All Forum Posts by: Charles Jones

Sorry about the poor formatting on the advice post. It looked much different in my mobile app before posting and I cannot find an option to edit it.

My father is law (let's call him FIL) is retired, owns his home free and clear, wants to downsize, and eventually would like his estate to go to his only child (my wife). Get likes the idea of moving into a condo or an apartment. He likes the idea of us buying his home and renting it, basically do he can have nothing to do with the details. His home is valued at approximately $475k and would rent for $2400. It's in Ashland, Oregon (a very desirable community) in a very desirable neighborhood. The interior and landscaping are dated and could be updated to increase the home's value to the neighborhood median (close to $600k). Here are my ideas: 1) move him into an apartment/condo 2) buy the house as a purchase option 3) renovate the home 4) Sell the home 5) buy a multifamily property in partnership with the father in law with the all the equity generated from selling his house. (I do not believe that FIL will be very interested in using the proceeds as leverage for purchasing a larger property, but is more interested in a duplex/triplex of similar value). 6) the wife and I would co-own with FIL, but actively manage the property Questions: Does this sound like a good approach? Does it need tweaking? Would it be fair for FIL to be a 50% owner with the wife and I owning 50%? Would this be beneficial for the family regarding estate taxes (FIL is in very good health and not foreseen to have many health issues in the next decide) We welcome your thoughts and ideas on how we can make the most of this situation and arrangement. Thank you in advance.

How are you finding property managers in small rural towns, generally? Do most realtors offer PM services?

Thanks Tom. I didn't realize that agents got referral fees. This is good info for me.

If I am considering looking at real estate an hour from my home, should I connect with a buyers agents in the area that I am considering investing in? That seems more appropriate than using an agent in my area. Thanks!

Thanks for the feedback, everyone.  The asking price for the duplex is $47k. If I was able to acquire it for $40k and bring in $800 / month, this property would meet the 2% rule, which suggests that it should provide a decent monthly cashflow. I know that its a general rule of thumb, but according to my estimated expenses, it wouldn't provide much cash flow with a 25% down payment, so it seems likely that I am overestimating expenses, hence the request for feedback.  

Also the 50% rule suggest that my after mortgage expenses should be approximately 50% of my rental income. My analyses comes out to 63%...  Again, it seems that I am overestimating expenses. If the 50% rule is applied, the property would provide some cashflow  (~$118/door).

So here is the status of the analysis:

Purchase price: $40k with $10k down @ 5% = $164 / mo payment

Monthly rent: $400/mo x 2 = $800/mo with 10% vacancy = ~$8640 /yr

Taxes: $1151/yr = $96/mo (County assessor)

Insurance: $300/yr = $25/mo (Guestimated)

Prop. Mgmt: 11% = $1060/yr = $88/mo

Maintenance: 10% = $960/yr = $80/mo

CapEx: 10% = $960/yr = $80/mo

Water/sewer/trash: ~$50/unit/month ~ $1200 / year = $100/mo (Guestimated)

Lawn care: $75/month x 6 months = $450/yr = $37.50/mo (Guestimated)

Therefore, potential annual income = $9600; expenses = $6077; Expense to income ratio = 63%

I am familiar with the 50% rule of thumb for estimating expenses, but am trying to analyze a duplex in rural northern Illinois and am trying to estimate expenses.  Can anybody provide feedback on the assumptions.  Too high?  Too low? Is plowing a necessary expense for a small driveway?  At what point is plowing necessary, if I look at other multi-families (6 units?)  Thank you in advance!

Estimated Expenses (annual)

Real Estate Taxes (estimated 4% purchase price)

Property Insurance (estimate 0.75% purchase price)

Property Management (11% rental income) 

Repairs & Maintenance (10% rental income) 

Utilities ($75 water / month / unit + $25 trash)

Lawn care (estimated $100 / month x 6 months)

Snow plow small driveway / parking  (estimate $100 / month x 3 months) 

Capital expenditures (10% potential rental income)

hi Adrian. i lived in Fairbanks for 6 years before moving 2years ago. The property has running water so that is great (in a town where at least 40% of the properties​ not. I think that your rent estimates are too high, especially for that part of town. However, I know it is close to Ft. Wainwright, but it is too far Eileson AFB to be a reliable source of renters. It is also in the wrong neighborhood for UAF students. Who would you market too?

Hello gentlemen, @Arpan Patel in your case the business entity is able to obtain a loan for the property with a 20-25% down payment, correct? I have read that LLC entities are not typically asked to hold mortgages. Is that true? What if 2 or 3 partners wanted to utilize an FHA loan? How might they structure the partnership?

Thanks!

@Michael Facchini I am originally from Dixon, IL (Hometown of Ronald Reagan and Walgreen's).  Thanks @Mark Nolan!