All Forum Posts by: Stan Butler

I dont follow any of the traditional formulas when evaluating rental properties anymore. To me, things like debt service are completely variable costs that can be manipulated. A buyer can borrow more or less money at different rates and terms to influence the payment amount, PMI and ROIC.

Here is now what I do for my area.  I want to get a minimum 10% yield on the total cost  + any fixed expenses (taxes, hoa, insurance).  So in your case that would be:

• $16,000 in Annual Rent (assuming no repairs since you didnt mention)
• $3,300 in Annual HOA Dues
• $800 in Annual Insurance (estimating 0.5%)
• $3,200 in Annual Taxes (estimating 2%)

So that would total out to $23,300 that I would want to collect annually, or roughly $2,000 per month. If you can only collect $1,350 in rent then I rate this deal at about a ZERO. Its really hard to overcome that much in HOA fees, which is similarly why Vacation Properties in Beach Areas really stink for cash flow.

This is an easy one for me...... Ive had plenty of bad contractors, so it makes identifying the good ones pretty easy.  Aside from the obvious communication and punctuality issues, here are a few more:

1)  Organization:  I like a contractor that gives me spreadsheets and breaks down the rehab by project.  It gives me a chance to cut or add things based on the numbers I see.  I also like to see a timeline for the expected completion dates of various phases of the project.  You will find this carries over to the work site and things stay organized and clean to reduce mistakes.

2)  Redundant Subs:  I dont want a project being delayed because my contractor only uses one plumber and he is on vacation for the next week.  Part of what I am paying him for is his ability to keep work going at all times.  As you know, when one thing gets delayed during renovation it can push many other projects back.

If you have only 1 property, it seems like a lot of overhead to setup an LLC to own the property and then another one for management. I would recommend just to get a large liability umbrella policy for now.

The broker that is suggesting to get the loan in your name and then transfer the title into the LLC, what does he say about the DOSC?? Assuming you are getting a conforming loan you will be violating the terms of the mortgage.

My opinion on this @Michael Wentzel is that your system for acquiring properties needs to include multiple options in all areas.  You should have multiple contractors, closing attorneys, insurance agents, material suppliers and lenders.  I have 4 portfolio lenders that I use and there are times when 3 of them are not writing any loans.  Also, these small community banks are acquired regularly and the guidelines and standards will change.  Same goes for contractors in case your primary is busy on another project.

Great turnout again today @Azeez K. 

Thank again for your efforts in making this happen!

@David Begley  is 100% correct and with the new Interface you can find cash buyers within a certain range of an address.

Welcome Chris!  We do a lot of rehab/flips in Cobb and Cherokee as well.

Continued success in your business!

Hey @Azeez K. count me in!  Thanks again for organizing!

I let me plumber bring it for the following reasons:

1)  I dont have a vehicle that can transport a Water Heater easily

2)  My plumber gets a discount on the price of the Water Heater that I would not get

3)  My plumber bills me at cost for the materials

@Stanley Okazaki thanks for the feedback.  We do have multiple sources of deals.  I was mainly just incredulous at the deals people are doing, because I dont see any money in them.  BTW, small world as my accountant lives in The Woodlands now....

@Andrew Cordle thanks for the tip, but we have moved up to the $300k to $400k price point already.  That's why I am floored that somebody is investing this kind of money in a deal with ZERO profit potential.  I can understand the wholesaler angle of this deal because they maybe new, but I cannot understand the rehabber angle to this deal.  It would never be a good rental so thats not a reasonable option.