All Forum Posts by: David Chappell

The BP calculator is showing $321 in CF but I believe I did the down payment incorrectly so I'm looking into that. My manual calculations show $244 cashflow but I'm not sure if there is an HOA so I am estimating at the very lowest.

Any areas/neighborhoods that you would stay away from?

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Houston, Texas

Hi everyone! Been browsing realtor.com looking for my first investment property and came across a few in 77044. Is anyone familiar with that area code? I grew up on the opposite side of H town so Im not too familiar with that part of town. I believe it is Section 8 housing but Im not sure. Either way, this SFH is under $100k and has had some minor cosmetic work done along with a new roof/AC and looks to be cashflowing $150+ but not sure about the tenant pool in that area

Also, if anyone has any recommendations on realtors/contractors that work in that area it would be greatly appreciated :)

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Houston, Texas

Originally posted by @Dylan Thomas:

@David Chapoell

Your calc is wrong. You never entered your down payment. You need to enter a % you’re putting down on the property. You mentioned $18k from a Heloc. I’m assuming that’s a 20% dp so you need to get that into your calc to make it accurate.

Also unless you’re getting seller help, or paying cash, or seller financing, closing costs are going to be more than $2k in my experience. Bank financing is expensive. My past 2 mortgages have been $10k and $12k in “closing costs”. Random things like doc prep, prepaid escrow, school taxes, inspections, flood certs, title company, attorney fees, etc etc. it adds up quick unless you can snag some seller help.

I have no idea your market, but I never run numbers at max rental amounts. If I think I can get $800 a month on a bad day and $900 on a good day for a unit, I always run the numbers at $800. It’s safe. If you do get fortunate and the market is hot, or it’s peak leasing season and you can get someone in there for $900 then great! You’re making extra cash. But prep for worse case scenarios and go from there. If the deal makes sense at your worse case scenario, then go for it and it may be better than you think if you can get those higher rental amounts!

For example. I have a 3 unit building that’s now finally 100% occupied. 2 units I knew I could get $700 and $750 for and I got them filled before COVID-19 hit. The other should be going for $900 in June/July aka peak season. But because of the crises I had a great applicant that I really wanted in, but they said they couldn’t afford the $900. So I settled and got an amazing tenant at $800. I’m not sweating over the $100 because I’ll never hear from this tenant ever again. Young IT professional straight out of college who can work from home and won’t lose their job. Plan worse case, and if you get best case then great!

Good luck man.

Geez I may need to re-estimate my closing costs. What is a % of purchase price that you usually use to estimate closing costs? And are those usually able to be rolled into the mortgage?

I need to go back and redo the calcs, I may have put 0 down as an easier way to estimate the total loan (HELOC + mortgage) but I realize the rates will be different in those so I shouldnt be lumping those into one calculation.

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Originally posted by @Randall K Compton:

@David Chapoell

The nice thing about that is if the boiler fails on one, just yank it off your vacant one and back in business!!! Haha.. jk of course.

Hahaha, the benefit of having rental units close to one another!

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Originally posted by @Cory Carlson:

The inputs are wrong if your initial post is the circumstance using $18,000 down. The analysis is assuming the $2,000 down as your "invested equity" and skewing your IRR. Being as $2000 is the denominator in the equation the analysis spits out a crazy IRR of 174.25% The visual at the bottom showing the Year 1 - 30 returns shows a year 1 equity of ~$2500. Here is an analysis with my software. I did it quick, used most of your numbers and made some minor expense suggestions, if anything it adds perspective. I am not offering you any real estate advise by using my analysis tool, I am not so familiar with the market.

These are the major inputs assumptions:

$90,000 purchase price and $18,000 down for 80% Loan-to-Value.
3.9% rate, 30 year amortization
Scheduled monthly rent of $1000.
Conservative annual expense load of ~4950 (43% of Effective gross income).
Investor effective tax rate of 15% and annual depreciation expense of $2500.

Projected Year 1 returns are as follows:

(1) Pre-tax cashflow ~$2568 (14.27%), After-tax cashflow $2365 (13.14), After-tax return + principle pay down $3655 (20.30%) and Total Return (After-tax + pay down + appreciation-1.5%) $5005 (27.80%).

Cory, thanks for the extra detail that sheet looks awesome! For my first property I havent really given much thought to the pre/post tax calculations, I was mostly looking at cap rate and cash flow. There's a ton of new numbers on that sheet for me, I need to take some time to make sense of all of that :)

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Originally posted by @Randall K Compton:

Is the rent still comparable with the tennant paying all the utilities, whatever they are. maybe I missed it. looks ok if there aren't any repairs that need to be done any time soon. sure would suck to have something over 1k that needs to be repaired within the first year.. 50 bucks a month seems low but I know that situational to what you plan to do with the net, set aside, and where you're at.

Hi Randall,

From what i Saw on Rentomete this is on the lower end and below average just to be safe. The property has new flooring/AC/paint and I dont believe there are any major repairs needed. The $50 came from the 5% of rent metric I had heard from a few places...when viewing the property I could probably put together a better estimate.

The exciting thing about this property, there are 4 or 5 other properties in the same neighborhood just like it that are for sale too.

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@Randall K Compton

https://bp-v-newproduction.s3.amazonaws.com/uploads/calculators/shared_report/report_file/40a59a69-2501-4746-ad75-e8fe2bb90443/report.pdf?X-Amz-Expires=601200&X-Amz-Date=20200401T021359Z&X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIAINAFXR3SDILSVHQA%2F20200401%2Fus-east-1%2Fs3%2Faws4_request&X-Amz-SignedHeaders=host&X-Amz-Signature=8c1013b904dea0f4dbf4640ebe9c598dacb6fdb8858c91274941ca3511befb94

Does that link work? Sorry, I’m new to this!

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@Randall K Compton

Hi Randall, I shared this straight from the calculator so I believe you should see a link to the report? Its showing up in my post, let me see if I can attach.

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View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hi Everyone,

Just became a pro member and am looking through a few properties in Houston, TX. I double and triple checked this deal so I believe :) the numbers are right but let me know if I am off on anything.

- C (I think) neighborhood in NE houston. Close to nicer neighborhoods, about 10 min away from shopping/retail businesses and a small lake.
- this neighborhood is full of row houses that all look pretty much the same, this is a nicer upgraded one but surrounded by similar houses without those upgrades.\

- FINANCING STRATEGY: list price is $90k, I will be opening up a HELOC on primary residence to get the $18k for the down payment and then hopefully a traditional mortgage for the other 80%

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@Nathan Gesner - awesome thread, definitely an interesting project :) Good to see it worked out for you and the good appraisal!

1 Vote

All Forum Posts by: David Chappell

David Chappell has started 12 posts and replied 161 times.

Post: Is anyone familiar with NE Houston?

Post: Is anyone familiar with NE Houston?

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: One man's trash is my treasure!