All Forum Posts by: Matthew Brill

 Thanks for replying John. I didn't want to assume appreciation just because I wanted to be conservative in estimating potential gains. As far as the loans go, I admittedly don't know enough about the structuring of commercial loans to be able to make a worthwhile evaluation compared to a residential loan. 

Hey Dave, thanks for your reply.

That had crossed my mind. With the commercial loan will the properties be grouped together so they couldn't be sold separately? Would it qualify despite there being negative monthly cash flow or would the terms change enough that there would be positive cash flow?

Hello BP community,

I am new to buy and hold investing and have being doing as much reading and learning as possible while looking for deals to get started with. I came across an opportunity involving purchasing duplexes in a new construction project. I would be buying 4 units (2 duplexes) directly from the builder. I networked to meet the builder and his partner and they said they would help me out, saying they would take a smaller margin, help get 0 money down financing, set up property management (which there company does), set up an LLC, and even 1031 to something bigger when the time presented itself.

The proposal is they will sell me each unit for $137,750 which will appraise for $160,000 per unit. This built in equity will supposedly allow me 0 money down. The terms presented to the bank are a 5% loan rate on 5 year terms and a 25 year amortization schedule (I am also currently reaching out to other lenders and trying to improve on these terms). That put the monthly principal and interest cost at $805 per month per unit. They also estimate taxes at $150 a month per unit and insurance at $125 a month per unit for a PITI of $1080 per unit per month.

Their market analysis estimates potential rents of $1320 per month and they claim there is already a waiting list of 125 people.

Assuming all of the above to be accurate, I also calculated the following monthly expenses per unit based off what I have come across in my studying:

Vacancy (1 month per year): $110 (of note, this is part of a 55 years old and up community so possibly a higher likelihood of long term tenants)

Maintenance (5% of rent): $66

Property Management (10% of rent): $132

If I use these expenses at the end of each month I am looking at -$68 per unit per month ($1320 - $1080 - $110 - $66 - $132). I realize that I am also not accounting for capital expenditures. 

I know in general I don't want an asset that results in negative cash flow but I have two questions. 1) Am I possibly overestimating expenses since everything will be brand new? 2) Should I not necessarily be as concerned about the potential negative cash flow since I am getting $22,250 free in equity? I would plan to sell in 5 years, hopefully before any capital expenditures, which would net me $33,448 per unit (taking into account the negative $68 cash flow per month).

I know this was a lengthy post and I appreciate you all taking the time and sharing your thoughts.

Thanks,

Matt

How does a 50/50 deal look in the buy and hold realm?

Splitting the cash flow each month seems like the short term way to split profits. But what about the equity portion? I know I would have to discuss specifics with the other investor, but come time to sell, do people just usually split the cash at closing? What do clauses look like if one person wants to sell and the other doesn't? What kind of buy out options do you put in place?

I am looking at purchasing my first buy and hold rental property in Oklahoma City. I have talked to a couple of mortgage specialists in attempt to determine potential closing costs to backtrack into the purchase price range to find my deal. I won't be living in the property so I'm looking at least at 15% down. I know there are various factors at play including PMI, purchasing points, lender, and fixed vs ARM that make for seemingly infinite iterations. I chose to use $100k duplex as my purchase point, estimated $1500 monthly rent, $650 monthly expenses and looked at options of 15% (requires PMI), 20% (no PMI), and 25% down. I ran some numbers and came up with the following:

15% down: $20.7K at closing, Cash flow $354 per month, cash on cash ROI 20%

20% down: $25.4K at closing, cash flow $426 per month, cash on cash ROI 20%

25% down: $30.5K at closing, cash flow $470 per month, cash on cash ROI 18.5%

Just looking at the numbers (My expense estimate and rental estimate are likely off but would still remain common variables between options), am I better off leveraging more despite less cash flow or leveraging less but getting more cash flow and possibly a lower ROI? Is there something else I should be factoring into my decision?

Welcome Troy. I'm also from south Florida. I currently live out of state but will be moving back within the next two years and looking to start investing in the market. 

Welcome to the South Florida community. I am from West Palm Beach but have been living out of state for a few years now. I will be moving back within the next two years and plan on getting investing in the south Florida market. I am currently in Oklahoma and interested in the DFW area as well. Hopefully we can further discuss our common interests. 

Matt

Hello all. I'm new to BP and exciting about everything the community has to offer.

I'm looking into my first investment purchase but I'm curious on certain analysis and some logistics. I have a neighbor in my townhouse community (which doesn't allow renting) who is looking to get out of her property quickly by a short sale and has yet to list her property. I have been talking to her and hope to get a good deal that I would turn around and immediately sell at market value. Does the 70% rule of wholesaling apply and I just don't adjust for rehab costs? Do real estate agents need to get involved? Could we just use RE lawyers and save on closing costs or should I play it safe and still go through RE agents? Is this a situation to use one agent to represent buyer and seller? I'm not sure of how to proceed in regards to discussing purchase price without agents/lawyers, or the order of things to be done. 

I appreciate the time and any given advice!

Matt