All Forum Posts by: Peter Korty

@Jeremy VanDelinder and @Shahriar Khan,

Thanks for the replys! 

My initial thought is to pass on it. I suspect that it needs too much repair and won't qualify for new permitting standards and is just too risky. This house was also featured on our local news because several animals they were fostering were killed. I think everyone else made it out okay though.

@Jeremy VanDelinder, the building codes just changed here from the 2013 building codes to the 2020 codes in January, and this house is so close to the neighbors house that the roof dumps onto the neighbor's roof and gutters. I don't know what the 2020 setback codes are, but I'm guessing that it would be in violation now. Would you still consider this property or do you think you would pass on it? 

Hi BP Community,

Would you buy a house that has significant fire damage? I found one on Zillow today for $19,500 FSBO. Mostly curious is all.

Thanks for the help!

@Tim Herman,

That's good advice even if you're investing in your own backyard! 

Hi @Juan Rosado,

It's probably just my misunderstanding of the report. I was thinking that the Monthly Cash Flow -$333 / $354 referred to Apartment A / Apartment B. I'm realizing now though that it probably was meaning pre-refinance and post refinance. My bad.

I personally am a total newbie myself and don't even have my first deal yet, so I'm certainly not any kind of authority on money lending. My understanding of hard money lenders though, is that they are interest only lenders. So you'd be paying 8% of the loan amount until you refinance with a more conventional PI loan and pay the hard money loan in full. 

As far as the 100% LTC, that simply means that your loan amount will max out at the construction costs since LTC=(Loan Amount/Construction Costs)*100%. For example, if you're approved for 100% LTC, and you have $40k in construction costs, you can only get a loan for $40k since ($40k/$40k)*100%=100%.

If they did 100% LTV, that would be totally different since LTV=(Loan Amount/After Repair Value)*100%. So for example with 100% LTV, if the property's ARV is $130k and it needs $40k in repairs, then the loan amount can only be for $90k since (($90k+$40k)/$130k)*100%=100%

Depending on your area, I think you'll see anywhere from 2+% market appreciation generally. I like to be conservative with my numbers, so I use 2%. Plus, that's what Brandon puts in when he does the deal analysis in the webinars.

That's a good question @Kris Columna,

I've actually wondered that myself. I had created my own spreadsheet to analyze deals with, and the numbers on my spreadsheet were a lot closer using the new calculator than the old one. So my vote would be to use the new one. 

The new calculator hides a lot of unnecessary information as well, all while keeping more relevant information in front of you. Especially the Insurance expense.

But that's all just my opinion.

I haven't figured out the $3k profit yet either. Like @Will Dixon said, it would be the Equity - Total Expenses = Profit. It looks to me like you're planning a house hack, but the cash flow from your tenant isn't enough to cover all the property expenses. 

If you can find a bank that will loan you 100% of the acquisition price, you need to give that banker a gift. Even if it is a jelly of the month club membership. "That's the gift that keeps on giving the whole year." :) Also, I'm a little concerned that your property value increases of 8%/year are too high. I think that if property values were to increase by that amount annually in your area, the estimated expenses increase would be higher than 2% as well. That is just my opinion though and I don't have any facts that would support it or disprove it.

Your vacancy estimation is also too low for my comfort. 2% would mean that it's fully occupied for 11.76 months of the year, or vacant for only 23 days/year. I think a more realistic vacancy rate is 8% or 1 month/year. Fixing the things that the previous tenant broke could take you more than 23 days.

I wouldn't say that it's a bad deal necessarily, you just need to find the right price and refinance amount that makes it a great deal.

Hi @Brandt Welch,

If you don't mind me asking, what is your reasoning for creating the LLC in the first place?

I don't honestly know anything about it, but I would think that if a court pierces your corporate veil, anonymous or not, I think they'll still get the information to track it back to you.

My understanding is that LLCs are really only valuable to protect you from a partner and a partner from you. Hopefully someone more experienced than me will provide you with more information since I haven't even closed on my first property yet.

@Daniel Johnstonbaugh,

IMHO, even with the total rehab, your monthly repair expenses would be pretty low, but the CapEx will still be there. Because everything is new, I would start at 10% as a base and increase it depending how close to end of life most of the CapEx items are. I think I would still factor in a 10% management fee. Like Brandon says in the webinars all the time, what if you decide to go on vacation? You'd still need someone to manage the property for you. Tim is also right too. Most banks won't let you refinance more than 70-75% of the appraised value. If you do find a bank that will let you take all of your expenses in the property out, you should probably send them a gift on a regular basis. Even if it is a subscription to the jelly of the month club.

I run my numbers pretty conservatively and don't even have my first property yet, so you may want to take my opinions with a grain of salt. My Dad would say it's your deal, you do it your way. 

@Don Stocks is right about the Lafayette market. When I run my analysis on a lot of properties in Lafayette, I tend to find that the number that makes it work for me is usually 55-60% of the asking price. Now that things are opening back up, properties are flying off the market. I checked out a house in the neighboring town, and it was on the market for less than 12 hours before it was sold and off the market. A house that my realtor and I checked out today had a person checking it out when we got there, and another showed up right before we finished up.

@James ONeal, Noblesville/Westfield prices and economies are very similar to Lafayette. A lot of middle class blue collar workers like Lafayette. The prices are maybe a little higher, but not too bad. Zionsville, from what I've been able to tell, is much more expensive. Lots of $1M+ properties, but it's right on the edge of Indy with a lot of upper middle class to upper class white collar workers. I can't speak to Plainfield or St. John. I can't say I've ever done more than driven through them a couple of times.

@Elijah Miller,

We're actually next door neighbors. I'm in rural central Indiana. If you're units are only 5'x10', then you'd be right on track with my market too. Slow and steady does win the race, I was just thinking that you may have the opportunity to increase rents and gain more value out of your business in case you hadn't noticed it already. I've only just started my journey of real estate investing, so other than a few tips that I can provide from what I've learned so far, my opinions are very inexperienced.

I do like the idea of the lease to own with the purchase option. IMHO that seems like a win win for you and the seller.