All Forum Posts by: Jonathan G.

Hello everyone, I am possibly looking into my first deal.  I am extremely new so please take it easy on me ;-).  I by no means think I have it all together or want to.  I would greatly appreciate any info as well as perspective when looking at this deal, thus why I am putting myself out here with such little knowledge.  

I am using the Rental Properties Investment calculator on BP, however I am finding out that I still have quite a bit of a learning curve to understand all that goes into my first deal.  One thing I know for sure is that once I master this process I will be in a great place.  I do not want to get wrapped up in emotion but numbers.  I just need some guidance on figuring out that formula to the best of my ability.  Any help would be much appreciated!

1) So starting out on the calculator, I am not to sure what my area's average cap rate is.  How do I go about figuring that out?

I am looking at a property that was recently built within the last 7 years and if all the numbers add up correctly, I would probably negotiate a price of about $167,000-$170,000.  I have spoken with a realtor about what the possible rent could be for this property and she checked with a management company that told her between $1,400 to $1,450.  

2) Is there any other due diligence that I can do to make sure this number is correct?  I have checked craisglist but their are not many on there to compare rents with.

Property taxes are $2,900

I would be putting down 20% and am looking into a 30 year fixed around 5.2% to 5.5%.

I am assuming that electricity, water, sewer and garbage would all be paid by the tenant. I am checking to verify that there are no HOA's but I believe there are not.

3) What would be the best way to figure out what insurance would be on the house?  Is there a particular formula to calculate that or do I need to call an insurance company?

I picked about 8% for a vacancy rate.  I am in a very desirable area and school district so I believe it may be a little high but however I would rather be safe then sorry.

4) Not sure what % to chose for Repairs and Maintenance since it is a fairly new house? What would you suggest?

5) What % should I use for Capital Expenditures, this I really have no idea about.

I have added 10% for Property Management even though I will most likely manage this one but I still want that in the budget because when I decide to change or scale up I want that already apart of it.

6) When it comes to future calculations, what is a safe rule of thumb for Income Increases per year (%), Property Value Increases per year (%), and Expenses Increases per year?

Please feel free to add anything else I may be missing or need to consider.  Again I appreciate all of you working with me to help me understand everything that goes into this process.  I hope that I learn to develop my skills in the future I will be able to add value back to BP as well.  

I AM ALL EARS!!!

So I am getting ready to do my first investment. My wife and I really want to make sure we eliminate as much risk that we can. One of the mortgage companies that I am looking to for funding says that they will not loan money to an LLC. Now he did tell me that it is not illegal for me to move the property to the LLC at some point but he cannot advise me or give me any advice to do anything that may jeopardize the loan for any reason. I asked him if it was illegal and he said NO but that there are terms of the loan that if the bank wanted to it would give them the right to call in the loan at any point.

My understanding is that this scenario is very very unlikely, especially because it is my first investment.  However I get worried about the possibility.  

I can go with another lender but they only do 15 year or a different loan with an ARM. So I am a little stuck and would like to get some advice, or if anyone has ever experienced this before.

We really would like to have a 30yr for the Cash Flow and the DTI ratio but we also want to protect ourself and eliminate as much risk as possible by creating an LLC. Any feedback would be a tremendous help. Thank you all for your input.

Hey guys, sorry it has taken me this long to respond.  I am not ignoring any of you.  Just now getting a chance to hop back on BP.  I will try and have all the numbers and details up on this blog post within the next 24 hours.   Again thank you for all of your input.

I know the interest payment would have to be figured into the Debt to Income ratio. As of right now I am a prime candidate for a loan. I have a 18% DTI. The interest only payment would be $170/mo. I have spoken with the banks and they will still loan me even with the money be borrowed for the down payment. Any thoughts on the above two posts would be helpful! Thank you again.

@Eddie T. , @George P. , @Gabe G. , @Jeff Wallace , @Brad T. , @Brie Schmidt 

Hey guys from the info I sent you do you think it would be a good deal?  This would be my first deal.  If you need more info let me know.  I want to make sure it makes sense.  Also another part of the deal is that I have spoke with family members who are just sitting money in the bank not getting any return about lending me the down payment, $34,000 at a 5% to 6% interest only payment with the understanding of me paying them back in 18 months.  It gives me enough time to save up and pay them back but at the same time get the property now.  Let me know what your thoughts are on this deal with those terms.  Again if you need more info let me know.

@Eddie T. , @George P. , @Aaron Montague  , @Brie Schmidt  15 yr. Mortgage only $1,097, 30 yr. $755.  Looks like I can get between $1,400 to $1,450 possibly $1,500.  Taxes are $2,800.  Vacancy rate would be around 5% or 6%.  Built in 2007 a lot of growth in the area very good chance equity will come into play but that is icing on the cake.  In a very good school district as well.,

@Brie Schmidt Thank you.  I have heard from time to time people say if you can't do a 15 year you should not be investing.  Not saying I totally agree.  I guess it all depends on what your goal is.

Question, first deal. For a Single Family Home. What would you suggest, 15 year fixed or a 30 year fixed? Please tell me which one and why and also if you are willing positives or negatives if either. Thank you all so much.

@Ram Srinivasan  - thank you very much for your input as well.  That is a great way to start when I begin to work with the investors.  I agree totally that I should give them the main portion as a starting point and especially if this is my first dealings with them.  Then gradually change the percentage as we approach other deals.  Thank you!

@Tom Keith , @Andrew Syrios , @George Smith , @Andy Argonaut , @Ned Carey , @Account Closed , @Joel Owens 

Thank you all so very much, this is great info that I will read and re read over and over to analyze as well as put a successful deal together.  I really appreciate all the input and respect each and everyone of you!  Thank you for taking your time to answer questions from someone who is just starting.  It really means a lot that I can rely on people who have the expertise and  success in this industry when it comes to figuring out this new venture.  

Thanks to @Joshua Dorkin and his partner Brandon for developing such a great site.