All Forum Posts by: Patrick Daniel

Are you part of a REIA in your local area? If you aren't comfortable on a deal by the time you find it driving for dollars, you should find someone that is where you would like to be in 5 years and bring them the deal so you can partner.

Best of luck!

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Originally posted by @Andres Aguirre:

Hi everyone,

New prospective investor here with TONS of questions and couldn't have found a better place to come searching for some answers :) Rather than post a very long list of questions, I thought it would be best and most beneficial for everyone for me to post one question at a time in the most clear and concise way possible (for which I will try my best!).

I've been immersing myself in books and podcasts over the past several weeks and have been particularly intrigued by the BRRRR strategy. It seems to be a very successful strategy and one that can result in rapid growth. After repair value (ARV) seems to be the biggest factor that can make or break your deal, especially if you are relying on short term financing for the downpayment/rehab and can't afford to leave any money in the deal. So my question is, how can I come up with a good estimate of the ARV when analyzing a deal and have some level of assurance that a bank would be willing to refinance for that amount?

Andres

Hi Andres,

The best way I have found for ARV is to do the following: (You dont have to have a deal to do this, you can look at any house on the MLS and calculate out the ARV just for practice.)

1. Find your subject property

2. Locate like homes in:

the same subdivision (If it is a house that is lakefront, don't compare it to a house that is across the street that is not)

same number of stories

same/similar lot size,

same bed/bath construct,

same/similar square footage

That have sold in the last 90 days.

3. Pick the 3 that most similarly represent your subject property and find the average price per square ft that they sold for.

4. Multiple that average Price per square foot by your square footage.

5. Subtract 5%.

6. You have your ARV:

Example:

SFR: 3/2 1,500 SQ FT $150,000 = $100 / sq ft

SFR: 3/2 1,650 SQ FT $185,000 = $112.12 / sq ft

SFR: 3/2 1,700 SQ FT $165,000 = $97.05 / sq ft

Your Property: 3/2 1,548 SQ FT @ 103.05 = $159,531 - 5%

FINAL ARV: $151,554

Hope that all makes sense, please let me know if you need me to expand more!

1 Vote

Have you thought about finding a trustworthy flipper in the area and partnering with them on the house? You provide the property, they provide the funds to flip and the work, then you sell and split the profit?

Not sure how that would work in Canada and if their are local/national laws that would get the way of that.

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You can represent yourself when you purchase a home. When it is an off market deal, generally buyers are required to pay for their agent out of pocket.

We generally do not use an agent when buying off market. Just ensure you are reading your contract, that it is a legal contract, and that you know what you are signing. I had a Wholesaler try to sneak in $2,500 of extra fees on my last purchase just to see if they could.

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How difficult do you anticipate the subject property will be to sell? If a fairly quick process, could you identify the property you would like to purchase and THEN sell your currently owned home? That would help the 1031 timeline.

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Loved this show. Great to hear Josh back and @Brandon Turner and @David Greene were sharing their scribe knowledge as usual! After that marathon of knowledge and information I wanted to to play Rocky training montages in the background and buy a dozen deals! Top 10 show.

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You are an Inspiration man! I want to be like you in a year! 15 here I come!

Originally posted by @Anthony White:

I would like to THANK BiggerPockets for your guidance and information made available!

Reading, Listening to the Podcasts, networking on here and just everyone has been awesome!

It has been a WILD RIDE! As just a year ago I owned nothing but making my monthly payments on my primary residence here in CA, and work as a HS Teacher. Now I am in the middle of a rehab on my 3rd duplex which is going well. (fingers crossed) :)

When I retired from Coaching Football, my friend handed me a book, 'Rich Dad, Poor Dad' and I was hooked to action instead of watching others on HGTV!

I'm 37, a High School Teacher, Married with 2 Beautiful Children. I am not rich, I did not have a huge savings, I did not have parents or anyone gift me anything - I worked, and met great people that helped and guided me and I STILL HAVE TONS TO LEARN!

I am in California and my Properties are in Memphis.

Just wanted to express my gratitude and say IT IS POSSIBLE!

1 Vote

As others have said, process the eviction through your attorney and ensure your attorney is aware they are military. If it comes down to them owing you money and it is taken to court, the judge can order an allotment come out of their paycheck to pay you back.

