All Forum Posts by: David P.

@David W we have also found that property taxes play a huge role in how we buy properties as with other fees. We use the REI Property Analyzer - an Excel file to help us to determine what our cash flow, CoC, etc. We average the taxes for last 5-10 years and other fees such as property managers and HOA fees if applicable to evaluate if the property meets our criteria. You need to understand your numbers and what they should be for cash flow prior to making a bid for a property and stick to your plan - don't be a motivated buyer! We like to have higher numbers than most, but we are picky and want our rentals to cash flow well from day 1 so when hard times come we can survive.

@Joshua Dorkin posted it here: (we have modified for our purposes)

http://www.biggerpockets.com/forums/88/topics/25519-free-property-analysis-worksheet

@Ciro LoCascio, I'm confused; are you only considering 3 units or 5 units? If the only 3 units, then $70 per door isn't bad for no money down, but... you can do better. Depending on the market your target should be $100 per door. Also, the other thing to consider is if one of these units go vacant, do you have enough funds to cover the mortgage and HOA? I expect the answer to be no. So then I would walk away from this deal unless you have other properties that can support your vacancy with these units.

Good luck,

@Anson Young, thanks for the heads up; yes I would do the same if I wanted to get rid of properties and had dependable buyers; saves headache and trouble down the road.

It doesn't help when the two markets I am looking in are very hot. There are more experience investors in these markets and since I do this part time, it is more difficult and frustrating to keep turning over the rocks. I know one day I'll find a good deal, but just like my last two; they came withing days of each other and fortunately I was in a position to pick them both up - sight unseen. They are my best two cash flowing properties at this point, just hungry for another one or two by the end of the year.

@Wayne Woodson I don't mind, however it came from @Nick Miller who deserves the credit. I think this is good, however I feel it's harder to live up to. I know deals are out there; but for over a year now I haven't found any great deals.

Thank you @Anthony P. and @Anson Young this is good information. I am doing this part time (i work a full-time job) and am having a hard time finding properties deeply discounted. The rehab work doesn't bother me, but with no success at finding properties that I can make money on, I feel I am wasting my time. (What I am doing is not working!)

My Goal is to find more affordable properties and one way to do this is by giving wholesales my criteria. So far I have only met one wholesaler at the RIA meetings; I would have thought there would have been more of them. I am looking into other RIA groups that I can attend to generate more leads. I have listened to the pod cast, and this does help, but at this time I am frustrated and don't feel like I'm gaining any traction and need to change my approach!

-- Dave

I am looking at buying wholesale properties and at an recent REI meeting a wholesale asked me several questions like where would you like the property, how much profit to I need. So I am looking to purchase properties in two different geographical areas of the united states (mostly because I already have an infrastructure setup) and want to stay in these markets. What are standard questions that wholesales ask potential buyers and what are typical answers to profit. Please remember that I come from the retail side; and I don't want to pay any more than I have to; but also need to make my numbers work on the cash flow side because I am buy and hold buyer.

Thanks in advance for your help,

Ciro, although the "Sniff" test seems like a good deal, run the numbers yourself. BiggerPockets has a spreadsheet to analyze the property and can be downloaded at: great http://www.biggerpockets.com/tools/REIPropertyAnalyzer.xls

Figure out what your CoC and CF for these properties should be to make it worth your time and investment. Although you are not putting any money down, you want your other investors to make money as well. You say you will not make any money for two years; how did you arrive at this figure?

Some things to think about: Be prepared for special assessments; this is where deferred maintenance that the HOA has put off gets charged in a one-time fee to each of the property owners. This can be substantial if you own 5 units within the same complex. Although this doesn't happen often, I am hearing more of this happening now that the economy is recovering. For a while, HOAs were having a hard time due to so many foreclosures; homeowners were not paying the dues, and when the bank took ownership they would defer payments until the property sold. HOAs had to take from reserves to keep the property, pay utilities but now they may want to try replenish these reserves.

One other thing to think about is that some HOAs often limit the number of rentals within the community - a certain percentage needs to be owner occupied for FHA certification (for others to obtain loans). I would check into this; get the HOA bi-laws and all other documents and analyze this information prior to moving forward. I own two properties in two different communities and they do vary in what is covered and what is not covered such as the roof.

