All Forum Posts by: Bennett Dickerson

House listed at $365k: 1 bed 1 ba, 871sq ft

• I estimate rent at $2,000
  
• 260$ monthly HOA fee, passed onto renter?
• 3% buyer agency fee, important? Just added to price of the house pretty much?
• 1% rule: ideally house would be rented for $3,650/month. Not near true. Rule less applicable in such a hot market?
• Given the 50% rule that half of the rent will be spent on fees:
• Say I put down 100k, leaving a 265k mortgage, 30 year mortgage which would bring the monthly payment to $1,253 at a 3.92% interest rate
• $2,000 (rent) - $1,000 (50% rule) - $1253 (mortgage) = -$253 in monthly cash flow
• Takeaway: not a good investment
• COCR and ROE not applicable given negative cash flow

I am 19 years old and interested in Real Estate but have no tangible experience.

My involvement in investing has come through the stock market where I have been focused on building my portfolio for quite a while. This is something I have been working on and learning from for about 5 years and this interest is ultimately what got me interested in Real Estate.

Something I have taken away from BiggerPockets books and from reading online is that it is vital to start in real estate investing as early as you can and also to take action rather then simply reading about it, researching, and making excuses as to why you have not started yet. 

I am going to be a freshman in college starting in a few weeks, moving from Nashville, where Real Estate prices are far out of my reach, to a smaller town with far lower prices on average. 

I do not have adequate money to put a down payment on a house, even if it were about as cheap as they come, unless I were to sell all of my stocks and use every dollar I have. Even if I followed through on that, I would not have additional money to make repairs, which many of the houses need, or cover potential vacancy or unexpected costs. 

That is where my question comes in. If you were in my situation, would you get creative with financing and start by renovating and flipping? Or just try to make as much money as possible in the next few years and focus on education? Or something entirely different.

I will take a few months or a year to adjust to college life and get to know the area before taking a lot of action but am still curious what more experienced investors would do in my situation. 

I am just starting out and one of the first articles I have read in-depth was about cash on cash returns. The concept and calculation makes sense but I have one clarification.

I was doing some calculations of my own, using the formula

annual pretax cash flow /  cash invested x 100% = cash on cash returns

I first used an example where I bought the entire house in cash and as a result, was very confused by the resulting return. I calculated that you would need about $100,000 / year in cash flow to reach the desired cash on cash return % on a $750k house purchased in cash.

Would I be correct in saying that this is not an appropriate metric for cash deals? Or is it the perfect option because it shows that buying in all cash is not the ideal method for maximizing return?