All Forum Posts by: Matthew Mucker

TWatson, I'm going to have to borrow 100%, so cash-on-cash probably isn't going to be an effective metric for me. (I will buy the book, though.)

Jon, that's some sage advice there. You know, I've lived in this area for 20 years now, and I have no idea how to gauge the local economy. Any pointers?

I'm in the Dallas/Ft. Worth area. I believe our economy is actually doing quite well. Our area hasn't been hit with the real estate appreciation and crash that has hit much of the country.

I'm still faced with setting a criteria for myself for what would make a transaction a 'good' transaction. I've put together a spreadsheet to figure NOI and cash flow, with two mortgages, and to find the gross rents needed to reach a certain cash flow. I just don't know what my target number should be.

So let me once again turn my question around... what do you folks use as your metric for determining what's an acceptable deal?

EDIT: just for a sanity check, the assumptions I'm currently modeling are a 1st mortgage of 80% at 7% for 30 years, second mortgage at 10% for 15 years, and operating expenses of 50% of gross rents.

I'd buy the Section 8 Bible. (Amazon has it or section8bible.com to buy direct.)

It's a very poorly written, self-published book, but it does contain lots of good info. If you go into section 8 it'll definitely pay for itself.

Also, spend some time reading MikeOH's blog for lots and lots of good insight. (I am hoping to make him my Jedi Master; I'm right where you are right now.)

Has anyone done any short sales on multifamily units?

I'm looking in my backyard and there's a glut of quadplexes all on one street for sale by absentee owners, all of whom bought in the past 3 years. Based on the 50% rule, tax records, and deed records, these people WAY overpaid (apparently they expected the Texas market to do what the California market was doing).

I ran the numbers, and in order for the deal to make sense to me, I'd have to buy at 50% of the asking price. (Asking $260K, my cutoff looks like it'd be around $135K. Gross rents are $2800 and I'd have to finance 100%.)

I'm wondering if banks are doing short sales on these types of properties.

Get your own RE agent to work with, one who understands investing, and have him submit your offer for $150K.

How much cash flow do most of you require before you'd consider the purchase of a residential rental property?

I've been modeling $100/mo per unit when analyzing properties (using the 50% rule). Is that too aggressive for a newbie?

It's interesting to browse the MLS and laugh at some of the asking prices out there.

That's a surprisingly simple answer that makes a whole lot of sense.

Clearly, if you're financing 100% you're not relying solely on bank loans. What kinds of structures are you using for your deals? (I assuming having the seller take back a second loan is one strategy. What others?)

Thanks, Mike!

How do RE investors accumulate a number of cash flow positive properties without running out of cash?

Let's say I have enough money to put a down payment on a fourplex and I find one that'll cashflow $400/mo. That's 50 months before it generates $20K for me to use as a down payment on my next property. (And realistically I'd probably need closer to $40K down.)

I don't see how investors can accumulate a large number of properties without finding massive amounts of cash elsewhere.

What am I missing in my vision here?

When cold calling, how do you avoid calling numbers on the national Do Not Call list?

There are significant financial penalties for calling folks on the list.

It's not so much accounting rules as it is case law. If you use your LLC's bank account to pay for personal items (groceries, beauty salon, etc.) then a plaintiff could claim that the LLC is nothing more than an "alter ego" for you, and thus "pierce the corporate veil" to go after your personal assets.

Those two terms in quotes would be great search keywoards to learn more.

OK, you're trying to treat your primary residence as an investment property in this thread. It's not! We all need a place to live, and we all expect 'negative cash flow' to pay for our primary residence.

You can't use investment property metrics on your primary residence! :)