All Forum Posts by: Irwin Haddox

I often see on here landlords that charge around $1,300 for rent but I personally don't know anyone who pays such high rent. If you have $1,300 rent why not buy? I know people usually say that they don't want to settle in the area for long so they don't buy but i'm sure if the deal was good enough then they could sell with instant equity. Also I hear people don't have good credit so they can't buy, but some landlords screen out bad credit tenants. Obviously if they live in NYC I understand but 1,300 buys a lot of house in other areas. So what I want to know is who is paying all this rent after all?

-Irwin

2 Votes

Originally posted by @James Masotti:

Originally posted by @Irwin Haddox:

Originally posted by @Diane G.:

Saj is right on.... Hands on management is the key to success here...

But I have a full time job...... I cant be woken up in the night for a leak in the toilet

Old wives tale. Ask most investors who self manage they will tell you this "never" happens. Of course it can and statistically it is going to happen to someone...but just think about your own home. How often do things actually brake in the middle of the night or on Christmas day or something like that. It hasn't happened to me in 30 years. Doesn't mean it can't...but I'd say that's a pretty good ROI on my time. Now... I have property management because the City of Wilmington Code says I have to. Since you're in New Castle County you wouldn't be required to do this.

Thanks I will definitely keep this in mind. Maybe I will start out as a land lord. Question though: If I do have a property management company do they usually pay for evictions or do they charge me?

0 Votes

Originally posted by @Diane Manders:

Thanks @James Masotti. I like to think of my investing as creating homes so I couldn't agree with you more on giving people a nice, decent place to live and taking great care of it. I will definitely PM you. Thanks again!

I would also like to give people a nice place to live but the math is just not on my side here

0 Votes

Originally posted by @James Masotti:

@Diane Manders - If you have family in Wilmington then you know it has opportunity, but can also be a challenging place. I'm in the process of shopping for a new lender right now and everyone wants to keep warning me about not investing in the A+ neighborhoods. I know the area I'm investing in. I've studied the crime maps, the demographics, the vacancy rates, etc. I know my client base and I know the risks. For me it's about knowing the kind of landlord you want to be and investing accordingly. I want to be able to give people a better quality home that they can live in. Just because you are a renter doesn't mean you should have to deal with a crummy place to live. I take care of the houses and fix things the right way. This allows tenants to take pride in the home and stay longer because they only need to move if something in their life circumstances change, not because they have a better option.

Anyway...small rant done but it's been on my mind this week.

I invest in Baynard Village and Northwest Wilmington as well as a very small area of Quaker Hill. Other areas I've considered though are Browntown and Hedgeville because the City has been developing there a decent amount. I stay away from anything on the east side as well as the 4th to 8th St area.

My team is still decently new to me(only the last year) but so far I'm mostly happy with them. Still need to spend some time refining the processes a bit to make things smoother. Feel free to message me for more details.

Wut?

0 Votes

Originally posted by @James Masotti:

Originally posted by @Irwin Haddox:

All,

I cant understand the math behind the rental investments even though I would love to get started in it. Where I am from (Delaware) a 3 bed 2 bath can rent for 850 a month. If I find an amazing deal and it costs only $65,000 for the property and I do the cap rate its around 1 percent. My expenses eat up the profit I would love to make 250 in profit but I cant see it working out. This is the scenario i am struggling with.

cost of property: $65,000

income: $850/mo

Monthly Expenses:

Property management $85

Vacancies: $60

Maintenance: $85

Capital Expenditures: $150

Property Taxes: $125

Mortgage: $220

Eviction: $65

So I end up with 60 dollars per month in profit........ This does not even include any HOA, tenant screening costs from property management, liability insurance, etc. Am i doing something wrong? Does anyone expect to find a class C or B home for under 65K that wont have a huge cap ex? Why are people making significant profits while still paying mortgage on properties? I am interested in the BRRR strategy but this does not make sense unless you remove the eviction cost after the first year or so and raise the rent by 75 dollars. Even then the cap rate is still low and I cant break 200 profit.

-Irwin

I think it depends on your area. I invest in the City of Wilmington and have a 3/1 renting for $1100 a month on a $63,000 mortgage. I'm about to finish another 4/2 that I expect will rent for $1200 with a $73,000 mortgage. Now I don't take into account eviction costs and do 9% each for Property Management, Maintenance, Capital Expenditures, and Vacancies.

After this I cashflow ~$150+ a month...and that's only if I actually have those vacancies and maintenance...etc. I'm fortunate I don't need the cashflow so the whole $400+ not going to debt service, taxes and property management stays in the account and grows over time. At a certain point it doesn't make sense to have $20-30k just sitting in the bank not doing any work for me. So with scale comes more flexibility to redeploy the capital.

I'm in it strictly for cash flow. CAP rates and capital expenditures are very important to me because I dont ever plan on selling any properties.

0 Votes

Originally posted by @Diane G.:

Saj is right on.... Hands on management is the key to success here...

But I have a full time job...... I cant be woken up in the night for a leak in the toilet

2 Votes

Originally posted by @James Masotti:

Originally posted by @Ryan K.:

As others have already said dont worry about a separate expense for eviction if using a PM.

I'm a little surprised by the responses regarding the maintenance and capex numbers. I'm usually fairly conservative, especially for SFHs on these items. If planning to hold for a long time these can be very significant. Every property is unique and you can somewhat calculate capex in todays dollars. But only budgeting 10% of total rent for BOTH is far too low IMHO. For your scenario that's only $85/month, or about $1k a year. Start adding up replacement roof, hvac, water heater, appliances, flooring, siding, windows, water/sewer lines, painting, etc., and $1k a year will never cover everything that eventually need to be replaced.

I agree 10% for both is too low. 16-20% would be more appropriate depending on the level of renovation and class of property. I mostly invest in older homes (1900-1920) so even if I do a big renovation I still expect there to be unexpected things which is why I budget 18-20% total

so how do you even make money? 17% cap ex is $150

0 Votes

Originally posted by @Account Closed:

Amazing deals don't have CAP rates of 1%. Also your budget for maintenance and cap-ex is way too high. Should be closer to 10% of gross rents.

You should self manage for awhile and learn the business, until you are so busy that you need to hire help. That will add 10% to your bottom line.

Keep searching for that great deal.

Saj I am concerned that cap ex of 10% wont yield enough to cover the fixtures, roof, floor, paint, appliances all of these things have a lifespan. For example if a capital expenditure like a roof, x, and y all need replacing in 10 years but I only saved up (85*12)(10) = $10,200 then I only have enough for the roof before x and y start eating into my profits. Also I work full time so a property management company is a must for me.

0 Votes

All,

cost of property: $65,000

income: $850/mo

Monthly Expenses:

Property management $85

Vacancies: $60

Maintenance: $85

Capital Expenditures: $150

Property Taxes: $125

Mortgage: $220

Eviction: $65

-Irwin

1 Vote

All Forum Posts by: Irwin Haddox

Irwin Haddox has started 5 posts and replied 24 times.

Post: Who's pay's $1,300 for rent?

Post: Who's pay's $1,300 for rent?

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out

Post: Rental investments: I don't see the math working out