All Forum Posts by: Derek Kirkwood

I have not used them but there are a few threads about this already.  Here is one with recent activity: 

https://www.biggerpockets.com/forums/92/topics/392...

@Vashti Green

The numbers look good if you get the 750 +1050 rents you are expecting, but its negative cash flow if you don't.  How much will you have to spend for improvements in order to get the higher rents?  Did you factor utilities into the 33% for "other stuff"?  You might also throw a 10% in for property management because you might not always want to self-manage this after you move out.  

@Aaron Humerickhouse

You said you were putting 20% down but the $907 monthly mortgage payment is what you would get if you financed 100%.  Once you fix that in your spreadsheet it will show $726 mortgage payment for the $152,000 you financed.  Might not apply to this one but always check if you have to pay any utilities.  Otherwise the analysis looks correct.  

From an outsider looking in:  its very generous of you to help a friend in need, but he has had a year to get his life back together.  Its time for him to move on and for you to put this on the market as you originally Intended.

@Travis White

Before answering your specific questions I wanted to point out:  You don't have to use the 70% Rule, its just a rule of thumb for flipping, but if you did the max you would offer for this would be $119,500. If you bought it at that price it would be 34% CoC with only about 10k left in the deal. For your specific questions in order:

-The CoC return in this case is one year of the $292/mo cashflow divided by cash left in: (292*12)/29000 = 12%

-Holding costs - yes! Holding costs are usually: property taxes, insurance, utilities, HOA, landscaping, financing costs. So for the 3 month rehab you will pay all those things, and the financing costs will be that 14% HML interest until you refi 6 months later.

-Putting more money down so that you have to borrow less HML will result in less financing costs overall, with everything else being equal will result in less cash left in the deal.

-Up to you on personal criteria, but a perfect BRRRR would result in no money left in the deal or even ending up with more than you started with.

-No I would stick to the 70% rule

Hope that helps!

@Kelly Kormos

Property manager, even if you are self-managing it would be good to know in case you want to hire it out later

Utilities.  Sometimes duplexes have separate metering so that you can have tenants pay it but it seems more common that landlord pays at least some, with the most common being water.  Landlords usually pay utilities for any common areas, not sure if this property has any.

CapEx. Save some each month for the big long term expenses. Unless you included that in repairs already.

Does the landlord pay anything for landscaping?

@Kelly Kormos

Sorry I see what you did now.  You have the mortgage included in expenses.  Those numbers are good if they are all correct.  My only concern is your operating expenses (everything but mortgage) are only 28% of rents which seems really low.  I would make sure you know what all the expenses really are.

@Kelly Kormos

The analysis numbers you posted are yours or pro forma numbers they sent you?

If there is only $1050 monthly left over after paying the expenses then where does the $23,702 NOI come from? It looks more like 1050*12 = 12,600 annual, which is about 5% cap rate.

@Sam Wydner

Ok, what is the assessed value that you pay the 1.9% on?  I'm trying to figure out what you actually pay for taxes because in your numbers above its just literally adding $1.90 monthly expense for taxes.  If you had not done this already you can go to the county tax website to see how much taxes will be.  Sometimes sites like zillow or redfin have the tax history too.

Obviously the maintenance and capex depends on a lot, like the market, condition of property, etc.  If you have any big expenses coming up that you know about, for example the inspector determined the roof will need to be replaced soon then you can start saving specifically for those.  To use very generic numbers for analysis you could do 5% for each.  Same with vacancy, it depends, but a lot of people use 8.3% because thats 1 month out of every year.  With 10% for maintenance/capex, 8.3% vacancy, and $2755/yr taxes (assuming the assessed value is same as you paid 145k) it looks like this will be negative cash flow.

@Sam Wydner

Whats the 1.9 for real estate taxes?  Is that 1.9% property tax?

I don't see anything budgeted for maintenance or CapEx. How about vacancy allowance? With your calculated $253 monthly operating expenses, thats only 20% of rent... I think there are some things missing.