All Forum Posts by: Tony Frasher

This was an interesting thread. Good read for sure.

My thoughts are this. The 50% rule is pretty accurate over many many years, so always keep it in the back of your mind.

While it's impossible to predict the future, the 50% rule does not figure in for future appreciation and higher/lower interest rates. I purchased a property in Denver in early 2008 as rates were sky rocketing and prices were falling off a cliff. Going off the 50% rule, I had a hard time pulling the trigger on the property as it didn't cash flow much, but I've since refied the property pulling out some cash, and lowering my interest rate by 4%. It's a cash cow now, and I have a massive amount of equity in it. Always something to consider if you're planning on being a long term investor.

Sometimes you just have to make mistakes!!! It's very easy for you to have your preconceived notions on the deal, and it's easy for these guys to pencil out the deal and say it doesn't look good. If it's your first property it's super easy to just sit on the sidelines deal after deal because you're scared to pull the trigger. Congrats to you for doing it, and I hope it continues as well as it has out of the gate. It's a HUGE learning curve that can never be gained any other way than jumping in with both feet.

Ha ha, same here Nathan. My last purchase was listed at 85K and I bid on it sight unseen the first day it was on the market full price. Only spent 6k getting it ready and I'm renting it for $1350 a month. Had it appraised a few months back for 130k!!!

I won't disagree with you on any of your points Jon, but to me, Dave Ramsey is more of a get out of debt guy, than a entrepreneurial type. I would say if you're in this forum you're looking for ways to make more money.

People that can't control their spending are going to do that no matter what their income might be. Kiyosaki talks about that. Learning how to buy an asset to pay for your liabilities. You just have to make sure you do it in the right order!

I would recommend reading "Total Money Makeover" as well, but I would also recommend reading "Rich Dad Poor Dad".

For getting out of debt and making you realize you don't need all the little stuff you think you need, Dave Ramsey is great. For me though, I like my toys, and I would rather just figure out how to make more money to afford the things I want. That's where "Rich Dad Poor Dad" comes in. I'm sure there are some here that don't like Kiyosaki, but if you start to understand where you fit in the cashflow quadrant, you start to see what it will take to get where you want to go.

That's exactly the kind of information I was looking for. That explains a lot. This complex is actually up in Idaho Springs. I just happened to see the for sale sign and figured I'd give them a call. I really appreciate the explanation.

Oh, ok.

So why do you think the expenses are too low?

Ok, I did the math on the 50% figure as well, but I didn't know if that applied as much to a commercial property. Supposedly this is an owner finance at 6.5% at 30 years with 25% down.

I have a couple of single family rentals, but eventually I would like to get into commercial properties. This will probably be at least a year or two out, as the numbers scare me for the time being, but I would like to start learning about what to look for now. This is a small apartment complex I came across. If you saw these numbers would the discussion end right there, or would you want some more information. What questions would you ask? Any input is appreciated.

Price: $1,100,000
Price/Unit: $45,833
Price/SF: $66.37

24 units
15 1Br/1Ba 600sq ft $547
9 2Br/1Ba 750sq ft $683

INCOME Current Proforma
Gross Annual Rent: $172,140 $181,800
Other Income:
Miscellaneous: $3,774 $3,774
Gross Scheduled Income: $175,914 $185,574
Vacancy Allowance: (10%) ($17,214) ($18,180)
Effective Gross Income: $158,700 $167,394

ESTIMATED EXPENSES Current Proforma
Insurance: $2,798 $2,921
Property Management: $11,109 $11,718
Property Taxes: $5,703 $5,703
Gas & Electric: $16,804 $16,804
Water & Sewer: $13,381 $13,381
Repairs & Maintenance: $9,600 $9,600
Administrative: $3,600 $3,600
Trash: $1,320 $1,320

Total Expenses: $64,315 $65,047
Expenses Per Unit: $2,680 $2,710
Net Operating Income: $94,385 $102,347

NOI: $94,385 $102,347
CAP Rate: 8.58% 9.30%
Projected Debt Service: $62,575 $62,575
Before Tax Cash Flow: $31,810 $39,773
Cash-on-Cash Return: 11.57% 14.46%
Principle Reduction (yr. 1): $9,221 $9,221
Total Return: 14.9% 17.8%

The cost would not be incredible. It would be the same exact precentage per unit. Actually, it would be less in an apartment building because it wouldn't require driving to each unit.

Ok, so my tenant paid the rest of the rent today, ahead of when we agreed upon, so I'm happy. I guess we'll just have to see what happens on the first of the month.