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All Forum Posts by: Brandon N/A

Brandon N/A has started 3 posts and replied 12 times.

Post: Deal or no deal?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

Hi Ralph and Mike,

Yes, it is the same property I talked about previously.I have been in regular contact with the Landlord's nephew who has now convinced his Aunt (the LL) she should sell.

Ralph, with regards to your comment - "No deal. You don't have the cash"...I'm sure a ton of REI started without their own cash. If people waited until they had their own cash to invest, I'm guessing 90% would never start.

Mike - what is your minimum profit per unit / month? $50? $100?

Post: Deal or no deal?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

Also, I need some advice on exit strategies. I would love to buy and hold this property but I am using $50k of family money, so I realize I might not be able to...

Ideally I would like to finance with debt rather than equity.

What is the best / most common ways to pay back the money? Re-fi after renovations and pay a portion of the money back? Offer monthly cash flow?

Suggestions are very much appreciated.

Post: Deal or no deal?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

* Also, this doesn't include miscellaneous income such as coin laundry

* Would try and put down $25k to allow for better cash flow

Post: Deal or no deal?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

$3,000 / month in rental income (6 x $500)
less 50% for expenses = $1,500 / month

$180,000 purchase price
$ 25,000 renos
total investment of $205,000
205,000 @ 7% & 30 years = $1350 / month

+$150 / month

* worst house on a good street (properties on both sides assessed at over $300k)
* could tighten management of property to reduce expenses to less than 50%

Thoughts?

Post: My plan, with questions along the way...

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

Alright...Iong story short...I'm 25 years old and am going to start my REI career / company this year. I have no money of my own to invest, but have 8-10 people who are willing to invest their money with me.

I have located a distressed, poorly run property (2 units, each with 3 apartments) and ran all the #'s. I will only pay $160k for it (with $20k down), and at that price + $15k worth of renos, it will flow just under $4k per year after all expenses.

My question is - although this is a small property, should I create an LLC company, or would creating a general partnership be suitable? I have no idea what I should do here, but would like a general idea before I speak with a real estate lawyer (which I will do for sure).

Also, in terms of financing - what is the best way to structure this? I would like to be the principle owner, so obviously I should have a higher ratio of debt vs. equity financing...does anyone have a business model they can send for this same situation (purchasing an investment property with multiple investors). I was thinking 3:1 debt to equity.

With regards to repayment of the debt financing, I plan on pulling out equity in the property (after I increase its value thru renos) and making full repayment within 18 months.

With the equity investors, what share would they get? If I raise $40k, use $20 for a downpayment and say $20k for renos, and structure it 3:1 debt to equity that means $10k is equity. If 5 people each put in $2k, does that mean they each have an equal share (20%) of the 25% equity? If I sold the house for $200k in 5 years (say it was 100% paid for for the sake of the question) does that mean they all get an equal share of the $50k (25% equity)? Is it that simple? Am I missing something?

Post: What am I missing?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

I never said I was collecting rents that were 1% of the total value, I said I was going to collect rent ($2700) on a $210,000 property...

Post: What am I missing?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

Yes, I do agree that operating expenses are typically 45-50% of operating expenses....and in this case (46%) leaves me with +435 (after mortgage deductions, assuming a 6%/owner occupied financing)...and that is far less than 2% of the total value of the property...my point is, surely it is possible to make profits each month off of properties which bring in less than 2%....as I said, that seems awfully high...

Post: How to approach or contact an owner of rental property

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

I just contacted an owner for the 2nd time in a year...at first she said she wasn't interested, and now (a year later) she says shes 'not sure'. As biggerpro said, make it happen - you have nothing to lose...and if it doesn't work out right now, make a follow up in a year or so...be persistent!

What you should try and do however, is find out as much information about the owner as possible....you might be able to use that information to your advantage and possibly structure a more appealing/creative offer which is win/win for the both of you.

Post: What am I missing?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

Hello Jon,

Thanks for pointing that out - actually, that might work well for me. I am also planning on moving there and need a place to live. I have two friends that could move in with me and pay rent, and then I'd just have to rent out the downstairs 3 bedroom apartment.

With regards to the price, I would never pay more than $175-180 for this place. If she is asking more than that I will walk away from the deal and wait for another opportunity!

Monthly rents which equal 2% of the cost of the property seems awfully high to me...say I spent $210,000 on this place, that means I'd need to bring in $4200 which is completely impossible. Rents in this area go for roughly $450-550 and with 6 bedrooms there is no way thats happening....

Post: What am I missing?

Brandon N/APosted
  • Toronto, Ontario
  • Posts 12
  • Votes 0

Hello,

The point about my Uncle isn't so much about him having experience flipping as it is about him being a real estate investor. Having someone already experienced in real estate investing is a big plus. Also, there are not MASSIVE differences between flipping and holding...it's not rocket science. It is far more important to have knowledge of how to buy, how to run #'s, deal with brokers etc.


With regards to expenses, that is what I came to using the most exact information I could find. I realize they are less than the "50%" rule that everybody talks about...

I just found a link through msnbc which shows that 30 year fixed rate mortgages are averaged at 5.96%, but because I'm so new I can't post the link...

I really can't see anyway I could obtain this property for less than $160-170k...ideally (I think) you want monthly rents to be in the 1% of total value area, which places this house at $270k...huge difference between that and 95K!

You are right about refinancing...I completely forgot about the implications on the monthly cash flow after that...saying that, maybe a ratio of 50% would be feasible, that way I could pay off any personal loans I have, and give a % of yearly returns 'interest' on the personal loans....

Maybe I have to re-evaluate this plan...I don't think I could be able to pay back any personal loans and keep a positive cash flow with these #'s...unless I refinanced a smaller % and gave all positive cash flow to my Uncle for 2-3 years until he is completely compensated...at that point I would collect the cash flows and have 2-3 years of equity built up....

P.S. Thank you very much for your reply, I appreciate your comments and your knowledge - I will look into everything you mentioned.