All Forum Posts by: Will Murphey

Hello members.

I am trying to understand all the variables a prospective buyer might ask/require of me in order to sell my business. I have included the ones I can think of below.

Your time/input/feedback is appreciated!

William

Property 1

4 bed 2 bath
Rent: $1,000.00
Cash flow: $779.67
Taxes: $683.00
Insurance: $961.00
2013 Maintenance: $40.00
Annual Property Management Fees: $960.00
Rental Date: March 4th 2013

Property 2

3 bed 1 bath
Rent: $1,000.00
Cash flow: $750.58
Taxes: $1370.00
Insurance: $663.00
2013 Maintenance: $00.00
Annual Property Management Fees: $960.00
Rental Date: Estimated Rent/ House is 2 weeks from rehab being completed

Property 3

4 bed 2 bath
Rent: $1,300.00
Cash flow: $1032.42
Taxes: $1020.00
Insurance: $622.00
2013 Maintenance: 321.00
Annual Property Management Fees: $1248.00
Rental Date: August 2013

Property 4

3 bed 2 bath
Rent: $1,200.00
Cash flow: $867.08
Taxes: $2005.00
Insurance: $814.00
2013 Maintenance: $24.00
Annual Property Management Fees: $1152.00
Rental Date: March 1st 2013

A few other attributes about the business and town I can think of are below:

The business also owns a 12 foot utility trailer and a 20 by 15 office space the business rents for $210 a month (all bills paid) with desks, laptops, and office supplies. The business has a credit card with a $0 balance. My wife and I have managed the rehabs in the past, so all the work on the houses have been done up to this point. The property manager sends us the Owners statement and deposits the money into our bank account monthly. The business has been opened/established for 2.5 years.

These rentals are in San Angelo Texas. Ranked fourth in the nation in Forbes Magazine's "Best Cities For Jobs" rankings. http://en.wikipedia.org/wiki/San_Angelo,_Texas

San Angelo is in the heart of the West Texas oil. The Cline Shale was recently discover in this county and is expected to be the largest oil find in North America. Oil companies such as Devon Energy have moved in the city. http://www.gosanangelo.com/news/2013/jul/12/business-activity-in-the-cline-shale-area/

San Angelo is also home to Goodfellow Air Force base. http://en.wikipedia.org/wiki/Goodfellow_Air_Force_Base

Sorry if this seems all chopy. I was just writing what came to mind. If you can think of any other variables a buyer might want to know. Please let me know. Thanks again. William

Not yet Derek, I just posted this thread yesterday. I’m still gathering feedback from the biggerpockets community.

Thanks, Will

Thanks for all the input thus far!

Thanks for the feedback so far!

Can anyone help/check my figures on my cash on cash return based on the assumptions below? Thanks!!!

Say the appraisal comes back for $25,000

Would my Cash on Cash return be: 66.5% ??????

Loan amount = $20,000 (80% of $25,000 appraised value)
Cash back in my pocket = $18,000 ($20,000 loan amount - $2000 closing costs)
Annual Debt service = $1152 [$96 * 12 months] ($20,000 loan at 4% for 30 years)

My purchase price $22,500 -18,000 cash from bank = $4500 skin in the game

cash on cash return calculation:

$4500 (skin in the game) / $2995 ($4147 NOI - Annual debt service $1152 (12 months * $96)) = 66.5%

Hi all.
Please review my analysis of increasing my return on my ‘paid off’ rental property.

Today I read a book that described cash on cash return vs ROI. and I'm thinking about obtaining a mortgage to get a better return and using the cashed out proceeds to look for another deal.

Details:

Purchased price 15 months ago with updates (new roof/paint job) was $22,400 (purchased with cash)
Cheapest 2 bed/1 bath today is $39,900 in my town on MLS.

Rental income last year: $600 per month on HUD
Property manager last year: 8% monthly
Last year expenses: $120 (wife and I replaced the tub handles/hardware) I will forecast $500 for the upcoming year.

Taxes paid last year: $383
Insurance paid last year: $480
Vacancy last year: None (Although I'll forecast 2 months vacancy for the NOI calculation below (2 months vacancy hopefully is the worst case scenario)

HOA: None

If my numbers are right my NOI in 2013 might be: $4147

Income: $600 rent* 10 months = $6000 annual rent
Property mgt: $6000 *.92% property mgt (8%) = $5520
Taxes: $5520 - $383 = $5137
Insurance: $5137 - $480 = $4657
Projected expenses: $4657 -$500 = $4147

If my calculations are right, my ROI this next year might be 18.51% if nothing changes.