I am not saying this is or is not a good deal; only you and your partners can make this decision. But having the right information will help you to determine if any properties are good or bad deals!

Good luck,

Tom, this is great advice to know your market, but putting into perspective the wages drop, is that a national figure? Some areas may do better while others will do worse, it's a good idea to know the outlook of the local economy.

Reviewing your market on an monthly basis is also great idea. If you are going to invest in real estate you have to work at it for sure. Knowing how property values, crime, school, medium income etc all affect how a property will perform over time. Seeing trends may prompt you to take action to sell, improve, raise/low rents or what have you. My point is don't just look at local or national figures, but having an overall view of your market will help you to manage your investments.

Phillip, I own two townhouses and have a bit of advice to offer. HOA fees eat up a lot of the profits/cash flow, but adds value that the outside of the property is usually kept up and sometimes the roof is also included in the repairs. One of my properties did not include the roof under the HOA, so I had to replace it shortly after purchase, and it cost $5K. More importantly it caused issues with the neighbors roof leaking and fortunately hired a company that was licensed and insured to do this work, so they took responsibility for this leak.

Not that townhouse are bad, you do need to evaluate if your CoC and CF is where you want it to be. Also it is hard to anticipate Special Assessments that will happen to the property - this is usually outlined within the documents you receive for the property, which will state that up to a certain dollar amount can be assessed without the Board of Director's approval and anything above and beyond will need approval. I have heard of some HOAs doing special assessments for windows, roofs etc. What this means to you is that you should be prepared for this in your annual maintenance reserves.

BiggerPockets has posted a great spreadsheet for you to analyze your property and it can be found at: http://www.biggerpockets.com/tools/REIPropertyAnalyzer.xls

Fill out the spreadsheet with potential purchase information and in one of the empty rows (Col A: 21-23) included HOA and put the annual HOA fees into the corresponding column H. It gives you a better idea of how the property will perform. Please Note: all cost are Annual on the spreadsheet - not monthly.

Good luck,

James, I always take out 30 year loans on my investment properties, but my strategy is to buy and hold - long term. When I first started buying properties I had very little money but still managed to put 20% down; I worked the numbers and set a specific CoC and CF return on my money prior to purchasing the property. Bigger Pockets posted a great worksheet available to help you evaluate your potential investment: http://www.biggerpockets.com/tools/REIPropertyAnalyzer.xls

Although there is no hard and fast rule to doing the 10, 15, 20 or 30 year loans, I am more conservative and not having to worry about refinancing in a few years unless I want to leverage my property to buy others. Also, refinancing cost $$$, so taking a longer term approach and with interest rates on the rise I feel more comfortable with the longer term. While others say pay it down quicker, I don't like to wait for 10 years to have a great cash flow percentage, I would rather have the difference between payments I use to save up to be able to buy another property or have it available for when we have turnover at the property - vacancy.

Like @Tom Goans says there is no hard and fast rule; your plan should be determined of what you want; not what is standard.

Good Luck,

James, it's like going to Vegas... doing a deal like this takes guts, but as they say "no guts, no glory!" Sometimes you have to go with your gut instinct, and if doing this deal makes you nervous then don't do it; it's probably a good indication that something is wrong. On the other hand, my wife and I purchased two properties in Arizona sight unseen, and we live in Colorado. Yes it was difficult getting through the process, and we trusted our real estate agent to send current photos of the property, but we were still gambling. It turned out for both properties and they are producing great cash flow.

If you can see the outside; peak in the windows and have some assurance that it has good bones then maybe it's not too bad of a deal. On the other hand if they are not allowing you in to the property it could be an indication that something major is wrong and they are hiding it from you. An investment firm wanting to get rid of a property??? I would keep asking for permission to access the property, if they are truly the owners of the property. I never take "NO" as the final answer; if you keep asking different people you eventually will get the answer you want to hear. If the answer is still No, then insist on them to provide current photos of the property so an honest evaluation can be completed.

I am no no means an expert on wholesaling, but no matter what deal I do I trust my gut! Last piece of advice; have different exit strategies for this property prior to making the final deal.

- good luck!