All Forum Posts by: Michael Keller

You're correct. I had also figured $2,000 closing costs for the land purchase. So it's $65k, plus $2k close on the land, minus $66,250, which leaves us with $750. I like the idea of bundling them. That would certainly increase the profitability further.

@Brian Garrett I should have clarified that $750 is the all in per property. $95,000 appraised value x .75 = $71,250. With approximately $5,000 in closing costs that is $66,250 from the re-fi. That leaves us with $750 in each property.

Recently, a friend and fellow real estate investor approached me with an opportunity. He wants to build 3 to 5 1,000 sqft homes in small towns that are within a 30 minute commute to a mid-size city in Texas. Through a local builder, who is a personal friend, we can purchase the land and construct the homes for approximately $65,000 each. 

Based on my analysis, I believe that the new homes would appraise for at least $95,000 each. These towns predominantly consist of renters -- around 65%. Additionally, the availability of new, quality rentals in these towns is almost non-existent. Based on my analysis, I believe these homes would rent for at least $950/month.

Assuming a 75% LTV on a cash-out re-fi, we would be all in for $750. At a 5.25% APR on a 30 year note, we would cash flow $2,300-$2,900 in the first 5 years. The total ROI would be 472%-555% in the same period. Of course, we could also take 10 year or 15 year note and decrease cash flow in the short term for a higher return after 10 or 15 years.

The only limitations I see are the ability to scale and lack of appreciation. Each town could probably only sustain 3 to 5 homes. Additionally, the homes would likely never see any real appreciation. Nevertheless, if we built 50 homes in 5 years (5 homes in approximately 10 towns), we could have $145,000 in cash flow a year.

Does anyone see any glaring problems that I'm not considering? Why or how would this not work??

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Hey @Ryan, I don't have any direct experience in East Richardson but have a property on the western edge of Garland -- it's in Richardson ISD. It's relatively new acquisition but I had good luck with rents in that area. I live about a mile west of 75 and I think East Richardson is on the rise. There's been some new development in the area lately and the city recently approved a plan to redevelop the downtown/main street area. 

@Ryan Moretundefined

Hello everyone.  After hearing Josh and Brandon repeatedly remind me to get active in the forums, I've finally done it. Been listening to BP podcasts for some time now and just recently started exploring the site more. Got involved in real estate investing just a few months ago and have already picked up two properties. Excited to be here, to learn and to connect!

-Mike