All Forum Posts by: Ibrahim Yamini

I've been running the numbers for a bunch of properties in my area and most of them gave me a negative return, except for a couple which was expected. I would get -20/-30/-5% ROI consistently. I managed to pull a +9% and a +2% ROI but then I decided to expand outside my neighborhood. I found a house that was $179K, but according to rentometer.com, the average rent in the area was $2700 a month. I ran the address several times and kept getting the same result.

After I did the four square method, and including mortgage, cap ex, property management etc., my Cash on Cash ROI still came up to 151%!

I wanted to research the area more, but my wife called me away from my office for dinner. I'll find out more tomorrow. This number seems unrealistic to me almost at cartoonish levels. Is the ROI possible? What's the largest cash on cash ROI you've ever achieved?

@Alexandre Marques dos Santos. Thank you. That's the advice I was looking for. My first house wont be a problem with a down payment because its a VA loan but Now you've given me something to think about with how I will attack the others. It looks like this is going to take longer than I thought but at least I'm learning alot before diving in blind

Thanks @Bill F.  One thing worried me was that the amortization calculators seemed to give me a lower annual equity than I was expecting.  However, if you calculate 3% annual appreciation, it was about the same so that was a relief.

Thank you!   That made things a lot easier, lol

I’ve been struggling trying to find out how to find monthly interest and principal payments separately but I kept coming up with  them combined which made it difficult for me figure out how much equity I would accumulate in 1 year on my first investment property.

I found this formula on YouTube and it seems to be helpful. Can somebody confirm that I calculated the monthly interest and principle correctly?

Unfortunately, I had to do a huge calculation to find out monthly mortgage payments first.

 P = Mortgage 

M = Monthly payments

r = Annual interest 

n = total payments 

M = P * r(1+r)^n
     (1+r)^n-1

For example a house $250K, what is the monthly payment if the interest rate is 5% or .05?

M = 250000 (0.05/12)(1+0.05/12)^360
     (1+0.05/12)^360 - 1

First, we’ll take $250000 * .05/12 = 1041.67

then we calculate this by itself. (1+0.05/12)^360 = 4.4677443

for simplicity let’s round to 1042.

Now we have 

M = (1042) (4.467743) Subtract 1 from the 4 and divide

       (3.467743)

M = $1342.48 monthly mortgage 

My issue is that I was trying to find out how much equity I would have at the end of the year so I had more work to do.

So now we need to find out how much interest we would pay over 30 years or 360 months 

T = Total 

T = 1342.48 * 360 = $483,292.80.  Now subtract by $250000 and we get $233,292.8

Total interest paid is $233,292.8.  How much are we paying interest each month?   divide this number by 360 

Monthly interest = $648 

Hopefully I did this correctly.  Now that I know how much interest I’m paying, I should be able to figure out the annual equity. 

We just subtract $1342.48 - 648 and we get 694.48

694.48 * 12 = $8333.76.

If my calculations are correct my annual equity should be $8333.76 

 Now that the calculations are done I have question.  Based on the information above, with equity, I should be able to buy an investment property, wait 2 years to build more equity, buy 1 more, wait another year and buy two investment properties, obtaining my goal of buying 4 properties in a 3 year period.  I did the calculations offline, which gave me $66K in solid equity, without calculating for appreciation-25% which would give me $49K to invest in another property. 

With the $49K, should I use it to buy four more properties in the $250K range, putting $12K in each property?   Or would I be better off using that investment money in a larger more luxurious house in the $500K range to rent out?

Thank you for any assistance and let me know if my calculations are correct or need adjusting 

-Ibrahim 

I’ve read a few books and seen endless YouTube videos on equity but I wanted to know if there is a different name for certain types of equity.  If there are, I must have overlooked them. Let me explain 

I bought my house at $245K and paid it down to $222K giving me $23K in what I’ve named “Solid Equity” because it’s backed by actual payments.

My house is now worth $310K which gives me $88K in Equity which I’ve named “Appraised Equity” because it’s based on the property value.

Is there a name for these types of equity?   How dangerous is it to invest using “Appraised Equity” if the market goes down and your house is upside down?

Does it even matter?

@Joe S.  Everything actually.  The only thing missing is an airport.  It’s near a Highway, there’s two high schools in the area.  It’s in the middle of what looks like a bunch of suburban houses, a lot of restaurants, and a bunch of amenities.  The location is pretty ideal.

Getting private lenders might be an option.  Befriend investors here or on LinkedIn might be a first step 

I came across a 3 story school that has a gymnasium, a track on the next floor, a wrestling room and all other rooms were obviously classrooms.  The building is 10000 sq and only $250K.  Of course it seems like there would be astronomical rehab costs.  

If you had the resources, what would you turn the building into?   A hotel? An apartment building perhaps?   does anyone have experience rehabbing a building of this size?   How much do you think the rehab cost would be?

Some people mentioned this above, but my first thought was “pay to vacate” or “cash for keys”.  It might actually be cheaper than everything else in the long run