deposit claim letter is not sent within 30-days of them vacating the property.  That his how strict the law is regarding security deposits.

One of the previous posters mentioned the SEC so I am a little confused on the ownership structure.  Do you hold title to this property or are you a limited partner in some kind of syndication?  If you hold title then this TK should be a licensed real estate brokerage as one can not manage other people's property without it.  You mentioned 4-months in one of your posts.  Has it been 4-months since they quit paying?  Has the eviction been filed?  What is the status?  You should be able to look up the case on the  county clerk's website where the property is located.  

If the eviction has not been filed and its been over 1-month, that is another indication your TK is not a good operator.  I'm not sure I'd trust them to evict the tenant.  Good tenant's can definitely go bad, my friend had a tenant that was a pharmacist that just decided to buy a house and break her lease.  But being slow to evict and the whole deposit issue are big red flags.

Next time I would charge them a pet fee instead of a deposit, if their dog destroys something you'll have to go through the deposit claim process which they could (and often do) dispute.  In Florida you're not required to put them up in a hotel but you should abate/refund the days they can not use the unit.  I have done both.   In the past I paid to put a tenant up in a hotel try to maintain a good relationship and be nice even though I wasn't required to.  They recently moved out and did a lot of damage to the house.  I made a claim on their deposit and they hired an attorney and threatened to sue.  Apparently goodwill doesn't last very long.  More recently we tented a small 10-unit building and did not pay for hotels for anyone but abated rent.  Don't pay for a hotel especially if they're bad tenants.

This is easy, offer cash for keys or hire an eviction attorney and get rid of him.  Get him to state he has an oral lease in writing (letter, email or text) with dead husband, then evict him (oral leases are legal in Florida) plain and simple.  If you've never evicted someone I would hire an attorney, typically landlord tenant attorneys are reasonable.  If he is squatting and there is no tenancy then you'll have to do an ejectment and not an eviction.  My understanding is this takes a little longer than an eviction but shouldnt be a problem for an experienced landlord/tenant attorney.  I would definitely check the docket for any prior litigation regarding the tenant and the property. PM if you want a recommendation for an attorney.