All Forum Posts by: Gabe G.

Purchased my 3rd rental property in Indiana and got it leased up yesterday.

The numbers

Purchase price $42000

Capital put in to rent- $2000

ARV $50k

30 yr fixed at 5.25

Rent $745

Principal Interest 162.35

50 percent rule $372.5

NOI- $210.15 net per month

Area is an ok area. working class.

Opinions?

And no J scott, if I paid 1 million for a rental, that cash flowed only 500 a month, that would not be a good rental.

I guess I am talking in my area. my rents range from 700-1100

If you are cash flowing, even phony cash flowing(I agree gross cash flow is not a accurate term) 500 after PITI, the property works.

I understand your point and you are right. And I don't buy turnkey properties so I am not being sold a line.

Obviously is we are talking about 2k a month rentals the 50 percent rule would eat into 500 a month after PITI

But considering all rentals I have and will purchase are from 700- 1100.

If I buy the property and it cash flows 500 a month after PITI, it will automatically work in the 50 percent rule. Because in my area, 500 a month of gross cash flow, usually works out to 200 a door using the 50 percent rule.

Just trying to get everybodys thought process.

As a new investor. I am more concerned about gross cash flow.

Which is simple rental income - principal-interest-tax-insurance

In the Indiana market I have been shooting for $500 in cash flow per property.

I see most people here are more focused on NOI(net cash flow), while I understand the importance of this, as it is a better guage of actual money coming in the door over the long term(roofs,water heaters,windows) add up over time and take away from cash flow.

Does anybody else focus more on this number? rather than applying the 50 percent rule to get to NOI?

I guess what I'm saying is, you don't necessarily have to drill down to repairs/expenses over the long term. If you are bringing in 850-1000 a month in rental income and taking care of PITI and walking away with 500 each month. The analysis can probably stop there, it makes a good rental atleast by the numbers

Thoughts?

Im a small timer just getting started. But it's obvious cash flow beats equity any day of the week.

You can get 30 yr fixes, and on down the line use cash flow to pay the mortgages off faster, but the 30yr gives you the option during lean times(loss of employment) new roof etc, to pay those out of cash flow, and not your own pocket. As the old saying goes, CASH FLOW is king, as it gives you flexibility.

Agreed. I am going to start asking some more questions verbally, before giving link to application. Good info.

Thank you

Yeah, I got to be honest, i live in indiana. reasonable real estate values.

I dont know where you are finding houses that arent in need of a total rehab at 60-65 % arv? I have been shooting for 20 percent or around 20k arv.

Meaning after expected repairs, I have 20 percent in equity in the home, which in a pinch would allow me to sell, and not lose money and maybe take some. Since I am dealing with houses in 60-80k range, this equates to about 20k +-. I may go slightly higher on quality neighborhoods that will make a good long term rental(15 yrs or so).

These houses i buy are usually in need of 5-10k in repairs.

I offered it to the single gentlemen, with an appropiate move in day and move in discount for the last of may. I will see what he has to say.

As a general rule what you guys are saying, that I shouldnt even send them a link to submit an application, unless we agree to terms? In general all 3 of these sounded ok, during my meeting. One disclosed they had a recent bankruptcy, but both worked, then I saw she made an apartment complex take here to court. The other said he made 16an hr and working 60hrs a week, and just had a repossession of a car several years ago, but when I pulled the credit, I see he has multiple collections for varying things that were recent. The gentlemen I approved, his story matched the credit and he has a good job.

I have had lots of interest in the property, I have a conversation with them, let them see the unit, before sending a link online for them to fill out the application. And I always state you must be serious about renting the place, as its going to charge 25-30 dollars for the application.

Well I was thinking the couple two, but that is one that has a recent bankruptcy and looks as if they had a decent judgement against them from an apartment complex, possibly during the bankruptcy situation.

I dont know if thats back rent or damage or what.

Also the one that got approved, can't move and therefor doesnt want to start a lease until early June. Which would mean 1 month vacancy.

What do you guys do in that case, where you may have a tenant you will approve, but they dont want to start the lease for a month? When you are having a steady stream of people interested in the property?