All Forum Posts by: Christopher Hui

Sarah Karakaian First off, from personally being from New York, my parents bought their house in Woodside back in 1993 for $350k and now their house is appraised at $1.85 million. Depending on the location (how far from the city) your house is most likely invaluable now since most of new construction is being built more in the Long Island area (Great Neck). I would keep the property and find another way to finance your next investment. One way that hopefully someone else could expand on is perhaps to refinance your property since your property value has increased significantly. That will let you keep the property and give you a significant amount of liquid for your next investment. Just know that the cash flow for this property will become pretty minimal. I'm a complete beginner and don't even know if this is possible, but from my research about the BRRRR method, this is the exact same thing, but instead of renovating to increase value, property value increased with appreciation. Let me know your thoughts!

For the United States, you have 60 Days to move in and you have to stay there for 6 months. If you move out the lender can call your loan to term and require you to pay. However most lenders don't check and don't care as long as you're making your monthly payments. -Strictly speaking from research and information given to me from several real estate agents

Christopher Giannino Sorry never mind! You said Monthly CashFlow and not Monthly Rents!

Christopher Giannino Don't forget mortgage payments!

BP, I was wondering how you felt about 5% Down w/ no PMI on a $350k home that pulls $3500 monthly in rent? I know the cash flow would be kind of low, but it's just to get me started. Let me know your questions and thoughts!

The rent you charge does not depend on the purchase price of the property. Rent is typically a static value dependent on location and number of bedrooms/amenities concerning the property. Instead what you should find out is how much rent you can get out of the property and then reverse that to calculate how much you should buy the property for. For example, if you know that you can get $2,200 a month of rent out from a property after repairs, you would divide that by 1% to get $220,000 (ARV). This means that what you should be offering is to be After Repair Value - Total Cost of Repairs = Purchase Price I'm not a seasoned investor by any chance, but I am pretty good at math.

Carlos Gonzalez You are being way too optimistic! The following link is everything that Donald Trump wants to do in the first 100 days in office: http://www.npr.org/2016/11/09/501451368/here-is-what-donald-trump-wants-to-do-in-his-first-100-days

@Brent Coombs, I used my own rent into the calculations because from an investor's point of view in my opinion, there's no such thing as living somewhere for free. Any occupied space that you own could be an opportunity for cash flow. 

My current cashflow (as in money left over after all expenses from my corporate job, including rent, is around $2,000/month). If I imagined the above calculations without my own rent, my monthly cashflow (from non-real estate income) would be higher, and my real-estate cash flow would be lower. It's just easier for me to imagine the situation as me paying myself and once I leave the house, the Monthly Cash Flow will remain the same. 

I don't really understand your comment about CoC being skewed. Could you elaborate? Is CoC not a measure of how fast your rate of return on original investment is? Or perhaps, you're speaking about how it is skewed compared to the CoC of a conventional 20% loan?

They do have quad's in my area, but they all consist of 2-BR Units. In addition, the rates of rent jump significantly when going to a 3-BR. 2-BR units are only $1,168 FMV.

That is definitely a possibility! However, crime rates are significantly higher north of the river, and as previously stated, this side of the river is being gentrified. I was hoping to appeal more to young professionals that work a couple miles south like several of my friends and I do (we currently pay $1600/month for a 1-BR in an semi-luxury apartment complex 0.5 miles away).

Thanks for the response! Greatly appreciate it!

@Robert Shaw,

If I take a down payment of 3.75% ($15,375.00) at 3.5% interest, I've estimated my annual debt service to be $21,264.51. Since my annual income is $26,593.80, I would be receiving $5,378.01 annual cash flow. Dividing $5,378.01 into my down payment of $15,375.00 would yield the CoC of 32.84%.

If I were to charge FMV rent across the board, my Annual Net Operating Income would be $36,245.52 and I would net $14,981.01 Annually. The CoC would be 91.49%. This seems way too good to be true.

Perhaps I'm missing something? Hidden fees/closing costs/maybe I'm being too optimistic with my Operating expenses?

Please let me know! I'm eager to learn!

Hey BP! It's been almost a month since I've first joined the community and started to learn about the business. I've been researching multiple multi-family properties, typically triplexes, and one just came on the market that I just visited through an open house. I was wondering if you could help figure out where exactly I should land with an offer.

Asking Price: $410,000

FMV Rent: $1,455 per unit ($4,365 total)

Rent Used for Calculations: $1,164 per unit ($3,492 total) (Used 0.8 FMV to be safe, but I can definitely get the FMV which I will describe in more detail below).

Vacancy Loss: 8.33% ($291.00)

Gross Monthly Operating Income: $3,201.00

Repairs & Maintenance: $320.10 (10% of GMOI)

Real Estate Taxes: $440.00 (1.3% of Purchase Price)

Rental Property Insurance: $170.79 (0.5% of Purchase Price)

Replacement Reserve: $50

Monthly Operating Expenses: $984.85

Annual Net Operating Income: $26,593.80

Capitalization Rate: 6.49%

Cash on Cash Return: 32.53%

Days on Market : 3

Now what's interesting about this property is that it's completely gutted rehabbed (new EVERYTHING, but no stainless steel appliances, but the market doesn't call for it) and it's in a good location. The neighborhood that I'm in is separated by a river. The more condensed and urban area is north of the river and the about-to-be-gentrified area is south of the river (where this property is located). Literally I can drive from the property's location five minutes and be in an area where every many houses are $1 million and over for a single family.

Now I say that I can get FMV for rent because on the other side of the river where it is more urban and condensed (inner city), and they are being charged 80% of FMV. I've been to a couple of open houses on the other side of the river where their asking price is $360-375k, but the quality of the houses are extremely lower and the neighborhood is significantly worse (high crime rate).

I've looked at comps 1 mile radius around the address and the only 3-Unit Properties sold were at $375k and $380k, but they weren't gutted and rehabbed. Perhaps in just good condition. There are many 2-Unit Properties that sold for $330k though. Some things to keep in mind is that that I am going to purchase this through an FHA Loan (requires appraisal???) and that comparable houses that haven't been gutted/rehabbed are also on the market for $400-$425k, but they've been on the market for around a couple weeks to a couple months.

So my question to BP is first off, is it worth it? Secondly, what should I place an offer at? It's only been on the market for 3 days (today was the open house) and I'm afraid if I put a too low of an offer, it will just be ignored.

SO SORRY FOR THE LONG POST!