All Forum Posts by: Joe Banks

@Danny Webber This sounds interesting

@Jordan Moorhead that's correct, I haven't been pre approved yet. I also don't have a realtor. Those two are the first steps I'll take next. Thank you

@Storm S. I too am not sure what master leasing is

It looks like the 1% rule is the metric with the highest figures across the board. 

 I'm working with a 20K down payment. Let's say income is 70K. On some online mortgage calculator it said 200K ball park. I don't want to loan more than 180 just to be on the safe side. There are no multi families in that price range but just for fun we were discussing value add properties:

Here is a 250K duplex making 1800 rent/month. For this to meet the 1% rule, the aquisition cost of price plus repairs would be 190K. So maybe an 80K discount.  I don't know if they would discount it that much on solely cosmetic repairs and don't want to get into structural repairs to be honest.

I read that as a rule of thumb, half of the gross rent goes to expenses but looking at properties I can afford in Austin, it's more like gross rent = expenses. For example with 20K down, the payment calculator says $909/month for this 1 bed 1 bath in my price range  https://www.realtor.com/realestateandhomes-detail/...

Let's say rent is 850. If I got a 35K TLC discount on this 109K property, and spent 10K on repairs, it would meet the 1% rule but only be $100 cash flow per month. So if cash flow and the 1% rule is out the window, that leaves ROI. $850/month on $20K down payment is 4.25%. Not great. But if I were approved with $5K down, it would be 17%. In my situation, would it make sense to put 5K down on properties where rent covers expenses?

@Jordan Moorhead that's correct, a realtor for one of the properties replied requesting a letter from a lender:

"If you would like to place an offer here are the details I would need to write. It would be done via Docusign.

1. Offer Price and down payment amount

2. If financed, lender letter. If cash, proof of funds.

3. Estimated close date

4. Any other terms important to you

5. Legal name of person or entity purchasing the unit and mailing address, email address and phone number.

"

A friend said that he visited a property 3 times but couldn't afford it. The property was then sold for $70K below the asking price, so he would have got it if he had simply made the offer. I placed an offer on the Austin properties with a number that meets the 1% rule and yields positive cash flow.  And should I continue making these offers through the message box on the realtor.com listing or is there a preferred method of doing this?

I'm also looking for value-add properties to place offers on.

Thanks everyone for your input

@Jordan Moorhead I will widen my search to include properties that need a little tlc. With your investments being relatively safe and low maintenance (pro landlord, austin area) do you still hire a property manager to oversee operations? Or do you have a contractor / handy man on call and just list it for rent on zillow when need be?

"Don't buy break even properties unless you're comfortable coming out of pocket. It's not a scalable strategy and you need that cashflow to be safe even if you don't need it for living."

Good advice, thank you for the heads up

Thank you @Seth Lipper for the response. A little background: This will be my first investment property, so I don't want to take on too much risk. I knew that I wanted to purchase in Texas ( I live in MA), but I didn't know where. I found properties in Killeen with much more favorable cash flow numbers but there is more risk of vacancy and other things. So I decided to play it safe and noticed that Austin is a very popular AirBnb destination, so there's always that option as plan B. Again, leaning toward a safer investment over cash returns. 

That being said, sticking with Austin has made me stray far from my original criteria. So I guess the question is, has anyone purchased a turn key property in Austin that meets the 1% rule and I should keep looking or is a .7% rent ratio and 4% cap rate okay for real estate around the UT Austin campus?

The zillow cost calculator shows a break even cash flow, neither negative or positive. 

Criteria aside, I think being in a prime location, if it covers expenses and pays itself off, it's pretty good. Some may think those are low standards though :D

Hello, I've been searching rental properties in Austin for the past 2 weeks and did not find anything that passes the 1% rule or has a cap rate over 7%. It's more like half of that.

If you were to find a property with a .7% rent ratio and a 4% cap rate, would you make an exception because it's a prime location, if the gross rent covers expenses? I should also note that these are turn key and require no repairs. I want to offer less than the asking price to help the numbers but at best it will bump it to .8% rent ratio and cap rate I don't see it going past 5%. 

The book Millionaire Real Estate Investor says Criteria is non negotiable. But in this hot seller's market, I find it impossible to find something in inventory that passes.

Thank you!