All Forum Posts by: John Leavelle

@Jason Mcdaniel

Try contacting local PM's.  They will know of current owner's looking to get out or retire from the game.  Also, if you go with commercial loan you will need to have 2 years landlord experience.  If you use an experienced local PM that will be covered.

@Kevin Malone

Contact a licensed plumber and get an estimate.

@Joshua Martin

I did not see you accounting for CapEx. That along with other miscellaneous expenses (lawn care/snow removal, pest control, legal, etc...) could burst your Cash Flow bubble.

I like your flip option the best.   Good luck.  :)

@David Noskiewicz

You have to conduct your initial analysis based on what ever the Seller is willing to give you, and your own research, prior to you making an offer and getting the property under contract.  In the offer/purchase contract you will list conditions for the purchase to go to closing.  Part of that is the due diligence where you list all the actual documents you need to review to confirm Seller's proforma data and your assumptions.  If the numbers don't jive, then, you renegotiate the deal or walk away.

Hope this helps.  :)

@Roberto Escapita Jr

Have you tried calling an agent?  That's the best way to get your comps.

@Kevin D.

Howdy!

The obvious question for me is would it have Cash Flowed at that price?  Secondly, would you have upgraded the second unit?  What was current rent vs Market rent rates?

For me I wouldn't be paying Market price for a property I knew needed  repairs and upgrades.

I think you made the right decision.

@Paul Lachaud

Nice job. Here's my 2 cents. The HVAC is still serviceable (your responsibility). Get an estimated cost to replace it. Include it in your CapEx calculations. Have the structural assessment completed (important). Negotiate the items needing repair with the Seller. Get estimate on damaged roof over entry way. Negotiate with Seller on this one.

Bottom line is I would negotiate with the Seller all structural issues (including leaking sewage) to have them fixed prior to purchase or get credits (discount) toward price.  Or a combination there of. 

CapEx items not needing immediate repair/replacement should be included in your reserves calculations.

Remember you have a projected ARV that you do not want to go past. If you now pay for all the items that need repair will that push you over the threshold (Purchase price + Rehab)?

Keep moving forward.  :)

@Adam Avinger

That does clear things up for us.  If your ultimate goal is to build cash flow income, then, I would keep the property.  And as long as you are sure it will cash flow -- your good.  Press on to the next one.

You might also consider doing what @Kerry Baird suggested. After refinancing and property is stable get a HELOC started. It it a ready source of cash to help in acquisition and rehab phases of BRRRR. I do that!

Good luck!  :)

@Christopher J Lemmon

My goals are to Cash Flow a minimum of $100 per unit after initial purchase.  But must be able to get $200 per unit after property is renovated, stabilized, and refinanced.  So far I've been able to do that.  It takes a lot of looking and lots of offers turned down.  That's ok, I'm a patient guy.

If I can't get $100 in the beginning, then, I move on.  This is with using a conservative 55% for expenses during my analysis.  But, right now I mainly look for Very distressed properties that I purchase at a big discount.  Eventually I will be trading up to small apartments (5 - 30 units).

@Christopher J Lemmon

I am like @Ralph R.. I start with 10 - 15% (depending on the age and condition of the property). I always have a thorough inspection completed and a report or SOW that identifies the condition and estimated life expectancy of major components. If I don't need to repair/replace initially, then, I get ruff estimates for future planning. I will divide that total by the number of years and adjust my monthly CapEx amount accordingly. All money is kept in a reserves account and used as needed. Once I reach my projected total for that property I will again adjust monthly CapEx withholding.

You already have a 4-Plex and that should help determine some of the CapEx costs. Unless you haven't had to replace anything yet (hopefully).

I'm still new at this game and by no means an expert. I always believe in being very conservative. So I might be maintaining more reserves than I need to. However, I do not worry about something breaking or going wrong and not be able to cover it. But I'm sure the more you do it the better you will be able to predict what you need to set aside for CapEx Reserves. As long as I'm meeting my Cash Flow goals I'm good to go.