All Forum Posts by: Kim Kaiser

Thanks,, i went back and read the initial post, and all the subsequent replies,,, and to be quite frank,, the whole article got pushed in to tax effects, buying below market, is it a flip,,and then, two or three opinions that disagreed with one another,  so, I am back to the original question.  All the other tax considerations, purchase above or below market, and all the definitions that one says is all the same, not a flip, the other says is a different calculation.

Based on what i put up there,,, assume at market if it makes it easier, and its a strait up deal, take out the re sale, take out being a flip,, just a strait numbers evaluation, on an income property,  all the perceived variables are accounted for and this is the final set of numbers that you come up with after all the other items,   where do you make your basis for decision,  return on your money put in,  OR the total return on the investment,, 

Scenario,

Buy duplex   400,000

note on          320,000

Gross income 53k

after expenses, note etc   you have a net income of 21000.00

ok,  you have put up, 80k,  after your expenses, which include note, taxes, everything involved in running the property

your net is 21k    so, is your return    21k / 80k

or is your return 21k / 400k 

it seems to me,, if you are taking money out of your cash/stock or what ever portfolios to buy a investment property, and if you are getting 3% at this level, and you could get 21k or 30 some odd percent on the rental level, that this is the basis of your investment criterial  sure, on the whole it is 6%  but that is not the real return on YOUR money, its the return on the banks money and expense money so what is left is YOUR money,,,and that in the end,, is what we are looking for, or if that is NOT the evaluation determination,  why isn't it and on what other level would you make it,,,

Here is why i am confused,, if i take out 80k, at 3% (dividends from a stock) that is 2400 a year.  that 80K is now 21k, in the rental.. (this is an actual scenario on a vacation rental opportunity i am sweating over),  why do you even care what the gross return is,, isn't it what your return on your money that is the crux.. if i take out the 80k and get a 21k, vs 2.4k,, it seems a no brainer..

please feel free to refute the math

Bozeman is currently restricting vrbo air bnb activity,, my interest was in a rural mountain valley about 20 minutes away,   the home depot guy that owns the falcons, owns 12k acres in this valley , but that is beside the point,, the county has restricted the area to 5 acre minimums, unless special circumstance,  lots go for 80 to 200k, depending on size, location and views, whether on yellowstone river, etc..i know of two tracts,,,80k,  i can build,, (self contract) the cabins,, 600 to 900 sf,, for 100 t0 120 furnished...i can be in under 200 for one house,, two on one tract 250, and each can generate 15-18k on a 5 month season, more, if i put them up for winter use.  The valley area has not restricted short term rental.. except to require a commercial fee of about 2k for a permit,,

in bozeman, i just requested info on a 3 unit house/garage thing,, they want 600k.  i know from searching craigslist rent info,, 1000-2000 a month is about average from 1 bd studio to 3bd house.. i see absolutely no way to make that work, and the problem is, most are that way,, 2800 monthly rent,, 2 units,, asking 355k,  my business partner and friend has tried to explain it,, I'm just not getting the concept,,  my dividends on stock give me 3%!!  Im not stupid, i know math, i used to be an appraiser, but the math, to me,, simply doesnt add,, so please, someone enlighten me so i can understand.  I read and listen to the podcast,, but i simply haven't heard the one that gives me the insight to say,, ah ha!! now i get it,,, 

That is what has been suggested,, and I understand that concept,, however, my concern is the math,  rental rates are 1000 to 2000 a month for 2 bd to 3 bd houses, or 1 to 2 bed apt.   thats what, 24,000 a year gross,  nothing in the area, new or old construction, for houses is under 300k, maybe condos, but that is it, , and when i say nothing, i mean nothing, (thats includes craigslist, hudhome searches) most single family residences go in the 300 to 340 range at am minimum,  now if you borrow, 20% or 340,, your at 272k  base note.  24000 wont even cover no interest note,, so what i am saying or asking,, where is the value,, where is the cash flow,, foreclosures hardly exist.   please explain the return with this math,, what am i missing,, 

i can buy a 100k lot, build a 1000 sf house, be in around 20000, run off vrbo, and gross 18000, more if i rent out in note offseason, (winter) ,  so explain why this would not be a better deal,, can put up two houses, on same 5 acres,,be in 300,000  with 36k rent... 

New Here..

I am in the bozeman/livingston MT area.  A longtime close friend sent me to this forum.  We have been looking for deals in the area.  Here is were I am confused on what to look for.  Primary reason is for rental income...

 I search the foreclosures, fsbo listing for rental, multi use, commercial, etc.  I have taken these rental rates, and done the math on asking prices,,, and they are no where near a return.  this area is very very active, new construction going up everywhere,  recent article stated a 18.00 per hour wage minimum to rent, average rentals are 1100 plus for small places, big university nearby,  basically no such thing as a rehab for a steal,, area just so active, professionals are closely tuned in on "deals"  the area is small compared to big cities so hidden "gems" are more exposed to realtor investors with similarly interested investors....  so for example.. asking price   for new const condo,, 145k.  applicable rental rates would be in the 1200 a month range,, roughly 14,4 a year,, take out your interest and taxes,,leaves sound 11k,  interest on 20% down note, 10 yr, 4 %  is 14k note,,, which leaves you with negative CF... not to mention no return on your down payment.

We are in the VRBO markets at yellowstone.  My idea  was to build smaller homes in the scenic valley where we could put up smaller, one/2 bedroom cottages,, gross rents  are in the 200 a night rate for about 100 night season,  would be at least at good or better.. homes would be 700 to 900 sf.  more that one can be put on a track of 5 acres,,

my friend is very successful in RE.  and he explains none or very few of the big people do building and make it,,,, 

anyway, i think you get the picture,, build vs buy .  given the heavy activity, nothing sits out there long or not at all due to similarly realtor/investors with a tighter grip on market availability and the rents vs the purchase are all very similar to the example above,, so please explain where there value is,,

some sellers even tell you the gross rents, and they dont even total the 10% of asking, so explain how to make this work.