Military Personnel are just people, and they should be held to their contract just as everyone else. I understand some want to be more linent and nice to service members, but what is nicer:

1 Letting the service member stack up 6 months of late rent before pulling the plug and then having them be so far in the hole that their check is garnished, and then their like at work becomes problematic.

2. Be swift to fix their deficiency through proper legal action and either they get current and clean up their act, or they don't and they be come their Command/Installation's problem before it gets too far out of hand.

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Originally posted by @David Slattery:

Hey Everyone! I've spent years crunching deal numbers just to let good properties get away and then see the gains someone else ends up making down the road... It's finally time to make moves, and I thought some perspective from the board might help me align my thoughts with reality.

Here are 2 Pensacola duplex's I'm evaluating and comparing. I'm inclined toward duplex #1, but I'm wrestling with my #'s for whether either is a worthwhile deal, and if so then to the comparative quality of both deals. What are your thoughts?

Duplex #1

Cap Rate 7.34... Cashflow $3,164 annually... Cash-on-cash 7.72%

The Property:

- Not listed, but owner mentioned to tenant they would sell it for $159k

- Each side is 2/2 rented at $750 each ($1500 total); Tenants handle all bills and lawn care

- No urgent repairs needed, but it's basic and somewhat outdated

The Area:

- "A-" neighborhood (upper middle class for Pensacola; good schools; low % of rentals; this is the only duplex I'm aware of in the neighborhood

- SFH's in the neighborhood are selling in the $175k - $275k range

- SFH's rent in the $1300 - $1600 range (mostly 3bed/2bath).

The Numbers:

Offer: $148k (no realtor) + $4000 (closing / inspections / etc.)

Financing: 25% down ($41,000); 75% financed 30 year fixed @ 6% interest = $666/mo mortgage

Expenses: Property Tax = $2000 annually; Insurance = $2000 annually; Maintenance/repairs = $1500 annually; Vacancy = 7.5%; No prop mgmt*

Rent: $1450/mo (conservative est.)

Duplex #2

Cap Rate 10.81... Cashflow $3,793 annually... Cash-on-cash 18.96%

The Property:

- Listed at $80k

- Recently rehabbed

- Each level is 2/1 rented at $500 and $550

The Area:

- "C-" area (area has mixture of tenants; this is on a busy road so it's not nestled back in the 'hood where you wouldn't want to go)

The Numbers:

Offer: $70,000 + budget $2,500 (closing / inspections / etc.)

Financing: 25% down ($20,000); 75% financed 30 year fixed @ 6% interest = $315/mo mortgage

Expenses: Property Tax $700 annually; Insurance $700 annually; Maintenance/repairs $750 annually; Vacancy 10%; Prop Mgmt 10%

Rent: $1000/mo (conservative)

Looking at your numbers, I agree that they are a bit tight for both units. I don't see a break out for CAPEX, I'd that rolled into maintenance and repairs?

Also, is there a reason that you didn't include property management costs in the first one?

By chance is #2 a green block built with up/down units?

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Hey Obed,

Looking over your numbers there are a few things that look like they may need to be tweaked a little bit. I would probably estimate vacancy at 8-10% to be safe as well as raising your CAPX and repairs to 7%.

When you look at it, with the 50% rule it would be cashflowing just over $200 a month rather than $600.

One other thing to think about is the residency requirements of the VA loan. With this type of loan, you are required to intend to be an owner occupant of one of the units for the first Year.

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All Forum Posts by: Patrick Daniel

Patrick Daniel has started 2 posts and replied 185 times.

Post: Do I need an agent to buy wholesale?

Post: Newbie Question #1: How do you estimate the ARV on a home?

Post: Flip to Myself or sell As Is?

Post: Do I need an agent to buy wholesale?

Post: who knows about Pros and cons of an 453 deferred self trust?

Post: Ep 290. 7 Paths to Financial Independence PLUS Josh Dorkin!

Post: Thank you Bigger Pockets! From 0 to 15 Doors in a Year!

Post: Help Evicting a Military Family

Post: Deal Analysis - Dueling Duplex's in Pensacola

Post: [Calc Review] Help me analyze this steal, I mean deal?