All Forum Posts by: Mark Wood

@Guy Roberts

What I meant for Cash on cash returns is the big picture. With the ARV where it was ($75K) and a 75% cash out after the rehab you'd get back some of the money but still have $9100 out of your pocket for cash in the deal. So I was thinking you could calculate the CCR on the cash you have in the game after the refinance.

Now if it appraised for $85K, it's a whole different picture. But, make sure you're being honest with yourself and not letting a wishful ARV make you take a wrong turn. I've done that in the past and it slowed me down tying up my capital for a while.

If you can pull all of your money out after refinance, you're talking an infinite CCR because you're dividing by zero. So you'd be playing with the casino's money.

It looks like you'd have $1650 in the game after a refinance with an ARV of $85K. That's a lot more solid. (even better if they took $60k for a purchase price!)

You can ask for validation just like a bank would in a loan process (in fact they probably will when you ask for a loan).  You can ask for a copy of their bank statements for the property.  Make sure everything matches up.  Get a bookkeeper to take a look too (in case your eyes glaze over with this stuff).  

It's not a bad idea to talk to a few of the renters and find out from them how much they pay.  You can also take it as an opportunity to find out what's working well with management and what they really want.  It can give you some ideas for forced appreciation once you buy it.  

You probably also want to get copies of all the leases just to make sure they didn't promise 3 free months of rent at the front-end of the lease just so they can get it filled up for a sale.  Also, you want to see if they have a bunch of sweetheart deals with friends and family who aren't paying enough rent.  

If you're looking to do a BRRRRRR, you need to think about how much cash you can get out with a refinance after you have it rehabbed and rented.  

So if you can get out 75%, you're looking at $56k out, assuming it appraises for $75K.  that means you'll still be out of pocket $9,100 after you refinance.  So you'd want to run your rental numbers on the $9,100 for your cash on cash returns.  

So one of the things you want to really look at here is your purchase price.  If they're not willing to go down any more, you can probably get a lot higher return on your money somewhere else

• Pick a market and know it like the back of your hand.  
• Be the king of your market - know what prices should be and where they're going.
• Learn who buys, who sells, and who rents.  
• Get involved in a local Real Estate Club and meet everyone.  Find out who the cash-buyers are and tell them that you're willing to do some bird-dogging for them.  
• Be Honest.  
• Get all your deals off-market when possible.  

What type of cash-flow and renovations are you looking at?  

Also, what are the seller's motivations?  I'm always suspicious with 0% down deals.  Usually the owner is trying to unload a problem property, or he's hoping to take it back through foreclosure some time in the future.  

It could work, but it sounds like you're paying top-price for it, considering the cashflow.  You'd be barely breaking even for the year if you have an empty month in there somewhere.  Also, class A properties are usually less than 10 years old.  

What percentage of the purchase price is the gross rent on this one?

You want to come to the table with a bit more knowledge if you take on a partner.  Just showing up with a vague idea isn't enough for a partner to give you the time of day.  Read up on it.  You could start with Robert Kiyosaki's new book "The Real Book of Real Estate"  In it, his advisors talk about development deals a lot.  

The turn-around on these things is really long too.  

If you really like the deal, get a structural engineer to come out and inspect it and tell you what he/she thinks.  It'll cost you about $350.  

It may just be an ugly, but safe thing.  So long as it's safe, there should be no problem with renters.  If it needs to be fixed, get a good ballpark of what you're going to need to spend.  Don't be afraid of ugly things that scare off retail buyers because those are the things that can make you some money.  

If they are buying the property at a good enough price, I'm sure hard-money lenders will be willing to do short-term financing and charge a lot in the process.