All Forum Posts by: Dave Smith

This is a cash buy from a seller. He is motivated, and the numbers look good, but I can't get my head around the impact of using my HELOC. Also need to understand the Quit Claim deed. Purpose is rental for eventual refinance, then BRRRR. The particulars of this little 1/1, 500 sq ft. house:

Sell price: $3000 (no kidding) Structurally sound, not lived in for 15 years - he always planned on fixing it up and now he's 81 and must sell).  C neighborhood.

Repairs/holding costs: $17,500

All in:  $20,500

Rent comps: $445

CoC return: 10.7%

1% rule:  2.2%

Actual cash flow:  $183/mo

It's 100 years old, so I'm factoring into my expenses10% Capex, 10% ongoing maintenance. My 50% exp rule is at $223, and proforma at $240, so pretty close.

Instrument:  He wants to quit claim deed the property.

Using HELOC funds at 4.99%

1.  At face value, the deal looks good, except do I factor in the cost of the money I'm using?  If so, does this put me in negative cash flow?

2. If not, will I be able to refi after 6 mos, with the HELOC affecting my DTI ratio?

3.  If not, how do i unlock my capital to get to my next deal?

4.  Am I looking at this properly?  Should I be considering break even?  What are my options?

Any assistance would be greatly appreciated.  Thank you.

Thanks, Joshua.  I'm sure I will have additional questions.

Working on getting approx. 75K in HELOC money. I have a full time job. I'm in the Kansas City market. Interested in duplexes, 3s or 4s in my area, in a way I can use BRRRR to develop cash flow, and acquire 10-20 properties over the next 3-5 years. Considering house-hacking as well. Can I get financing since I'll have a primary mortgage and a HELOC already? Will my debt to Income ratio be too high? Or will these be cash deals or private or hard money to get the first property? No problem living in the property, even though the rest of my family lives in our primary residence? Is this a reasonable starting (and scalable) strategy, or should I shift my thinking? Does anyone have any other creative suggestions? Any pitfalls I'm not considering?

Thank you.

Hi folks, new investor from Olathe, KS, getting my education on BP, while trying to secure funds to do my first deal.  Looking for an agent/investor to work with/partner with/bring value to while fast-tracking my learning curve.  

Looking on KS side, (66061, or in Lenexa, Shawnee). Also want to consider MO side if it makes better sense for me to look at C neighborhoods with 30K-40K SFR. Shaping up my strategy and I'm leaning toward BRRRR with dulpexes, 3s and 4s. Also considering house-hacking. Cash flow is my primary objective. Thank you.

Very helpful, thank you Derek.

I know I'm making this harder than it is. For a SFH, or small multis, am I thinking right here:

For Cash Flow:

Gross Scheduled Rents 

- Vacancy at 5% = Effective rental income

+ Other Income = Gross Operating Income

- Operating Expenses = Net Operating Income (NOI)

- Annual Debt Service = Cash flow before taxes

  Add Back:Principal Payments 

  Add back:Depreciation 

Taxable Net Income (or loss)

/12 = Net Monthly Cash Flow 

The "add backs" are throwing me off.

For Cash on Cash:

Cash Flow before taxes 

- Down payment 

- Cost of repairs 

- Closing costs 

- Holding costs 

= Cash on Cash return (CCR)

Thank you.

Awesome!  Thank you, Andrew.

I'm a newbie, so perhaps my opinion doesn't carry the weight of the rock stars.  I've been in business before as an Electrical Contractor, so I also know hard work.  In my education and pursuits, I always look for the nuggets.  I feel one take-away I didn't previously have makes it worth it, if I can then put it into action.  I understand plugging a book to promote sales.  I understand the prep involved to get just one hour of content.  For me, it's all about perspective - perspective that empowers or dis-empowers.  I choose the former.  For newbies like me, these podcasts are invaluable - thank you.  I wish I'd discovered the resource 12 years ago when I started the game, and exited due to a partnership gone bad.  I didn't have the tenacity to get up and get back on the horse.

That said, there are a couple things I'd like to offer.  Sometimes the silliness is a bit much.  I'd like to hear Josh poke at Brandon a little less.  I know he appreciates Brandon, but it sound unhealthy.  I'd be more endeared to hear Josh publicly honor him.  You both ask great questions, and Brandon, you have a great way of going down the rabbit hole when you get into your guest's story. Keep up the good work guys!

Thank you, Logan.  I had seen it on a couple spreadsheets that were designed to analyze cash flow, and it didn't seem right to me.

When analyzing cash flow, and with respect to depreciation:

• Do I calculate depreciation into cash flow projections?
• If so, is it on the total price, or just the building and not the land?
• And, is it figured on the basis, or the ARV?

Thank you.