All Forum Posts by: Ashley Wynn

After reading several real estate books, blogs, and listening to podcasts, I'm still confused on the purpose of cap rate specifically for commercial multifamily properties. If cap rate is based on factors such as property type, location, condition, etc...but expressed as Cap Rate = NOI/Value(purchase price) then it seems that cap rate should vary and not be a set number based on the market because it can easily be manipulated. For example, cap rate could change by simply reducing expenses or by increasing rent. With that said, how do you use cap rate when looking to purchase and sell? It just seems like cap rate should be specific to an asset and not the market. Also, since it's based on the current condition, how is that helpful when analyzing a deal? There is an 8 unit multifamily that's on the market for $224,900 in my area with a cap rate listed as 9.33%. It looks like it needs a lot of updating based on the outside condition (I have not seen the inside yet). Rearranging the cap rate equation, I can determine the NOI is ~$21,000. With rents at 650/unit as stated by the seller (also the current rent rate for the area), that's a gross annual income of $62,400. I can determine from the NOI that either all the units aren't occupied or they're spending too much on expenses. How is this useful when determining if this is a good purchase price considering there's going to be rehab needed and room for improvement? When it's time to sell how do you use the cap rate to determine the sales price? Maybe I'm looking to deep into it, but any clarification would be appreciated. Thanks!!

Pentagon Federal Credit Union. I believe they do 80% CLTV for rental properties.

My husband and I are looking into flipping a property if the finances come through. We would love to hear from other flippers the experiences from flipping your first home. Any advice? Things to watch out for? Was the experience positive? Etc...Thanks in advance for any responses! 

@Alexander Felice @Rylan Rock @Tom Shallcross

Thanks for the responses!! 

Most of the books, blogs, podcasts, etc...that I've read and listened to suggests not purchasing a property for BRRRR more than 70% ARV less the rehab costs. I understand that once you refinance, most lenders will loan up to 70% of the value which allows you pay yourself back the capital you invested or pay off your private lender/hard money loan. However, if you purchase and rehab costs are 70% of the ARV, how do you recoup the costs for closing and carrying costs to truly make these deals "no money invested"? It seems like because of these costs, you truly never get back 100% of your capital invested.

@Thomas Garza, thanks for the insight!

@Jerry Padilla, thanks! I'm going to check them out!

@Danielle Wolter thanks for the response! I definitely haven't stopped looking, but would still need more funds for a purchase and rehab. 

@Thomas Garza. My original reply didn't tag you correctly. Thanks for your response!

@Thomas Garza,

Thanks for the advice! We actually just purchased our primary home this year so there's no equity in it yet. Our previous home we turned into our first rental. We only lived there for about a year and took advantage of 100% financing at the time (wayyyyy before we thought about investing). I have another home outside of my husband that has long term renters and about 60k in equity, but I've had a hard time finding places that will allow me to pull that out in a HELOC since it's not my primary residence. That's why we've been considering using private or hard money lenders since we don't have enough capital now to purchase and rehab properties.

Hello all!

My husband and I are planning to start our REI journey soon. We've been reading tons of books, BP blogs/forums, and listening to tons of podcasts to educate ourselves about the business. We've also joined our local real estate organization which has been helpful as well. So, we've managed to narrow down our investment strategy to BRRRR investments. Want to start off with multifamily units (2-4 units) then upgrade to larger properties like Monopoly. The strategies in Brandon's book 7 Years to 7 Figure Wealth inspired us to go that route. So in essence, we're looking for cash flowing properties that also works as rentals. The one thing we can't seem to figure out is the financing portion. For those that don't have much capital to buy in cash, are you using private lenders? How do you analyze the cash flow for both phases of the process (when paying interest only payments towards private lenders then once the loan is refinanced)? We've used the BP calculators for some properties we've analyzed but find ourselves stuck regarding the financing. Anyone successful with using private lenders for the purchase and rehab costs of properties then refinancing using a conventional bank lender? With using private lender companies, is that seen as a cash buy? Any tips? Thanks in advance!!