All Forum Posts by: Justin Wai

I agree, this was a very good episode!  Well, they all are, so...

One way to test out buy and holds as well as flips is the BRRR strategy...

Yes, that is a very good post.  One thing I would suggest is ask yourself why you are using one metric or another. I use cash on cash return because it is a way for me to measure other investment returns on an apple to apple basis. Also, since my wife and I have W2 jobs that we want our real estate business to replace we can not invest for capital appreciation and the cash flow is very important. People will tell you one number is better than another, but all the metrics are used in different scenarios and investment philosophies. IMHO, dont listen to what is the "best" metric and figure out why you want to use one or the other. They all have pros and cons.

@Joshua Gutierrez Do you have Microsoft Excel?  If so, on this website, under tools>fileplace>spreadsheets there are a lot of spreadsheets one can utilize.  Aside from that I like to look at the Cash on Cash return in a rough calculation.  I take the price of the property and multiply by 23% (20% down 3% closing costs) and add any repair costs I expect to that, getting my expected cash outlay.  Then I calculate the mortgage payment (there are tons of calculators online to do this), add in monthly taxes (county website, then update for your purchase price), monthly insurance (get an estimate from an insurance broker), and add $50 per a unit in maintenance (this will vary depending on size of unit, age, etc.); multiply this monthly cost by 12.  Next I run comps to see how much rent per a month I think I can get.  I multiply the rent by 11 (I assume one month of vacancy).  I subtract the yearly rent by  yearly cost and get my yearly cash flow ("CF") (some minor things are left out like taxes, but I consider that to be upside to my analysis).  Lastly, I divide my CF by my cash outlay that we did in the beginning (the 23%).  Personally I want a minimum of 7% cash on cash return, but if I find a deal with more risk my return minimum requirement goes up and vice versa.  I have had 20% cash on cash returns that need some work, and I have had 5.5% cash on cash return with a model home lease back that I expect to give me the 5.5% for 2 years and 0 work / minimum risk.

For example, I buy a $100k place.  My cash outlay is $23k.  Mortgage payment is ~$480, taxes are $200, Insurance is $100 and maintenance is $50.  My cash payments are $830.  If I can rent it for $1100 then my yearly gross rent is $12,100 (1100x11).  My yearly cash expense is $9960 (830*12).  My CF is $2140.  Lastly take CF and divide Cash outlay; $2140/$23k which gives me a cash on cash return of 9.3%.  If the property looks to be in decent condition in a good area I would like this deal.  There is other qualitative information that is very important too, but above was just looking at the analysis.

@John Moon one thing to think about too, is if you get a portfolio loan, what happens if you want to sell just one of them? or two of them?

I am interested in hearing what people have to say here.  I currently do not have a PM, but contemplate getting one in the future.  Thanks!

@Lucas LeBlanc Did you see my question above?

I have an uncommon question.  I have a 9 month old daughter.  I am watching her on the night of this event.  Would I be able to bring her?  She is typically very quiet and good.  Thanks!

Thank you Marian Smith.  That is how I originally interpreted the contract, however, I was thinking what if the box was not checked?  I just closed on two model leaseback properties and they checked one but did not check the other.

I just purchased a model home and leased it back to Ryan homes.  This is in our contract.  My question is, does Ryan homes (the Tenant) have to pay the property taxes, per the contract.  I live in FL.  If you need more information just let me know and I will post it as soon as possible.