All Forum Posts by: Garett H.

Welcome to the forum Will. It’s great here, a ton of information and you’ll make quite a few local connections - like me!

Props for not suffering from paralysis analysis and just jumping in! It seems like a pretty low-risk property to do it with, and from your numbers it looks like it could be a decent deal as well. 

I agree with your assumption that having a smaller place in a high rent area will probably lead to a more stabile tenant. I don’t think the loft part will hurt you too bad on the prospective tenants. Mainly because as you mentioned your target tenants are going to be bachelor/ettes with decent jobs, and from first hand experience I feel those type of people aren’t too terribly picky as long as the property is half decent. 

For a better analysis post up what your taxes and insurance are on the property. Are you doing the property management yourself? Are there any repairs needed in the near-term?

In order to make a profit, you need to bring something to the table. Whether it be money, experience, management, or the deal itself. 

If you can get a good enough deal on it, and convince someone with money that you have enough experience to manage a property like that, then it’s that easy. 

If not, perhaps you could wholesale it and take a fee for matching the seller with the buyer.

@Franklin Romine  Basically trying to see which area is going to be the best to focus my efforts on for buy and hold/flipping

Here’s a brief analysis I did of a few different areas that will be local to me starting next year. 

Am I leaving any important aspects out? I’d appreciate some input on how you interpret what the data says as well. Always nice to see different perspectives.

He’s still just as human as you and I. You’ll be fine. 

You’ve probably dealt with larger drug dealers without knowing it. 

I’m confused.. If you purchased the house for $70k AND they stayed there for a year rent free (valued @ $15k) they should have been coming out $85k ahead. Instead they came out with $70k total ($55k for the house and 1 year free rent)

Basically you bought a house for $70k and then had a tenant for a year who paid you $1250 a month which “lowers” your purchase price if you want to look at it that way. 

You need to type “@” and then the 1st 3 letters of their name and a box will appear where you select the name. You can only tag colleagues or people who have replied in the post previously. 

http://www.biggerpockets.com/blogs/1/blog_posts/20337-at-mentions-come-to-biggerpockets

Get out to your local REIA meetings and start networking/getting recommendations.

and refinance last property for an additional property, 

What are you refinancing for? You don’t have equity to pull out of this property, unless you’re planning on the assumption of massive appreciation every year. You do have your 20% downpayment in the property, but that’s pretty much the minimum that every lender is going to require.

Assumptions:

-Property prices: >$80k

Do you mean less than $80k?

-Refinancing is done annually and for the appraised value of the property( only need downpayment)

-Refinancing can be done multiple times to the same property yearly. (at most 5 times)

As mentioned, refinancing yearly isn’t something that makes sense. Not to mention closing costs..

You say your goal is $1000 per property CASH FLOW. That’s a big stretch. 

To give you some rule of thumbs that are pretty standard matrices used for RE investors: ~50% of your monthly rent is usually estimated to be your operating costs.  So in your scenario where you are obtaining $1500 rent ~$750 of that is going to be going taxes, principle, insurance, interest, maintenance, property management, etc.. 

The other rule of thumb is the 1% rule, if you can buy a property for $100,000 and get 1% of the cost ($1000) for rent per month, it’s possibly a good deal that you’d want to look further into. So unless you’re getting pretty creative/steals on property obtaining $1500 a month rent on $80k properties is going to be difficult (not impossible, but difficult and arguably not sustainable at the rate you’re aiming for)

To just throw some numbers out there based on these rule of thumbs and your target of $1000 a month cash flow. You’d need to have properties that rent for ~$2000 a month. Using the 1% rule you’re looking at ~$200k properties (does your target market even support this kind of return on this level housing?) For a $200k property you’re going to need $40k cash as a downpayment, and will need that for every property you acquire. (Again, there are many ways to get creative here, and the first place I’d recommend to learn about these are this site) The next hurdle is going to be getting financing for the large number of properties you’re talking about. Does your 9-5 income and current outstanding debt support the debt to income ratio requirements to take on an additional 7+ $200k properties?

$7,000 a month cash flow per month in <6 years is an extremely  high goal. I’m all for setting huge goals as well, but without any real estate background or experience it will be extremely difficult to get these results. 

@Chudney Wesley

Basically one quick way to check your DTI on your own is to divide your monthly debt services (car payment, property taxes, insurance, rent, child support, student loans, etc..) by your monthly take home pay (not including your rentals since you haven't had them for 2+ years)

Alternatively, take your monthly take home * 40% then subtract your monthly debt services. This leaves you with the remaining dollar figure until you reach the 40% threshold. So your new mortgage, property taxes, insurance, interest would need to be less than this number.