All Forum Posts by: Michael Seutin

I am not quite sure what you are getting at with the debt service. I didn't finance 100%, I had 10% down payment on the first ppty, 20% on the second and 25% down on the 3rd.
Now I know that the debt service only include the Principal and Interest and that's exactly what I put up there on the numbers, and I also know that the debt service will not go up or go down as they all are 30yr fixed.
My cash on cash return on the 3rd ppty was right about 6%. Not great, but doesn't the cash on cash return increases year after year as the rents slowly increase?
I know that my coc on the 1st two ppties is negative, as I said I learned from these lessons.
thanks

I bought 3 ppties so far. I am learning and improving eacth time. But I didn't do so good at first. Here is a recap using the 50% expense rule that I believe in cos it is proven in my ppties.

1st Ppty: SFH bought in 2007, in Austin, Tx,
first year, per month
gross rents: $1000
NOI: $500
Debt Service: $769
Cash Flow: ($269) loss per month

2nd Ppty: SFH bought in 2008, in Austin, Tx
first year, per month
gross rents: $1150
NOI: $575
Debt Service: $708.72
Cash Flow: ($133.72) loss per month
second year
gross rents: $1200
NOI: $600
Debt Service: $708.72
Cash Flow: ($108.72) loss per month

3rd Property: Duplex bought in 2009 in Fort Worth, Tx
gross rents: $1775
NOI: $887
Debt Service: $610
Cash Flow: $277, positive at last

Now the first property I know I should resale but I co-own it and it's complicated at the moment.
My question is the second property, I had a loss of $133 per month the first year and $108 the second year. Now I learned my lesson and won't invest in any more neg cash flow. But should I resale it now? or keep it until the cash flow at least break even and starts to become positive ?
Reselling cost money in fees and rebuying also cost money in fees. And I am guessing that in 2010 I will be maybe cash flow neg $50 and then 2011 will be break even.
What do you guys think of rent increases, what is the average rent increase percentage wise per year ?
Even a slight cash flow negative property might be worth holding at times?
or should any wise investor automatically resale such a property.
When I got started I didn't have the same knowledge as today but I told myself that as Warren Buffett did, I would only buy but never resale.
Opinions please.

MikeOH,
I don't mind you telling me what I do wrong but how about telling how to do it right ?
You say going through a realtor is the easy way, as far as I know they get and screen their listing from the mls and from the info I am looking for.
Even with direct access to the mls, I would not know the areas as well as a local pro.
So how do you do better than a local realtor who specializes in duplexes, fourplexes and com ppties for investors ???

Tom,
The reason I kind of decided on DFW area is because it is a well know area for investors looking for cash flow, now I obviously want to keep learning and improving. So if you suggest to me areas that have better cash flow on average than Dallas Fort Worth, please let me know so that I can investigate for next time. I had found some in areas such as Detroit and Others like it, but I also think of the future and those places lose population and jobs by the minute, I didn't think it wise to invest there.
As for the 50% rule, I do believe that it is an average over all properties and all investors. But doesn't the choice of the property, area affects that rule. For instance an investor buying in old properties in bad neighborhoods as a strategy to get great paper cash flow will probably have a lot more problems=expenses than someone looking for nicer properties in nicer areas ?

There is the 2%rule and the 50% rule and then there is reality. To me reality is that even a real estate broker that knows all of dfw area and he specializes in investment properties, could not find much better deals than the one I mentioned above. Definately not a 2% rule. I think that probably where you can buy a property that fits the 2% rule, you will have problem tenants, bad neighborhoods or towns and that's why your expenses will be about 50% of your rent.
I do have some expenses but 50% is too high in my experience, if you pick a clean property in a decent area with good tenants at the right price range for the tenants, expenses are not that high.

The interest I pay over 30 yrs is 6%. So I do cash flow because I have to put 25% down on a conventional loan on a duplex nowadays.
That 2% rule is pretty unrealistic in areas I know. Unless you do some fixer upper rehabs maybe..
Rents slowly increase and in a few years I see it a good cash cow.
The areas where I saw the 2% rule applied had a loss of population which can not be that good in the long term for buy and hold

I have only 3 properties and now I am thinking of asset protection, the thing is creating an llc is headache and cost quite a bit.
If I get a few millions coverage with liability insurance, wouldn't that protect me against any kind of lawsuits pretty good ? wouldn't that be enough ?
if I do need an llc, and I am buy myseld on it, can't a good lawyer go after my llc anyways ?
in short, what is the best strategy for a small investor with 2 sfh and a duplex ?

I got this duplex near dallas. Cost me $135.500, tenants are already placed and total rents are $1775 a month. I have seen the property and the tenants, property looks great, tenants take good care of it.
I am putting 25% down payment, so I will cash flow pretty good, probablay over $500 a month even after some maintenance.
Now I know it doesn't fit the 2% rule but none of the properties in dallas fort worth did (not the ones I have seen).
Do you guys agree with me that this is a good buy ?

Brian,
Yeah I don't buy in my area, too expensive, I have 2 rentals in Austin cos' I thought Austin was both good for cash flown and a strong univesity white collar city.
Now as I m not satisfied enough with the cash flow in Austin, so I am about to start investing in Dallas Fort Worth area where cash flow in superior to Austin. I am happy to learn as I go.

My question to the pros is the following:
Would you consider or have you done duplex, triplex, or other property investment sight unseen ?
Is this a valid strategy if you still do your homework such as getting an inspection done, appraisal done etc....
Would a pro do it if the number worked ?
I live in CA and I m wondering if flying across the u.s for a 50k deal is worth it ?
thanks