All Forum Posts by: Dan Nim

@Mike Bolen OK. Mike you are right. I was wrong. Feel better now?

@Mike Bolen LMAO. Not scared at all because I dont fit the “demographic” that would be harmed. I do respect our frontline medical personneal responding to this pandemic and for that I respect the order. More importantly I didn’t like your disrespectful response to Wendy. Kind of ironic that you are posting news articles but not respecting what our “doctors” are recommending. Who is claiming to be a Dr now?

@Mike Bolen Did you read the article you posted on Sweden or just the headline? You may want to read the article.

@Fred Cannon where r u investing in those 150-170k turnkey properties?

Everyone talks about $100 or $200/door but what does that represent as far as return on your money invested? Its all relative.

If you put $50,000 down for the home and collect $100/month net after vacancy/expenses/PM and etc, that's $1,200/year. Divide that $50,000 and that only amounts to a measly 2.4% return on your money. Put down less and receive a higher yield, than ya that's better.

I know it is not that simple because you can factor in principle pay down and potential appreciation in for return but strictly from a cash-on-cash return that's not a whole heck of a lot of a return for something that is not as liquid or that much better than the current (2/4/2020) risk-free rate on a 3 month US treasury bond yielding 1.57%. 

Shouldn't we be looking at other calculation like Return on Equity (ROE), Internal Rate of Return (IRR) etc?

@Salvatore Lentini Thank you for starting this discussion. I started a discussion in another thread but would like to re-post it here for my reason why I didn't pull the trigger on my first deal.

My current goal is to look for properties for cash flow to help supplement retirement income in the near future (possibly 4-8 years from now.I could extend that time frame). For the deal below, after calculating the numbers, the COC was a small 1.2% return or $133 per month of cash flow. This concerned me because I was taking out a $130K HELOC. Is $133/month enough to pay back the loan in a respectable manner? That didn't feel right with me:

Anyway, the deal I backed out of was a duplex (both 3bd/2bth) in Riverside (43 y/o property)with a gross monthly rent of $3625/month. unit 1 at $1,950 because it was recently upgraded and unit 2 @ $1675 because there was a tenant in place for the past 10 years so rents weren't raised over time). It was previously in escrow but the buyer walked and I was able to review the inspection report (minor repairs and work but nothing major except for maybe foundation? see below for more)

The offer was $530k. 25% down (~$130k) with a 5.1% mortgage rate at 30 yr. After running the numbers on a spreadsheet my yearly cash flow projection was $1,593/year or $133/month, 5.1 cap, 1.2% COC Return. I used the following to calculate expenses: 5% vacancy, 1.16% property tax, 5% of effective gross income for repairs/maintenance , 10% property management, abt $1,100/yr gardening & utilities and $1000/year for insurance). This does not factor in paying back the HELOC.

The neighborhood was a solid C/C+, maybe B- neighborhood with several other duplexes in the neighborhood tract, which I'm pretty sure were all mainly rentals.

I did not go thru with the deal because:

1. Saturation of rentals in the area and concerned that in a downturn this could be a problem competing for renters or increase supply affecting rental rates. (maybe I'm wrong about this assumption? Maybe not a factor since there may be more people displaced from their homes and need to rent?)
2. A much older neighborhood that may not see much further appreciation potential? reading comments in trulia neighborhoods, it appears that longer term residents have complained about how the neighborhood has changed and no one cares for their property like it used to be.
3. I had some concerns my cash flow was too small of an amount to contribute towards paying down the HELOC in a timely manner. However, I believe thru regular savings I could probably pay it back over 7 years. Instead of saving, I would divert the savings to paying this down.
4. Maybe jitters of getting back into the market after all these years
5. 2 hour drive to get to the property, maybe even more if having to drive in traffic, thus requiring a property manager since I work full-time, which cuts into the cash flow greatly, which is my primary goal.
6. Concerns about foundation issues. I noticed through other listings in the neighborhood, foundation cracks appeared in the listing photos in the living room [flooring was pulled up].  All the homes in the area appear to be built by the same builder/developer many moons ago. This subj property was showing similar cracks around the outside of the house.

Other things I considered in favor of going for the deal is that in four years I could retire and possibly manage the property myself and recapture the property management fees.

I wanted to act and break free from the paralysis from analysis but opted to stay on the safe side. I accepted the fact that it was better to miss out on an opportunity rather than buy into a mistake.

My question to the community is would you have done this deal?

Did I miss something in this deal? Was my thinking off as far as the COC return. Should I have been thinking a different way? i.e. accept the fact that there was small positive cash flow of $133/month and chip away slowly at the HELOC and then maybe in 7-10 years (if enough equity was in place) do a cash out refi to pay off the HELOC? That thought seemed too speculative.

If anything this was all good practice for me to help me prepare to look at the next opportunity.

Oh and while I'm blabbing, the idea of capturing $100-200 / door as cash flow that I have been seeing in other discussions or hearing on the podcasts are these folks considering the COC on this? are they willing to accept a lower return or is it because they are buying relatively cheaper properties requiring less cash up front?

Thank you and look forward to your thoughts/comments.

@Philip Devine you only paid 225,000 for the place but it grosses 250k?

@Account Closed Thanks Mike. Yes my thinking was with a 200/month cash flow with a 130k down (CA property) that's only a 1.8% COC.

Read your link. Very interesting. So that's an assumable loan you took over? How do you find people to buy from like that?

As far as finding the buyer, do you list it as a rental with a lease option to buy?

I have heard on several of the podcasts and read thru the forums that people aim for cash flowing properties in the range of $100-200/door. Is that a typical goal to set?

What I don't hear is what the cash on cash return is on that. Depending on what is put down, whether it is 30k or 150k, this will affect the return, which I feel collecting $100-200/door is not necessarily a good goal? 

@Aaron K. Thank you Aaron! Truly appreciate the feedback.