All Forum Posts by: Joe Salimao

Mike,
When you say $100 cash flow what do you consider cash flow? When I say cash flow I am referring to money leftover after PITI and property management. Are you including more in this? From what I have seen $200-$250 is very doable in my area.
Thanks for your responce.

Hi guys,
I have recently developed my company’s business plan and goals. I wanted to give an overview of what they are and see what you experienced investors think of it. Here it is.

Target Market:
I want to target blue collar neighborhoods where ARV’s are between 75K-150K. These areas will be good rental communities and will have the potential for $250/month cash flow. They may be lower income but will not be a war-zone and will have stable home values. Still have to pinpoint these areas.

Marketing Strategy:
I will market to pre-foreclosure, absentee owners and probate. I will use direct mail, bandit signs, flyers and printed/web classifieds to obtain my leads. Still need to work on my budget…haven’t done that yet.

Acquisition Strategy:
I will obtain properties for <70% of current market ARV minus repairs, closing costs and transaction costs. Should I include marketing and holding costs also? For example,

ARV = 100k
Repairs = 20K
Closing Costs = 2K
Transaction Costs (cost of money) = 5K
MAO = 70K â€" 20K â€" 2K â€" 5K = 43K

I will encourage owner financing and subject-to by giving three offers, one being I finance, one being they finance and the other being subject-to. Obviously, the owner financing and subject-to offers will be higher than if I have to finance.

Exit Strategy:
My main exit strategy will be rehabbing and renting the properties. I will like to rent all of the properties obtained within the first 3-5 years, although if I obtain a deal through my marketing that doesn’t work as a rental I will assign it to another investor. I will not do any flips in the immediate future.

Short-Term Goals (3-5 years)
Don’t know if this is really short-term but I consider it this because this is kind of my first step in my overall plan, which is to acquire 25-30 rentals over the next 5 years max as a part-time investor. These rentals will cash flow anywhere from $200-$300/month. I will have 30% equity in all of my properties due to my acquisition strategy. Obtaining these properties will give me the experience needed to become a full-time investor and more importantly will give me the income that will allow me to go full-time. These properties will act as a safety net for me and my family.

Long-Term Goals (Past 5 years)
Transition from a part-time investor to a full-time investor. I will also transition my exit strategy from renting to wholesaling and flipping.

What do you guys think?

That is hilarious. He didn't think people would notice? Unbelievable.

Originally posted by MikeOH:

Unfortunately, that won't work ANYWHERE (almost anywhere)! When you take all the equity out of a property, they simply won't cash flow. That doesn't mean that you must have any of your own cash in the property, but it does mean that you'll have to leave equity in the property unless you want it to bleed cash.
Mike

Mike, let me clarify. I meant purchase a property and 70% - repairs then do the repairs and refi at 70% LTV. As long as I purchase below the 70% of ARV and the appraisal comes in where I expect it you can definately cash flow on these types of deals. I still would have 30% equity in the property.

Originally posted by Dave V.:

The negative sentiment you've been hearing is likely due to the fact that it's almost impossible to successfully invest in rentals in most of NJ. The extremely high property taxes combined with the high cost to purchase make it that way. I know there are a couple of people here who claim otherwise, but I haven't found it to be the case at all.

Hi Dave,
You are exactly right with rentals in NJ...at least most parts of NJ. Trenton I hear is good but I haven't looked there myself. Here is the thing, what I learned is that when people tell you that it is possible to cash flow in NJ ask them what their strategy is. See not everyone has the same strategy as me, which is to obtain a property at less then 70% - repairs and refi and get all of my capital out. Some people don't mind leaving a whole bunch of money in a property either because they only do a property here and there or they are full time landlords and that is all they ever want to do so they are not worried as much about having capital for flips and wholesales. I had someone tell me OH YEAH you can cash flow in NJ NO PROBLEM, then after talking to him for a little while more I found out he was leaving 20% in the properties. Well you can probably cash flow anywhere with that strategy. It is near impossible to cash flow on properties in most of NJ without leaving cash in the deal. Some areas such as Camden and Trenton you may be able to.

Originally posted by Dave V.:

You can probably fix and flip to homeowners, but you won't be able to sell to investors, and rentals just won't cashflow.

I have to disagree with you here. You CAN definitely wholesale to other investors. There are plenty of investors at my local REIA who buy wholesale properties and both rent them and flip them. Some people don't mind leaving money in the property and if they are flipping it the taxes really don't matter.

Originally posted by Dave V.:

I hear Philly's not bad, but I've never tried it.

This is exactly where I am looking. The properties are reasonably priced and the taxes are all <$1000 on the properties I have looked at.

Hi Aly,
What part of NJ of you from and where are you investing?
Joe

Mike,
Thanks for the response.

I am assuming you are a landlord so would you recommend this business and what are some things I can do as a beginner to ensure I don't end up miserable like these people I have been talking to?

All I hear from investors anymore is how bad it is to be a landlord and how unexpected expenses come up and really hurt you and how cash flow really isn’t cash flow and you need to account for this and that…….
I will not be discouraged by this because I know I want something more out of life and that real estate is my ticket there.
I want to build a portfolio of rentals that will supplement my w2 and then transition to other ventures of re investing.
I know this isn't going to be easy but man is it really that bad, especially if you have property managers?
Joe Salimao

Hi Dan,
I am looking more for private money than hard money.
I have found hard money to be too expensive.
Well, since I am on this topic. What is the average rate you guys pay on hard money. Say with a credit rating of 750+.

Originally posted by Jon Holdman:

Since its been on the MLS, refi-ing into a decent permanent loan is going to be very tough and time consuming.

Could you explain what you mean by this Jon?