All Forum Posts by: Nathan Emmert

Given a complete lack of knowledge on the local market, I would advise you to exit and invest some place you know.  What you're doing now is akin to throwing a dart at the stock page of your local paper and buying whatever it hits for the long term.

A $130,000 house that rents for $1,100... in Grand Rapids??  Short of the medical mile, I'm curious where this house is... there are $30 - 50k houses that rent for $800 - $1,000.

Hmm... I've been in row houses in Hoboken, NJ that must have been 10 - 12 feet wide.  There was a sofa, less than a foot of space, a coffee table, less than a foot of space, and the entertainment center... that was wall to wall width for the entire unit.  The kitchen table folded down so you could walk through the kitchen when you weren't eating.

So an REI group meets the 2nd Monday of each month from 6:30 - 8:30 at the Buffalo Wild Wings in Wyoming... be a great place to network. I made the meeting in December but missed January and will miss again Monday due to work travel.

Be a good place to network for you!

I know at least one of them gets a lot of bad press so I don't believe they've been thoroughly screened... but could be wrong.

Tell everyone you know that you are a real estate investor... Facebook, LinkedIn, Match.com... I don't care, every family member, friend, co-worker, and other acquaintance should understand you invest.  From there, hopefully money comes to you.

Have a good pitch... let them know the value you offer them... what sort of business association you'd be looking to do, the risks, the returns, etc.  You want to come across as knowledgeable without being too slick... they want to trust you but not feel like they're being sold something.

Beyond that, look to do HMLs.  They are pricey but you can sacrifice some return for lack of working capital.  It would help you build up the cash you need to not use them at all moving forward.

What's the ARV? If you can refinance out all your cash things will look a bit better. Buy, fix, refi your cash, repeat!

If you do manage the property yourself, that 10% should come directly to you... it shouldn't be split with your partner 50/50 as cash flow (unless that was part of your deal).  You're doing a job to earn that money, it's definitely not free cash flow.

Your taxes and insurance are high... you're at 6 months worth of expenses just with what you have listed... 2 months for CAPEX/repairs (conservative but a good idea), 2 months for taxes (high), a month for vacancy, and over a month for insurance (high).

What about loss to lease?  This is a big deal in lower end rentals (more C/D areas but likely also in B)... I'm finding more and more I need to calculate at 80% of GOI to account for vacancy and loss to lease.

Single family house so all utilities, lawn care, etc are paid for by the tenant?  Any business fees you need to account for where you are to rent?

Could it be the buyer's realtor doesn't trust flippers?  Unfortunately there are many who simply throw lipstick on a pig.

But yes, I've found houses in west Michigan to be of pretty low upgrades... I couldn't believe vinyl flooring in $300k houses.  Real tile and hardwood are hard to find, very low end on the finishes in the houses we looked at.

So you want to leverage $400k and live off it...

$400k will leverage to $1.6M of property at 75% LTV (assuming you have the W2 income to back it all up). Assuming you can buy 2% properties in California, that would generate $384,000 a year in rent. So if we take the 50% rule, you're down to $192,000 for Operating Income, pay your mortgage payment of $6,080 a month (4.5% interest) and you're working off just under $120,000 a year... doing the PM yourself will add $38,400 back in giving you about $158k a year to live off.

Is that a full time job for you in SoCal?

I think your biggest problem is that you won't be finding 2% properties, you'll be lucky to find 1.5% properties... and probably well below that.  At 1.5% you'd be at $288,000 GOI putting your cash flow at $71,037 plus your $28,800 from self managing would be about $100k... things quickly go down hill based on the numbers.

Small apartment complexes are sort of no man's land.  They are too small to get the economies of scale you want with full time employees... but too large to get residential financing.

Given the almost free money available on residential, I like the plays there.  If you find a value add opportunity in the smaller apartment complexes, go for it... but I wouldn't force the issue just because you can afford it.