All Forum Posts by: James Wilcox

@Timothy L Olsen welcome to the BP and REI community. You have to the right place to learn more and network with fellow investors. Good luck in all your REI goals.

Ok here is the deal. I am working an off market "deal". There are two triplexes for sale that each bring in $19,800/year per building.

$19,800 x 2 buildings = 39,600 Total Gross Rent

The seller in coming up with their asking price has used total gross rent instead of NOI in there calculation to determine their asking price! I can see where this could have easily been done by someone out the REI community, but it is a big difference in final price. The seller said they want to get a 11% cap rate.

This is a tricky situation. How is best to present a reasonable offer that will not offend the seller. I would like to keep the relationship open for future deals. 

The Seller is asking $340,000! 

A more reasonable estimation imo at the 11% cap rate is ~185.5K. That is an around ~150K difference! Will this guy even be able to swallow hearing such a difference in price? IK it is a just a numbers game, but how can I best approach without crushing his ego that much.

Any advice is greatly appreciated.

Ok here is the deal. I am working an off market "deal". There are two triplexes for sale that each bring in $19,800/year per building.

$19,800 x 2 buildings = 39,600 Total Gross Rent

The seller in coming up with their asking price has used total gross rent instead of NOI in there calculation to determine their asking price! I can see where this could have easily been done by someone out the REI community, but it is a big difference in final price. The seller said they want to get a 11% cap rate.

This is a tricky situation. How is best to present a reasonable offer that will not offend the seller. I would like to keep the relationship open for future deals. 

The Seller is asking $340,000! 

A more reasonable estimation imo at the 11% cap rate is ~185.5K. That is an around ~150K difference! Will this guy even be able to swallow hearing such a difference in price? IK it is a just a numbers game, but how can I best approach without crushing his ego that much.

Any advice is greatly appreciated.

@Justin Doyle Welcome to the REI and BP community. You have definitely come to the right place to learn all there is to know about REI. Make sure it is clear the roles of your other family members in this business. Good luck in all your REI ventures.

@Justin Morris welcome to the site. Check out the beginners course and guide. They are great resources. Good luck in all your REI ventures.

@Evan Haag Much like @Tim Johnson said you should try to work with a bank near you just for the ease of communication imo. If you want a true commercial loan with no seller help I would think it would be difficult to find a loan for 20% down. You are probably going to find a commercial loan for more like 25-30% down. Good luck in your REI ventures.

@Brandon West Welcome to the REI and BP community. You have some creative ideas and you need that to succeed in this industry. However, your numbers are highly unrealistic and you need to flesh them out more. @Kathleen Bassett is right in that your system is kind of like an airbnb system. 

1.) First and biggest is that what you are proposing is in some states illegal if you the owner are not living in the property. Since you are also have a traveling professional, I assume this is not going to happen. There could also be maximum occupancy rules in play in this scenario.

There is an example of the law in California currently to my knowledge.
"any rentals 30 days or shorter can take place only if the owner or permanent tenant stays in the house with the guest during the whole rental. The rules also implements a 14 percent tax on those rentals and mandates business permits."

2.) You will also have a lot more expenses than what you have proposed. For example: are you really going to only clean your home once a month? So dirty dishes are just going to stay in the sink for that long? You would need to think of it more like a hotel and clean much more frequently than that.

3.) Also if you do not have a lease in place than your rental income may not be counting toward your debt to income. When you go to get a loan, your lender will probably not be able to use your rental income from such a property toward your debt/income (even if you are making tons of money from it on the back end). This will make it difficult to get a loan on future properties.

Basically you will need to find out what the laws are in the state you wish to purchase your property in. 

Because of professions, much like yours, Airbnb has become a big player in the short term rental market. It has been a big asset for some in the REI field as well. However, imo it is likely the current Airbnb system will need to adapt to keep up with laws and the times. Laws and changes that affect them would likely come down on your proposed operation as well.

Keep up that creative mindset and keep us informed on what you plan on doing. Interesting to say the least and good luck.

@Matt Madar welcome to the BP and REI community! Congratz on taking your first steps toward financial freedom! House hacking is a great way to build up equity and cash for more REI. BP is the perfect place to learn all there is to know about real estate.

Good luck in all your future REI ventures.

I think it is an excellent idea to give gifts from time to time. RE is a people business, so if you got to brown nose a little then that is just what you got to do. I just recently gave two tenants small coffee mugs with some candy at a duplex property we are going to acquire shortly. They are so excited about having a new landlord, even before the gifts, because of how we have already treated them. The amount of good will we have acquired from the $6 gifts ($3 per side) is well worth it IMO. Also something utilitarian like a mug shows more thought than a gift card. It also gives a subtle reminder to the tenant about your landlord expectations out of them, every time they use it. 

@Dean Hart welcome to the BP community! We are glad to have you. Good luck in all your REI ventures.