All Forum Posts by: Guifre Mora

I'm not quite sure if there are problems with my calcs, or if everything I find on market are simply bad deals. Please let me know if I'm doing anything wrong here? Here's the details...

I plan to use FHA loan on a multi. Initially, I will house hack, but I'm running numbers to see what it will do once I leave and it becomes solely an income property. I'm analyzing North shore homes, 2 & 3 families, on the outskirts of the city. I've worked out some kinks and THINK I am as accurate as I can get.

I'm using list prices from MLS and estimating rents from craigslist. I'm including closing costs into the mortgage ($7,500 generically, is there a good percentage to use?). 5% (each) for vacancies, repairs, and cap-ex. 10% for management. Local utilities have been estimated, and of course, PITI and PMI using a mortgage calculator.

With 2 families -($500k-$525k range)
What I'm finding is that they refuse to cash flow with 5% down. At 20% down they will cash flow but the COC ROI is under 4%, and also falls shy of the 1% rule. (I've also included a 1% "clean-up" cost for minor repairs/paint as a one-time cash expense, into the COC ROI)

With 3 families -($600k range)
At 5% down payment, they seem to cash flow nicely, over $200/door, although the 50% rule is pretty negative and I just meet the 1% rule. In this scenario, the COC ROI is suspiciously inflated at over 20%. (Also included the 1% clean-up fee).

3 fam- ($650k range)
The numbers are much more realistic. Cashflow just over $100/door. COC ROI 11%, but 50% rule is WAY negative (About $1k) and falls under 1% rule.

I'm aware the 20% vs. 5% down payment makes a world of difference, plus saving the PMI. I can't afford 20% on a 3 family, and the 20% on 2-family scenario just seems off to me at 4% COC ROI.

So...Is anything glaringly off with my numbers, or is this expected for the current market?

Thanks for reading!

The way you pose your numbers are very hard to see the calculations and give you realistic feedback.

There are markets that don't cash flow at the current prices vs market rent.

So if 1% and 50% rule aren't covered you could cashflow but the property is underperforming or is an unhealthy investment.

A low ROI (4%) is based on your initial investment divided by cashflow. I bet if you lower the price or calculate a higher rent in the calculations your ROI will go up.

Ya, I bet if he lowers the price or calculates based of a higher rent the ROI will go up too.

He's not a broker trying to dupe a buyer. He is the buyer. What good is pissing on his own leg going to do him?

For him to see the numbers and how they work and why would a property cash flow or not.
Im curious what your advise is exactly?
1% & 50% rule ... very vague.

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Boston, Massachusetts

Rome, Morrow, Jonesboro to mention a few

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Yes I do, AL & GA

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Originally posted by @Eric Han:

Hello! I am having a 5 Plex appraised and received a quote for $1,700 from the same company that quoted $450 for SFR. Is $1,700 a normal dollar value for this sized unit?

It depends there are lots of factors. Have you tried a different company?

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Originally posted by @Matt Brown:

@Guifre Mora

Unfortunately it is an as-is sale (estate sale). We knew condition wasn't great beforehand hence we were already planning on doing that work. Appraisal wasn't to. o clear on it anyways, said mildew around the tub, that's a Clorox wipe fix! (We're replacing the tub altogether though)

I really don't understand what you are trying to gain with this post on BP, it needs to be fixed period if both realtors don't know what to do its because they are inexperienced or unwilling to move a finger and that's what they are getting paid for to get it done. Both of the realtors should be getting it fixed to clear the inspection. Have them earn their pay. He'll have one of their handymen fix it in 1 day. Be done with it put it to bed or walk away.

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Originally posted by @Matt Brown:

@Guifre Mora I've no doubt that it is accurate. However, the lender, and both the listing and buyers agents have never heard of this and really don't know what to do.

Then both realtors need to earn their commission and make it happen, seller need to fix it get an extension have the seller make up for the trouble.

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Originally posted by @Matt Loewenstein:

Hey guys! Currently, I do not own any real estate investments besides REITs. I would like to potentially buy a multi family property, but I am trying to figure out why this may be better to go through the work of owning a property if an REIT, OR syndicate can possibly provide the same returns, but is more diversified and more passive. Can someone who invests in multi family properties explain why it is more beneficial to own a multi family property? Also, what is the best way to get started and limit falling into traps?

