All Forum Posts by: John Leavelle

@Carlos Casanueva

Will you be able to put any "skin in the game "?  Or are you looking for 100% financing for acquisition, rehab, closing and holding costs?

Private Lender Financing can be structured many ways.  It depends on how much risk they are willing to take. And how much of the costs you want covered by the lender.

Are you looking to purchase a multi family property will private lender and refinancing later with a conventional loan?

@Zach Ziskin

Here are two reasons to have contractors submit bids.

First, you get a detailed punch list of items that need to be repaired or will need to be replaced/upgraded in the near future. You then use that list to determine what you can do and what will need professional work. It gives you an accurate CapEx reserves determination.

Second, it provides solid ammunition to justify a discounted purchase offer.  You have greater negotiating power with the Seller.

As far as making offers based on photos or even sight unseen.  How do you really know when the photos were taken.  Do you think the Seller will show all the problem areas?  Let me give you an actual example.

I went to look at a duplex (2 - 3 Bed/1 Bath) on a 3/4 acre lot.  List for $100K.  3 pictures were provided (Front street view, 1 Bedroom, 1 Kitchen).  All looked decent and clean.  When we arrived the first thing you see is the property was completely overgrown with vegetation, 2 foot high grass and weeds,  large dead limbs hanging from trees, one even on top the roof.  The exterior needed a complete makeover. The roof was more than likely damaged from the tree limb.  When we entered the first unit it had a strong odor of dog urin and cigarette smoke. Kitchen cabinets need repair/replacing, as well as most rooms needed something.  The second unit was worse.  It apparently had water damage from the roof leaking.  It had been gutted and the work had not been finished.  Far from it.

The detailed SOW and bid we developed provided more than enough justification to purchase the property at 50% of the list price.  The Seller really just wanted to get rid of a problem property he did not have time to mess with.

Of course there are numerous other hidden problems that cannot be detected from photos.  Like foundation s, septic systems, HVAC, to name a few.

My advice is not to go that route.  Stay conservative, be thorough, do your due diligence, and you will be more successful and profitable.  :)

@Zach Ziskin

There are a lot of variables that effect your Rehab estimate.  As @Len Roche suggested get J. Scott's book to learn the details of what is involved.  Do you plan on doing any of the work yourself?  Otherwise, as @Kuba F. recommended, get a general contractor (or two or three) to walk the property with you and develop a Statement of Work (SOW).  Then have them submit bids for you to determine your course of action.

Using the square footage is fine for initial ruff estimates when you have not seen any of the property.  But, for your first Rehab project I would get a contractor to help figure it out.  Be sure to pay them for their time.  You may not end up using that contractor to complete the work.

Also, you may not need to complete all repairs identified upfront.  Some may be deferred to a later date.  Hope this helps.  :)

Howdy @Kishore P.

I think you mean BRRRR calculator. Neither calculator includes depreciation in the analysis. Depreciation and Cash Flow are two separate and distinct topics. Depreciation is only a paper loss you claim on your tax return. Thereby decreasing the amount of income tax owed. It has no bearing on the operation on the rental property. Except if you are trying to determine when to implement a Capital Expenditure (i.e. replace the roof) in order to start claiming the depreciation.

Cash Flow is the result of your rental income received less all expenses during a given period. That includes moneys held in reserve for future CapEx (the roof!). There is no discounting involved.

The link that you provided does not work.  What is the actual title of the article?  I could look it up that way and be able to comment as it relates to your discussion.

Hope this helps.  :)

Rand Building (downtown), 131 Soledad st. 

Go to the "Meetup.com" website and find/join the group.  

@Betty Cruz

There  is a Meetup group, "SAN Antonio Real Estate Investors Discussion Group " that meets the first Tuesday of the month at 6:00 pm (I think).  Next one should be 6 December.  It is ran by two BP members @Chad Claton and @Seth Teel.  I have not attended in a while because of my work schedule.  Hope to be able to soon.

As far as finding the Cash Flowing properties.  Yes, I find them but some have been out my current price range or my offers were not accepted.  Some turn out to have more issues than I want to deal with.  It also depends on what areas you are interested in.  And how much Rehab you are willing to accept.

You really need to develop a plan identifying specific criteria for your investing strategy.  It will help you reach your goals.  There are plenty of blogs and Podcasts on this website to help you develop a plan.

Try to attend the meetup. Everyone  is very friendly and will help you if you ask.  :)

@Kenneth Cowan

I'm glad you added some of the expenses I was referring to.  Yes there are PMs that will take care of some of the expenses I am talking about.  But, I always go in extra conservative with 55% for expenses.  Until I have hard proof to the contrary. Tenants paying for all utilities.  Landscaping/snow removal, pest control, maintenance all may be handled by the PM, but, are they billing you for it in addition to the normal fee?  

You are looking for a low end property.  They may not be willing to provide the full extent of their services at the price you will be paying.  

I would never go with 30 - 40% expenses in my analysis unless it is a turnkey operation and the Seller has ALL the hard data to support it.  Go with a complete list of expenses and scratch them off one at a time as you determine who pays for each.

If you say "I can't get it to Cash Flow with 55%", then, maybe you should keep looking.  Or do what I do, go with a low enough offer that it will Cash Flow.  :)

@Tomi Stoya

Your analysis looks to be correct.  If other investors are buying properties with such slim margins, then, your local market may not be an ideal investment choice.  You may need to look elsewhere.

Howdy @Kenneth Cowan

How are utilities cover?  Any by landlord/owner?  I would also plan for landscaping/snow removal, pest control, and other miscellaneous expenses (legal, accounting, etc.).  Otherwise, it looks good.

Hello @Betty Cruz, like @Jordan Moorhead I think of debt as good and bad (good investor debt / bad consumer debt) similar to cholesterol (good and bad).  You can develop a plan to control the amount of debt you are comfortable with.  For example:

Start with a 4-plex that Cash Flows minimum of $150 per door ($600 per month)

After you sell your current home you could purchase 4 additional 4-plex's with same Cash Flow ($600 x 5 = $3,000 per month).  Hold them for 10 - 12 years or trade up to small apartment.  Of course you can house hack anyone of these.  And you can pay down the loans that you feel you need to.

You might want to start attending the local REI meet-up group in San Antonio. There are several BP members that go. They might be able to help you find the property you are looking for.

Hope this helps. :)