All Forum Posts by: Jacob Sampson

You are correct, the math is the math, except when the math is personal preference.  You have defined the numbers that work for you.  Stick to them.  Other's may be willing to accept smaller margins than you, though. 

This is just part of the game when dealing with a home for sale by owner.  They are more emotionally involved.  Also, in defence of them, there very well may be a buyer out there that wants to rehab and use as a personal residence.  In that case, they may be willing to to forgo profit in order to get a home they want to live in.

All that being said, you have defined your numbers, stick to your guns and move on down the road to the next opportunity.

Here is a link to a property I purchased in May of 2015.

http://www.snco.us/Ap/R_prop/Listing.asp?PRCL_ID=1411202011031000

3b/2b we purchased for $54,000.  We put less than $500 into it to get it rentable.  It rents for $900/month.  2 months into it we did end up spending $800 to cut a tree down in the back yard.

There aren't an endless supply of these sorts of deals but I can pick 1 up every 2-6 months.

Not sure if I meantioned this in this thread or in another, but here are some basic equations I use to decide whether or not to buy/what I require from a property before I am interested.

At max I pay 60 X monthly rent. That price has to include any fix-up costs to get the palce rentable. On a 15 year note the property must provide at least 12% cash on cash ROI. I use 30% as my longterm average vacancy and maintenance cost. You really cant count on appreciation in these small towns but I have started buying in areas that have a long track record of sustaining property values. The example above is definately one of those areas.

I recognize this is a fairly old post.  I am in Topeka, KS.  We have, what I consider, a decent rental market for cash flow.  If you are interested I would be more than willing to answer any questions or give my opinion of my local area.

Jacob Sampson

Not sure how useful my opinion is since I am investing in Topeka, KS, but as a gut check, quick and dirty analysis, I max out at 60 X's monthly rent.  I would top out at $120k.  If owner covers some utilities or yard maintenance then I wouldn't even go $120k.  I'm not a fan of that deal. 

Additionally, I require at least 12% cash on cash ROI on a 15 year note.

Thant's my $.02.

I'm sure this isn't a new idea.

I live in Topeka, KS.  I own 16 units and have a full time job.  I'm not handy and so, although, I self manage, all maintenance is outsourced.  I want to grow much bigger but mine and my partners job's pay really well and replacing that income is not in the near future.

I had an idea to start a property management co-op where local, small time landlords like myself would pay some flat % into the PM company and that would handle all costs except for materials.

At the end of each year we could pay back any cash each individual member did not spend or the cash could build up or the PM company could purchase office space to operate out of and begin to grow it's own assets.  Any number of things could happen.

The main goal being to allow members to offload management of there properties for cheaper than a traditional management company.  Secondarily, possibly taking on other landlord properties in a more traditional sense to offset co-op owner expenses.

I see many problems with this idea but also some great options from it.

What are your thoughts about it?

IMO, it just comes down to the cost of money. You can pay a HML whatever % for a finite amount of time. For example, after the home is rehabbed and rented you shouldn't have much trouble moving it over to bank financing. On the other hand the partner takes whatever % for eternity. That's expensive money.

Don't get me wrong, I actually think partnerships, when done well, are fantastic.  I purchase all of my rentals with a partner.  I just think the partner needs to bring more than just cash to the table.  My partner and I are both intimately involved in the business.  We have similar life goals we are working towards, we have been through some rough times together.  Great partnerships are fantastic, and hard to come by. 

Don't partner because you see a big pile of easy money.  That is a disceptive pile of cash and comes with a very high cost.

I think this has been stated already but I will add my two cents.  I never insure for replacement cost.  I ensure for about what I paid for the property.  If something catastrophic happens then I look at it as though I just sold the property for what I paid for it and didn't incur any transaction costs.  Depending on value of land, after loss of property, I would donate it to a non-profit organization.

My full time job is in IT management. On the side I buy and hold residential real estate. Mostly SFH's and duplexes.