Quote from @Sam Yin:
I will have to agree with Joe. I would not make that particular purchase. There are always other properties out there that will make the cut.
I would only purchases and close escrow with cash flow on day one. That with all the conservative underwriting. Any upside from raised rents is additional, no matter how below market you feel the purchase price was.
Also, dont go with just percentages, make sure the actual numbers make sense. I look for about 5+% CoC on the close with reserves and vacancies factored... normally accounting for another 5+%. Then raise rents and got to 10%+ in 12 to 18 months.
But the actual numbers must work. I generally will not close on a property that cash flows less than what I'm exiting from or exchanging from. Also, the starting point is usually $25K+ with a plan to get $50K plus in 12 to 18 months. This is using 75% or more LTV, on properties around $1M.
@Sam Yin Wow, I didn't consider some of these other numbers as much. I was more concerned with the "deal" (immediate equity and cash flow once stabilized). I just started reading, "The Multifamily Millionaire, Vol 2" and am learning these numbers are very important as well especially as I get into the bigger deals. Thank you much for this wider perspective, clarity, and detail!
