All Forum Posts by: Douglas Gratz

@Stone Jin Can you describe what qualifies as B and B+....Why do you not by duplex's in that neighborhood? (or maybe they do not exist) . I am asking because in my Class CishDish neihboroods, SFH just barely cashflow (taxes 3k yr) so I was happily forced to step it up. I guess when in B class hood, (obviously depends on so much but in utopia) one would buy a SFH, accept the lower cashflow in speculation of a significant rise in home sale price.

@Anthony Rosa "Its money in the bank & Appreciation is where the real money is." What do you mean by that first one?

@James Wise yeah in nutshell maybe cashflowing is hard, but if I have so many other properties that could help chip in to my Class A , for what  5-10 years, then turn around sell it for a hopeful 50k plus :)...In this scenario you just need to be at a place with your finances that you can afford a short term loss

When I started 4 years ago, I got into section 8 and low income neighborhoods. The CoC was out of this world and ROI was 14-16% ....I am having difficulty shifting my perspective to one that gets me any more less of return, but I need to expand my horizons....B class seems the general consensus in which one can Cashflow while expecting appreciation yeah?

and...how do i compare and contrast other similar apartments to see if I am getting the deal i need to make the numbers work (for example, on loop net, practicing a little, but how can I have a good idea of good deal or bad) ?

I have bought 8 properties in the past 4 and refinanced them all and since I bought them cheap enough I was able to pull my cash out and or profit while still renting them.  I created this post because my goal is to in one way or another own an apartment building 5,10,20 units (commercial) and I have so many questions.  

1. Developing small apartment 10-20 units....How does one do research on weather his location has a better than not chance of working out?

2. Just throwing random numbers if i built and it cost me 1 million, it being brand new would the bank let me get most of my money out (given all the numbers added up and it was fully leased)? If so does it work the same as residential?

3. Can i get the money upfront to build it instead? How? 

4. Lets say I am interested in an already existing complex, and I think  I can install some new utilities of sorts that will end up saving a lot (charge parking, washing, etc), thus increasing its worth.  But how can I see the current owners numbers?

More questions will flow but this is all i have for the night as I must rest.  Have a good Sunday everyone!

@Russell Brazil Yeah they just knocked down the local business's across the train station where my barber was.  They built a small apartment complex with stores on the first floor.  And I see it all over, but this neighborhood is class B/C.   Ill have to look more into it. And I see this near transportation theory in action all over. Every exit almost on the PA Turnpike , huge townhome/condo complexes are going up.

I started a discussion and found that I learned quite a-lot relatively fast just reading peoples working strategy examples. So I  thought I would try this to see if I can learn more!  Below is the strategy I aim for and is my latest examples of how it worked and works. Straight and to the point

1. Buy only duplex's and above

2. For duplex's make sure be all in for a max of 122K preferably 100k

3. After buying, rehabbing, and renting, REFINANCE

4. Duplex's appraise for 175k so I break even or profit on the deal while still owning

So with the above strategy, I am able to refi and still cashflow 600-800 per house (because the mortgage on 122k is $600.00) This strategy allows me to leverage so I can buy another and another and so on

Anyone else want to share feel free.  

@Jay Hinrichs @Alan Grobmeier @Russell Brazil

Alan- You answered it when you said you basically paying for cashflow (putting % down so your payment is less) BUT really, is that 175k max because that was your purchase price, or in general you cant cashout refi for more than 175k on any property? (doesnt seem right) On another note , I need to hone in on how the tax system works and how to save in that arena

Thanks guys, sharing this information and strategies in a nut shell really shed some light on how one achieves his/her goals in the Class A/B Arena.  

Russel- What kind of research do you do or have done to be able to predict your properties will rise so high (assuming they arent $1,000,000 homes with a 2.5% appreciation rate)

@Alan Grobmeier in your experience with Class A, do you find yourself always take less money than the bank might be willing to give in order to keep a positive cash flow?  I ask because I want to see if I have to switch my point of view for this type of investment from my view now, where I want to get all of my money out.

@Jay Hinrichs So in your scenario, people I guess have other cash flowing properties that help the negative or neutral property along until your ready to sell .  Any tips on doing the correct research for properties you buy for their potential appreciation? Any good strategies?  

If anyone else comes along and reads this, if you have a working strategy for buying Class A and B please chime in ! I hope to see how others approach this.

I currently have 12 units all of which are Class C. My ROI for most is around 12-14% and CoC way higher but how do I make my strategy work for Class A Properties? When I buy a property the following has been my strategy

1. Buy only duplex's and above

2. For duplex's make sure be all in for a max of 122K prefably 100k

3. After buying, rehabbing, and renting, REFINANCE

4. Duplex's appraise for 175k so I break even or profit on the deal while still owning

So with the above strategy, I am able to refi and still cashflow 600-800 per house (because the mortgage on 122k is $600.00) This strategy allows me to leverage so I can buy another and another and so on...However, my question is...

I want to diversify, and not just have Class C properties, but the more expensive the property, the higher the refi, and thus a higher payment.  Let say I buy a property and am all in for 300k its a duplex. (2) 2 bed units at 1300 each. So I gross $2600.00 with a $2200 mortgage payment (including insurance and taxes) In Class A neighborhoods the taxes may be higher then my estimate.  With putting repair 5% away and vacancy 5%, I end up in the red....

How do you make this work?? I would really like to diversify (Aside from getting it cheap enough to where I do not have to refi for 300k, and aside from choosing not to refi as that does not fit my strategy)e

Thanks friends, cant wait to hear what everyone has to say!

@Matthew Reid I dont want to talk out of my *** (so I will try to speak of what I know), as I do not know much about loans other than my personal experience which is ....i purchase a house with cash for say 40k then I use my own cash 60K more (rehab) totaling 100k out of my pocket at first.  Then I go to the bank and refinance it. They come out, appraise it for 175k, give me 122k and now I have a mortgage.  I make 2500 a month, 1,000 mortgage/insure. I cash flow about 400-600 and I am plus 22k on the deal.

You are saying you are going to finance the rehab costs so I do not know what position that puts you in after all is done, but if you can pull your 70k out with an equity line or refi, then it sounds good. Your cash-flowing and paid nothing for it however; Personally, if its a low income area, I think 130K is a little much. I like a lot of cushion so I do my best to be all in way under its APR. (Again I no nothing of your area, so take what i say with a grain of salt)