All Forum Posts by: Charles Benkendorf

Hi all,

I'm looking into potential purchase of a vacant duplex in Oakland. I would plan to move into one unit and rent other out. I understand with Measure Y, the second unit would be rent-controlled / eviction protected. However, for the unit that I plan to rent out, is it possible to rent out bedrooms instead of the entire unit? Say it's a 3 bedroom unit, it could be that renting out 3 shared bedrooms could bring in more rent than renting a 3 bedroom.  I'm not thinking of Airbnb or anything, just having standard leases. Plus I'm a little nervous about one person taking the lease, then holding on and renting out the other bedrooms at market rate down the line.

I know it's probably more overhead and perhaps more liability (e.g., if someone damages the stove, can I hold them all responsible if they're all separate?), just looking to understand the trade-offs.

Thanks!

Thanks Mike - I feel encouraged by this and will look into it!  I’m looking into a market on other side of country, so the letter route seems interesting.

Hi all, I was reading some articles from Brendan Turner about buying right - how he looks to buy property at 70/80% of the value

If you follow this rule, what are some rules of thumb you use to identify these opportunities?  Here are a few scenarios I'm thinking of:
1) being sold by a realtor - price is likely close to market value. a notable exception is if house needs significant work, in which case the cost is being accounted for in a lower price.  It's possible with a longer time on market, they may be open to a lower price.

2) being sold by owner - may be more opportunity here. price may be over/under market value.

3) foreclosure - bank is motivated to sell. may be willing to sell under value especially in a slow area.

based on this, it seems like best bet would be to pursue houses sold by owner, foreclosures, and listings that have been on market for a while. 

there also is a whole other approach of finding motivated sellers - drive bys, bandit signs, etc.  But I'm not ready to get into that yet.

Thanks!

"Grant 🚗 done"?

Hi, I am just getting started with real estate investing. I read this article from Brandon Turner on how to make a million dollars in under 10 years: https://www.biggerpockets.com/renewsblog/2012/12/1....

It was a pretty interesting strategy, and I was following along but when I ran the numbers the criteria seem extreme. He did note that the criteria are high, but you can find these properties.  I want to lay out my numbers here and get a sense check! Am I wildly off in any of my assumptions / missing something? And secondly has anyone had deals in this ballpark before? 

Assumptions

• Goal is to cash flow $200 / month / unit
• Buy a property listed at 100k for 80k. Put 20% down, take out 30 yr mortgage @ 7% interest to pay for rest.
• Rent is $665 per month per unit, or 2660 for the building. This is the number I have to use for post tax cash flow to come out to 200 / unit / month.
• Using 50% rule, monthly NOI of $332.5 per unit, or 1330 for building. Cap rate is 20%! Seems very high but let's keep going to see where we end up.
• Mortgage payment of 426. Cash flow is 904 for building.
• Tax - monthly interest is 372 and monthly depreciation (27.5 yrs) is 242. Taxable income = NOI - interest and depreciation = 290 per month. Assume my tax rate is 35%, that's 102 monthly tax.
• -my post tax cash flow, what i can save for next building is 802 per month or ~200 per unit.

A cap rate of 20 seems high I usually see under 10%, maybe 11-13% for a lower income area. It's a 16% cap if you base on the listed price (100k) instead of purchase price (80k).

It also seems he excluded tax for his calculations but given the high cap rate, tax is not wiped out by depreciation and interest.