All Forum Posts by: Ed McIver

It seems a troublesome tenant has decided to move out. But her mother and mothers boyfriend has moved in. I am reasonably happy to be rid of the original tenant. She always difficult. However, now I have two people who are not on the lease occupying the apartment. 

I feel like I have lost control.

I agree. I am hoping for another option.

My new property has an old (100 year) brick Carriage House. The building has a bit of rustic charm but that doesn't pay the bills. The brick work is on poor condition. A mason told me I should budget 7k to repair the outside walls. To completely stabilize the building I should budget 10K+. If I rent the building out as storage I might get $150/month. Both these numbers are optimistic. The best case ROI is 18% most likely lower.

The building can not be converted to living space.

 I am open for suggestions as to what to do with it? Here are my options.

1) Let it fall apart. This is what the previous owner did. 

2) Have the brick work repointed and and repaired and rent out.

3) Have the building removed. 10K? I really do not know.

I would really like to know what other investors have done. 

Thanks

I assume they have different meanings. But as far as I know they are essentially the same. 

Debt Service Coverage Ratio (DSCR) and Debt to Income.

the Cash on Cash on this property is 35.82%. What I really thought was interesting is that my DSCR is 2.2 which is less than the 3.26 of the property. So buying this property will improve my score. Thus make it easier to purchase the next.

Sorry my calculation is wrong!!! It should be 1432.08 divided by 439.21 giving a DSCR of 3.26!!!

Please check my Math

When analyzing rental properties I use the BiggerPockets Rental Property Calculator. It is an easy tool to use and it can quickly show if a deal is worth pursuing. Assuming the deal is good, you get a loan from your favorite bank. Part of the loan application is to calculate your Debt Service Coverage Ratio or DSCR.

Your DSCR is a ratio of your net income divided by your monthly loan obligations. It is a measurement of your ability to pay all your loans. If this ratio is below 1.2 your bank is not likely to fund your loan. As your DSCR get higher banks get friendlier and loans get easier.

Well this started me to thinking. Do my rental properties have a DSCR? I think they do. I pulled out my BP worksheets. I looked at the expenses. The expenses include Vacancy, Capex, Water & Sewer, Repairs, Electricity, insurance, Property Taxes, and Points and interest (P&I).

For our purposes, I am removing the P&I and recalculating the expenses. In my case the total expenses equal $667.92 per month. My total income is $2,100.00 per month. My Net income is $1432.08.

Now if I were to do a DSCR calculation to my property I would divide 1432.08 by 667.92 This would give me a property DSCR of 2.144. So, from a certain point of view, if my property were to apply for a loan to buy it's self, it should get approved. But more importantly, If my personal DSCR is lower than the properties DSCR. Then the purchase will improve my finances. And make it easier to purchase more properties. If the property's DSCR is lower than mine, it will make my finances look worse. Thus make it harder to buy more properties.

As I have heard hundreds of times you make your money when you purchase.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $105,000
Cash invested: $30,000

I was contacted by a wholesaler who had a lead on the property. The property was originally offered at $120,000. Due to the collapsing economy I said I would only consider "great" deals. I offered $100,000 without knowing knowing the address or condition. I only knew the town and it is fully rented.

What made you interested in investing in this type of deal?

I am investing for retirement. I do not take profit out of my real estate company. My goal is to have $100,000 in profit in 10 years. This property will bring me $12,000 per year closer.

How did you find this deal and how did you negotiate it?

It was brought to me by a wholesaler. I will only consider great deals right now. So we asked for a $20,000 discount before I was off the phone.

How did you finance this deal?

I am getting a conventional loan 5.25 %

How did you add value to the deal?

The property has a large out building. I will be renting the building out separately. 100 to 200 /month

What was the outcome?

So far so good.

Lessons learned? Challenges?

The seller was a bit hesitant. We agreed on a price early but he did not seem to want to sign the contract. Finally I gave a 5 PM dead line.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $105,000
Cash invested: $30,000

I was contacted by a wholesaler who had a lead on the property. The property was originally offered at $120,000. Due to the collapsing economy I said I would only consider "great" deals. I offered $100,000 without knowing knowing the address or condition. I only knew the town and it is fully rented.
As it turned out the seller was motivated and the contract was signed yesterday,
The house has issues. My biggest concern is the electrical service. I will need to upgrade the wiring within 30 days of the sale of the house. I have already had an electrician review everything.

What made you interested in investing in this type of deal?

I am investing for retirement. I do not take profit out of my real estate company. My goal is to have $100,000 in profit in 10 years. This property will bring me $12,000 per year closer.

How did you find this deal and how did you negotiate it?

It was brought to me by a wholesaler. I will only consider great deals right now. So we asked for a $20,000 discount before I was off the phone.

How did you finance this deal?

I am getting a conventional loan 5.25 %

How did you add value to the deal?

The property has a large out building. I will be renting the building out separately. 100 to 200 /month

What was the outcome?

So far so good.

Lessons learned? Challenges?

The seller was a bit hesitant. We agreed on a price early but he did not seem to want to sign the contract. Finally I gave a 5 PM dead line.

Toilets overflow when they are clogged. What is clogging the toilet? Is it clogged with **** and toilet paper? And is there is sewer water draining down in the walls? Might need to have the tenant move out for a few days to re mediate the sewer water. Or is the water clean? Did they dump clean water on the floor and blame the toilet.

I bet it is the second. Did you examine the toilet? was it clogged? I have no doubt you are screwed. Remodeling the bathroom can take several days. I'm sure they would need to move out during the process. I know a thoroughly unreliable guy who can take weeks to get the job done.