All Forum Posts by: Felicia West

Quote from @Felicia West:

Thank you, Mike!!! One day, I would love to be able to get properties at 75% of market value, but I figure I’ll work my way up to that.

Your explanation of the numbers was so amazing!  You have such a thorough grasp of that.  It makes total sense and I will give it a try.  Thanks again!

I'm going through some of the early stages of deal analysis, and listening to some of the books from the library here. One thing I didn't mention earlier, but came up again is the impact of CapEx savings. For those of us starting out, and looking at lower end real estate, saving for expenses will eat up a good portion of that monthly cash flow until we get a nest egg to hold, or until you (I'm in the same boat) get into more expensive/valuable properties. As Brandon Turner put it - $200 CapEx/month on a $2000/month property is 10%, but $200/month on a $600/month rental property is over 30%. The things that need to be updated in a property don't scale as fast as the property itself. In other words - a water heater or a dishwasher for the two properties won't vary nearly as much in cost. I'm betting your numbers look like mine, and CapEx saving is eating up a lot of it.

@Felicia West 5 years ago you could easily find cashflowing rentals on the MLS!

Nowadays, you need to work backwards:

Start with your target ROI

Figure out what the likely rent will be

Deduct taxes, insurance, maintenance, vacancy, etc.

Using what's left, determine what mortgage payment can be supported to reach your ROI

Figure out, given current rates, what the P&I mortgage payment => mortgage amount

Add your 20-25% down payment

THAT IS THE NUMBER YOU OFFER! Not what the seller is asking.

You may have to make 100 offers to get one accepted - the easy times are over!

Felicia, here is a quick way to analyze markets and properties nationwide. 

https://www.loom.com/share/79170bf16882465e8fca26369a1fa1a7?...

What markets are you looking at? If you're looking for cash-flow and struggling to find it in your current market.. you could always look elsewhere. 

I also recommend connecting with an investor focused agent so they can start presenting you with the hottest deals.

@Felicia West I analyze every multi family property that comes on the market in my target investment areas.

It is good practice to analyze many, you start to learn what works and what won’t work the more deals you analyze in any given market.

A lot of the deals I see today are negative. When that happens sometimes you can figure out creative ways to make them work that others don’t see. Other times they just don’t work and you need to move on.

My two best suggestions are as follows:

1. If you like the market keep analyzing deals in it. 10 is likely not nearly enough to determine if you can find some that the numbers work on.

2. Have all your ducks in a row so you can move quickly on securing the deal when you do find the right one that the numbers work on.

Be prepared to set up a viewing ASAP and be ready and able to make an offer quickly.

In some markets you only have a short window of opportunity before someone else will land the deal and you will miss out.

Quote from @Felicia West:

Hi there.  I’m a new investor and have begun using the rental property calculator on bigger pockets for my market.

I've only analyzed about ten properties so far, but I am getting about negative $1000 cash flow per month for most of the properties and negative cash on cash return. The properties I am looking at are on the MLS because I feel I do not yet have the skills needed for off market deals

These numbers are even with a 25-30% down payment.  I am using 5% for repairs, 10% for cap ex, 10% for vacancy, and 10% for property management.  Are these the numbers you use, or what am I doing incorrectly?  I definitely do not want negative cash flow on a deal.

Thanks in advance for any insight you can give!

Deals are definitely found in the numbers, you will probably analyze 100s of properties and make 25-50 offers or so before getting a deal. Don't be afraid to offer at numbers that make the deal work for you. Asking price is irrelevant honestly, just make the offer because you never know what you might get under contract. Buying real estate is not like shopping at Kroger because you cant negotiate with the cashier but you can negotiate real estate with a seller anytime! Hope that helps! Let me know if I can help at all in Memphis TN or North Mississippi! Talk soon!

Hi Felicia, it’s going to vary greatly depending on the market you are planning to invest in. I'm based out of the Seattle area, but prices are so high, there is no way I can cash flow or even come close to breaking even. It’s likely that I would be out 1-2k a month at current prices and interest rates. Instead, I've been investing in midwest markets and have built a 9 property portfolio across Memphis and Detroit using in turnkey, BRRRRs and everything in between. Happy to connect and knowledge share if you are interested.

@Felicia West

The BP calculators are very general and not very market or neighborhood specific. Think of it like a Zillow estimate. There are multiple factors that go into determining rents and if there is limited data the rents will be off. If the subject property is in an area that is highly desirable and the there are no rental comps, the data will be pulled from a distant location that may not be relevant. You can use Zillow and Rent cast to check rents to confirm.
     Also every market is different for vacancy. Some markets there is vacancy data available. For example in Reno, NV the apartment vacancy rate is less than 3% and in ATX I've seen apartment vacancy numbers over 10%.  With any deal analysis there will always be some assumptions and every calculator will has slightly different assumptions.  Areas that the market rents are increasing every year you'll have an opportunity to raise rents. What I like about the BP calculator is that you can easily adjust the number to see where the variables need to be to break even. 

Your looking at the wrong markets.  You need to learn how to analyze markets, not properties.  Property numbers are based on the market, not the other way around.  Properties are pieces of a market.

You're not doing anything wrong with your property analysis, you are doing wrong in your choice of markets. If when you tell the doctor your arm hurts when you raise it, the first thing the doctor tells you is, "don't raise your arm".