All Forum Posts by: Michael Wentzel

@Eric Reichelt If you really want to stay in the area, have you considered looking at foreclosures or short sales? If you can get a better deal on the purchase price, it might make you monthly cash flow numbers look better even with the high taxes.

Mike

Hey Zach. Welcome to BP. It is great place to learn for free. Good job posting your potential deal and getting input. Others might have jumped at the deal and regretted it later.

I would encourage you to look outside your area and even outside of your state if the numbers don't add up locally. It is a challenge to learn a market where you don't live. But BP, internet research and a visit can probably help you become comfortable enough with another market to invest. Research a few, pick one, build a team (Realtor, Lender, Property Manager) and have a go. When you get off the West Coast, you can find good markets where you can get a multi-family for less than $100,000 that will cash flow $200 per unit with a mortgage, property manager, vacancy, taxes, repairs, etc. Plus, the initial investment will be a lot less and it gives you more cushion to make mistakes as you learn.

So that's a bit of advice from someone who is relatively new to Real Estate investment. I held two rentals while we were overseas for 7 years and it worked fine because we had a good property manager. I'm now investing in a community 40 minutes away from where we live because the numbers make sense there.

I hope you find a good first step that will give you plenty of cash flow.

Mike

@Eric Reichelt Hello Eric. We currently live and invest in Colorado, but grew up in Ohio. So this summer when I was back in Ohio I looked around at real estate prices. The purchase prices were about the same as Colorado, but the taxes were 3 or 4 times higher. When I'm hoping for a unit to cash flow $200 or $300 per door, an extra $100 or $150 a month is a big deal! So for the moment, we're staying in the Colorado market. I close on a fourplex next week with $1950 in rents per months and I'll be paying $31 a month in taxes.

That being said, I recently asked on the BP forums if property tax rates had a big influence on people choosing markets. Most people said it was just another number to be factored in. You can find markets when the purchase prices and rents are so good, that the high taxes don't make a difference. Some areas of Cleveland are this way.

I recently heard someone say, "Live where you want to live, but invest where the numbers make sense." So if the numbers don't make sense in your area, I would be open to looking further away or even out of state. I've been overseas the last seven years and had two rental properties managed by a property management company. Overall I was very happy to give them the 10% to handle the tenants, repairs and vacancies. The challenge is getting to know a market where you don't live. But its very possible. At the moment I'm investing in a town 40 minutes away from where I live because the numbers are significantly better down there.

I'm relatively new to the game, but that's my bit of input. Let me know if you have more questions or if I can be of assitance to you.

Mike

@Joe Boggin Thanks Joe. It sounds like an interesting market. I'll take a look at it.

Mike

@Jorge Garcia Have you had any interest in the properties you listed on October 13th? I would consider these turnkey with the rehab you have done on them and the fact that they currently have tenants. It would certainly be worth it to pay a bit extra on the property management side to get the job done well. I assume your dad would be willing to manage the properties you are currently trying to sell, correct?

@Christian Carson Thanks for the insight/ caution. I probably wouldn't be interested in buying a wreck and managing the rehab from long distance. I close on one property here in Colorado next week and will probably try to add another by the end of the year. It seems like I should hold off on Cleveland for the moment if the numbers aren't significantly better than southern Colorado.

I'll be in Ohio in December to visit family. So maybe I'll take a day or two to come up and further explore the Cleveland market.

Thank you both for you insight. You've both been very helpful.

Mike

@Ugochukwu Opara I'm still new to crunching numbers, but I think these are right. The first set is a 4-plex I'm about to close on in Colorado. The second set is a duplex in Cleveland. The Cleveland guys are telling me my property management numbers are low... but it gives you an idea...

4-plex in Colorado

Purchase price- $85,000

Financing- $21250 down (25%), $63750 at 5.25%, fixed for 30 years

Monthly rents- $1950

Monthly expenses- $1248

Tax- $31

Insurance- $55

Management- $195

Vacancy- $100

Maintenance- $195

Mortgage- $352

Utilities- $320

Monthly cash flow- $702

Cap Rate- $12648/ $85000 = 14.8%

ROI- $8424/ $23412 = 36%

Rent over Purchase price= 2.3%

Duplex in Cleveland

Purchase price- $45,000

Financing- $11250 down (25%), $33750 at 5.25%, fixed for 30 years

Monthly rents- $1250

Monthly expenses- $752

Tax- $101

Insurance- $50

Management- $125

Vacancy- $60

Maintenance- $125

Mortgage- $191

Utilities- $100

Monthly cash flow- $498

Cap Rate- $8268/ $45000 = 18.4%

ROI- $5976/ $13750 = 43%

Rent over Purchase price= 2.8%

I'm actively seeking to build a portfolio of rentals in Colorado. I'm considering Cleveland, Ohio as a second market to go into. Let me know if you have questions or if you see mistakes in my numbers.

Mike

@Ugochukwu Opara I'm not in the Philadelphia market, so I'm not sure what is good for the area. I'm also relatively new. But $100 monthly cash flow on a triplex seems really low. I've heard people targeting $200 to $300 in cash flow monthly per unit. So on a triplex you would need to be over $600 in cash flow a month. I'm about to close on a 4-plex in Colorado that projects over $700 in cash flow a month, even though I will carry a mortgage and pay a property manger.

I would keep looking for better numbers. Especially if you're going to put a ton of effort and money into rehab.

Mike

@Christian Carson Thank you for giving input to the new guy. Here's the numbers for the 4-plex we close on in Colorado next week...

Purchase price- $85,000

Financing- $21250 down (25%), $63750 at 5.25%, fixed for 30 years

Monthly rents- $1950

Monthly expenses- $1248

Tax- $31

Insurance- $55

Management- $195

Vacancy- $100

Maintenance- $195

Mortgage- $352

Utilities- $320

Monthly cash flow- $702

Cap Rate- $12648/ $85000 = 14.8%

ROI- $8424/ $23412 = 36%

Rent over Purchase price= 2.3%

Those last four numbers are the ones I'm most interested in as I try to build a portfolio of buy-and-hold properties for cash flow. Most of the multi-family properties I looked at didn't have numbers this good. I have been looking at some basic single families in the same community that I might be able to purchase for $35,000 and rent for $750 to hit similar numbers.

Just looking at the properties in Cleveland and the listing prices, it seems like I could beat the Colorado numbers. One that @Jorge Garcia shared was a duplex for $45,000 that rents for $1250 per month.

Purchase price- $45,000

Financing- $11250 down (25%), $33750 at 5.25%, fixed for 30 years

Monthly rents- $1250

Monthly expenses- $752

Tax- $101

Insurance- $50

Management- $125

Vacancy- $60

Maintenance- $125

Mortgage- $191

Utilities- $100

Monthly cash flow- $498

Cap Rate- $8268/ $45000 = 18.4%

ROI- $5976/ $13750 = 43%

Rent over Purchase price= 2.8%

So the Cleveland numbers look better than the Colorado numbers. But are they good enough for me to move into a market that is further away and that I know less about? Am I missing anything in my calculations?

Mike

@Yesenia C. I'm relatively new to Real Estate investing and I'm not familiar with HomePath. Did you do a general search for "HomePath" on Bigger Pockets and see if there are any forums or blogs concerning the program?

Mike