All Forum Posts by: John Evan Miller

Plus, when you take into consideration that real estate prices are the lowest that we have seen in a decade, sometimes I wonder why everyone is quickly flipping properties to make a "quick" thousand when they could accumulate these cheap investments, see a nice cash flow, wallow in high ROI and then live to see a double-digit yield when it comes time to sell.

There is a major difference from holding business opportunities and real estate. It is a management issue. In holding income producing real estate, the main concern is finding good steady tenants and maintaining the condition of the property.

Managing a business is much more complex and is full of many more financial decisions. If you higher staff to run your business and they do a lousy job at it, the value of your business can easily crash to almost zero. Additionally, I do not believe that there is necessarily a greater profit margin in running a business vs. the "passive" income that comes from real estate investment.

Honestly, when it comes to resale - that can be a real challenge. One, there are a lot less business investors than buyers for real estate. Two, a savvy business investor can easily start their own nail salon or dry cleaners so there is less motivation to purchase an existing business.

Just a couple thoughts on the matter. Let me know how it works out for you.

David Thomas, to be honest with you, I have seen a lot of posts here in BP that express the disappointment that can come from a paid mentor. You have to be really careful here. There are quite a few out there that just take your money, throw you a few impractical tips and set you lose.

My advice? Let the team here in BP be your mentor. This forum is full of seasoned investors who are willing to give good sound investment advice. If you got questions - someone here will have the answers.

I have to agree with Jon Klaus, this does not seem to be a cash flow property but rather a purchase of your personal home with the perks of having a renter off-set your mortgage costs. If you are planning on living there and the home fits your personal needs, then it maybe a good investment for your family.

But if you are looking for a good income producing property, the offer on this property seems too high.

If you are able to locate homes in the low $30k with an ARV of $100K, have you thought of purchasing them yourself, fixing them up and reselling them. In this way, you will benefit from the full equity spread.

If you wholesale a property to a rehabber, he or she is not going to be willing to pay market value since there is no profit in it for them.

Morris Lucas: Try going to the county tax department. For most properties, they will have the owner's current address on file. If the tax department cannot find a property owner then in time the property will go up for auction due to the unpaid property taxes.

Buying at a foreclosure auction can yield great results for buyers who want to get a good deal on a property. These repo auctions are extremely popular across the country, especially for those investors who know how to work the system and get the best price.

Many buyers don't realize that there are different ways to buy foreclosed homes depending upon how they were financed in the first place. Some of these homes are REO properties, which stands for real estate owned. In most cases, the bank will require a substantial deposit or even the full amount of the property at the time of winning the bid on the courthouse steps.

Other properties for auction may be HUD homes for sale. In most states, there is a certified HUD listing broker who will list the properties for sale. Then, HUD will have a specific starting bid. Instead of bidding on these properties in person, there is an online process where an agent will walk the buyer through the special HUD contract. Typically, the bidding is open for certain period of time, and sometimes it is only open to certain groups such as owner occupants or investors.

In many states, the entire price of the home must be paid within 24 hours of winning the bid on the courthouse steps. Check with your state to find out what the rules are regarding payment. For regular auctions done by a third party, many buyers are able to go ahead and get a traditional loan. The same can be said for HUD homes, which go through the normal process of closing just like any other type of home.

Looking at your figures and adjusting them for industry standards, here is what I came up with:

$14,400 Gross Rental Income
-$1,440 10% Vacancy Rate (= 1.25 months vacant)
$12,960 Total Gross Income

-$5,792 40% Estimated Expenses (50% Rule includes vacancy)
$7,168 NOI

-$2,864 Mortgage Payment
$4,304 NOI Before Tax

This would give you a CAP rate of 13.5%. This could be a good investment if the property is in relatively good condition and the rents are at market levels.

I agree with David Beard. Your utilities are low unless the tenants are covering them. Your repairs and maintenance should be around 10% of gross income or close to $1,500. You need to factor in a capital reserve to replace big ticket items like the furnace and roof. Generally an owner should set aside 3 - 5% of the income.

Before you make an offer, double check all of the profit and loss figures to make sure they are accurate.

If you make an offer, make it contingent to a satisfactory home inspection to make sure this will not be a money pit.

Other than that, looks good based on the information you supplied.

If your tenants would like to move to the smaller house, you could "hold" the cheaper house for them and not let them move until a new tenant can be found for the larger more expensive home. At least that way you keep a good tenant and the cheaper house stays vacant (which would be this way until you found a renter for that property anyway).

Once a new tenant is found, they pay the security deposit on the new property. The security deposit on the original tenants is transferred to the new property less any deduction for damages. Any extra could be applied to the first month rent. Of course, they would have a new lease agreement under the LLC.

Daniel Miller we are glad to have you as part of BP. I am sure that others that visit this forum will benefit from you asking your questions and sharing your experience.

I have to wholeheartedly agree with Joshua Dorkin who said "This is a pretty spectacular bunch of people who really are committed to helping one another out." That is really true. Not many places you can find such a wealth of information without having to pay for a mentor.