All Forum Posts by: Elliot Vann

@David Ribardo

Aren’t those colleges building brand new dorms? It will really mess with the supply and demand there...

What cap rates are you seeing those trade at?

@John Kutrzeba

You still in Lehigh Valley? Trying to get an idea of the returns people are seeing and any tips for underwriting there.

Thanks in advance!

@Jeffrey De Los Santos

This is some great stuff here!

I’m trying to get in on the Lehigh action, so appreciate this thread a lot!

But wondering what everyone thinks about returns. I have been underwriting deals in the area and everything seems to be hovering around a 7% Cap and 12% CoC. Is that what everyone else is seeing from deals there as well?

Thanks in advance and love to hear more from the “Lehigh Crew!”

@Miltiana Holdip

If it’s NY, you are lucky if you can pay them to leave. Otherwise, months and months of eviction proceedings...

@John Warren

Lol, is it really possible to take away my love for real estate?! ;)

I totally hear what your saying. My really question though assumed there wouldn’t be negative cash flow just not positive.

Here is an example.

Rents $1,000 and $1,000

$24,000 annual income

-taxes $8,000

-capex, vacancy, repairs and management 6,000

-$10,000 debt service

=Zero cash flow

BUT some of those are just assumed costs so I would actually have cash flow after the mortgage and that is what would pay for any unforeseen costs

Principal paydown annually would be about $8,000 a year and I would have to put in about $30,000 into the deal which is a 27% return on my money!

Where else are you getting those numbers?!

Still think it makes no sense because a bug capex early on would ruin all profits and wouldn’t have returns till few years in? The same thing could happen with something that cash flows $200 a unit a month. One roof and you are out of business.

@Joseph Scorese

Which product are you referring to? That’s sounds great, to be able to put 5% without MI.

@Gregory Hiban

Big Capex or 6 months vacancy would be no problem. I have very little expenses and a solid W-2 job. This would be max 30% of my cash.

Would you say go for it then?

@Joe Villeneuve

Two possibilities really.

One scenario is that the rent covers the mortgage, taxes and insurance, but not any repairs or vacancies. However, I would still have positive returns including principal pay-down.

The other possibility is that it rent would cover all costs and just be even without cash flow.

Background:

I live in a city in New Jersey with a high bar to entry that requires a sizable downpayment. Even though I could have the money to put down or find investors it would be much preferable to not have to use all my savings on one deal. I have looked in PA for smaller deals but it is a tougher market with less appreciation.

POLL:

What do you think about buying a 2-4 unit property locally with an FHA loan? The goal would be to live in it for a year and then rent it out. I expect the returns to be well over 20% on my money. THE CATCH is that there would be ZERO cash flow and my returns would come from principal paydown.

I would be analyzing the deal assuming regular maintenance, Capex, vacancy, etc. So technically it might cash flow more than the actual mortgage but the idea would really be to have an investment with great financial/economic returns but little short term cash returns.

Love to hear everyone’s thoughts!

Thanks!

@Zachary Caudill

Obviously all the software and cash pay ideas are great, but if you want to do it the old fashioned way then I recommend sending a bill every month with a pre-addressed and stamped letter they can put a money order in and mail out. It will cost you a few cents for the stamps which would be cheaper than software and they don’t need to do anything besides put the money in.