All Forum Posts by: Joe Ferguson

I just used the 50% rule, current rents of 625 and assumed a conventional mortgage with 20% down.

116000 x .2 = down payment of 23200

92800 conventional loan at 4.2% interest = 454 (principal & interest) per month x 12 = 5448 per year

625 x 2 = 1250 per month x 12 = gross income of 15000 per year

15000 - 7500 (50% expenses) = net operating income of 7500 per year

7500 - 5448 = 2052 cash flow per year / 12 = 171 per month

OR.....

Since rents are the same just chop one off for expenses (50%)

625 - 454 = 171

Perhaps you are referring to the GRM (Gross Rent Multiplier)?

Similar to the Cap Rate in commercial, the GRM relates the income to the value in residential properties.

You should have your own realistic expected ROI and crunch the numbers on every property until you find one that meets that criteria. No magic number can really tell you that.

How are you paying for it? Cash, conventional loan, FHA? Not a home run but it will cash flow a little over 150 with current rents and 50% expenses (for quick math). If rents go up like you say and expenses likely to be closer to 40-45% there is some money to be made.

I don't recommend "banking" on anything happening. I calculate worst case scenario (no rent increase, no appreciation, expenses will always push 45-50%, etc.). If the numbers work here, I almost can't lose going forward and hopefully only position myself to be pleasantly surprised. 

Best of luck!

Those with sufficient cash flow in properties and locations that appeal to the masses survive when the market tanks. 

Sounds like your strategy is buy and hold. This is a flip deal. Walk away!

Owner/seller financing. It is up to you and the seller on exact terms but you can set it up exactly like you would a regular mortgage and instead of paying the bank you pay the seller directly. 

They get a down payment, monthly payments and the ability to foreclosure should you default on the loan.

You get (hopefully) less headache not dealing with the bank and one less mortgage on your credit. 

Win - Win

@Ryan Ingram By default Craigslist displays ads in a gallery or list format. You can change this to "map" which will display everything just as you are used to seeing it with the other sites. Then to filter you just type words like "duplex" or "4 units" in the search bar. Craigslist is crucial as many of the ads are off market deals not listed on the MLS.

What is a small amount?

FHA Loan = 3.5% down

VA Loan (Veterans Only) = 0% down

Seller Financing: Lower down payment (or none) may be negotiated.

Lease Option: Lock in purchase price and pay rent while you save down payment needed to purchase. 

Find someone to partner with.

Welcome to BP!

Don't forget Trulia and Craigslist. 

2% rule.... that is like a 3.7% rule. That is insane.

I agree with everyone else. Unless you can somehow get that money to make you more than it is now you would be crazy to sell.