All Forum Posts by: John Hanson

Hi all, I've been looking diligently for rental property, typically duplexes, triplexes and quadplexes, but with today's prices, even if I were to buy these properties at a 10% discount to asking price, I'm coming up with Cash on Cash estimates of no more than 3% to 4% in the area just outside Minneapolis/St. Paul metro area.  I'm using the following expense estimates:  Vacancy factor 8%, overall ratio of expenses to income of approx. 50%, Cap Ex Reserve of 1%.

Everything I've read says that one should have Cash on Cash of at least 8% to justify the investment.  Are there scenarios that I'm missing that in fact do justify investing for Cash on Cash of 3% to 5%?  I'm a first-time investor and would like to get started, but wondering if I just need to wait until prices come down...which could be a long time.

Thoughts?

Thanks for the quick response....

I'm looking at a duplex that was built in 1870, so it's about 150 years old!  However, if I assume monthly repairs of 1% of the value, plus capital expenditure reserve of 1% for a total of 2% of value, the Cash on Cash and Net Operating Income actually looks quite good.

I still need to learn specifics about what in the house has been replaced and what hasn't, but assuming that after inspection there are no major repairs needed, how risky is it to buy houses that old to rent out as a duplex?

Thanks everyone for the great feedback.  Of course, I do need to figure out how to find off-market deals, but I won't ask this of people here, because it sounds like it would be offensive.  One question I have, however, is what the difference is between and investor's agent and a regular agent who has expertise in how to buy correctly for investment purposes?

Thanks Michael..are there certain meetings you'd recommend?

Thanks a lot for the insight. I'm much the same in that I don't want to deal with poor areas or heavy work to rehab/flip/rent...but most of the SFH's in decent areas are pushing $225,000 to $275,000, with maximum rents of about $1800 to $2000.

I'm pretty handy myself and would like to at least have the ability to physically check on properties and take care of smaller things myself to increase profits...much more difficult and expensive from a distance.

I'm just getting started in real estate investing, with the intent of renting out either single family homes, multi-family or townhomes. I know that one cannot go strictly by the 1% or 2% rule, and that more detailed analysis is required...however, at least for screening the hundreds of possibilities, I'd like to understand whether ANY properties in the Minnesota MSP/metro area meet even close to the 1% rule, let alone the 2% rule.  Everything I'm finding is more like .5% or .7% at best, and my banker, who has done investing himself, basically said the market is so high right now, it would be better to do nothing until prices comes down.  Any advice?