All Forum Posts by: Manny Garcia

 Gotcha. Thanks for your feedback @Bruce Woodruff

Yeah, I gotta say I have not really seen $300 cashflow yet on any of the markets that I've run the numbers on.
I think that for this deal there is a potential to increase rents and if I manage myself I could be looking at $180 - $190 cashflow per door, which is good but still not quite your $300.
...and unfortunately this market has really low appreciation potential.
But anyway, thanks for your feedback man, I really appreciate it!
M

Bruce, thanks for your feedback, and I agree 100%,  $90 seems a bit tight.
BUT let me throw 2 follow-up questions at you:

1. how much do you usually shoot for on cashflow per door?

2. do your numbers include property management or not? ...mine include a 10% reduction on rent to account for this. When I get rid of this number (and assume I will manage them myself) my cashflow jumps from $90 to $140 per door per month. What are your thoughts, @Bruce Woodruff?

Thanks again for you help!
M

Thanks for your feedback (again!), @Mariel DeVito

Yeah, the $356 cashflow would be for the 4 properties (so ~$90 ea., close to that $100 ea. I was referring to).
You mention your properties cash flowing between $300 and - $1050 per month. Is that per property?
What is your cash on cash return? ...unless you paid cash for them or have held them for a looong time (and don't have a mortgage payment), that sounds like an incredible cashflow, and I've never seen anything like that, so kudos if that's the case!.

Thanks again for your time, Mariel and have an awesome Sunday!

All the best,

M

Afam,
These are my (pretty amateurish) thoughts about your numbers:

Cashflow: $780 for 14 units ($56 ea.) sounds a bit tight in my opinion and in addition, you don't have a line item for property management (usually 10% of rent), which means that those $56 bucks will also be paying for your own time to manage those 14 units (which could be quite time consuming).

Vacancy: Since you included $6,121 as total rent (instead of the $7,600 the agent gave you) I am assuming you are already including some vaccancy, correct? ...and 10% may be a bit too conservative (that means 5 weeks per year per unit).

Taxes: I agree with @Tim Herman on the need to include them. When you run those numbers, please consider how the taxes that the property has been paying traditionally may increase with your new purchase price.

CapEx: I agree with Tim again to add them, but your repairs budget of 12% seems slightly conservative for a normal property (but you mention deferred maintenance in the property)

Last, how has the neighborhood/appreciation done in the past 5 or 10 years? ...3% annual increase on property value may be too conservative or too optimistic and could change things for you significantly on your 10- 20- 30-year projections.

I hope this helps!
M

Mariel,
Thanks so much for your feedback!
I've heard two (rule-of-thumb type) criteria for a "good" cash-flowing deal: 1) at least $100 cashflow per door and 2) at least 10% Cash on Cash ROI.
Raising the rents a bit would make me my numbers exceed 1) and 2) but based on your comment ("cashflow is too thin for that many properties to maintain") it seems that the more properties you have the more cashflow you would expect to get (?). Can you elaborate a bit on that, Mariel?
Great comment on the inspection, which it is the next action item!
Mariel, thanks for your time reviewing my numbers.
All the best!
M

Malcomb,
Thanks so much for your feedback!
Answering your questions:
1. I agree that the rent could probably be raised because a) rents have not gone up in 2-3 years and b) there is not much being offered at (or below) that price point in that market. I guess I was just trying to be a bit conservative on the first year while I learn the ropes in what would be my first deal.
2. Excellent point and I agree 100%. This is the line item that I most uncertain about. That was my estimate based on a walk I did. I really need to bring a home inspector and/or contractor to walk the properties and give me a budget for short/medium term repairs.
Any other thoughts/recommendations on my numbers?
Malcomb, once again thanks for taking the time to go over my numbers.
All the best! 
M

Hi y'all!
I have a quick question on an issue that came up when reaching out to local banks/credit unions when discussing their ReFi options.

I've contacted 8 local banks and credit unions and the issue is that they will only loan up to 80% of the appraised value, which they are considering as the lower of either the purchase price or the County's appraised value  ...in other words, they don't run a comp with other recent sales.
I may be wrong, but these ReFi conditions may limit a perfect BRRRR, because although I am buying under market value and I am willing to put some elbow grease on it, the bank will only loan 80% of the purchase sale (and 80% of the Reno costs) which means they are not recognizing the added equity/value to the house, and I could not recover 20% of my investment.
One (creative) alternative I could have is purchasing the property for a price above the agreed price (let's say +$40k) and then request a check/credit from the seller for that same amount. That way the purchase price would be such that would allow me to get all my investment money back, but seems a bit of a loophole to me (and would increase the taxes on the property slightly).

How have you navigated this issue before?

Thanks for the help!
M

BP Community,
After spending several months listening, learning and analyzing I am asking for a couple of minutes of your time to give me your opinion on the following deal (which would be my first one). Is it a homerun (spoiler ...I don't think so), a good, a meh or a hard pass deal? 

Description: Portfolio composed of 4 single-family homes on a flat population growth small town in the Columbus area in Georgia. 
Portfolio purchase price: $130,000 +6% closing costs
Portfolio repairs: $40,000 ($10,000 per house)
Financing: One loan for the 4 properties - 20% down @3.8% interest for 20 years
Total Monthly Rent: $2,050 (the four rents have stayed the same for the last 2-3 years. Not planning on raising them on the first year)
Insurance: 1.5% of portfolio purchase price
Repairs+maintenance: 5% of monthly rent
Vacancy: 6% of monthly rent
CapEx: 7% of monthly rent
Prop. Management Fees: 10% of monthly rent
......
Monthly Cashflow: $356
CoC ROI: 10.2%
......

1. As you can see I am running the numbers for these separate 4 properties as an combined portfolio (almost like a multifamily). Anything wrong with this approach?
2. Thoughts on my numbers? I've gone through this exercise for several properties but I could really use a pro's critique on my numbers.

Thanks so much for your help on the beginning of my journey!

Manny