All Forum Posts by: Mike Sola

I personally use whatever the loan amount is going to be because you are comparing the rent to the mortgage payment. 

I never knew about this....thanks guys!

What are you stage are you at?

Have you made offers? Not sure what price to offer?

Do you have potential buyers?

Also, consider your cash-out refi options with your lenders....for example, I have a lender who will do 85% of ARV. With that said:

ARV*.85 - rehab -holding cost - closing cost = offer (feel free to add in some sort of buffer for unexpected cost)

This would be the same if your cash refi was 75%, 80%, etc.

This ensures that you are not pricing yourself out on some potential deals.

Now for the rental analysis, take the 1% rule against what the actual loan will be, not the full ARV. For example, an ARV 100k but your loan is 75k. I like to compare my rent to the 75k since the 1% rule is supposed to compare the monthly rent to the monthly mortgage payment. Remember, the 1% is a rule of thumb not a law. I don't like properties unless the rule is at about 1.3-1.5. It will vary from market to market. I work in a market that you may never get the 1% (hence why I don't BRRRR in that market) but it is a good market to flip in. Another market I work in is great for BRRRR or flipping.

As for your questions:
-"I am more confused on the purchase price/offer price. Offering 67% of
asking price seems very low? The home will need to be gutted, tear down
walls/add walls/cosmetic touches etc." There is a reason why the offer is low....IT NEEDS A FULL REHAB. At the end of the day, rely on the numbers because numbers don't lie. Show the numbers to the seller so they understand. If they do not want to budge...move on. Tell them who you are and what you do and be honest.

-"The first loan will be $92,000 (with 20% down of $114K) and refinance
loan will be $154,000 (70% of $220K)? If that is correct, I will receive
$62,000 back? If all numbers done correctly." With those numbers, yes that would be the resulting math but consider your rent and loan -> 1400/154000 = .9%....slightly below the 1% rule. Like @Jaysen Medhurst said, may not be a bad flip! I use as a rule of thumb.....220k*.9 = 198k to account for all closing cost in the sale. So for 198k - 154k = 44k potential profit (assuming all your previous numbers accounted for all holding cost, rehab, etc.)

I know I said a lot here lol. If you have any questions, feel free to message me.

Good luck!

Hey David!

Congrats on beginning your real estate journey. I am still active but my interest began when i was stationed overseas. I took that time to educate myself as much as possible. Books, podcasts, youtube, etc.

One thing you can start researching is your "team". I set up meetings with realtors and property managers immediately. They are the best source for the most up to date info on where to invest. They are the ones actively selling and managing properties. I've had my realtors/PMs tell me to not do this or that property based on a variety of factors. As soon as you pick a location, I would immediately start reaching out to them.

Also, do not look past wholesaling to start. You do not need a lot of money (sometimes none at all) to start it. It forces you to learn how to analyze properties from an investor perspective. It will help you build capital quick for your first BRRRR. Highly recommend listening to Ryan Dossey on the BP and BP business podcast and download is ebook.

Best of luck
Mike

P.S. feel free to message me if you have any questions.

@Ashish Acharya Thanks! simple enough. I am currently going through "Start Your Corporation" by Garrett Sutton and it is all making sense now

Hello everyone!

I am still extremely new to this and I am starting to find my first property. My friend and I were looking to partner up on some deals in the future. If we both have our own separate LLCs, would we be able to purchase a property together under the two separate entities? Or would we have to put it under one?

Thanks,

Mike

Thanks for all the tips guys! It really clears things up.

Is there a simple way to calculate depreciation so that I can predict it when I run the numbers on a property?

Hey everyone!

I was listening to BP episode 335 or 334 and I heard something interesting. The speaker mentioned that either he or someone he knew invested in a very expensive property which had negative monthly cash flow. However, due to tax incentives, he was still able to maintain a positive ROI every year. Could someone please explain?

Thanks in advance!