All Forum Posts by: Jon B.

You bought the property for $83k and the property taxes are $915/year on it, and let's just assume that insurance is $750/year. Now let's assume you put 25% down at a 4.5% interest rate. At the point, your cost will be $453/month. You set the price to $1,115/month and lets assume that PM/Vacancy/Repair/CapEx is 28% . Let's also assume that tenant pays all utilities and trash is municipal as well. This scenario will leave you with a $350/month cash flow.

Looking at Memphis rents, anything over $1k/month looks like it'll be in the top 10% of the city; By the looks of it, you can certainly bring the price down to around $900/month and still cash flow $195/month which is pretty good.

From a renters perspective, I would think "why the hell would this owner put the extra $15 to make it $1,115 and not just $1,100??  There's a psychology effect to it that makes it seem like all you care about is the numbers, which is true but you can't come off to a tenant that way in such an odd price.

I have a question to @Scott Trench about banks allowing 75% of rental income to count towards personal income... Does that only apply if the house is owned 100% or does it change if the house is under a mortgage?  It doesn't quite add up  if it's mortgaged because all the expenses added up is surely less than 75%, likely even 50% of the rental income... A quadplex that rents $1,000 each unit will probably cashflow just around $500 for the typical investor, so why would a bank allow 75% ($3k) of the $4k rental income to count towards income?

I used to live in Philadelphia and there are parts of Philly which are "D class" neighborhoods, but will attract many people who just finished college and are working entry-level jobs or jobs where they're underemployed.  D-class neighborhoods in a college city like Philly can attract many "B-class" tenants who are new graduates that simply can not afford an A or B class neighborhood rent.   I personally lived in a D class neighborhood for many years because that was all I was able to afford.... Then once I got my life settled and started making a decent salary, I moved to a better neighborhood.   There are many A-C class tenants that are looking in D neighborhoods simply because of the price.  IMO, the key to investing in D class neighborhoods in having the right tenant.

To sum this article up, it states the banks allow 75% of current rental income to be counted as an individuals income towards the new/future mortgage, and 75% of the potential future rental income on the property which the new/future mortgage is for to count as well (as long as you have 2+ years landlord experience).

Example: Your day job income is $80,000/year.  You currently own a triplex that generates $1,000 each unit while 'house hacking' and living in the third unit. $1,500 of the $2,000 in rent counts as 'income', meaning you tack on $18,000 a year to the $80,000 day job income for a total income of $98,000 a year.   Now you're at a bank trying to finance a mortgage on a quadplex that generates $1,000 rent on each unit.  Since the bank will allow 75% of the potential rent to count towards income, you can now add $3,000/month of $36,000/year to the now $98,000 yearly income to make it $134,000 yearly income which the bank will finance you for; instead of just based off the $80,000 day job income.

Wouldn't surprise me if this is a fake account with fake success stories.  Just saying..

Hi everyone.. I'm relatively new to real estate investing myself; just been reading books blogs, the forums, and podcasts... I've been talking with a friend of mine who is in a great situation and wants to get into real estate... His situation is this: He has just over $100k in cash in the bank; He has a w-2 job that gets him $100k-120k a year; He has $0 debt besides besides car insurance/cell phone (he lives with his parents still); He has 720-760 credit score; And he is currently in the Army reserves and eligible for a VA loan. My buddy is only 25 years old too.... I've been trying to get him to join BP, read some books, and educate himself but he thinks he knows everything already but yet he doesn't even know how many years a mortgage can be.... So my thing is this: What advice would you give to my friend if he asked you what he should do?

I would have never let things go 5 and 7 years without a rent increase.  I would have raised the rent every two years by a small margin of about 5% if they're a great tenant and 10% if they're an tenant that isn't so great but wouldn't mind keeping.   If someone was paying $720 about 7 years ago, they should be paying $850-875 today under a 5% every 2 year plan which is still under the $900-950 comps.

Great work on the rehab.  I wouldn't consider it a dud at all; it made a $24k profit even after going over budget by 35% and was held for 16+ months.  If anything, it was good deal that could've been better.  For some people, going over budget by that much and holding for that long for put some people close to the red.  It might feel like a dud because you split the profit and not had it entirely.  Good job.  Also, I'm curious.. Any pics of the driveway and backyard?

Any pics of the before/after of this deal???

Good job.   Ever figure out what the leak was about?