All Forum Posts by: Derek Luttrell

@Dave Passey you're saying repairs and capex should be 10% each? For what it's worth, the current owner bought it for $40k in 2013 and rehabbed to its current state with new major capex items. 

It's 30 minutes outside of Chicago, so the rental rates are pretty solid....until you remember that it's still under Cook county's property taxes. 

@Steve Bracero the listing agent actually just e-mailed me with records showing water bills averaging $130/month, so add $30 to my expenses. 

That's a good idea selling off the old appliances. I'm a believer in clean and updated kitchens attracting better tenants and buyers, so I find good appliances to be worth it. 

@Frank Macias thanks for chiming in. The current owner bought for $40k in 2013, and rehabbed the property to its current state. The contract that fell through was also FHA financing, so he (according to the listing agent) spent $5,000 a few months ago to bring everything up to their standards.

The $2000 I put in for rehab would likely be used on better looking appliances in the kitchens, and plugging in a washer/dryer to the hookups in the second unit. 

Hi All,

I've come across a duplex with a frustrated seller after a drawn-out FHA deal fell through due to the buyer's financing. Evidently the buyer's lender required him to pay off his credit card balance in order to be approved for the loan, and the buyer refused/wasn't able to.

The asking price is $128,000, but I was thinking of utilizing a BP calculator report (shown here) in an offer to show what it takes to achieve my coveted 7% cap rate and 10% COCROI. It's those good ol' $7000/year Illinois property taxes that really eat into the cash flow.

A friend's parents own a triplex in the same town, and they said their water bill is $150/month, so I'm assuming $100/month for this duplex. Please feel free to chime in with any suggestions or concerns with my analysis. Thanks!

Hi All, 

I've come across a duplex with a frustrated seller after a drawn-out FHA deal fell through due to the buyer's financing. Evidently the buyer's lender required him to pay off his credit card balance in order to be approved for the loan, and the buyer refused/wasn't able to.

The asking price is $128,000, but I was thinking of utilizing a BP calculator report (shown here) in an offer to show what it takes to achieve my coveted 7% cap rate and 10% COCROI. It's those good ol' $7000/year Illinois property taxes that really eat into the cash flow. 

A friend's parents own a triplex in the same town, and they said their water bill is $150/month, so I'm assuming $100/month for this duplex. Please feel free to chime in with any suggestions or concerns with my analysis. Thanks!

@John Underwood good point--I did ask for proof of enrollment, which he said he could provide. I'm hosting an "open house" this weekend for everyone who's expressed interest throughout the week, so I'll be able to continue the conversation in person. 

Hi All, 

I am in the midst of screening potential tenants for my first rental property. I've been chatting with an applicant through Facebook Marketplace, and he is a Pharmacy intern who says he doesn't get paid right now, but he can show his bank statements that prove his parents send him money for rent every month. His facebook profile checks out, and he graduated from University of Jordan, but I'm curious if any of you have ever rented to a tenant like this, where the parents/potential co-signors are overseas. 

He added "I can pay two months upfront if that makes you more comfortable," and when I asked him how I would be protected if something happened and his parents stopped sending money, all he said is "they won't. I will pay no matter what." All things are pointing towards skipping this one, but I wanted to get BP's opinion. Thanks! 

@Mitch Jorgensen considering you haven't even graduated yet, I would definitely say you're on the right track. It took me three years and $33,000 in Chicago rent to find BP and realize I had the ability to dramatically improve my financial situation. 

In July I bought a 3-bedroom and have 2 roommates who cover almost 90% of all the bills, and I wish I started a lot sooner than that. I wasn't able to live for free like you may be able to with a duplex + roommate in Milwaukee, but right now I'm paying $250/month when not long ago I was paying $1,000/month for rent. If you won't be spending all your savings on the down payment and you will be cash flow positive once it's time for you to move out, I don't see why you shouldn't start right out of school. You'll be living with roommates one way or another, so you might as well be the one collecting the rent.

With the help of my savings rate shooting up since getting roommates, I closed on my first 20% down buy and hold rental last Friday; just 7 months after closing on my first property. 

 Joe, so true about past generations. I'm 25 and have done well at my commissioned sales job since graduation, doubling my W2 year-over-year since 2015. My father has been a mailman for as long as I've been alive and, even though he meant it in a way to express how proud he was, it broke my heart when he told me that even in 2016 I made more than he ever had a year in his life. 

My work ethic comes from him, and growing up I watched him crank out the overtime anytime a vacation was coming up (they didn't come up often, which makes the memories that much better). 

He's 60 years old and has never had a passport--until last month, because I've arranged for us to go to London, Paris and Munich together this summer. Call me an old soul, but It's amazing what my generation feels entitled to vs. how our parents lived at our age. 

I'll be profitable once I move out and hold onto it as a rental, but you're right, it wasn't possible to cover the entire PITI with my bedroom not producing any revenue. My plan all along has been to live here for 1-2 years, then go move into a new place with 5% down and repeat the process (hopefully with a MFR this time.) I know it's not for everyone, but at this time in my life I actually enjoy moving somewhere new every couple of years.