All Forum Posts by: Jason Hodge

@Jaysen Medhurst, 

Thanks for the additional info. I'll add Cash on Cash and IRR to my metric.

Jason

@Jaysen Medhurst 

So, using trulia heat maps for Cincinnati listing prices, it does look like the home resides in a D-Class neighborhood. Thanks for pointing out that criteria when considering a property and the problems with lower class neighborhoods, as well as the fact that duplexes can be difficult. I assumed that "any" multi unit property would be better than a SFH, but I will be changing my Business Plan to focus on A & B class neighborhoods and properties with a minimum of 3 units.

A follow up question I have on your reply, is concerning the 2% rule. If I am only looking at A & B class neighborhoods, should I expect that properties with minimal repairs needed will usually hover around 2% or lower? And if they are above that I should expect a decent amount of improvement costs and include that cost in addition to the sale price when calculating the 2% rule?

Thanks Again,

Jason 

Good Afternoon,

This is a long post, thank you in advance!

I think I found what could be a "good deal", but I'd like some feedback because there seem to be sooo many moving parts in a RE deal, and other than purchasing my home I have never purchased any other properties.

I guess I am looking for: Is this a good deal? If not why? What have I over looked. *My numbers are coming from Zillow/Realtor/Rentometer.com. I haven't contacted an agent yet because I don't want to bother someone until I zero on a REAL good deal. I do not have numbers on repairs because I haven't been in the property or spoken with an agent or contractor, so I am assuming they are low to negligible for now. I know that repair info is much needed data, but how can I go about getting the info without wasting an agent/contractor's time if I am not ready to purchase... anyway, moving on.

Description:

Duplex.Large brick 2 story 2 family home. Maintenance free exterior. Unit #1:  2 bed & 1 bath. Unit #2: 3 bed & 1 bath. Large rooms throughout. Over 2478 sq ft.

Market Value/ARV/Zestimate (low end): $58,000

Asking Price: $35,000

Total Rental Income / m : $1236

Financing

Down Pmt (20%): $7,000

Via 90% LTV HELOC (If I can get one, don't know if offered anymore)

Mortgage: $28,000

Mortgage Pmt / m: $129.67

Closing Costs @ 4% of Asking Price: $1,400

Via 90% LTV HELOC (If I can get one, don't know if offered anymore)

Monthly Expense Estimates (Other than mortgage)

Property Management @ 10% of total rent: $123.60

Vacancy @ 10% of total rent: $123.60

Property Tax: $100

Insurance @ 10% of total rent: $123.60

HELOC Interest Only PMT @ 5%: $35

Monthly Cash Flow After All Expenses: $600.53

Total Y1 Cash Flow: $7,206.33

Paying off the HELOC:

After 12 months, and basic improvements, get the house to an ARV of $58,000 (This was the Zestimate for the property on the low end of the scale). Refinance @ 80% of ARV, for a mortgage of $46,400. Using this money, I would pay off the original mortgage of $28,000 as well as my HELOC balance of $8,400. This would leave me with $10,000 cash in hand, and a fully restored HELOC ready for the next deal. The new mortgage PMT would reduce monthly cash flow to roughly $461. If the ARV is closer to the Median Zestimate for the neighborhood, $49,600, the change is the cash in hand is reduced to $3,280 and the new mortgage PMT would reduce monthly cash flow to roughly $546.

Price History

02/20/16 Price change $35,000 +21.1%

01/23/16 Price change $28,900 -22.9%

11/24/15 Listed for sale $37,500 -16.5%

Neighborhood Info

Median Zestimate: $49,600

Foreclosures (per 10K): 11.7 compared with 7.6 in Cincinnati & 3.1 for United States

Why I think this is a good deal:

Rent to Price = 3.5% (greater than 2% rule)

Cap Rate = 42.4%

Asking Price is @ 60% of Estimated ARV (meets 70% rule)

The Monthly Cash Flow of $600 leaves me with a lot of wiggle room if my numbers are wrong or I need to put a few more thousand dollars into the property from my HELOC.

Although I have been working the numbers based upon $35k asking price & having not seen the property, I am actually assuming that I could get it for less since only a few months ago the property was $7k cheaper.

Thank you for reading, please give me plenty of constructive criticism - but please try and be specific in your answers if possible.

Thanks,

Jason

Hi,

Just a quick question:

Would a service that provides properties that are currently behind on last years taxes, searched from multiple counties/states at a time be useful to real estate investors? Perhaps to find properties before they get foreclosed on (or just in general financial trouble) so your first in line?

I ask because I have started working on the service for my own amusement, as I was looking at auditor web sites but wanted the ability to search many at the same time. Since it was just for me, I may stop development unless there are other interested parties. If I continue it, I'd probably charge a small subscription fee. Do you think it would be useful? What monthly subscription rate would you find appropriate for such a service? I saw other sites that provide lists for around $30/m, but my idea is more robust in my opinion than just a list.

Thanks,

Jason

@AJ S. I have seen some of Joe Crump's stuff, what he says seems credible but its mostly a teaser for selling his course.

Jason

@Dev Horn Dev, I too have been reading up on subject2/lease-option and subject2/wrap deals and I have a question regarding you state that there must be equity. Even if the seller has no equity in the home, couldn't the REI create equity for themselves via a wrap? for example:

Property Value: $100k

Seller Mortgage: $100K

you obtain the property on a subject2, you then turn around and sell with a wrap with the following:

Sale Price: $110K (premium due to owner financing)

Down Payment: $20K

You then carry a note for $90K that the buyer must pay off

You then apply $10k of the down payment to the wrapped lender, bringing the wrapped mortgage balance down to $90K, the same amount as the note you are carrying.

In addtion to all that, the terms on the new note are created to give you a spread between the wrapped PITI & the buyers PITI (assuming that taxes & insurance are escrowed in).

So, after the closing you have created (and extracted) $10K (minus any closing costs) in equity from the deal, and you also are now receiving monthly cash flow via your note and you have no property upkeep.

DISCLAIMER: I have never done one of these, this is all academic. I also realize there are risks involved that may be too much for some investors.

Jason

@Jay Terpenning I would also second @Bryan L. 's advice. Many people think that a website is needed before anything else. As an IT person who can easily setup webpages and have setup many of my own, I can tell you that they are not the great tool you think they are. Down the road, you should probably have one - but for right now there isn't anyone looking for your website, and websites are only useful if you have a good amount of traffic to them. And getting traffic takes money and time, there is no getting around it. I would suggest putting other business tasks ahead of setting up a website for now.

Jason

@Ryan Dossey stated, its called anchoring. Essentially, your first offer and the sellers first asking price set the stage for where the final price will be. You pretty much know that your first offer is going to be rejected because its main reason for existing is to set the stage. I saw in the other post where you were rejected, and to me this indicates that either the person's asking price is not negotiable and it may not be a deal for you, or they are just trying to force you to bring up your offer before they lower their asking price to set the stage in their favor.

One thing you can attempt to do is known as "reframing". basically you point out "some" of the reasons why your offer is reasonable. I say "some" because you need to save some of your reasons as ammunition for later in the negotiation so you can reframe again. Perhaps you could approach the seller with the following: "Well seller, I know you are asking $XXX for the property, but based upon the following repairs needed, local market, lack of appreciation in the coming years, etc... my offer is fair..." then let them think about it. they could always end the conversation the same way saying "No Thanks", but they could always throw out a different number to keep the negotiation going.

I hope this helps,

Jason

@Brian Burgett Welcome! I'm a new user and new to Real Estate. I'm actually from Sharonville so not that far from you. 

Jason