All Forum Posts by: Presley Balestreri

First Investment Property - Commercial vs Conventional Mortgage

I have been researching and trying to decide on a lender/Type of mortgage for my first property. I would like to get pre-approved so I can be ready to purchase when the time is right.

My Property goals are to start and scale up to multiple investment properties over time. I am unsure if I should just start with a commercial loan under an LLC as to not affect my personal DTI. This may be overkill to start with, which is why I am debating for my first property to keep it simple and get a Conventional personal loan. My main concern being, that it would affect my ability to purchase other properties in near future. I am looking in the Memphis/Cleveland markets, Any and all feedback or Lender recommendations are appreciated

Thank you all for the info/Feedback.

I have updated the Calculator and have changed the interest rate to 6% as well as Capex 10% Monthly. It appears if I purchased for a negotiated price of 85K (property is listed for 95K) It would be cashflowing $108 per month, Which seems pretty tight. I do have my Vacancy Reserve at 10%, Which may be high.

Hello, I have been looking at rental properties in Memphis TN area. I have came across a possible property for my first Investment property. I was hoping to get some feedback if the numbers all Look good, This property appears to be a solid property. Tentant is in place Currently M2M since 2021 at $950. Any and all feedback is greatly appreciated! 

BiggerPockets Rental Property Calculator
McKellar Ave
Monthly Income: Monthly Expenses: Monthly Cash Flow: Pro Forma Cap Rate:
$950.00 $658.43 $291.57 8.99%
NOI Total Cash Needed Cash on Cash ROI Purchase Cap Rate
$7,638.00 $14,025.00 24.95% 8.99%
Property Information
Purchase Price: $85,000.00
Purchase Closing Costs: $1,275.00
Estimated Repair Costs: $0.00
Total Cost of Project: $86,275.00
After Repair Value
Down Payment: $12,750.00
Loan Amount: $72,250.00
Loan Points: -
Loan Fees: $0.00
Amortized Over: 30 years
Loan Interest Rate: 4.000%
Monthly P&I: $344.93
Income
Rent $950.00
Total $950.00
Expenses
Electricity $0.00 Gas $0.00
Water & sewer $0.00 HOA fees $0.00
Garbage $0.00 Custom expenses
Vacancy $95.00 Maintenance $47.50
Management $95.00 Insurance $41.00
Property Taxes $35.00 Mortgage Payment $344.93
Total $658.43
Buy & Hold Analysis - 01/09/23 10:05:27
PM Page 1 of 3



Total Initial Equity: -$72,250.00
Gross Rent Multiplier: 7.46
Income-Expense Ratio (2% Rule): 1.10%
Typical Cap Rate: 8.99% Debt Coverage Ratio: 1.85
ARV based on Cap Rate: $85,000.00
50% Rule Cash Flow Estimates
Total Monthly Income: $950.00
x50% for Expenses: $475.00
Monthly Payment/Interest Payment: $344.93
Total Monthly Cash Flow using 50% Rule: $130.07
Analysis Over Time
Annual Growth
Assumptions
2% 2% 2%
Expenses Income Property Value
Year 1 Year 2 Year 5 Year 10 Year 15 Year 20 Year 30
Total Annual Income $11,628 $11,861 $12,587 $13,897 $15,343 $16,940 $20,650
Total Annual Expenses $7,976 $8,053 $8,293 $8,725 $9,202 $9,729 $10,954
Total Annual Cashflow $3,652 $3,807 $4,294 $5,171 $6,141 $7,210 $9,696
Cash on Cash ROI 26.04% 27.15% 30.62% 36.87% 43.78% 51.41% 69.13%
Property Value $86,700 $88,434 $93,847 $103,615 $114,399 $126,306 $153,966
Equity $15,722 $18,781 $28,499 $46,693 $67,767 $92,236 $153,966
Loan Balance $70,978 $69,653 $65,348 $56,921 $46,632 $34,069 $0
Total Profit if Sold $5,349 $12,214 $34,321 $76,583 $126,383 $184,723 $331,821
Annualized Total Return 38% 37% 28% 21% 17% 14% 11%

Hello, I have been researching and touching on investing in real estate long term for a few years now, but have yet to pull the trigger with my first property. 

I have always been interested in real estate and have viewed it as a potential to achieve my long term financial goals. My name is Presley, I am 24 and live in CaliforniaI own my own E-Commerce business and Manage a separate waste management company. My Goal for the next 10 Years would be to acquire 10+ rental Properties. I have been nervous with the markets to make the jump and purchase But I feel that I am ready.  

A few questions for the more experienced:

1) Purchasing Turnkey from a Turnkey Company vs Finding rent ready property on my own and hiring a management company for first deal?

2) My goal being multiple properties and owning a business currently, Setting up LLC for first rental property or purchasing personally?

3) Starting with SFH or a duplex in the Memphis area?

These are some of the questions I have. I am motivated to start this journey into this, It would be good to hear some feedback, any advice is appreciated.

Thank you,

Presley

Hey everyone, I am currently looking at a first time turnkey investment property sub 100K in Memphis, Any reccomendations/advice is greatly appreciated!

- Presley