All Forum Posts by: Kenneth Garrett

@Kenny Kuramoto

Let’s put these numbers in a different order:

PP 100K       
Rehab 40K.           
Property tax $500 - is this during rehab?
Closing $2000 - not sure what this was applied to utilities, ins, etc           
$6000 closing costs - maybe on the refi - not sure
Subtotal $148,500 - I am assuming this covered extra costs during rehab as well which always seems to happen.

ARV 175,000 - $148,500 = $26,500. 175,000 x .75 = $131,250. $148,500 - 131,250 = $17,250

Rent Numbers     
Rent 1400.        
Property taxes  per month??      
Insurance $100.     
Maintenance/Capex $210. Glad you accounted for this, but after rehab should not need to spend much on maintenance/capex. How did you arrive at $210.
PM $100 - Pretty cheap, I would use 10% of rent ($140) or self manage.     
$873 Mortgage payment does this include property taxes or insurance, i am assuming no.    
Vacancy $100

Cash flow $17.  Definitely way too low.  Maybe capex/maint., is high after rehab either way it’s low.  
to answer your question, yes that is basically correct on how you run the numbers. I added a few things for clarification.

@Patrick Deering

I don’t look at Cap Rates as they are only applicable to 5 residential units or more or a commercial building.  I agree with @Mason Hickman about coc and cash flow or profit. If you're talking about rental property; cash flow and CoC are the best metrics. I like a 15% or better return on my cash and a $300 cash flow. If you bought a property and financed it and it cost you $25,000 of cash (down payment and closing costs) that would bring you a CoC of 14.4%. Not bad. I like to shoot for 20% that equates to all your money being returned in 5 years. When you invest in BRRRR projects you can get your money back within the first year and you can then reinvest that money.

@Daniel M.

If you’re not happy with the work have him fix it.  You are paying for the work.  I would not hire someone else to fix these things that should not have been an issue.  Don’t pay twice.

At the base of the wood floor there should  be quarter round molding (some call it shoe) where the bottom of the baseboard meets the flooring. None is installed in the picture.  Doors should close properly, not sure how bad this is.  Baseboard gaps should be fixed.  If small, caulk and paint will take care of it.  Closet doors should be aligned.  If you’re saying the electrical plates for the receptacles and switches have gaps around the plate.  Drywall and mud will correct it.  It’s a pain because you also have to paint it again.

@Christophe Madell

I've used private lending for years for my flips and BRRRR projects. It's a great way to fund projects without using your own capital. I've never used HML so I can't speak on that. After my first BRRRR project, I was able to get 100% funding for purchase and rehab. Real estate has been good to me.

@Thomas O'Donnell

Congrats on the house hack.  This time of year is the most difficult to find tenants in the Midwest.  I’ve had to lower my rent in January and February.  March always seems to pick up.  Look at your competition and see what they are offering with amenities and overall quality of there units. Look at there qualifying criteria.  Most tenants don’t read the requirements, I think they only look at rent and location.  That is frustrating, but it just comes with the territory.  Sometimes based on our market we ask for too much where we limit ourselves.  Not saying you are doing that, but for instance I want a credit score of 700 and an income of four times the rent.  That reduces your pool of tenants and your market has to be able to support that or be reasonable.  I agree screening is the best avenue to selecting quality tenants, just don’t over do it.

@Dave Tov

I agree with @John Underwood about using social media as a means to find a cleaner. If you are at your property on a Saturday (which is typically check in and check out day), you'll see many cleaners working at other STR's go talk to them.

@Michael Yi

In general kitchens and bathrooms get the best return. I like to buy 2 bedroom houses that have enough square footage to add a third bedroom or additional bath. Adding a bedroom is relatively basic, provided you are not messing with any structural walls. This market is tough, but investors are still flipping. Be careful of using an aggressive ARV. Depending on your market, prices are still coming done, whereby at the time you finish, your ARV might be $5000-$10,000 less than what you projected. It's all market driven. When we have an unstable housing economy you need to be very conservative on your numbers.

@Zach Rozmarniewicz

The private lending documents are the same as a traditional mortgage company.  You have a mortgage or deed of trust (depends on your state) and a promissory note which describes the terms.  The terms are how much you borrow, the borrower and lender, the length of time, interest rate, default rate, when the loan and interest are paid back etc.  Use a title company to forward funds to and to handle the closing.  I always use an attorney to draft my documents or at least review them.

@Aaron Heers

You can use rentometer , Zillow, the MLS and other sources to determine the market rent. I use Zillow for currently what's on the market and use rentometer for historical data. Of course, if you have a real estate agent/broker they can run rental numbers for you. Depends on your area. In my area, the MLS isn't used that much for rental properties so I use the other resources.

@George Knetzger

Here is an example:

Purchase $100,000 

Rehab $25,000

ARV $165,000

Your cost are $125,000 plus utilities, property taxes, cost of money, if applicable, and closing costs. If you figure closing cost at 12% your cost is $19,800 plus $2000 for utilities, property tax, etc, $21,800.

In theory your at $165,000 -146,800= $18,200 profit.  Not a home run, but I’ve done these deals like this if you can turn it around in 90 - 120 days. It might be worth it.  You need to be really accurate with these types of small profits.