All Forum Posts by: Harry Metzinger

Looks like I need to become a long distance investor according to your standards then @Patrick Liska, because $76,800 is not getting it done in my area.  $76,800 all-in means hitting the 2% rule.  Finding a property w/ a monthly rent of 1.5% of purchase price + rehab within a half hour of my town is extremely difficult.  Most in my area would be very happy w/ 1.5%.  I made three offers on the property in question - nowhere near your $76,800 all-in, but also nowhere near the $127,000 all-in in my example above - and found out today that another offer was accepted.  Grrrrreat.@Patrick Liska

Hi @David Carr, I live in Marlton and my focus is in areas within a half hour of my home...parts of Burlington & Camden County. With my access to MLS, I am able to see recent rental comps. I think the property in question could rent for $1,600/mo., but I tend to be conservative in my estimates, so I am sticking w/ $1,550 for purposes of this analysis.

@Chris Anderson @Lisa Monnig @Jay Dewberry @Patrick Liska

Thank you all for contributing to this thread! Sorry Patrick, between a full-time job, a family, and my real estate pursuits, I can't work for you for free, ha. The way I looked at it was if this property cash flows, say, $200/mo. after everything else (PITI, HOA, CAPEX, repairs/maintenance, and vacancy), self-managing was worth the $200 for x # of hours per month I put into it. Anyway, lesson learned, I will include property management in my #s.

In my initial post, I asked what you would need to change to make the numbers work for you.  Asked another way, what would your all-in number (purchase price + rehab) need to be to buy this property?

Rent: $1,550

Taxes: $325

Insurance: $50

HOA: $70

Repairs: $124 (8%)

CapEx: $124 (8%)

Property Management: $155 (10%)

Vacancy: $62 (4%)

Cash Flow before Financing: $640

Hi @Jay Dewberry, thanks for your feedback. Agreed that I need to account for vacancy/repairs. In your experience Jay, what % of rent have you allocated/incurred for vacancy and repairs each month? I believe CapEx would be covered by the HOA, but will need to get a copy of their bylaws to confirm. I plan to self-manage so am not including Property Management in my costs. Agree that the taxes are a killer. That's life for us in New Jersey unfortunately.

Different people have different standards, but I am curious to hear if there is a gross margin $ threshold or gross margin % that investors on BP subscribe to.

Looking at the following townhouse in South Jersey as a potential buy and hold investment:

Purchase Price: $115,000

Rehab: $12,000

ARV: $150,000

Rent: $1,550/mo.

Insurance: $50/mo.

Taxes: $325/mo.

HOA: $70/mo.

Net Operating Income: $1,105/mo.

Financing: $92,000 (or 80% of purchase price at 4.5% over 30 years) = $466/mo.

For the down payment + rehab, I have a HELOC that could fund it. 3.99% variable rate, 15 year amortization. If I used it to fund the whole $35K ($23K down payment + $12K rehab), at a 4.5% rate (I'm not going to assume my HELOC rate will remain at 3.99% throughout the 15 years), that's $268/mo.

NOI minus financing = $371/mo.

This is a B class area...a good location with an average school system.

For the sake of this thread, let's assume the rehab amount, ARV amount, and rent amount are correct.

For you buy and hold investors, would you buy this?  If not, what would need to change for you to buy it?

@John Rogers, thanks for chiming in. Yes, I am a licensed agent so I have the ability to submit bids on my behalf. The net HUD wants is above my MAO in this case, so I am not increasing my bottom number to match theirs. I am curious in your experience as well as @Greg H. and @Ricky Gibson 's experience if you have seen HUD drop prices at the 30 day DOM mark, or if you have discovered other price adjustment trends that have served you well in your bidding attempts?

Thanks for your insights @Greg H. and @Ricky Gibson! Since you both bid on HUD homes, just wanted to give me a little nugget of my experience. I have read advice from experienced HUD bidders on BP before that you can usually count on HUD accepting offers at a net to HUD of 88-89% of list price. In my case, I was pleasantly surprised to see that HUD's counteroffer came down to 85% net. This property has not been on the market for between 3 & 4 weeks. I figured they would come down to 80-85% net once DOM exceeded 30 days.

Hi BP, newbie investor here...well, been actively looking since the beginning of 2016 but no contracts signed yet. After making more than a few offers on properties so far this year with no results yet, I decided to take the plunge into HUD Homestore and start making offers based on some great advice I read in other BP Forum topics.

Today I received a counteroffer to one of my bids, which is encouraging. HUD's counteroffer is above my maximum allowable offer. I'm encouraged though because we are not too far off. HUD says it has set the minimum acceptable net to HUD as x. If I counter at x minus $10,000, I know the answer will be no. My question is is it better to submit a counteroffer to show HUD that I am still interested in purchasing the property, just not at their price...or do they look at it unfavorably because I am submitting an offer that I know will be rejected?

For the record, I am inclined to submit a counteroffer, but curious to hear from those w/ firsthand experience bidding on HUD properties through HUD Homestore. Thanks.

Phenomenal job @John Upperman!  This is inspiring.  Thanks for sharing.

Thank you @Wayne Brooks @Russell Brazil @Kim Knox for your insights!