All Forum Posts by: Michael H.

Just a clarification. The -268 net loss is per month. Annually, it is a negative cash flow of -3,232.

For me, house hack and the appreciation is not what I am worrying. I am more worried about the negative cash flow once all three units are rented. Doesn't seem like a good deal I think...

Yes, I will be using FHA loan and will be occupying one unit for at least 12 months. I've factored in PMI in the calculation. My strategy is a hybrid between a house hack, buy and hold, and appreciation. I will be owner occupying one unit for a year or two, and then renting it all out. In my opinion, there will be room for appreciation once converted to a single home as similar home in that neighborhood are selling for 650k (similar size as this). The two rent is rented for 1050 each, so it will bring in $2,100. I am okay with paying some of the expenses while I am living in the 1 unit.

I found a property in a very good area of Tampa, FL. Asking price is 350k. I am trying to make this deal work for my "house hack" strategy and ultimately rent all three units out within a year. I am doing my analysis as if I was to rent out all three units.

The three units are fully rented out for $2,750 but believe I can increase this to $2,900.

Analysis based on annual numbers

Rent Revenue = $34,800

Principal + Interest = $18,792

PMI = $3,312

Taxes = $4,300

CapEx = $2,784

Vacancy = $2,784

Property management = $3,480

Water + Sewer = $2,400

Net Profit = -268

Based on my calculation, it may seem like a bad deal. I wanted to get your thoughts on whether I miscalculated anything. Like what I mentioned above, it is in a good neighborhood and very close to the best parts of Tampa. A lot of homes in the neighborhood are being built that are half a million - million dollar homes. based on my research, Tampa isn't the best area to get a good rent/price ratio and most of the time the 1% rule will not work in a good area. How can I make this deal work?

@Jonathan C. It is great to see someone successfully flip homes near the Washington, DC area. Congrats on this flip, it looked like there will be a nice chunk of change to be made. How are you financing these projects, are you using a hard money lender or private lender? I'm planning on potentially doing my first flip over the summer. If possible, I'd love to connect with you.

@Robert Leonard I do plan on following the rule and live in the property. The Northern Virginia area is a hot market right now, homes are selling fast and prices are appreciating. Unfortunately, I do not think any property in this area will cash flow well so that strategy will not work for me.

@Wayne Brooks @Albert Bui Where can you get a conventional loan that only requires 5% down? Are there issues purchasing a home through a wholesaler from using a FHA or conventional loan? The properties I will be looking for will need roughly 10 - 20k renovation which will be just cosmetic which I believe should pass the FHA inspection (replace tiles, paint walls, replace carpets, renovate kitchen).

I'd consider a 203k loan but I heard it is a pain in the butt getting through the hoops that is tied with the 203k.

At the end of this year, I would like to purchase a personal residence with a FHA loan. Is it possible to use a FHA loan for wholesale properties? I would live in the property and do renovations (kitchen and cosmetic) and sell it in a year. I like this idea because I will not be wasting money on rent and also I will not have the time pressure related to the holding cost. Do you foresee any issues with this and has anyone done this before?

Currently I'm paying 1,900 a month for rent for my 1 bedroom apartment, I figured that it might be the time to start looking for a home. A multi family home will not work in my area for cash flow.

I used the 50% rule. If rent is $700 a month, 50% ($350) goes towards operating expenses such as vacancy, management, repairs, taxes. The other $350 is used to pay down your principal and interest. Principal and Interest in this example is $160 which gives be a cash flow of $190 ($350 - $160).

This is my initial check to see if its something to work with. The next step for me was to actually dig down the actual figures by checking redfin for taxes, and using 10% of rent to factor in repairs, property management and vacancies.

Although, this deal looks good, it is possible to find better deals in the OH area.

Thanks James. I wanted your take on this deal since you're a local. What are the cashflow or coc return you're seeing with the better part of cleveland?

@Michael W. I will contact a property manager in the area. I just searched on Craigslist to see what some of the properties around that zip code and it looks like the market is actually closer to 600... The seller said the comps are 750-800 but I'm not sure if that is accurate.

As a general rule, I use 10 percent of gross rent. However, with homes where the rent is so low, the amount allocated to maintenance is pennies compared to the big maintenance items such as roof and hvac. Fortunately, this property had a new roof in 2010 and hvac maintained so I'm comfortable with using 10 percent.

Can anyone recommend me a property manager around the Akron area?