All Forum Posts by: John Matthews

 I mean rental income is 1.5% or greater of the purchase price.

Quick question for you all - in the following counties in SE PA, is it possible to find 1.5+% properties (1-4plex) in A and B neighborhoods?

• Philadelphia County
• Montgomery County
• Delaware County

How about over the river in NJ?

• Camden County
• Gloucester County
• Burlington County

This has answered a question I've had for the past two weeks that I didn't know I had - Thanks!

Thanks all for the responses.

@Nathan 

@Nathan Emmert good point. A lender I was speaking with today actually brought up that point. Because I'm a nerd, it's worth nothing that assuming we're talking about the seller financing the last portion, and raising the purchase price to match - it actually looks like rolling the closing costs into the loan makes a difference (in this scenario of a 25% downpayment) of closer to 0.8%. Though, when you get to a 20% downpayment you're up to 1.3%, 15%, you're up to 2.2%, etc. The graph is exponential similar to the CoC gain chart that @J Scott posted in his post below yours. This is also highly dependent on the closing cost %.

@J Scott Thanks for that link, it's so timely that you just posted that. Do you happen to have the excel file used to create that chart? I'm a big data guy and I'd love to play with numbers a bit.

I'm not sure if this is the right forum (I never can figure out which to post in!), but here goes:

Is it possible get great cash on cash returns using conventional (non-FHA, non-owner occupied) loans and your own money as the 20-25% downpayment?

As I can see it, the factors affecting the % return are the following:

• Purchase price / rental income ratio
• Decreasing the loan interest rate
• Decreasing maintenance costs
• Increasing leverage (potentially the biggest factor as I can see)

Is there anything that I am missing here to increase the cash on cash return? So let's look at a simple example:

• Purchase price: $200,000
• 25% Downpayment: $50,000
• 2% Closing costs: $4,000
• 4.5% 30 year fixed rate mortgage: P&I = $760 / mo

Let's assume gross rental income is $3,000/mo (1.5% might be reasonable in Philly?). Using the following rough approximations:

• 50% rule: $1,500/mo
• NOI: $3000-$1500-$760 = $740

Yielding a cash on cash return of 16.44% (NOI Annually / Cash down or 740*12/54000). That's not terrible, it's certainly greater than the stock market on average, but it would be great to be over 20%, right? Or is that unrealistic?

Are there some creative ways of bumping that number up, while still using traditional financing that I'm missing out on? Or am I relegated to creative financing if I want to sweeten my cash on cash return? Any comments are appreciated!

Sorry, I meant to include I'm specifically curious for 1-4 family residences.

Hi All,

So I'm not sure if there's a better way to do this, but I'm trying to determine which investment strategy makes the most sense from an ROI standpoint, notes vs buy and hold, so I made a spreadsheet to determine theoretical returns and I wanted to verify it against real world data.

Question: What are people seeing as far as returns before taxes (benefits) on their rental properties?

Specifially post, 1) where you're investing 2) cashflow % and 3) total IRR of the whole investment (including principal paydown/equity growth)

Thanks!

Welcome, @Michael Morisseau !

@Larry Fried Thanks. So why did you end up moving towards investing rather than lending?

Regarding the returns on an investment, I had the math wrong when I posted the previous post, but now I'm looking at the following: I think can get a CAGR of about 23% (including the tax benefits, cashflow and equity growth) and about 12% CAGR for cashflow only (including tax benefits)

• 9% Cap rate
• 97% LTV (most from private investors - family)
• 5% APR, 12% APR (first 5 years) on 17% of the loan
• using the 50% rule
• no appreciation
• Buying the property at ~100% ARV

I think most of that is realistic except for maybe I could refinance sooner than 5 years, to improve returns (by roughly 7%), and the price I'm buying the property at is obviously quite high, but being a new investor, it's probably likely I won't be able to get a super awesome deal.

With all that said, I'm not sure it's worth the added work of dealing with the 3T's for a few percentage points, when I could just stick with notes and get the 10-20% (maybe)

Is my thinking on this flawed?

Thanks, @Michael Graham 

I should probably add that I'd really like to get into the buy - fix - hold strategy (for multifamilies). I don't really want another full time job, more of an ideally relatively passive investment. 

I'm looking into notes as well, but if my math is right, on a purely cashflow property, my gains will be significantly greater with a rental than they will be with the note.