All Forum Posts by: Enrique Huerta

If contingencies were released and they were technically obligated to move forward then you are entitled to the funds assuming the contract states that as being the case. I am not providing legal advice but in my experience you will have to sue for the deposit if the buyer does not sign the mutual release. Speak to your broker about your rights and remedies in this situation.

That's a pretty solid interest rate, in general. Can you elaborate though? Is this for a SFR or an apartment building? How much down? What term?

We have received slightly better rates but that was for Multifamily agency financing. I’ve also seen recent SFR interest rates around 3.5% from banks.

You have to refer to the purchase and sale agreement. Are they entitled to the release of their funds? Did they breach the contract? Were contingencies actually released or did they have contingencies intact? Just because they backed out before closing doesn't mean you would be entitled to their earnest money deposit. The situation is dependent on what the contract says and how closely timelines were followed.

Please elaborate on the specifics and someone can be more helpful. The best course of action is always to discuss with your broker and legal counsel in your specific situation.

@Eric Duran

Send me a PM. I have a property we just closed on (50+U) that may need your handyman services. I will be happy to have you bid and work on various projects on the asset, as well as guide/mentor/explain why we are doing certain things. I'm not asking for free work, but simply a reliable contractor. If you prove dependable, then we can explore working together on the investment side of things. The ball is in your court! Talk soon.

Everyone uses different rules of thumb, but I've typically seen the following:

$500-$1,000 per unit in Replacement Reserves (usually lender required anyway), and

1or 2 months of operating cash flow (to cover expenses and debt service for a month or two if any excessive vacancy occurs)

Beyond that, it is a personal preference. You would want to have cash for:

-Purchase Price

-Closing Costs

-Capital Expenditures

-1 Year of Insurance Premium

-1 Year of Property Taxes

I can give a more specific answer if you have a breakdown of your acquisition costs, planned CapX, and short-term business plan. 

The best thing you can do is ready your HOA documentation regarding renting out the units within the association. That will typically spell out everything you need to know as it pertains to renting out the condo that you specifically own.

Regarding the neighbors, there's not much you can do. You can inform the tenants of the complaints and request that they abide by the community's quiet hours (variable but usually 10 pm to 8 am).

I've never requested rental approval for HOA so I cannot speak to the reasons for the denial.

Otherwise, welcome to BP and best of luck on your adventure of REI.

Everyone has different motivations for buying a property. Some may be owner-occupants who don't care about getting the best deal, just "a" deal. Some may be buying for tax purposes. Some buy for capital preservation. Some buy as rentals. Some buy as inexperienced investors. The only thing you can control is how you analyze and buy. It is incredible, but stick to your guns and eventually you'll snag the right deal for you. The more offers you make, the more you analyze, the more adept you get at knowing a market and you may be able to "overpay" and still make a profit. 

Best of luck to you!

Sorry, I didn't answer your question. We are finding decent deals and the way are doing it is just by cultivating relationships with real estate professionals and analyzing everything that comes our way. Also, this is just my opinion, but $30k-$40k margin is a little tight for today's market. It's up to you and your risk profile, but that is my thought process. Idk your average price point, but you can probably sell a couple homes in that timeline and make the same amount of money with less risk.

Welcome to investing in 2020. It is just part of the investment game. To give you some insight, our firm looked at 1,000+ deals, underwrote over 650 from start to finish, and bought 3. 

You've got to kiss a lot of frogs and don't get discouraged. It takes time and you just have to do it every week!

Let me know if there's anything I can help with. You are not doing anything wrong. You just haven't done the "thing" enough times. Keep going and it will stick.

@Pinaki M., I realize this is an old thread but I thought I would shed some light on how the calculation is conducted to determine whether you have positive leverage. The positive leverage is not actually between the cap rate and the interest rate but between the cap rate and the loan constant. 

The loan constant is the annual debt service divided by the loan balance. In your case of having a $880,000 loan amount with a 5% interest rate and a 15-year amortization term, the annual debt service is approximately $84,781.21. Dividing $84,781.21 by $880,000 yields a loan constant of 9.63% (OUCH!).

With your $65,000 NOI and $1.1M purchase price your cap rate is 5.91% as you mentioned.

Now, subtract the loan constant of 9.63% from the cap rate of 5.91% and you end up with negative 3.73%.

Therefore, given your financing structure, you're actually using negative leverage of 3.73% with that loan. As others alluded to, I'd look into some longer-term loans (30 year amortization) and options with lower rates. Today's loan programs are better than two years ago.

I hope this helps you and anyone else when running the numbers.