All Forum Posts by: Kevin Boylan

Yeah, I get the feeling he was in a situation where he could be sloppy with the numbers and still come out way ahead as I believe he lived in an area where appreciation was and may still be almost out of control.

I like this one although there are a few small things about it that annoy me. But for the price it is good and I think it gets pretty widespread use.

Well, it looks like they went out of business. Their website is no more.

Greg - Is $2005 the rent these 3 houses are currently getting, or is that what you figure the current market rent SHOULD be for them?

I think I would evaluate based on current market rents, but make my offer based on what I think is the best deal I can get.

Here are some possibilities that come to mind:

1. Go to the local Real Estate Invetors Assocation and get to know other investors, get ideas from them, and even partner up with some of them.

2. Find houses where the owner is willing to provide seller financing.

3. Find private financing, probably through someone at the REIA

It's probably not a good deal by any means, but it's not as bad as you make it out to be if the property is somewhere that, for some special reason, will see good appreciation. Given what she said, 6.5% loan, $335K price, 80% LTV, 2600 in rents, and assuming 50% operating expenses, 5% yearly appreciation, 3% yearly increase in operating expenses and rent, she would make money any year she sold the property and her cumulative negative cash flow would never get higher than $22,000 while she held it, and that is figuring 50% operating expenses straight through. With all the capital expenses shoved out to later years (being a brand new property), if she sold fairly early on, the numbers look even better.

Higher end houses do appreciate especially if they are in some special situation (lake front, new business going in nearby, etc), and that is pretty much the only way you can make money off of them. If you can take the hit for several years, it can be well worth it. You don't look at it as losing money every year, you look at it as part of the cost of getting the return you are looking for.

Thanks Shadow. Unfortunately I don't use a MAC, but I can add that to my spreadsheet quite easily. Thanks!

That tool is fine. I just wanted something that made it quick and easy to determine the mamixmum price allowable based on the rent. It is always good to do a complete cash flow analysis too, but I didn't want to have to play with mortgage amounts till I get the right answer, I wanted something that can work backwards directly from known rents as well as something that did a good job showing the relationships between rent, operating income, and cash flow.

Mike,

I don't think John was defending that particular deal. It was obvious that he was speaking generically. There certainly are a lot of people that have made (and lost) a lot more than you or I by speculation in real estate. There is no denying that you can make (and lose) money off of appreciation in many parts of the country if you do it right. Speculators have their business plans too and are just as vehement about the right way to do it. Even in South West Ohio there are opportunities for buying into appreciation. Losing $2000 a month is nothing if the appreciation is going to dwarf that. (again, not talking about this particular deal) Looking for appreciation isn't the best place to start out, but even every stock investor should have a small part of their portfolio in smart speculation.

Kevin