All Forum Posts by: Peter Korty

I have a bachelors in electrical engineering technology and currently work as a test development engineer. I've worked with 3 other engineers that dabble in REI too. When I listen to the podcasts, it seems pretty common that the guests are/were engineers. Even Mr. Money Mustache was an engineer.

I think @Antonio Cucciniello hits it on the head that engineers are numbers people and this is mostly a numbers game.

Hi @Abdul Mitchell, I haven't bought my first house yet, but they get a 4.9/5 on their Google reviews and the couple of people I know that have used them said they were very satisfied with their services. 

Perhaps you can connect with some other local investors on BP or when the next meetup takes place you can ask more experienced investors there.

I hope it all works out for you,

Pete

Thank you everyone for helping me with this. I was talking with a friend at work who is also just getting started in real estate investing. Like Mark, he suspects that I'm over analyzing my market and am probably erring on the too cautious side. And I probably am. I'm an engineer by trade, so over analyzing a problem is kind of what I do... Maybe a local meetup will happen soon now that restrictions are loosening from COVID-19 and I can see if another investor would come up with similar numbers as me.

@Marcus F., I'm not planning to rent to students. I know how hard they can be on things that are not permanently theirs, especially if they are only planning to be there for 3-9 months. I would initially think that it's all in the screening process and lease to make a real difference IMHO though.

Thanks for the help,

Pete

Hi @Matt Williams,

The Market I'm in is relatively rural or agricultural based (Lafayette Indiana). The nearest large city only has a population of 72k. There is lots of manufacturing, but almost no one works directly for these companies. The manufacturing companies that do have direct employees are almost fully automated and only have about 80 employees at each. Almost everyone works through a temporary contract agency, so max pay is about $20/hr before taxes. The only other major employer in our area is Purdue University.

I'm looking at properties generally need moderate repairs IE $20k-$30k repair budgets. I always sort my Zillow listings by price lowest to highest. I throw out the houses that are in the worst neighborhoods and analyze the rest using the BP calculators. Once I finally find the right purchase price, I just divide that by the asking price. It's frequently been around the 55-58% of the asking price.

To answer your questions:

• Are you absolutely positive about what the potential gross rent will be?
  1. No. The extent of my research is talking to one local investor that said he rents out his between $700 and $750 per month. I also check Craigslist relatively frequently to see the rental rates. The rent ranges from between $450-$1400 per month with the apartments being removed from Craigslist within a week for $550 or less, within 2 months for $550-$800, and $800 and up have been posted for more than 3 months.
• What formula are you using to determine that you should be offering so much less than what homes are listed for?
  • I don't have a formula. I just use the BP calculators until I find a purchase price number that gets me to where I want to be. Then I divide the purchase price by the asking price to find what percentage of the asking price I'm looking at. I just noticed that several of the properties I've analyzed come out to about 55-58% of the asking price.

• Are you looking at single family, or multi-family properties?
  • Single family thus far. I started analyzing multi-family properties last week. These are coming closer to the asking price, about 65-70%. Dave Ramsey always says to use the 70% rule, so I don't feel too bad about those.

• Are you open to investing in other markets?
  • Yes and no. If I weren't working full time an hour away or were not just starting out, most likely yes. But right now, no not really unless I really can't find something in my target area.

Thanks for the help,

Pete

@John Teachout and @Marc Winter 

So after running the numbers and finding the property's good deal number, would you both say that I should submit an offer, even if it's 55% of the asking price? 

I've been afraid to because unless they are really motivated, why would they accept it? The only property that I've submitted an offer on they told me they would tear down the house and build a garage on it before they would sell it for that price.

Thanks for the help,

Pete

Thanks Marc! As a broker and investor looking at the MLS, I'm assuming daily, do you see very much over inflation of the houses listed compared to the rental rates? Where do you try to target for rental units?

Perhaps I'm not analyzing my market properly? When you analyze a property, what do you look for as an economic health indicators? Do you look for economic health indicators? In my area, while we have lots of manufacturing, most of the jobs are for contractors. I think we have relatively low prices for goods and services and the pay for these factory workers is steady for that, but home prices have exploded. Should all of this be included in analyzing a market?

Thanks for the help, I really appreciate all the wisdom I'm getting from the experienced investors on BP.

Thanks for the help,

Pete

Thanks for your wisdom John. It's much appreciated. 

You went two years with no deals? I wonder if your initial target area was like mine with over priced houses and low rents.

I personally haven't figured out how the people in my area even afford the home prices. Many of the houses that I analyze are realistically only $60k retail, but over the past 5 years have jumped to $140k. We did have two new companies move in, but their plants are almost fully automated.

How did you know when you found the right target market?

Thanks for the help John.

I guess I'm not looking for a formula to go by so much as I just happened to notice that the properties I've analyzed are a lot closer to 55-58% and am curious if that is relatively common.

Hi BP Community,

So I know that this has been asked/stated like a million times, but I didn't quite find what I was looking for as a newbie, so here it is with a little background.

I've been practicing deal analysis with the calculators using listings that I find on Zillow, and generally what I'm finding is that the number I need to make it a good deal is 55-58% of the asking price. Craigslist deals are pretty similar too.

Obviously off market deals from deal funnels are the better way to go than strictly going off of the MLS, but my question is mainly to the more experienced investors out there that analyze the MLS all the time. Is the MLS over inflated (deal wise) by about 55-56% generally speaking?

I'm guessing it's probably market dependent too, so as an example, in my area most 3-2 SFR units will rent for about $750/month.

What percentage of the asking price makes it a good deal in your area?

Thanks for the help,

Pete

Thanks for the help Guifre! I hadn't even thought about the holding costs at all, let alone including water and electric while I'm working on it...

Thanks for the help,

Pete