All Forum Posts by: Gary Faucett

When I run a Rental Property report and it returns NOI. Is that NOI for the life of the 30 loan or 5 years are annual or what? In other words, what does the amount of NOI represent?

Thank you. That makes more sense.

I am looking at the rent estimator for a duplex. When Bigger Pockets list $2500/mo is this for one side of the duplex, or for both sides (total rent for that duplex)?

Watch your Return on Investment (ROI)! My first rookie mistake was to upgrade/update one of my rentals to the tune of $10,000. I was lead to believe by my Property Manager, that if I updated the apartment that had become vacant, I could increase the rent by $200/mo. However, as it turns out, after spending $10,000, I could only rent it for $100 more per month. Big difference! In the end, I have learned that you have to watch how you update your rentals. Updating is good and should be done, just make sure your ROI is within your guidelines for investment returns.

Second mistake is choosing the right property manager. All property managers tell a good story, unfortunately for me, while the manager was a good person, the day to day operations was left to staff. And they did not know what they were doing. So do your research... upfront.

Nathan Water answered this well. When looking for properties, search everywhere. Truila, RedFin, Zillow, drive the streets, Craigslist, etc. Leave no stone unturned. I have found it most helpful to find a Realtor I trust and who is also a good property manager. This combination of professional can help find you properties and give you great insight on how much the apartments will rent for and if the location is in a good. Another benefit of a realtor is that some times they hear of properties that are coming on the market and may be able to broker a deal before it even has to go on the MLS. Don't be afraid to talk to several Realtors. It cost you nothing to pick their brains and have them watching out for you.

I would wait on learning the calculators. Start now and play with them using any type of duplex or triplex just so you can see how they calculate and how changing the numbers makes a big difference. Then once you find a duplex you feel could really work for you, you'll be able to compare those numbers against all the others you've been running.

I'd be upfront with your tenants as to you owning the property. It's not hard for them to find out who owns the property if they're Internet savvy. You don't want to get caught misrepresenting yourself. If you don't think you can handle tenants, then consider placing 10% in your calculations for a property manager. I don't purchase any property that does not work for a property manager to manage my properties.

My grandson has a great desire to purchase a duplex and live in one side of it as a way to get into real estate investment. He is 21 and will be a first time home buyer. He mentioned to me that there are first time buyer home loans for 3% and that all he has to do is live in the duplex for a year then he is eligible to purchase another duplex using the same type of loan, and that he can do this up to 3 times. This is way out of my field as I am having to put down 20-25%.

My question is, does anyone know if what my grandson is saying is true? Can he really get a 3% loan three times in a matter of 3 years?

The model of $100-200 per door per month is an interesting one that I have not seen or used before. So far, I am probably averaging on the higher end of those numbers. Another quick and rough formula I have used as a quick rule of thumb (which seems to pencil out at lease in the Spokane area) is that the rent should be at least 1% (or better) of the purchase price. i.e. if purchase price is $100,000 then the total gross rent (for the complex) must be (at least) $1,000/mo. This quick analysis assumes the prospective property is not in need of major repairs, in a good neighborhood and has a good rental history. Any thoughts?

Thanks everyone. This helps.

@Samantha Klein Hi Samantha. As you can tell I am new to investing in the real estate market, at least to the extent that I want to be, and I am new to biggerpockets. I am seeing many ways to try and determine if a Long term buy of a hold rental properties is a good investment. I am also learning that of course not every investment is going to yield that optimum % of return we always seek. I am however curious still about what you mean by, "at least 20% return". I am using the bigger pocket "Rental property Calculator" and at least in the duplexes I am considering I can't find any return in any report that is going to yield me a "20% return", or maybe I just don't know how to read the report. When you refer to 20% , the profit based on the amount you paid for the property, the income gained while you had it and what you made off the sale of the property at the end?

I ask this because I am considering a piece of property in Spokane, WA. It appears to be a good investment for me, but the RPC isn't giving me near the percentages you're talking. Maybe I'm reading the report wrong or maybe it's just not as good an investment as I think it is.

For example: This perspective property based on what I entered into the biggerpocket Rental Property Calculator has a gross monthly Income: $4,000.00; Monthly Expenses: $2,992.76; Monthly Cashflow: $1,007.24; Pro Forma Cap Rate: 6.72%; NOI: $28,557.00; Total Cash Needed: $118,290.00 Cash on Cash ROI: 10.22%; Purchase Cap Rate: 7.68%

AND my 50% Rule is; Total Monthly Income: $4,000.00; x50% for Expenses: $2,000.00. Monthly Payment/Interest Payment: $1,372.51. Total Monthly Cashflow using 50% Rule: $627.49

So while I look at this info (still learning), even by the conservative 50% rule I have a positive cash flow, and that seems good to me. More than any other investment property I've purchased.

So maybe the question I should be asking myself is, "Is this good enough or is there a better investment deal out there."

@Samantha Klein

I'm not sure I understand what do you mean by "at least 20% return"? Are you referring to "flipping" homes or longer term rental properties?