All Forum Posts by: Braden Hobbs

I'm in process of making first few offers and I'm trying to do my due diligence and discover true rental income numbers from seller. However, when I've asked to see these numbers before making an offer the seller/agent seem taken aback. Is there a better way to ask? I've never had an issue asking my sellers to provide rent rolls, and they usually understand why it's being asked for. 

@Andrew Meyer

Makes sense. I've got other income sources so I never really thought of that but it's a good suggestion. Thanks!

@Andrew Meyer

If something goes wrong immediately we'd have to fund the purchase out of pocket since we'd have no reserves right off the bat. 

Do you suggest incorporating a reserve fund as initial cash outlay in analysis of deals? I haven't seen that done before but it sounds like a smart idea.

@Andrew Meyer

Taxes on the property have never been more than $625 dollars for the year. I also was shocked by this.

Each unit is separate meters. And tenants pays utilities. House has current lessees and no major repairs needed. 

@John Leavelle

"What is your primary goal here? 11% COCROI, Good Cash Flow, or Both."

Both

"Did you get the numbers from a listing? Did you get any additional info from the Broker/Seller? Or did you develop the data yourself (i.e. Rent $900)? Why do you think it is low? Is it a Duplex or SFH modified to be a Duplex? How is it zoned?"

- As a realtor in the area, I know what 2/1 should rent for. I also peruse CL, rentometer, and padmapper to get a good idea of rents. I kept it on the low end of all the data I was seeing. I also then try to overestimate all expenses. In my initial post I said it's a SFH split into a duplex. It's zoned R-M, which is residential - medium density.

"You also did not include other expense items: utilities, sewer, garbage, snow removal, lawn care. HOA fees."

- Utilities, Sewer, Garbage, snow and lawn care will all be on the tenant. No HOA on this unit.

"Is the $42,000 down payment your Total Invested Capital? What about closing cost, any repairs required upfront (or is it move-in ready), or other miscellaneous expenses you will pay to obtain the property. They must be included in your Total Invested Capital to determine COCROI."

- 42,000 is down payment of 40k plus closing cost estimate(based on GFE from banker). Property has tenants, and is supposedly turn-key. If there are things I want to change, I'll wait until I have some reserves built up.

"To get to 11% COC you need to increase Cash Flow or Reduce your total invested capital (or both). That means a much lower purchase price. Somewhere closer to $157,000."

- Can you elaborate on this? Are you just assuming 55% expenses? I understand using the 50% rule as a "safe" way of analyzing deals. But what I'm trying to find out is if in my analysis of expenses if I missed anything or way underestimated what repairs or capex are going to be in the long run?

@Kevin Booker

I am just breaking down each expense for this property. 50% rule for me is usually just to real quick decide if I want to do a more thorough analysis like this.

@Ceasar Blackman

Thanks for your input. I did mess up the repairs estimate, I only did one unit. Oops!

All things equal, I'm showing an 11% cash on cash return at a $180k offer. This would lower my dp amount from $40k to $36k. 

How do you all feel about my percentages or estimates on the expenses?

I'm contemplating putting an offer in on a SFH that is split into a front/back duplex. Each unit has 2bd/1ba and a garage. Let me know if my math looks correct or if I'm blatantly forgetting something please. I plan to put in an offer where my Cash on Cash is above 11% but here are the numbers for sellers initial asking price.

Asking Price - $199,000

Expected Rent - $900 a month per unit(guessing low)

Taxes - $55 a month

Insurance - $100 a month (guessing here)

Vacancy - 8% per unit - $144 a month

Repairs - 5% = $45 a month

CapEx - $200 a month (30+ years old)

PM - 10% - $180

TOTAL EXPENSES: $724

NOI = $1076

CASHFLOW = $266 A MONTH

ROI = 3192/42000 = 7.6%

Thanks!

How do you begin your search for a new deal?

Did some searching on this and found very little. I know all scenarios will be different but thought it would be great to get lots of ideas on this for all the newbies(pointing at myself here).

For those of you with MLS access(or just Zillow), how do you start your search for deals? Are you staying under a price window? Are you only searching for foreclosures and short sales? Do you look for properties with long DOMs?

Thanks for the info. I understand ways of changing your DTI ratio to get the loan. I however have no desire to wait years until my current home or student loans etc are paid off so I can meet DTI requirements.

I was mainly curious as to ways around DTI.

So far it seems like there are a couple options for investors in this boat. 

1. Find a bank that counts current rent towards your income. They exist just find them. 

2. Hard/Private money

3. Increase income or decrease debt. 

Thanks for the input everyone!!

Thanks. Once I have a deal locked in I'll probably be reaching out to find out more about HMLs! But one thing I'm concerned with is if you can't find a bank to loan without 2 years of rental income showing, does that mean you'd be carrying hard money for 2 years if you can't change your DTI et al.