All Forum Posts by: James Free

Ben Leybovich has written plenty about the folly of investing in pigs (https://www.biggerpockets.com/renewsblog/2015/03/0...).

I am wondering if the deal below qualifies. It certainly does on purchase price, and perhaps neighborhood, but the multifamily aspect makes the prospective rent so absurd that it might be a good deal anyway.

Purchase price: $40,000

Taxes: $600/year

Units: Three 2/1 units

Market rent: $550/unit

Even with a generous capex budget, you can find a lot of room for cash flow when you're getting 4% rent/value ratio. Suppose repair/capex is 40% of rent? Fine, throw in 10% for vacancy and 20% for taxes/insurance/water and I'm STILL cash flowing over 10% on my $40,000 investment.

I understand that the key to this is actually getting tenants at $550/month, but if the market seems to support that, can a pig not be a pig?

@Dan Mackin thanks for the info; I'll be interested in coming from Fort Collins to that.

@Doug Martin how much do you want to learn vs simply getting decent results? If you're just looking to put your money to work for you, you may want to check out one of BiggerPockets' sponsors, RealtyShares (www.realtyshares.com). There are people there putting together deals that you can get in on without doing much your end. The more you do yourself the more you'll learn, but you have options, and you need to decide how far you want to go.

@Ozzy Smith I'm interested in looking into Ohio from out of state. If you have leads I could look at, please PM me.

@Brandon Turner posted this classic years ago: https://www.biggerpockets.com/renewsblog/2013/04/0...

@Ben Leybovich counters with this: https://www.biggerpockets.com/renewsblog/2015/03/0...

It seems to me that these two contradict each other. Brandon is estimating similar capital expenses on his five-plex to what Ben estimates for a single-family.

It would be great to get a "four-years-later" update from Brandon on this property's status, but I'm also curious whether others here think that Brandon's feat can be replicated - and actually pan out the way his article forecasts, or is Ben's cold water the final word?

@Brandon Turner posted this classic years ago: https://www.biggerpockets.com/renewsblog/2013/04/0...

Ben Leybovich counters with this: https://www.biggerpockets.com/renewsblog/2015/03/0...

It seems to me that these two contradict each other. Brandon is estimating similar capex on his five-plex to what Ben estimates for a SFR.

It would be great to get a "four-years-later" update from Brandon on this property's status, but I'm also curious whether others here think that Brandon's feat can be replicated - and actually pan out the way his article forecasts, or is Ben's cold water the final word?

Can anyone here suggest good sources for data on neighborhood vitality in Ohio?

I occupied a house for seven years, then moved and began renting it. I cash-out refinanced months before the move, as it had appreciated 60% since I bought it. Now that it's a rental, I can take depreciation, but using what amount? The original (2009 short-sale) purchase price, or the (much higher) appraised value as of the time of the cash-out-refi?

And what value is the basis for depreciation? Should be price minus value of land, right? Here's a sample county website entry (random house, not mine) - what number would be used given this? http://imgur.com/gallery/2KAX4

@Michael Seeker The notion of minimizing interest over the theoretical life of a loan runs counter to any leverage-based strategy, which is what BP is all about.

I'm not concerned about how much interest I'll pay by the time I've paid off the loan, because I'm not Dave Ramsey. I'm interested in cashflow, and I'll keep growing the debt until I die. I can get out at any time by selling the properties, because I still owe less than they're worth. Then I'd become a normal retiree with a traditional pile of money.

@Michael Seeker It is true that refinancing for the full amount might not be possible at perfect 12-month intervals, but you'd only actually need to refinance as you need to spend money. My math is a long-term average, but I annualized it to show the rate of return.

Interest rates can vary as well, but rents tend to go up and down to match. A key to my approach is the idea that rent increases cover payment increases.

I agree that refinancing costs are real, but they amount to something like 1% of the principal, which is TINY compared to the TAXES you'd pay if you extracted equity by selling property.