All Forum Posts by: Phillip Coleman

Welcome Jessica.  I also invest in single family homes but currently in the Mid-Cities.  You are in an interesting part of the metroplex that has a lot of opportunity and job growth.  Enjoy the site!

If your concern is really about the pet then just say that you reserve the right to interview it for fit.  You have to screen the pet just as much as you screen your tenant.  This can be done with an animal independent of the candidate's credit score.  

I also agree with Bob that Cap rate really is not applicable here and should not be your determining factor in making this investment.  

Hello Jordan,

Thanks for the post.  I really enjoy evaluating opportunities and you have a good one with lots of variables.  This will be a good exercise that you will learn from.  I'm sure that your reading has given you a lot of tips about how to evaluate properties so if you'd like you can compare my ideas with what the experts have already said.  This is my first response and I hope that something I post either reinforces that you are on the right track or makes you think.

You need to develop a model that can be used to evaluate deals like this and quickly.  A good opportunity won't stay on the market long and you want to be able to know when to drill-in for a potential purchase.  If you are comfortable with Microsoft Excel then you can create a spreadsheet to determine multiple ratios (cap rate, cash return, RV, etc) or you can use something more simple on paper.  Either way it is good to have an objective, repeatable process that you can go back to again and again.  

To address your question about what things to consider outside of what you've posted here are my thoughts:

• In the revenue projection I would add in an allowance for vacancies.  I like to use one month (which removes 1/12 of the revenue) because I feel that it is reasonable for areas where I purchase.  
• When considering expenses to determine your cash return include all out of pocket items. Besides the trash and sewage I would add in insurance costs, maintenance (depends on age and condition of property but one month's rent is a good start), and obviously the mortgage payment based on the terms of your FHA loan. I think you included most of this because your cap rate seems to reflect it.
  • Because the property is occupied then it doesn't hurt to ask the seller if they can produce a listing of their expenses over the past 12 months.  They may say "no" or that they don't have them but it is free to ask.

So, as a point of caution I would not take the seller's information to be truth.  If you are serious about the purchase then I would validate it for myself (taxes based on your purchase price, rental comps to rationalize revenue projections, etc).  Once you make the offer then the real work begins because you can inspect the units (it is more difficult to do this when they are occupied) so that you can find any gotchas and understand the true cost since you would inherit any maintenance items that the seller won't remedy.

I wish you good luck.  Self-managing is really fun and I'm sure that you will be a great property owner.

Thanks for all of the encouragement and kind words.  I think I will like being on BP and look forward to contributing soon!

I will and thank you for the advice Jon.  There is an overwhelming amount of good information but I hope to get my rhythm soon.  And as you stated the best part is that it is free!

I am a new member and wanted to say hello from the Dallas market.  

I have an EE degree from Texas A&M and I have an MBA (corp Finance) from SMU.  I work at AT&T.  

I started investing in single family properties in 2012 because of the double digit returns.  I now own three properties and would like to purchase more.  I have been reading about real estate for many years and I'm currently reading "The Millionaire Real Estate Investor" by Gary Keller. 

I look forward to connecting with other investors and exchanging ideas.  I'm inspired by the opportunities and freedom that real estate can bring those who decide to take the plunge!

Currently I am enjoying the use of leverage to generate returns but I'm thinking through what my long term goals should be.  I'm sure that I'll enjoy reading the many blogs/comments and exchanging ideas with everyone.