All Forum Posts by: Nathan Patterson

Thank-you for posting this, I was about to ask in the other thread when the next one would be. 

I have a desk job, where I'm online for 8 hours a day....I just keep BP up in the background and post when I can. 

Great post & insight to the workings of an NPN. I think more of these from investors would help the people who are interested in note investing. If anything, would help others learn from others mistakes/successes.

Hello BP,  

So recently a family member has posted their house up for sale in Mississippi, I live in Colorado.  This is a home that I have been around for years so I know it has been taken care of, lived in the area for 14 years.  It does need some rehab, but not much to get it rent ready.  I'm budgeting $10,000 for rehab, over estimating.  It is in the Northern part of Mississippi, smallish town of 40,000, though it is growing....just slowly.  Rent rates in the area are 800-1000.  I have two questions, but first the numbers.

As Is:

purchase price: $110,000 

rent: 825

10% for vacancy/PM/repairs/Capital expense: $82.50/ea

20%downpmt - $22,000

this leaves a Cashflow of $6.40/month or $716.51/yr.  

P&I: 450.60/month 

PITI:488.60/month

COC: 2.095%

cap rate: 5.567%

Total ROI: 12.61%

This is based on a 30 yr mortgage, 20%downpmt, interest rate of 4.59%.  

$90,000 purchase. 

rent and expenses stay the same

downpmt goes to $18,000, still the same 30 yr mortgage & 4.59% interest

Cash Flow: $88.33/month $1,601.32/yr

COC: 5.374%

Cap Rate: 6.695

Total ROI: 15.25%

P&I: 368.67

PITI: 406.67

Additional info, currently the house is a 2bed 1 & 1/2 bath. One of the bedrooms used to be two, one of the walls knocked to make it into one large room. If that was split to being two again, making it now a 3 bed, rent would increase to 950-1000. That would change the COC/Cap Rate/total to 8.44%, 7.71% & 18.32% respectively. This is still for the $90K purchase.

For the $110K, would come out to 4.77%, 6.39% & 15.29% respectively.  

Of course this means a higher rehab cost which I have not accounted for as of yet.  

Do these numbers sound right or am I missing anything? 

Second  question:

If I do end up purchasing this house, what would be the best way to purchase?   I haven't purchased a home before, let alone one that is 18 hrs away.  I know my team will need to be based in Mississippi, which the majority of my family lives around the area so they can help with PM and other issues & I routinely visit 2-3 times a year.

Basically, what am I missing?  What is the best way to purchase the house if it is a good purchase.  Are there any pitfalls I should watch out for with it being long distance.

Welcome to BP, great to see someone else from Tupelo!  Where are you looking to invest in? 

Looking forward to it!

I agree with you say about learning by doing.  But when did you feel like you knew enough to jump in?  Or did you just jump head first hoping for the best.   

As the others have said.  Look at Colorado Springs/Pueblo area.  The northern part of CS is starting to go up but not nearly as bad as Castle Rock/Denver area.  I'm personally looking at West & East CS for primary residence/house hack.  No luck yet, but I've had a couple that were promising.  You could also try Monument, but even those prices are high because it seems to be a "retirement" community. 

@Natasha Hunter Thank-you for the information.  I'm learning more and more that this is highly a networking business.  I am looking into note school and Scott Carson's Note camp to help me learn the intricacies of the business and get started.  There is only so much one can learn from books/blogs/podcasts  Are there any facebook/linkedin groups you would recommend? 

Yep, I have an emergency fund that can support me for a year at my current living style.  I also have additional savings for investing that could be used after the emergency fund if need be.  Sadly yes, a lot of people live paycheck to paycheck because they live beyond their means.  I spend roughly 51% of my income each month for rent/utitlites/food and other random items.  The rest is saved for now.  I could cut my expenses down to 40% each month if I wanted to cut out eating out, gym membership, drove less and didn't go snowboarding so much and other mischellanous items.