All Forum Posts by: Josh Ewin

Jon - thanks for the reply. I'm looking at this and common sense doesn't make the deal work for me either. The one upside is the tenant - keep in mind we haven't seen rent rolls yet.

So, given the above scenario, what would make this deal work, assuming HOA, Taxes and Insurance are fixed?

My wife and I are considering a property that our agent brought us last week. The property is a 2/2 condo (upper floor) in east Delray Beach, FL. Nice area, amongst several other condo developments.

Seller is the former president of the condo HOA and is willing to finance; though financing specifics haven't been discussed. Our credit is in the neighborhood of 770, so he couldn't find a much better buyer to finance.

Whats more, the current tenant has been in the property 3 years and is ready to sign a new 3 year lease (owner has waited to sign the new lease, pending buyer's wishes with regards to tenants).

Here are the Numbers:
-Assessed Value: $145,000
-Annual Taxes: $3210
-Monthly HOA fees: $315
-Rent: $900

Seller is asking $90,000, with a 30 year amortization and a 5 year balloon on the financing. To get right side up in the property, we'd have to put down at least $40,000... Is that right??

I'm in South Florida. We had a huge real estate market boom... and an equally huge crash. The deals have to be out there... but the problem I've run into is that the rents are very low in my area.

That being the case, is it a bad idea to look at foreclosures as a way to increase my margins, thus accommodating for the low rents?

I'm currently reading RichDad's The ABC's of Real Estate Investing. Unfortunately, the author's site is no longer online :shock: , so all of the great, helpful spreadsheets for budgeting and property analysis are no longer available. Can anyone suggest a comparable resource? TIA

So, I called the broker and told him my offer would simply be too low. Based on the numbers, not gut, the offer is just too low based on the comps and the seller's asking price.

Wheatie - thank you again for your wise insight. I feel very thick-headed right now about REI, but I'm sure that will pass in time. Thank you so much for your insight.

ramon6001 - very good post... it keeps me going to hear things like this:
"there are a ton of deals out there just take your time and pick one. "

So, I'm back on the prowl. I'm speaking with my neighbor (and the selling broker for my own home, when I bought it some 5 years ago) to find some other opportunities. I'll keep you guys updated and will certainly have another deal to look at soon.

Wheatie, CumminsHomesLLC,Ryan_Webber...

Thank you all for your insight. Wheatie, you're right here. I can see it in my own neighborhood. We had our home appraised last year and the comps in the neighborhood were all over the place... many of the homes were bought by investors looking to flip the properties... the bottom fell out of the market and these investors got stuck; particularly when their teaser rates went up.

The broker is telling me to make an offer. Well, let's make an offer... but one that makes sense. Units like this in other neighborhoods were selling for $40-$50k 4 years ago. So, lets see what makes sense here. The HOA fees cover insurance, water/sewage/waste and cable. Electricity would be the occupant's responsibilty. So, expenses are as follows (Wheatie, I'm adding $900 in annual expenses for repairs and advertising here, am I in the ballpark?):

$1000 - Rent
($331) - HOA fees
($75) - management
($75) - expenses
($205) - tax
------------------
NET: $314

Working backwards, with 6.75% interest and 10% down... that gives us:

$40,000 - Offer Amount
$4,000 - Down payment
$800 - Closing costs
$36,000 mortgage

Total Down + Closting = $4800
Monthly Payment: $234

$1000 - Rent
($331) - HOA fees
($75) - management
($75) - expenses
($205) - tax
($27) - vacancies
($234) - mortgage
------------------
NET: $53

Am I right here in saying that no one in their right mind would pay any more than $40,000 for the property? I'm not accounting for vacancies in here either. Given the state of the market, (and the high likihood that the current owner is loosing on the property every month), I think it makes sense here to put in a realistic offer. Do the numbers I have here work? Am I missing anything?

That being said, my goal when I started reading and learning about REI, was to build up $5000 in monthly revenue. I'm a VP and make a decent living; credit score is almost perfect... it seems that the market is the problem. Is this goal of $60k in annual rental income realistic by any stretch of the imagination?

I'm looking at my first deal and my broker is telling me the deal makes sense , even though it's cash flow negative... he says (and I agree, with some reservations) it makes sense from an appreciation standpoint.

It's a 1.5ba/2br condominium in South Florida. Nice area, nearby the Interstate, shopping, schools, 3 miles from the beach. There are 60 units in the building; the community has it's own pool and tennis courts. Probably $2000 in cosmetic repairs to be made. Current tenant's term ends in 30 days (has been there three years). Here are the numbers:

Asking Price: $130,000
Comps: Last 3 sales in the building have been $130,000 - $160,000
(My broker tells me the unit can be had for somewhere between $105k-$115k.)
Rent: $1000
HOA fees: $331
Down: 10%

The Monthly picture:
$1000 - Rent
($331) - HOA fees
($75) - management
($205) - tax
NET: $389

Now we add the mortgage in. Figuring 6.25% on 10% down (30yr fixed); the monthly payment is $637:

$1000 - Rent
($331) - HOA fees
($75) - management
($205) - tax
($637) - mtg
NET: ($248)

At the height of the market, other units in the building were going for $200,000. Others on the market in the building are asking $160,000-ish. Figure the unit could be sold in 3 years for $160,000 (this seems realistic, given the current state of affairs)... so we look 36 months down the line and see:

Sale price: $160,000
Total investment (expenses x 36 months and down pmt): ($20,068)
Loan balance: ($99,600)
NET: $40,332

So, the question is, if one could reasonably expect the unit to sell for this price, does it STILL make sense if you're in the red on a monthly basis? I'm all ears...

Hi All,

Nice looking forum, I have a feeling I'm going to learn a lot here. I'm learning as much as I can about rental properties and will be picking up my first property in the next 3 months. That being said, I do not plan for that property to be my last.

I'm putting pencil to paper and figuring out the best way to leverage my investment capital for the properties. In running my numbers, I need to figure out the down payment required for an investment property. I've heard 20% as a minimum is a good rule of thumb. Can anyone verify this? Also, is there a better way to leverage my investment dollars? At 20%, I'll be lucky to have a 2 year ROI on that money.