All Forum Posts by: Carlos Garza

The PM works for you. If you would rather hire out some of the work or do some of it yourself it is his responsibility to at least ask for you. If the repairs are a package deal then that is understandable, but you should be informed.

Example, if I do landscaping and I normally cut the grass, weed eat for a resident I charge a flat rate based on square footage. If you want me to trim the hedges I can do it for a reduced rate because I am already there and don't have to make a trip just for that. If someone else calls me just for a hedge trimming it will cost more because I have to factor in the cost of doing business ie, minimum hour of labor to cover travel time. Doing your hedges for 10-15 dollars barely covers the costs I incur and is not worth taking the job.

@ Brandon turner
Thanks. And the podcast is awesome. Can't wait for the next one.

Hello BP,
I'm a little late on this, but I'm finally doing it now. A little about me. I'm a 28 year old husband, father and United States Marine. Due to being a Marine I have been an a accidental landlord for 2 years. So far it's been a learning experience. I bought a home at appraisal price and renting it has left me breaking even. Not great, but it could be worse. I haven't ran into any major issues yet so I'm doing good. The biggest problem has been when my tenants moved out at the beginning of the month the deposit didn't cover the full cost of carpet cleaning, repairing and trash pickup. They split leaving me to cover the last $200. I am currently still looking for tenants, but I figure it could take a month or two. I was able to better my position by refinancing last month reducing my interest a full percent and lowering my payment by a little over $200. Now I will finally cash flow.

I will be out of the Marine Corps in about 4 months and the goals then are to carry a full time job and also get my real estate license. I plan on building a collection of SFH and MFH around the base with an end goal of 50 homes/units. I am sure this will take some years, but that's the planned end state. I just keep telling myself if I evaluate 1 deal at a time and ensure each one will better my position in some way then I will be fine. Now how to convince my wife that I'm not crazy!

Carlos

Also, I'll get a picture up soon for my profile.

@aimar Campbell
To answer about building a buyers list first, listen to the BP podcasts. I don't remember which one exactly, but they explain how a buyers list with nothing to buy is pointless. Find the deal and buyers will come if its a good deal.

If you don't have the funds to cover yourself when it's vacant, then either put it back on the market or rent it for less and split the difference with the mortgage. Some of your mortgage getting paid is better than none. If you have to pay an extra 100 or 200 dollars then cut your cable, reduce your phone bills, cook at home etc. most people can save if they reduce their unnecessary spending.

@jason merchey
I can tell you what I would rather do and why. I would rather have the 2 instead of 1. Yes you have to worry about double the tenants and double the maintenance and so on, but I think the pool of renters is bigger at $800 than $1500. Second, I think 2 is twice as diversified as 1 so if anything goes wrong you still have 1 hopefully cash flowing. Yes both could not cash flow, but that's pretty much the same as the one $200,000 one not cash flowing. Plus, if you set up LLCs then if some unforeseen tragedy occurs the two property's are separate and unrelated to each other so one could be lost while you still have the other.

I hope what I'm saying makes sense. Hopefully some more experienced investors could chime in and give better advice.

Ben Bakhshi,
There is more brought to the table than just the cost of the loan. Insurance and Taxes could quite easily eat up another $200-$400 a month. HOA fees could add more. If a property manager is being used, then plan on losing 10% of rent, so $80 a month. To me, the deal already looks like it is a losing scenario.

You could count on appreciation, but if that does not work in your favor you could really be down a lot. More information is needed to make an accurate determination though.

This is just my 2cents. Others with way more knowledge and experience could give you more information.

Carlos

John Winston
Thanks for the info. I knew that I would need money for maint and repairs, but was unsure of what kind of numbers to use. Thanks for the info.

Kyle B.
I see, I made a mistake when I did the COC. I misread the calculations from The Basics of Real Estate Investment Deal Analysis Sticky. I see now that my cash flow is NOI-debt (the loan). I still see good in >18% though.

Brian Hoyt
Thanks for the info Brian. I have looked up the 50% rule previously and it makes sense. I just wanted hard numbers to work with so that I could actually see a scenario and the return rates. I do think that the 50% rule is definitely easier, but I assume that a lender would rather see the numbers played out instead of a rough estimate. Or do lenders even look at your numbers?

John K.
Thanks. I thought it looked good as well.

Sorab Gakhar
You got me. I knew I was missing something. Found out HOA is 105. That basically ruins it for me. At my worst numbers that basically halves my cash flow so I do not see the reason to go through with it. I know it would still put me positive $100 a month, but I am not in a hurry. I would rather keep looking for the better deal than settle for the workable, but not preferable one.

Steve Babiak
The rent estimate is because the market is greatly influenced throughout the year. It is a military town that has an influx of activity during the summer when the military generally PCS's everyone and then the rest of the year which is steady but not over powering. During the PCS time of the year, rentals will quickly fill at almost any rate asked because nobody wants to get stuck with the undesirables and as long as it is below the Housing Allowance for the area, most younger military members don't care. They get the housing for free, and spend it just as freely. It backs down during the rest of the year though so the rents have to be more competitive. I have known people in this subdivision though with the exact same floor plan and square footage paying both my high and low numbers with the only difference being the start date of the lease.

Hello BP. I have been interested in REI for a while now and believe I am finally ready to take the plunge. I have been prying here and finally am making my own post. I will add a picture and more info to my account shortly. I just haven't had time yet, being consumed with work.

I have found a town home for 63K. The highest I will pay is 60K, but plan on offering 50K. Have seen the home and there is no obvious damage. Plan on having a contractor/inspector look as well, but there is no forecast damage. Constructed in 1997. Avg rent in the subdivision is $650-$850.

Running my numbers at worst offer paying 60K looks like this. Lender wants 25% down. $15,000 down, $45,000 financed at 4.125% = $218 monthly mortgage. Estimated insurance and taxes is $200 monthly. Charging monthly rental of $650 - $418 monthly liability results in $232 cash flow.

The numbers how I understand them are:

Cap Rate: $7,800 / $60,000 = 13%
Cash on Cash return: $5,400 / $15,000 = 36%

If I run everything at $850, it's even more realistic seeming.

Cap Rate: $10,200 / $60,000 = 17%
Cash on Cash return: $7,800 / $15,000 = 52%

Am I looking at everything correctly or did I make a mistake somewhere?

Carlos