All Forum Posts by: Anton Ivanov

@Luke Respondek

There are a lot of questions you need to answer before deciding whether this is a good deal or not:

• "The house is on one of the worst Streets in the town" generally, I would never buy a property in the worst part of town (meaning C/D areas). The tenant problems that usually come with this will far outweigh any benefits in terms of returns
• Are you going to re-finance it after purchase/rehab and after you pay off your line of credit? You didn't mention this, but re-financing into long-term financing will significantly increase your ROI/IRR
• What do you anticipate the vacancy rate to be? 5%? 10%? Given that you'll likely have sub-par tenants, I would budget a higher amount to account for evictions, late payments, tenants just skipping town, etc.
• What do you anticipate your maintenance/repair expense will be? Will depend on the shape of the house and its age. Again, the worse the tenants are, generally the more wear and tear you'll have in the long term
• What do you anticipate your capex/replacement reserve should be? This will depend on the age of major systems like the roof, HVAC, Water Heater, etc. Are there any significant plumbing, electrical or structural issues you'll have to address eventually?
• Will the county/city where the house is located re-assess it during the sale and increase the tax bill? That's something you should check and use "projected" property taxes if this will happen
• Does your property manager have any other fees beyond the monthly management fee? Leasing fees? Tenant placement fees? Lease renewal fees?

Hope this helps you start researching more...

@David Morehead

Just my 2 cents, but there isn't anything in any of these seminars you can't learn in a few weeks for free yourself (or by buying 2-3 books for around $10 each + reading free info on sites like BP).

Not trying to talk you out of it, but for $10k you can actually buy a rental property in some parts of the country, so I would seriously consider the value you're going to get.

@Jacob Gallup

Not exactly an answer to your question, but the "Currently there are plenty of new homes never used ready to be purchased and rented out", combined with the fact that an existing owner is selling one of these after just one year got me thinking whether this is a good area to own rentals at all?

If there overabundance of new housing? How long are your expected lease up times/vacancies? If the city/area growing in terms of economy and population?

There may be nothing wrong, but just to be on the safe side, I wanted to point out that not all new construction homes are a good investment.

@Ian Hamrick

You can also just search the website for a particular term (at the top). Like if you don't know what a "cap rate" is, search for it and then look through the Blog Posts. There will probably be an article describing that specific term in detail.

It will take you a few days to get through all of the info, but it's worth it to understand what you're doing.

@Ryan James

Utilities and landscaping still missing - see my previous comment as to why you may want to factor them in.

@Logan Koch

Here are my observations/notes:

• Insurance at $2,050 - this way too much for a SFR. Shop around, you should be able to get a property insured for less than $800/year
• Yearly maintenance - this seems low. Assuming there will be several students sharing this property, and the nature of your tenant, I'd assume that there will be much more wear and tear on your property than $83/month. This is especially true, since you can potentially have 3 tenant turnovers a year and will need to do some sort of make-ready repairs at each of those times
• Missing vacancy - you're assuming that you'll have to problem renting the property out every semester/summer. What if this is not the case?
• Missing property management - are you going to self-manage this property? If not, you'll need to factor in your PM costs

Hope this helps!

@Naeem Barbour

It's a pretty loaded question, but a simple answer would be that a "good deal" is a property that meets your purchase criteria.

So as the first step, I would focus on figuring out:

• What are your goals with real estate? Cash flow? Appreciation? Some of both?
• What types of properties are you interested in buying and why? I'm assuming it's multi-families, but why exactly?
• What neighborhoods do you feel comfortable owning property in? Low-end areas? High-end areas? Middle of the market?
• What is the condition of each property that you're OK with? Do you want a new construction home? A home that needs a lot of rehab work? Somewhere in between?
• How much cash do you currently have to invest? What type of financing will you be using?
• What is you minimum COC return? ROI? IRR? Cash flow per unit?

Once you start answering these questions, you'll start putting together your property criteria. Then when looking at potential deals, you can compare them to your criteria and see how well they meet your goals.

@Alexandre Medrano

One thing nobody here mentioned is contacting some local property managers. Even if you'll be self-managing, get some contact information for local PM companies.

Then when you're looking at a property, send them a quick email with something like - "Hey, I"m thinking about purchasing this property, how much you estimate you'll be able to rent it for?".

Don't take what they say as 100% truth, but combined with other sources, this will improve the accuracy of your estimates.

@Zahrah Dillard

I'm not sure where you read that using a line of credit for maintenance is a good idea. That doesn't sound smart to me. You should have some type of reserve in your bank accounts used for operation and the maintenance/repair funds should come from there if they exceed that month's rent.

I have these so-called "emergency funds" or "reserves" for each of my 35 units.

@Joe Ellis

My observations:

• Rent to Value (2.18%): is rather high (although not unheard of). If this property is on the MLS, I'd say you may be over-estimating the monthly rent. It could also mean that it needs a considerable amount of work and that's why it's listed for so cheap
• Annual Insurance: you can get this for much cheaper, just FYI. Shop around, you should be able to find something for around $600-800/year based on my experience
• Management at 6%: this is unrealistic. The only time I've met managers who charge this little is in larger markets and with volume discounts (like you have 20-30+ units under management). Most likely this will be 8 or 10% of rent, but the only way to find out for sure is to talk to a few local PMs.
• You may want to check the local landlord laws for billing the tenants back for water/sewer/gas that you pay for the building. I don't think all states allow this, unless you can definitely prove how much each tenant is using (instead of just assuming 50/50). Alternatively, you can just have a flat "utility" charge on their lease - that's what I do in these situations.

Hope this helps!