All Forum Posts by: Joseph Weisenbloom

Hey John,

I'm curious where you got the 20% ROI calculation from?

Here are my calculations based on the most conservative scenario possible. $1000/mo + $1400/mo = $2,400/mo or $28,800/yr. $28,800/yr - 50% expenses = $14,400 NOI. If you are planning to purchase this cash and pay asking price your getting 3.6% ROI ($14,400/399,900).

Not sure how you plan on purchasing this property but for the sake of this exercise Ill assume you are going the standard route with 20% down. If you are going this route your numbers look like this $14,400 NOI - $20,604 (P+I annually for 20% down) = -$6204/yr. If you divide this number by 20% down which is $79,980 = -7.7% ROI.

Based on my analysis I would not pull the trigger on this property. You are going to have negative cash flow from the start according to my numbers. To make this work you would have to purchase the property for $120,000. So offer $100,000 and see where it goes. Also none of my calculations include repair to get the property up to standard so keep that in mind.

Just my 2 cents but I am a newb so if you can shoot holes in my logic let me know. :)

BTW damn real estate in Southern California is expensive how does anyone make any money out there? It seems like the rent should be way higher for this but I have no idea about the Southern Califonia market.

Hey Marc,

I'm a newbie but have been doing a lot of number crunching so Ill see if I can be productive.

1. First right off the bat looking at this property from a rent to purchase price ratio it looks like a 1.02% deal. $1400/mo/136,000 = 1.02%. Even if you negotiate down best case scenario 1450/mo/115,000 = 1.2% Preferably we would like to have this number closer to 2% but sometimes 2% deals are hard to find depending on the market.

2. For practice sake lets keep breaking down the numbers.

1450/mo - 50% expenses = $725/mo NOI - 557 P+I = $168/mo cashflow or $2016/yr.

I assume you are using standard 20% down based on the P&I you provided. Which is $27,200 DP plus the $7000 estimated repair bringing you to $34,200 all in. So if you look at $2016 cashflow/yr divided by $34,200 investment you get a 5.8% ROI. Or if you negotiate them down best case scenario $23,000 DP + $7,000 = $30,000 all in with $2016/yr cash flow = 6.7% ROI.

3. So long story short based on the numbers you have provided you can get between a 5.8% and 6.7% ROI which compared to other investments out there is pretty poor. My opinion I would not pull the trigger on this.

4. Only way you can boost your ROI to acceptable levels is to somehow put less money down (add partner or more leverage) which may be too risky considering it is your first time deal. Or if you can drastically reduce the purchase price. I see this deal being profitable at $70,000 so offer $50k-60k and see what happens. Otherwise this deal does not have legs.

Just my 2 cents but I am a newb so if anyone can shoot holes in my logic let me know. :)

Rebecca Chapa I'm in Dallas itself settled in the design district. Ive been finding a lot of more affordable opportunities outside of Dallas in the suburbs.

As far as price goes I just try to use craigslist, rentometer, or just common sense to find the rent I can get for a property and reverse engineer the price I can pay from there. For example rough conservative estimate for a 2-1 duplex in Arlington is 1200/mo. So appropriate price range is between 50k-70k.

I figure if I'm chasing distressed properties they are going to need some rehab so rough estimate 10k-20k work. So in a round about answer anywhere between 40k and 60k duplexes. Which is appropriate for the amount of down payment and repair cost I can afford which is around 30k.

Needless to say finding a duplex in that price range in the metroplex is not easy. Been trying to look at anything as far from the MLS as possible so REOs, Vacant houses, out of state owners, burned out landlords. At this point just practicing tracking down leads and crunching numbers I still have a lot to learn and some money to save up.

Wow getting a lot of Boston people responding to this. For all the Massachusetts investors out there keep Boston strong. While Boston may be a tough place to invest Dallas has its own problems as well namely a lot of competition for properties. It seems everyone and their mother is trying to be a real estate investor.

Ali Boone I have also been looking at mobile homes recently. Despite the negative stigma of owning a house on wheels the ratios seem to be a lot better. Not to mention there is less competition for them which is key for Dallas.

Hey Dallas guys what local real estate investment groups are you involved in? Ive been looking online doesn't look like there is one specific group that is the most established for DFW.

Benjamin Christensen
Ben Hughes
Harry M.
Andrew Herrig
Mike Duran

Wow didn't expect such a response for a dummy like me. Thanks guys.

Ann Bellamy I saw your podcast on hard money it was quality material

Mike Hurney I assume your talking about rising interest rates?

Brandon Turner I read the intro guide it was quality material. Also I will add the alerts.

Ben Hughes I already am addicted!

Andrew Herrig The duplex seems like the best approach to learn the ropes

Benjamin Christensen Good to know I'm not the only young person out here trying to do this. Nice to meet you.

Mehran Kamari I definitively need to get some more reading material for real estate focused evaluations. Thanks for the recommendations.

BTW total newb moment I have no idea what I'm doing with all this @"name" business. Hopefully Im following forum protocol :)

Hello all,

My name is Joe Weisenbloom I recently moved to Dallas, Texas and decided to join biggerpockets for learning and networking opportunities. I am originally from Boston, MA and have also lived in Ohio for 5 years. I am only 23 years old so I am still learning a lot about real estate and life in general.

I have no first hand experience in real estate but my family runs a portfolio of properties in Massachusetts so I grew up knowing about real estate investing. I am a finance nerd and I have experience evaluating fixed income investments but have yet to venture into real estate. I am hoping I can use my investment analysis skills to evaluate properties effectively.

My goal in getting involved in real estate is to create passive cashflow that will allow me to replace my current income. I am interested in learning about buy and hold strategies for multifamily, storage units, and commercial real estate. The strategy I would like to use for my first property is an owner occupied duplex using a FHA for financing.

Please don't hesitate to reach out to me I'm very friendly. :)

Joe