All Forum Posts by: Jonathan Sher

Trey,

You would calculate the profit made from when you sell the property and hopefully make a profit, not what you think the "profit" you made from buying it under market value.

Hey Ryan, the property is great shape, hardwoods covered by carpet, newer windows etc. the house is full of stuff from the previous owner so as long as there's no crazy unexpected issues, it needs a deep clean and paint.

Hey Shanequa, fortunately I have some family members willing to lend me their cash that they are receiving zero interest on. I also just got approved by a local bank and trust here in town, they are willing to do the loans from 30-50K locked in around 3-5 years with a 15 year AM. They only considered it because I have enough personal finances to back it up.

Thanks for the input Nathan. I'm always looking around for better insurance. I think it's just living in the midwest, tornadoes, hail etc. I'm lucky to get a $850 quote on $100,000 on dwelling and $500,000 liability. I would certainly appeal the taxes but its a solid number in my book as to what it will possibly be.

Hello BP Fans,

I currently own 6 single family homes of which 3 are rented, 1 goes on the market next week for rent, 1 under construction and 1 waiting to close on.

I'm putting an offer on a house which if i get, would be the most expensive rental I would own. I want to check where my head is at after owning 6 properties and putting over 100 offers in over the past year.

1,100 sq ft 3/1 house in a nice neighborhood built in 1960

Purchase price: $42,000
Borrow $35,000 @ 5.5% 15y
$3,000 for clean up and repairs
$10,000 cash investment

Proforma
Rent $900 a month = $10,800 a year
Mortgage $286 a month = $3,432 a year
Taxes $100 a month =$1,200 a year
Insurance $100 a month = $1,200 a year

I know there is unexpected vacancy costs, maintenance costs, lawyer costs etc... I'm just looking for a high level perspective.

Thanks!

Was your property inspected for occupancy purposes? I know I would of certainly got dinged by a municipal inspector for not having a handrail.

Hey Kevin,

The 2% rule of thumb is a quick tool people use to establish if a property will cash flow after expenses. This is a heavily debated topic and doesn't work in every real estate geographical market. So if I know I can get $800 a month in rent for a house, if I divide 800 by .02 (2%) then that means I would be willing to be all in on that house for $40,000.

This is just a fast way to calculate things. Like I mentioned people absolutely love the 2% rule and other people hate it. The 2% rules says that I should also be guaranteed a decently positive cash flow on that $40,000 property. Nothing is guaranteed of course.

I would definitely consult a real estate attorney or CPA just to make sure. If I remember in basic accounting classes, if you buy back debt you owe at a lesser value than what it was issued at, that is considered a financial gain in the IRS' eyes and we know what the IRS does to financial gains.

I'm not 100% sure, that's why I would think its worth a few hundred bucks to find out from a professional.

Hey keith, I think you really need to have some infrastructure in place first. I think you need to narrow down the states and areas you are interested investing in. Let's say you find a great deal in Missouri.. Well, do you have anyone you can trust yet from a property management stand point, from a repair and maintenance standpoint? Would you be comfortable investing in properties living in Florida but owning in other states? I think you need to find out what you're most comfortable with and then seek those kind of resources in those areas.

Hey Chris, Great story. My question is? Do you think HUD had this property over priced? Was there a specific reason this property was available for over 60 days?