All Forum Posts by: Rick L.

I'm formulating a spreadsheet to assist me in quickly analyzing potential rental properties. I would like to calculate the property value based on NOI using the following formula:

• Property Value = Net Operating Income/ Capitalization Rate

I'm confused as to why a higher Cap Rate would decrease the property value.  Wouldn't a higher Cap Rate make the property more desirable?  In this case it decreases the value.  What am I missing here?

Do they sell the vinyl plank floating flooring in other patterns besides wood pattern?  It would be real nice to have a tile pattern to utilize in my kitchen and bathrooms.  Also, it sounds like the click together type is superior than the adhesive type?  Thanks in advance!

@Dion DePaoli Wow, great description and summary. Thank you so much for that information. I'm sure as things progress I'll have additional questions.  Something new like this is just plan scary to me.  

Thanks for your input @George P. How do you project your expenses when the rate changes every ~3 years?  Do you just attain the average interest rate and utilize that for your projections?  

I have made a connection with a commercial lender at local community bank. After speaking with the commercial lender, they're willing to offer the following loan vehicles with as little as 15% down payment. I have little understanding of ARM and especially balloon loans. However, some information I've read states they both can be rather risky. I'm a small buy and hold investor who is interested in acquiring cash-flowing properties to quickly build my portfolio. I would like the properties I acquire to be self-sustaining and don't want to get myself into trouble financially. I have always prided myself on my financial responsibility and >800+ credit score. I would prefer a fixed rate type loan, however I suppose these loan vehicles are more commonly use in the commercial sector? Here is an excerpt from her email explaining each loan:

"As mentioned on the phone, we have a 9 year ARM that we can offer. This works with a normal amortization (typically 25 years or less).

First Three years: 3.25% (unless we have a amortization of 10 years or less, in which I can offer 2.99%)

3-6 years: The three year treasury plus a spread of 2.50% with a cap of 5.25%

6-9 years: The three year treasury plus a spread of 2.50% with a cap of 7%

***Currently the 3 year treasury is .93, so with a spread of 2.50%, you would have a rate of 3.43%***

To make this visual, based off $100,000, on a 20 year amortization, below would be your worst case scenario for 9 years.

0-3 years: $567.20

3-6 years: $659.02

6-9 years: $732.31

I can also offer a 5 year balloon. Rates are normally in the low 4’s. Based on $100,000, on a 20 year amortization, with a rate of 4.25% you would have a payment for five years of $619.23.

Once the balloon or ARM is up, we would renegotiate the terms. Those terms are based off the current market. We do our best to stay competitive so you have no reason to want to leave TheBANK.

What concerns should I have with these type of loans?  What are some pro's and con's of employing these particular loans?  Is it even worth the effort, as a buy & hold investor, to use a 5 year or 9 year loan and then have to renegotiate terms to whatever is available at that time?  It all just doesn't seem to pass the smell test to me, but what do I know... Any comments would be greatly appreciated.

Thanks for the suggestions guys.  I'm also, considering using a trailer to haul stuff.  Something similar to this:

http://www.harborfreight.com/1195-lb-capacity-48-inch-x-96-inch-heavy-duty-foldable-utility-trailer-with-12-inch-wheels-90154.html

Just not sure if my little Nissan Versa would be capable of hauling much. I already have a 1 1/4  trailer hitch installed to transport my bikes.

Thanks for the suggestion @Richard C. 

  Although rules vary store by store, the Home Depot, I frequent limits use of their truck to people who purchase items in store.  Ultimately, I'm going to have to purchase a truck myself, just trying to delay the acquisition as long as possible.

I'm not at the point where I think purchasing a truck/van to haul supplies (-ie, lumber, cabinets, water heaters, etc) is justified.  However, I do need to find a way to haul large items from Lowe's/Home Depot to my property(s).  How do you haul items to and from your properties?

Yes, we are. We have currently completed one flip this year. We're looking to meet some new hard money lenders in the area. Care to share who you know?

Anyone know of any local hard money lenders in the ABQ area? They gentleman we've uitilized in the past has fell through and my partner and I are looking connect with a new lender.