All Forum Posts by: Bill Jacobsen

I use square ft. if it is within 20% of subjecter. Just know that as Sq. Ft. gets larger the cost per sq. ft. goes down. I also look at age of house.

Good Luck.

Bill

This seems like a great deal that you can buy for less than 50% on the dollar. You are not really buying free and clear since you are using borrowed money to buy.

I like to keep it simple. I would use the net income you make the first year from rent + proceeds from selling one of the houses.

Good luck.

Bill

I did run the numbers and if I did them correctly I got a cap rate of 10.6% and a cash on cash rate of 11.1%. Mortgage paydown is not included in the COC calculation because you can't get your hands on it.

Those numbers by themselves aren't bad but you are achieving them by doing your own rehab and maintenance.

I don't like to partner unless I need the partner for some reason. I believe that partnering brings some complexity. Dave Ramsey, financial guru, says that the only ship that won't float is a partnership. Since you mentioned the rent and annual expenses I assume you will hold this for some time. What is the agreement for holding period? Is it one year or 5 years or what. Three years into this will all partners be in agreement? It looks like each partner will get about $34 per month. Will that keep them interested?

I hope for the best.

Bill

We own properties in several states. We use property managers in some and manage some ourselves. We travel 4-6 months out of the year. On properties that we manage we never do the repairs ourselves. We establish relationships with handymen and contractors.

With today's technology we can send contracts and any documents remotely for signature. Having a PM does make it easier though but we are typically charged 10% of collected rent + first months rent to acquire a new tenant.

Some of our rentals are vacation rentals which we rent by the day/week. We also manage some of these ourselves.

If you are managing yourselves you have an investment and a part time job. You can decide if that is what you want.

Good Luck.

Bill

If there is enough room ($2,000-$5,000) in the deal you can certainly wholesale. You have to know exactly what your investor wants or you will be sitting on the property waiting for the next investor.

Bill

If you don't know the numbers for the operating expenses such as taxes, insurance, management, maintenance, vacancies, etc. a rule of thumb is to use 50% of rent income. The cost of utilites usually fit on top of that.

Thus, I just estimated your net income to be 50% of gross rents - minus the extra $300 for utilities.

I hope I was clear.

Bill

Obviously I only know what you have told us about the property. I would add $1,000 to the cost of the property to make the buy price $26,000. I would also add 20% cushion to the rehab cost for a cost of $36,000. That makes the total cost $62,000. You also should add tax, insurance and utilities during the time you are rehabbing.

Without knowing the rest of the ongoing cost I would estimate 50% of rent plus the cost of owner paid utilities. ROI would be estimated at $2,900 per month times 50% or $1,450 less the $300 for utilities equals $1,150 per month. The yearly NOI is $13,800. Your initial cost is $62,000 so your CAP rate is estimated at over 22%.

I hope this helps but remember it is only based on what we know.

Good Luck.

Bill

First of all, I think a $5,000 fee is good on a house in this price range. As a flip and fix investor I would not pay $12,500 for the house. I would probably pay between $7,500 and $8,000. Contingencies that have to be considered: house not selling at estimated ARV, buyer asking seller to pay their closing, overrun of repair estimate, property tax, utilities while rehabbing, insurance.

Be careful.

Good Luck.

Bill

Only partner when you need to. When I have partnered it is usually one puts in all money and one does all work. Dividing up work is hard to do so I just don't do it.

Bill

I don't know what the problem is. The variables are: rent to price ratio, expense to rent income ratio, interest rate, and % down payment.

If I use a 1% ratio for rent to price, a 50% expense ratio, a 5% interest rate, and 20% down payment on a $100,000 property I get the following: $12,000 in rent - $6,000 expenses -$5,154 in mortgage payments for a total cash flow of $846. This is low cash flow on your $20,000 but at least it is positive.

Look at your numbers to see where they deviate from the above.

Good Luck.

Bill