All Forum Posts by: David Doiron

I don't mean to highjack the thread, but thanks for the wise input.

Thanks for your input guys !

The lack of cashflow pretty much kills the deal, because the whole project becomes based on potential revenue of the flip... while the cashflow will not increase for any other investors as well, so it could become hard to sell at a decent price.

So, as a learning process and in order to practice my deal analysis skill I'm scouting mls to see if I could find a deal on my own. After some time I've stumbled on this 8-plex which could be interesting. This is to be taken with a grain of salt, as I'm looking to validate my thought process and analysis. I'm not even sure if that would be a good first multiplex project, since it's a repo !

City Evaluation = 680,000. Market price is usually 1.2 to 1.5 above Evaluation

Asked Price = 620,000 (I believe it is too high since the lack of tenants)

Nice Area, well located, high rental demand.

8 x 1Bed Room units out of which only 2/8 are rented (!!)

Potential revenue as per realtor 49,000/year (I believe it is too low, my research shows that avg 1BR units rent for about 600+ in that area = 58,000$/yr )

2 units need major rehab, other 6 needs love. Since it's a repo, I'm uncertain about other major maintenance such as windows, doors and roof.

So here goes my take on the strategy:

Offer 400,000

Get 500,000 hard money to account for rehab and upkeep costs

Rehab and Rent all 8

Refinance mortgage for a value of 700,000, so 80% amount to finance = 560,000

Pay off the hard money lender and fees. At that point, I have no more cash in the project, so I would think about holding the property. But the 50% rule shows a negative cashflow with that new mortgage value.

Possible exit is to consider this a flip and resell the plex for a one-time profit. 

When you see this as an investor, would you even consider taking the time to deep-dive the numbers and make a more detailed guesstimate.

Advice, comments on the analysis ?

Thanks for sharing and helping my learning :)

PS.: Property cannot be visited unless an offer is accepted ... smh :/

I come to the same conclusion as you are: The 50% rule is practically impossible in our market ... and I've covered most of the province in my research. The 50% guideline is new to me, so I was comparing with other known indicators such as ROI on cashdown, Gross profit multiplier, Net profit multiplier and such. Sometimes I would see >100% ROI on cashdown but -50$/month per unit cashflow.

So I guess it means 3 things: 

1- The 50% cannot be used here right of the bat, maybe 40% would be more adequate.

2- There will be no easy rule of thumb for our market, and we'll need to dig deeper in the actual expenses when qualifying potential properties.

3- It shows how the market value is not proportional with the price of rents.

Anyways, best of luck to you !

David

Thanks guys for the warm welcome.

@Samuel Sedore. you seem to make a distinction between a realtor, and an investment realtor. Are there realtors specialized for investors ? I would gladly take you up on references and tips. I want to get in the game the right way, and want to "ready-aim-fire" correctly the first time.

Yesterday I was listening to the podcasts, and I think I got me a tangible objective: 50 doors within the next 5 years. Why 50, you ask? Because it sounds great, and divides squarely by 5, lol !

cheers !

DD

Hi Everyone, my name is David and I'm from the greater Montreal, QC area. I'm an engineer in his mid-thirty and brand new on BP.

I've been thinking (way too much) about jumping into real estate investment for the past 15 years, but never really got to getting the cash down required. I have owned personal houses, but I'm speaking investment-only. Since the "should've could've" remorse get you nowhere, last year I decided to jump in the wagon and bought a super-well-located super-good-looking cottage, that I now put up for leisure renting. I couldn't be happier, plus I now have a cottage I can go to when I feel like relaxing with the family and kids. 

That being said, for 2016, I want to get things rolling and leverage what ever money I can get to invest in a multi-family home (6+ apartments). I don't know yet if I'm gonna go in by myself, or get 1-2 partners to make a group investment, which would allow a bigger buy/bigger return kinda deal.

Or I might just try to find a single-family house flip, although I'm not so sure about the risk VS gain, equation on that. I know that people can make good money with that, but I know more people who failed miserably than the latter. That I would definitely not go on my own ... but finding the right deal is probably the biggest challenge on that aspect of REI.

So that's it! And thanks in advance for the tips you guys provide

Cheers !