Please review my thought process below regarding obtaining a mortgage. (Thanks in advance!!)

Obtain a loan from the bank at 4% interest rate for 30 years, put 20% down of $22,400 (my purchase price) Although maybe the bank will give me a loan for more, not sure how this works or how it would affect my cash on cash return.

After running a few mortgage calculators, my debt service on the assumptions above will be $107 monthly.

So my cash on cash return for 2013 might be: 63.9%

$4480 (20% cash outlay) / $2863 ($4147 NOI – Annual debt service $1284 (12 months * $107)) = 63.9%

I few things I don’t understand or where they fit into the calculation are:
If the bank/appraiser says the house is worth what I paid for it $22,400, do they simply cut me a check for $17,920 ($22,400 house value – my 20% down payment)?
Closing costs— Can this be financed in? If so, how does it affect my cash on cash return?
If the house is worth $35,000 by appraisal, can I / should I get a loan for that amount? How would that affect my cash on cash return.

Thanks for looking at this!!!!
Will

I just came back from this conference (2012 version). I'm glad i found this thread a few months back.

A major theme was education on owner finance (go figure). I purchased the audio for my wife and I to review as we couldn't take in all the classes. If interested in that audio you can find it here:

http://www.reiaudio.com/sp/expo-audio

A few months back I had a 720 Sqft house done for $2400. It had two existing layers. They took it down to the plywood and replaced three bad 4 X 8 sheets, new flashing etc.

I have a single family home I recently purchased and rehabbed. I was hoping a few investors would chime in on how much they would pay for this cash flow.

Details. Single family home in a town with 110,000 population (Texas town) Military base presence with a Public University. This two bedroom 1 bath house (720 sqft)is paid off using cash. I had new interior and exterior paint done, new carpet, and new roof installed.

I have a tentant in place for the last 3 months paying $658 a month rent.(section 8). I bought the house 4 months ago.

Taxes are $387 annual and I have USAA property insurance paying $473 annual. I have a property manager in place and pay them 10% of the rent.

I am wondering what I should sell this to another investor for. Or maybe create a note for someone to assume.

I am a new real estate investor and have 3 properties purchased recently.

Any advise is greatly appreciated.

Thanks for the great feedback. I like John's idea of flipping deal 2 and 3 and finding more of deal 1's.

I'm glad I found Bigger Pockets and look forward to learning.

Please help me take a look at 3 deals if have recently done. I am new to this (Just started 5 months ago.)

Deal 1: 2 bedroom 1 bath. (Questionable area of town. Paid $16,500 cash ,rehabbed a bit with new carpet, new roof, and exterior paint. Total cash costs in this property is $22,400. I just rented it out last month for $661 on HUD. On MLS comps seem to be a about 30K for a like property. I have a property mananger in place paying 10%. My taxes are $387 annual and homeowners insurance is $473 annual.

Deal 2. 4 bedroom 2 bath. (Decent are of town, close to elementary school. Paid $37,500 cash ,rehabbed a bit with new carpet, new interior paint, new titled kitchen and a few cabinets, new gutted tiled bathroom, new vinal floors in other wet areas. Total cash costs in this property is $47,431. I just got it finished last week. On MLS comps seem to be a about 80K for a like property. My taxes are $1116 annual and homeowners insurance is $907 annual. I could either rent this for about $1100 a month rent or just flip it. Not sure what to do.

Deal 3. 4 bedroom 2 bath. (Decent are of town, close to a High School. Paid $52,196 cash ,rehabbing it now and hope to be done in 30 days with a total cash cost for the fixed up property at 55K. On MLS comps seem to be a about 75K for a like property. My taxes are $950 annual and homeowners insurance is $609 annual. I could either rent this for about $1100 a month rent or just flip it. Not sure what to do just like deal 2.

My main concern is this is about 75 percent of my cash that I have used up by paying cash for these properties. I have an 840 credit score but lost my job about 1.5 years ago, so my income is just limited to the rent on deal one and a small VA pension that pays my living expenses.

Please any input would be appreciated.