All Forum Posts by: Devin Haertling

Good point on the section 8. I will ask about that.

Here is how I am going to go about doing my due diligence 1. I asked the realtor why the listing has been in the market so long and what is there motivation to sell and if they are in a position that they need to sell. -The answer I got was very vague. I was told the seller is is slightly negotiable on the price but is collecting rent every month so I might not get them much below asking price. -again very vague though on why the listing price was so low and it has been on the market so long, the realtor didn't even address my question so when I look at the property I will ask again 2. I reached out to contacts I have in that town about the bad places to own property and it seems like this property is right on the edge of the part of town that has issues with crime (drug deals, shootings, lots of 911 calls). 3. I am going to try to get in touch with current tenants on why they live there. Get their stories and find out what kind of people they are As of right now I have driven by the property but have not been inside. Hoping to at least set up a time this week to get inside the units and I hope that one of the tenants will be home when I do that so I can ask them all the above listed questions.

I am currently doing my due diligence and trying to find out those exact answers. I will let you all know if I find anything out.

Also yes I would inherit the current tenants but haven't seen a lease yet. That's definitely something that will have to be addressed.

Aaron Pfeffer It is in an area with single family homes. It is the only duplex within a 4-5 block radius. Most of the homes in the neighborhood are in the same shape. Slightly run down. Not a lot of for sale signs but a few houses around the area appear to be vacant

Kevin Hunter It has been listed for 200 days

To start I currently own 6 SFR that I self manage. I found a duplex in a town that I work in 30 miles from my home and where I currently own all my rentals. 1 bed 1 bath on each side Current asking price 19500 Current rents $495 per unit so $990 per month. (They claim to have gotten this for the past 2-3 years but I have yet to see rent rolls) Taxes 980 per year Insurance less than 500 per year. Property might need a little work here and there. Window AC units Roof is new (last 3-5 years) Water heaters new Furnaces about 10-15 years old. Bathrooms and kitchens are both simple. Nothing special but floors aren't rotted out and no holes in the walls No broken windows basically the property does not look like a foreclosure. D property maybe a stretch to a C- C/D area Now at first look this is a cash flow king but there has got to something I am missing. Does anyone have experience with these type of rentals in lower areas? Am I just asking for headaches or is the cash flow that good that you all out there would think it would be worth a headache here or there?

So I am glad you are 100% as a long investment because this will make my point even clearer.  

If you pay full cash at 120K and you expect 1200 per month.

Lets say that 1200 per month is pure profit and you have no expenses, not insurance not property taxes, nothing.  It will take you 8 1/3 years for you to realize any profit at all on the property.  

So taking into account part of that 1200 each month has to go to at least insurance and property taxes your break even time gets extended even further out.

If you use a mortgage you are taking money from a bank to buy a property that the tenants will then pay off the mortgage.

Another way of looking at this:

Lets say all things are equal and you end up holding this property for 30 years and you never have a single expense and you pocket all the cash:

A 30 mortgage at 5% with 30k down will cost you $483 per month for 360 months

so if you pocket the excess each month you will have (1200-483)=717 per month x by 360 months gets you $258,000 for only a 30k investment

now take that number and multiply by 4 because with 30k down you can buy 4 properties and you have $1,032,480

so 120K = $1,032480

Your way will pocket 1200 per month for 360 months = $432,000

so 120k=$432,000 at the end of 30 years

now of course there are extra costs included with the above calculations and thats where owning multiple properties spreads out your risk.  

First off if you are buying 4 properties that are going to be vacant all at the same time then you are buying the wrong properties.  Usually what happens is you have one vacancy you have 3 other properties to cover the costs of the one vacancy.  

Then lets say you have one bad tenant that destroys the place and it takes 2-3 months to get the place in shape to rent it again.  Where is the money coming from for that.  With one property it is coming out of your pocket.  With 4 properties it is coming from the other tenants rents.  

A lot of the risk of what your talking about with vacancies is avoided by properly screening your tenants and if your getting 1200k per month your tenants should be decent.  

Looking back at your above example of 5 properties costing about 4400 per month then what is your cash flow?

5x1200=$6000 per month.  After all expenses are paid in your above example you are pocketing $1600 per month (more than the 1200 you are getting in one month with one property and not even taking taxes and insurance into account).  And at the same time you are paying off the properties with tenants rents aka money that is not yours and at the end of 30 years you have 5 properties that are paid off each with a value of 120k.  

Peter G. I'm am not trying to rain on your parade or discourage your deal but I think you need to go about getting the deal done a different way. Right now at all cash at 120k you are tying up a significant amount that is not liquid. What happens if there is a large cap ex cost that pops up? I guess what I am really asking is what are your investment goals?

Have you though if only putting 20-25% down and using the rest of the cash for another down payment on another purchase. If you used this technique you might be able to buy 4-5 properties.