Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Ben Hunt

Ben Hunt has started 5 posts and replied 24 times.

Post: [Calc Review] Help me analyze this deal

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

@Nic S.

Hey Nic! Thanks for the response.

So this analysis is completely fictional. As in, I know this isn't a good deal. Which is why I didn't change the purchase price from the listing price. I'm mostly concerned with where I'm getting the input parameters from and how the calculations work.

On the rebuild coverage, wouldn't you just want the coverage to be the purchase price - land value?

Post: [Calc Review] Help me analyze this deal

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

Hi BiggerPockets!

View report


I've decided to do a calc review in hopes to remedy some of the "analysis paralysis" I'm experiencing. There's so many input parameters to analyzing a deal, it can be paralyzing. Especially for newcomers, Capex, Repairs, and Vacancy rates are hard to calculate accurately.

The property I’m analyzing is a Duplex in South Austin Texas. I wasn’t fishing for the perfect cash flow property per-say, rather at this moment I’d prefer be able to determine the quality of a deal easier

I’m going to include where I’m getting value of parameters from so that I can be critiqued in that regard.

Purchase Price: $445,000 (Currently listed price)

  • 2 Units, 3/2 Each
  • 2066 sqft

Amount Down: 3.5% [FHA] (I know this analysis doesn't include me living there).

Rules of Thumb: [From the book on rental property investing]

  1. 2% Rule Test: .79% ($3500 rental income / $445000 purchase price)
    1. In areas like central Austin Texas it seems impossible to get a high % here.
  2. 50% Rule: $1750 ($3500 rental income / 2)
    1. Est. Cashflow @ $1952 P&I monthly: $3500 – (1750 + 1952) = $-202
  3. Right off the bat, using this generalization of expenses I see that I wouldn’t be cash flowing positive and would need to offer lower.

Income:

  • $3500
    • Current rent roll from Realtor.com && Rentometer says this is fair price.

Expenses:

  • Tax: $634
    • o $7613/12 - 2018 Tax assessment according to realtor.com. $8300 estimate from the local online county tax accessor website)
  • PMI: $244.75
    • o Estimated at 0.058% of purchase price – or $55 for every $100K
    • https://tinyurl.com/u9bl48r
  • Vacancy: $175
    • o 5% of monthly rent.
    • o Where: Estimate found in Brandon Turners book.
  • Repairs: $350
    • o 10% (5-15%) of monthly rent.
    • o Where: Estimate found in Brandon Turners book.
  • CapEx: $280
  • Property Management: $350
    • o 10% of monthly rent.
    • o Where: Estimate found in Brandon Turners book.
  • Home Insurance: $102
    • o Quote from Liberty Mutual for $230K of coverage for assets. (estimated rebuild cost).

Returns:

  • Cashflow: $3500 – ($2135 operating exspenses + $1952 P&I&PMI) = -$587/mo
  • CoC: -30.5% LOL (-$7044 yearly cashflow / investment)
    • 1st Year Insurance Premium: $2880 (240*12)
    • Title Fees: $1000 (my lender says this is the max I’ll likely have to pay in Texas)
    • Appraisal: $500 (quote from lender)
    • Lender Fees: $250 (credit report / etc)
    • Escrow, 3-4 Mo Tax & 2 Mo Insurance: $2419 (634*3.5) + (2*240)
  • ROI: See IRR calculation in report.
    • o For this specific property, you would have to bank on appreciation. A modest 2% yields decent returns, ~17%, at 5 years and 5% YoY yields ~40%.

Takeaways:

  1. Running this analysis takes way too long to do on every property. I’m starting to like to use the 2% (or whatever %) rule for quickly screening properties.
    1. What do rule of thumb screening process do you all prefer to use?
  2. For areas like both coasts, the price to rent ratio is absurd. I plan on house-hacking MF in this area to get started and while the cash flow isn’t good, I think it is still better to do than renting and the equity built on the back-end has potential. Afterall Austin since the year 2001, has average 5% appreciation YoY.
    1. Do you guys factor in appreciation, or is it like “icing on the cake”?
  3. It’s hard to do much with a rule of thumb like the 2% rule without setting bars that you are aiming to reach. However, it’s hard to set bars you are aiming to reach if you don’t where the bar should be set.
    1. How are you guys calculating percentages to aim for?

