All Forum Posts by: Korie Apgar

Just remember to refinance it costs money like a regular home purchase would.  Then you're turnjng around and closing again on another property, more money there.  Do you know who you're going to finance with?  Do they have a seasoning period before they'll refi?  Make sure your short term loan doesn't have to be paid off before you can refinance.  When you calculated coc, did you account for  vacancy, maint, cap exp, taxes, insurance, debt service?    Coc= yearly cash flow / cash invested.  

With having your money out of the deal, yes, your coc return skyrockets.  

@Patrick Moody

Thanks.  Yes, I've counted for cap expenses.  

In example, multifamily $27,000 investment, yearly cash flow $9600.  coc return 35.5%

Refinance and have $11,500 of $ still in the investment, cash flow now $8076 b/c of slightly higher mortgage and coc return now 70.22%.  

I'd like to know if I'm calculating my returns properly when it comes to refinancing. 

Original purchase and closing come to $27,000.  I'm all in at $27,000 and when I refinance I can pull out $20,000, plus to close again will probably be $4500.   (I walk away with $15,500 after refinancing). 

Am I calculating the following properly?  Now that I got $15,500 of my investment back, I only have $11,500 of my money in that property.  My returns just skyrocketed since I now have less of my own money in the deal.  Yes, the mortgage went up slightly and cash flow down a bit but it still flows very well.  It took me a while to wrap my head around this because I kept thinking every time I close there's more personal $ dropped into the investment.  Wasn't thinking about the money I was getting back!!  Light bulb.....slow learner here!   Thoughts on this??  Thanks in advance.

Small, local banks that keep their loans in-house are the best. My bank, for example, has no seasoning period and I can cash out refi up to 80% LTV.

@Chris Walters

You want an agent who knows the area, works with investors, knows rental market, ideally would be an investor too.  As far as numbers you need your gross rent for the year.  Then take out your vacancy and that percentage depends on the area.  I use 5% when I run my numbers.  It could likely be higher.  Then I subtract (for the year) my totals): accounting, advertising, cleaning, cap. expenses, insurance, lawn care and snow removal, legal expense, maintenance and repairs, management, utilities, taxes.  That brings you to your net operating income.  Then subtract your debt service (principal and interest), and you're left with a number which is your CASH FLOW.  Divide it by 12 and that's your average monthly cash flow.  Take yearly cash flow total and divide by the cash amount you have invested (down payment, closing) and that's your cash on cash return.  There are wonderful calculators available on here to show you your returns/run scenarios, etc.   

You asked about closing.  It's typically 3% of sale price but call a title company and ask them to give you the rundown.   You have transfer taxes, here it's 1% of sale price.  You have title insurance and that depends on the price of property and whether you get enhanced or not.   Get a pamphlet from a title company and those prices are on there.  There are notary fees, tax cert. fees, and more.  It adds up.  You'll also have to pay the taxes at closing, prorated for your days of ownership with sellers days of ownership.   Don't forget you'll have lender fees, origination fees, etc and your inspection.  Closing on a $105000 property but my closing with taxes and insurance and all the rest will run about $6000.  That 3% rule really doesn't stick.  

@Chris Walters  You want to know why it's not rented.  Occupied by owner or not able to rent due to condition?   You need to know if it'll take money to be in rentable condition.  Call the municipality and find out what their rental inspections go over.  You don't want to purchase a property you'll have to jump hoops through and dump money into just to be able to rent it unless you get it for a great price, and the numbers work for you.  How can their listed 10% coc return be true in your case or anyone else's?  It's dependent on your financing.  Never go by "potential income" or expenses listed.  You must run your own numbers, know the market rents for size/bedrooms/baths/condition/yard etc.  Get actual expenses, not stated expenses.  In the future if you purchase a property currently rented, you'll want to review the leases,  rent roll to prove tenants are paying, and property expenses as part of contingency.  Just because there is a lease doesn't mean the tenant is paying.  You also want an estoppel letter which basically states the current lease is in effect and there aren't any verbal agreements outside of the lease.  

@Chris Walters  You want to know why it's not rented.  Occupied by owner or not able to rent due to condition?   You need to know if it'll take money to be in rentable condition.  Call the municipality and find out what their rental inspections go over.  You don't want to purchase a property you'll have to jump hoops through and dump money into just to be able to rent it unless you get it for a great price, and the numbers work for you.  How can their listed 10% coc return be true in your case or anyone else's?  It's dependent on your financing.  Never go by "potential income" or expenses listed.  You must run your own numbers, know the market rents for size/bedrooms/baths/condition/yard etc.  Get actual expenses, not stated expenses.  In the future if you purchase a property currently rented, you'll want to review the leases,  rent roll to prove tenants are paying, and property expenses as part of contingency.  Just because there is a lease doesn't mean the tenant is paying.  You also want an estoppel letter which basically states the current lease is in effect and there aren't any verbal agreements outside of the lease.  

Owner doesn't sound very motivated.  Fishy.

@Gwen Fyfe

Hi,

You must know your ARV and what you should pay for the property. If you buy low but then the rehab brings you up to ARV you didn't buy at a discount, and that's crucial. Watch the BRRRR webinar. You've got the right thinking but buying low enough is crucial or you'll have a major setback in scaling your portfolio. Enjoy the learning curve as I can see you are passionate about investing.