All Forum Posts by: Michael A.

@Joe White Richmond has been interesting. I feel like we need about 1% of the sale price in rent/mo. in order to cover costs. Finding a buy that can generate this seems tough, but I've just been "window shopping" on Trulia or Zillow to feel things out.

Philadelphia, especially maybe Grays Ferry or Point Breeze seem like they are much more possible. How has your experience been in Philadelphia? I can PM you if you're more comfy with that. 

@Adrian Stamer I agree. I typically have been assuming the following after some specific calls to a lender, a popular property manager and city office to confirm property tax rate. I'm going to assume the 5% for now on the loan, but going to bump everything up to the estimates Keller recommends. 

- 30 yr note @ 5% (Keller was using 6.94%)

- property manager at 8% monthly income (Keller uses 10%)

- property tax at 1.2% in the city of Richmond (Keller uses 2% to be conservative)

Thank you both so much

Hi everyone - Happy New Year! I've resolved in 2017 to actively seek mentorship and guidance more regularly, so I'm putting myself out there and would really appreciate your input. 

Is anyone willing to critique the spreadsheet I use to calculate potential buys, or perhaps share their own? It's from Keller's HOLD book which I found to be very inspiring. I'm concerned that it is overly conservative and leading me to pass on just about everything i come across in the Richmond, VA and Philadelphia, PA markets I am particularly interested in. The file is below if anyone is interested. Mainly concerned about estimated expenses (insurance, taxes (1.2% per the city we're interested in), vacancy estimate, property management per quotes received, and small maintenance reserve saved each month).

Thinking it's better to be conservative than not, but don't want to play it so safe on paper that we never move forward with anything.

Appreciate your feedback!

HOLD Spreadsheet

Originally posted by @Adam Fout:

When analyzing a deal, should an investor who finances the deal with a conventional loan factor in ROI on debt pay down and ROI on appreciation?

Example: I am looking at a property to purchase for $132,000, 25% down on a 30 year note and the monthly rent is $1,050. Total upfront cost is $37,440 (Closing costs, repairs, down payment) After expenses, the ROI on cash flow is 4.77%. This seems low until you calculate the other two. Annual loan pay down is $5,671 which gives a ROI of 15.15%. Ohio's average appreciation rate is 3.52% so using that percentage The property should appreciate $5,533.50 the first year with an initial FMV $155,000. The ROI on appreciation is 14.78%. When you add these three together you get a total ROI of 34.7%!

The problem I see with this model, is if you rely on all 3 numbers you could have negative cash flow and still calculate a positive ROI. Just wondering what other poeple's thoughts are on this subject?

Hi @Adam Fout. Sorry to jump in so late. I am searching for our next buy and am looking at similar purchase price/target rental numbers, so this is an interesting example. However, I've been using the HOLD worksheet from Keller and if I calculate a $132,000 buy at 25% down and $1,050/mo rent I get almost no cash at the end of the month after conservatively budgeting expenses (mortgage, insurance, taxes, property management, vacancy, maintenance reserve). ROI is closer to 1%.

How are you calculating your potential deals? This is something I am very eager to learn more about as I search around. Based on my assumptions I'm not finding anything I think would be worth buying, but I may be way overestimating things!

Appreciate your feedback. File link to the spreadsheet is below. 

HOLD Spreadsheet

Good Morning Everyone, I'm looking for general advice on preparing for the commercial loan application process. Did you come prepared with a business plan, property analysis, past examples of rental experience, etc? Or in anyone's experience is the process more robotic in that? Appreciate your insight and personal experiences. Was one lender more willing to provide financing than another?

I'm in VA, and we charge $50 if paid 5 days after it is due. State law does not cover late fees. If nothing is mentioned in the lease we are not allowed to charge one, so we try to be very clear in our leases. We do not charge a returned check fee, which is limited to $50 by state law. Dialogue and communication is very important to us. We're all humans who encounter the same ups and downs. I would rather work through the problem and strengthen our relationship with someone as a first course of action. Last resort is to threaten eviction, etc.

Hello BP Community, I'd like to open up a bit and share the biggest fear my partners and I have as we get off the ground with our first SFH rental. This group has been so encouraging thus far, thank you all We're terrified (strong word, but perhaps appropriate for us) of what might happen if a tenant were to injure themselves at our property. We're not solely financially independent yet, so the thought of continuing to pay for our property out pocket does not phase us nearly as much as the treat of a multimillion dollar lawsuit stemming from a terrible personal injury. Maybe I've seen too many personal injury attorney tv ads? Maybe being slapped with a bill in the "millions" makes me think my life would be over? Maybe I'm overreacting? Whatever the case may be, it is our biggest fear. I'm curious to know how you all have reached a level of comfort (high on the "I can sleep at night" spectrum) with regard to liability coverage at your properties. Thanks f or all of your advice thus far!

Mike Wood Thanks very much for the feedback. Didn't think to go the non-refundable route but it makes total sense.

Whoops, I meant to say Pet!

Hello BP community, Any advice regarding amount to ask for pet deposit? SFH, $1350/mo, tenant will have 2 cats, we will keep one month's rent as security. let's assume credit/background/refs are good. Appreciate your advice and any problems/non-issues you've had renting to pet owners

Thanks very much Casey J Burkhead and Chris Eaker for the advice. Once we have the policy squared away I'll post an update outlining the cost and terms. It sounds like we'll pursue a personal umbrella from our current agency for 1m that will need to cover the rental we currently have. Have a great weekend.