All Forum Posts by: Nathan Churchill

Thanks for the feedback! I have the inspection next week and I'm going to walk through with the inspector so I'll keep a careful lookout. The home as a newer roof, new siding and paint, new concrete slab out back, and newer windows. I'm unsure of the age of the furnace/AC, but it's not original. The home was built in '82. I'm not concerned about asbestos or lead paint.

Also, I've run the numbers and if I follow the BRRRR method and refinance my capital backout, I'm still cash-flow positive ($136/month) and I now have an infinite ROI.

Hello, BP. I'm under contract on my first deal and I'm wondering if I can get some feedback. Everything seems to be good, but I could use a sanity check to make sure I'm not missing something. This is for half of a duplex.

Asking price: $75,000

Offer: $75,000 (Yes, I offered what they were asking because there was a lot of competition and their asking price was way under market value)

ARV: ~$110,000

Down payment: $15,000

Rehab: $5,000

Closing Costs: $2,000

Total out of pocket: $22,000

Rent: $1,000

Total monthly income: $1,000

Expenses:

Mortgage: $313 ($60k @ 4.75%)

Taxes: $100

Insurance: $80

Flood ins: $0

HOA: $0

Maintenance: $100 (10%)

Capex: $100 (10%)

Management: 0$ (I will self-manage)

Vacancy Allowance: $50 (5%)

Total Expenses: $749

NOI = income - expenses = $1,000 - $749 = $251/month cash flow.

Wealth gain = ARV - mortgage balance - down payment - rehab - closing costs = $110k - $60k - $15k - $5k - $2k = $28,000

CoC = 13.7%

So, to me this seems like a really good deal and I'm worried I'm missing something because it almost seems too good to be true. The owner is out of state and I'm wondering if he just doesn't know what it's worth. The house needs some repair - flooring throughout, paint, and a few odds and ends, but nothing major. I've estimated $5k for repairs. I have an inspection next week, but I have a contingency in my contract that let's me back out if inspection isn't good.

Also, I've run the numbers and if I follow the BRRRR method and refinance my capital backout, I'm still cash-flow positive ($136/month) and I now have an infinite ROI and $22k to reinvest.

Thoughts?

 Great advice. thank you so much!

Gotcha, so you don't even need to do an analysis, you just know if you get a home in those neighborhoods for ~80% of ARV it will be a good deal? I may take a similar approach. There are a few neighborhoods that my wife and I are eyeing. Thanks for the insight!

Thanks everyone for the great advice! Sounds like we're all on the same page.

@Kyle McCorkel a couple of questions. 1) What evaluation do you do to determine you're willing to make an offer? 2) when you say "larger deposit" do you mean to put up more earnest money?

Hello, BP! I've started my journey into real-estate and my wife and I are in search of our first deal. We've looked at a couple of properties, but both ended up being a bit more work than we wanted for the price that was being asked.

I'm wondering, when you find a property you like do you usually make an offer based on what numbers work for you? For example, if there's a house listed for $90k, but the numbers don't work until a $70k purchase price do you go ahead and offer $70k and just see what happens? Is there any downside to making low-ball offers?

What's your trigger to make an offer on a property, low-ball or not?

Right now in my area getting 1 - 1.2% would be pretty good. In my area, I don't see 2% getting me into a good neighborhood and I'd rather have a smaller return on investment than deal with the headache of bad tenants.

Looks like you're setting aside 5% for maintenance and 5% for capex. Doesn't BP recommend 10% for each? What does your cashflow and CoCR look like if you do 10% for each?

@David Faulkner - thanks for the feedback. I typically calculate out cap rate, CoCR, and total return (includes equity and appreciation) and the returns look much better. I'll have to add IRR to my calculations so see how things measure up.