All Forum Posts by: John Salcedo

This doesn't pass the sniff test. Reminiscent of the " I have $3M to invest, how should I deploy my capital posts". 

1. If you've bought and sold hundreds of properties in the past two years how is flipping 10  homes a month scaling? You are already doing that volume

2. If you've transacted in hundreds of transactions over the last two years and have 15 employees how are you funding the current operation? Most at this level are not coming to BiggerPockets forums for advice on how to scale. 

3. If you are selling hundreds of homes, it’s highly irregular to only have 6 rentals. Especially in this market.  Based on your own numbers, assuming at least 200 sales in the last two years &  having only 6 rentals means at least a 97% success rate in absorbing your flips. That's quite high. Most doing this volume are forced to turn more of their inventory into rentals. 

@Lilach Holtzer hope your well after our chat a couple of weeks ago!

Maybe lenders do see some BRRR's but I think the amount that are happening in Jax are the rare case right now, and not probably deals you're finding on the MLS, probably direct to the seller. And if that's the case, I would be surprised if the cost to reach the sellers and the time as well is being factored into the deal costs so does that even really count?

I do think you would have to be very close to the 1% rule with your all-in cost to rent in order to refi out a bunch of money and even then you may not get it all. 

$1,500 rent

40% expenses

$900 NOI per month

$10,800 NOI per year

at a 7% cap rate that's $154,285 cost per unit

$154,285 loan at 6% and a 30 amortization is $925 which is a 0.97 DSCR

For $900 a month NOI per unit, to get to a 1.25 DSCR you would need a monthly mortgage payment of $720 per unit. To get that you could only borrow $120,000 at 6% with a 30-year amortization.

So even if you could find a property or MF property where your all-in cost is $154k/unit you could only borrow $120k per unit which is a 78% loan-to-cost ratio so this isn't a BRRR.

And good luck finding multifamily in Riverside and Avondale for less than $120k a unit and if you do, your all-in cost isn't $120k per unit once you're done. 

Want to do a single family house?

$2,000 rent for a 3x2 1500 SF house is pretty fair

$2,000 at a 30% expense ratio which is way too low is

$1,400 NOI per month

$16,800 NOI per year

a 7% cap rate is $240,000

$240,000 at a 6% interest rate and 30-year amortization is $1,428.92 per month or a 0.97 DSCR

To get to a 1.25 DSCR at these numbers you could only borrow $187,000 at a 6% interest rate with a 30-year amortization.

Find me a deal you can be all into for $187k that rents for $2,000 in Jacksonville and I'll find one of two things. The deal of a lifetime or a deal with incorrect numbers or problems that aren't being addressed. 

If someone is actually doing a BRRR in Jacksonville I would actually love to see it because I just don't see how it can be done without spending a ton on direct marketing costs and then those costs should be added and I'd be curious if it's still an actual BRRR. I genuinely welcome someone to give me a real example with actual numbers showing how I'm wrong and I will fully admit it, but I just don't see how.

How can you say that? There are countless "newbies" who wholesale part-time and have done 1-2 deals their first year. They made some money, and paid off a CC or took their family on a well-deserved vacation. Why do you get to decide what is worth it and what is not?

You offered no solution to his roadblocks. Hopefully, he has the courage to continue on his REI education journey, and keep coming back to this awesome community where others will actually give him advice.

If you care to understand the perils of chasing cash flow look no further than this forum thread. Remember this forum thread began with Rich seeking recommendations on where to buy cash flowing properties below $200k. We now have a turn key operator having to defend whether the neighborhoods their remote clients/investors buy are C rather than D neighborhoods.

Even more amusing, to validate their services we are directed to another forum thread where current/past investor clients are singing their praises because they received a favorable appraisal, got their initial investment back and are cash flowing XYZ per month in year 1. News flash for those who are drinking the Kool-Aid, C/D neighborhood appraisals are not indicative of true value. If you think otherwise, list your C/D properties and see what happens. 

If you sell to a home owner, prepare yourself to pay 5-6% seller assist & get absolutely abused during the home inspection/repair addendum process (yes, even if this was a "turn key" or completely rehabbed property). Now try repeating that process to unload an entire portfolio. Most lack the perseverance after sale 1 and resort to selling the rest of the properties to an investor who doesn't pay remotely close to that appraised value.  Oh, and let's see how well that property is cash flowing a few years from now when the first cap ex event that hits wipes out 2 years of cash flow because these low priced properties are disproportionately impacted by operating expenses, most notably repairs.

Why do you believe there's constantly portfolios or packages of C/D neighborhood single family homes available? I would imagine most are accidental portfolio sales because of the false sense of  reliance on the appraisals/cash out refinances that led to the second, third, fourth purchase and so on. I can only imagine the number of investors who are banking on putting their children through college with these turn key investments and are in for a rude awakening.