Post: Should you use a real-estate agent for multi-family properties?

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

@James Wise
I won't shy away from saying I'm a newbie, because I am. (This is my first purchase, a house hack).

However, I also won't shy away from reading as much as I can and talking to others more experienced than I for advice. Basically, being well educated before taking any action. 

Post: Should you use a real-estate agent for multi-family properties?

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

@James Wise, well stated!

I hadn't thought about it in the sense that any listings that are already on the MLS will have the entire 6% already allocated. So while I knew that there was a 6% split, I didn't realize that no matter what, if the listing is on the MLS, there will be that commission taken. Then, it's pretty much just motivation for the listing agent to take your offer over others if you went without.

In my case, I'm sending out some mailers to off-market MF properties in the area. If one lead bites, there's no listing agent/buyers agent at this point, should I use one?

Thanks again.


Post: Should you use a real-estate agent for multi-family properties?

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

Thanks @Manny Cirino and @Jordan Moorhead for the responses!

I know that the seller pays the 6% and I'm also aware that by not using an agent does not guarantee a discount of the purchase price.

However, I felt more pressure than I would like for making an offer from an agent when touring a property. It seemed we had our own interest. Mine was to find a good investment and the agent's was to get a good commission.

Like everything, it varies from person to person and I can't project that view on to every agent.

Also, I'm not talking about not using an agent in every circumstance, rather the specific circumstance when there aren't really any properties listed for sale on the MLS.

Post: Should you use a real-estate agent for multi-family properties?

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

@Jason Allen

Thanks, for the response.
Your thought is, unlike small MF properties, commercial property deals are harder to find without a solid relationship with a broker(s).

Post: Should you use a real-estate agent for multi-family properties?

Ben HuntPosted
  • New to Real Estate
  • Austin Texas
  • Posts 24
  • Votes 4

Hello BiggerPockets!

There's a small supply of MF properties, specifically 4-plexes, in the area that I'm looking in and I don't see much value-add from a buyers agent. I plan on house hacking a 4-plex that has some value-add potential.

I'm currently set up on the MLS for a feed of 3 & 4 plex properties, but there's hardly anything on there, just a few listings.
In addition, everything that I've seen on the MLS, I've seen on other sites like Realtor/Zillow/Craigslist and etc.

So, from this, there's not much to manage in terms of property searching. I'm already resorting to an off-market search, so especially in this case, would an agent provide any extra value and 3-6% of the sale value at that?

Also, this would be for my first purchase. I wouldn't want to use one solely because "you're a newbie", but if there's actual value-add that can be had. 

Questions:

  1. Is there enough value-add from a buyers agent in this circumstance to warrant the 6% cost. (or 3% after split)
  2. What would I have to now manage if I didn't go with an agent? What would the difficulty be in making an offer myself?

    Please let me know!

    Best,

    Ben



      Post: What time frame to look at properties for housing hacking?

      Ben HuntPosted
      • New to Real Estate
      • Austin Texas
      • Posts 24
      • Votes 4

      @Rochelle Thea Fabrizio
      Thanks for the input. I just sent all the documents to my lender and will be in communication with him about the points you mentioned.

      Post: What time frame to look at properties for housing hacking?

      Ben HuntPosted
      • New to Real Estate
      • Austin Texas
      • Posts 24
      • Votes 4

      @Jacob Pereira

      Roger. Thanks for the information. I'm getting set up with a search now.

      Post: What time frame to look at properties for housing hacking?

      Ben HuntPosted
      • New to Real Estate
      • Austin Texas
      • Posts 24
      • Votes 4

      @Adam Farmelo
      You're right. It's important to keep in mind.