All Forum Posts by: Brendan J.

What's your breakdown on expenses? I would tend to agree that 67% does seem high. Also explain the 12 year term? No options for longer amortization?

@Matt Huber

That sir was a wealth of information on notes! Obviously reading a book like you suggested would be an excellent start, I'm just curious where you're finding a lot of your notes. Local deals done through REIAs, relationships with local banks, long distance relationships with your own personal contacts, online shops like Peerstreet?

I'm thinking this type of investing would be perfect for people I know with $500k+ sitting in equity or low-yield annuities.

@Todd Willhoite

If you're interested in the numbers for a Buy/Hold strategy, they do look a bit better than the Fix/Flip did.

Be advised, no amount of guess work or application of general rules can replace the actual line item approach to estimating rental costs (but can be surprisingly accurate for most homes).

50% rule would state that half of market correct rates (meaning that you can't rent this home for $1200 and hope the rule will work) will go towards property management, vacancy, taxes, insurance, cap ex, and repairs over a large sample set of years. There will obviously be years of 40%, 60%, etc.... but over time, these figures get closer and closer to 50%.

$1,400 gross monthly rent - $700 (50% rule) = $700 for principal, interest, and cash flow.

Assuming 25% down and 4.75% interest rate over 30 years : $493 per month for principal and interest.

$700 - $493 = $207 for possible cash flow. Please note that I didn't include utilities anywhere in my math because those should generally be passed along to the renter. If you HAVE to pay those, it will eat into your cashflow.

Let's say the renters pay the utilities and you can realize ~$200 in cashflow......

$200*12 = $2400 / $36,500 (down payment and repair costs) = 6.5% cash-on-cash return.

6.5% isn't terrible, but there are also better deals out there. Ideally you'll be in the 10%-15% and beyond on good Buy/Hold deals.

Hopefully this helps. I wish you all the best!

@Todd Willhoite

I think you're on the right track in deciding that this is a pass scenario. Money in Real Estate is made when you BUY and in looking at these numbers, the $126k Buy is just too high.

There is a loose rule, the 70% rule, that would tell you to take your (ARV * 0.7) - Repairs = to get a general idea of what you should be paying for the property. It isn't the bible, and in more expensive markets, or for those looking at Buy/Hold rather than Fix/Flip, that 70% might slide up to 80%.

Your numbers:

($150k*0.7) - $5k = $100k . Ideally this is what you would be paying the for house you're looking at (Fix/Flip strategy in the heart of the nation [not CA or NY])

Using purchase price and working the formula a different way;

($126k Purchase price + $5k repairs) / $150k

($131k / $150k) is showing an entry point of 87.3% of ARV. IMHO, this house isn't priced low enough for a Fix/Flip.

Welcome Reed. It seems we are starting to see more and more Knoxville faces on here. Glad you've found us and look forward to some good conversations.

Welcome Rene, thanks for joining the community. Please dive into the Beginner's Guide and the Podcasts. Talk soon!

Welcome Stacy! We are glad to have you and wish you well. Make sure to check out all the Podcasts and other resources.

Glad to have you Diane! You've joined a great community here in BP!

I'm going to say a 4 Plex. Because as soon as you hit 5 units, its a commercial loan whether you're living there or not. There are much smarter people that can chime in I'm sure.

Welcome Daniel! We are very glad to have you. It sounds like you already have the start to a great team. Best of luck!