Direct Real Estate Investing Pros

Positive cash flow and appreciation
Tax advantages
Control over decisions

Cons

Requires time and energy
Risk of financing default
Illiquid (not easy to buy and sell)

REIT Pros

Real estate profits without having to own, manage, or finance property
Higher than average dividends and potential for appreciation
Liquid (easy to buy and sell)

Cons

No tax advantages
Sensitive to interest rate fluctuations
Property-specific risks

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Originally posted by @Marten M.:

I have what I imagine to be a pretty common scenario, but I'm having trouble wrapping my head around the proper way to run these numbers.

I just recently pulled equity out of my current house. I plan on using roughly $40,000 (20%) to renovate this house and the remaining $160,000 (80%) will be used to invest in other properties. The problem I'm having is when I run numbers on the current house I have, do I calculate the full amount of the P+I which is $910/mo. or do I only account for 20% of the P+I ($182/mo) as the remaining 80% will be invested in other properties?

If I calculate the full P+I, the house is negative cash flowing (which is somewhat okay because I currently live here, can raise rent for the second room and have a 3rd room that is empty I could rent out). If I calculate only 20% of the P+I, I pretty much break even - again, I still can increase cash flow by renting out the 3rd room so it's not the end of the world, but I'd like to know the proper way I should be doing this.

Hopefully this makes sense and I appreciate any insight you folks can give me.

Thanks!

At this point, you are wasting your time calculating all this. Simplified it, live mortgage free have your rooms rented to cover the mortgage plus an extra for cashflow. When you purchase the new asset it's being paid for from your current tenants so the new asset will cash flow at a higher ratio.

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Originally posted by @Jordan Parr:

I’m currently in the beginning of my 90 hour pre-licensing course (Louisiana), and I am looking for any beginner tips or strategies as to starting my career in real estate. I’m 24 years old and have been in the restaurant industry since 17. I don’t have much experience with real estate but i am open to anything and everything. Any books, you tubers, podcasts, etc. that I should look into.

I also will be looking to purchase my first house after getting my license, to save on fees, within the next year or two. Which would be the best loans to look into and anything I should prepare myself for ahead of time?

I plan to move every few years to explore some of this beautiful earth, and I would like to purchase a home each time and rent out the house I leave behind. Which would be the best ways to go about this in the future and anything that may cause any problems with this?

Jordan, finish one project before you start with the second. Your income will be 1099 and you will need 2 years of proof of steady income. So you are putting the carriage before the horse asking for loan programs. Your future brokerage would have a preferred lender and you could go through them. Learn to sell and fill up your pipeline or you will be so poor no loan will be able to help you buy a home.

I suggest the following for you. The Recession-Proof Real Estate Agent.

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Originally posted by @Matt Brown:

We're currently under contract to purchase a property for $65k. We're using a conventional loan on it so we're putting down 20%. No issues so far.

The appraisal came back at $75k with a few "lender required repairs" listed such as flooring and mold/mildew. Both of these things we've already planned on fixing and budgeted in our rehab.

Has anyone seen lender required repairs on a conventional loan before? I've seen it on VA/FHA, but not conventional.

Our options at this point are for the seller to remedy the issues, us to remedy the issues (before we even close because we can't close until the repairs are made), or back out of the contract (we do have a clause in there that covers this). We don't want to back out as we were planning on doing the repairs anyways, but I still have a natural hesitation on completing repairs on a house I don't own because we haven't closed yet.

Has anyone seen lender required repairs on a conventional loan before? Yes, this is accurate.

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All Forum Posts by: Guifre Mora

Guifre Mora has started 2 posts and replied 838 times.

Post: Boston refuses to cash flow

Post: Financing out of state rental properties

Post: Financing out of state rental properties

Post: 5 Plex Appraisal Quote

Post: Lender Required Repairs on Conventional?

Post: Lender Required Repairs on Conventional?

Post: Multi family house purchase

Post: How Would You Run These Numbers?

Post: Just started my 90 hour pre-licensing course...

Post: Lender Required Repairs on Conventional?