All Forum Posts by: Account Closed

My name is Scott and this is my first post on BP. First, I'd like to say how incredible this site is. I can't believe how much I've learned in the past few weeks just cruising through the forums. Thank you to everyone who contributes.

I'm 33 and my wife and I just had our first child. Working in sales with no pension, the thought of paying for my daughter's education seems overwhelming. I had this thought of buying an investment property for mostly a buy/hold strategy (a little cash flow would be great obviously).

I was initially looking at mf homes, but the amount of possible work, maintenance, and upkeep really scares me. So, I started looking into condos due to the fact that the hoa takes care of exterior maintenance. I know most of you don't agree with condo rentals, but let me know what you think of this.

The condo I would purchase is a 2br, 1 ba, 1050 sq ft, roughly $70k in a nice suburban neighborhood . Renters in this area generally seem to be responsible. Taxes are about $1500 per year. HOA fees are $200 per month. Liability insurance is only $150 per year. I'd put down 20% so my mortgage would be roughly $265. Rental income is going to be approx $925 . I spoke with the head of the hoa and they're very well funded. Special assessments are rare and the highest has been $19/month. They're currently 88% owner occupied and they keep a very close eye on that.

I used J Scott's rental analysis spreadsheet (awesome spreadsheet by the way) and it looks like I would bring in cash flow of about $2,500 per year and the tenant would be building about $1000 of equity per year. Is this a good investment? I know it doesn't fit the 50% or 2% rules, but it seems somewhat safe. My thought is this; I'm building equity that I can cash out in the future, not to mention the small extra cash flow, with minimal headaches or stress. My goal would be to buy a few of these over the next couple years.

As a newbie, I'd like to hear from you pros out there. Am I totally missing something or is this a reasonable low stress first investment? Let me know what you think. Thanks!

hi Scott, welcome to the club!

I've been kicking around the idea of condos for the reasons you listed. the next question(s) becomes: if you didn't have this, what else would you be considering? what's your opportunity cost? how much better can you do?

good luck!

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Originally posted by Leo Cao:

Yes I know, general sentiment is don't invest in condos. Look at the numbers anyway and see if it makes much sense,

SS in progress 120k [will go no higher]
Closing, say 5k
HOA fee, 250/month [master insurance and exterior]
Taxes at 170/month
Rental comp reliably at 1250-1350; relatively good market, will attract A class tenants.

Investor mortgage 4% 10 yr balloon, amortized over 30yrs, P & I, 430/month.

This unit would sell at 140k (+/-5k variation max) if marketed in the MLS. At the height of the market it might have gone for 180k, most believe this area is at the bottom and will go up again, so some appreciation might happen.

Not certain how this would exit, if it's rented, it's hard to sell while rented. If it's held to re-list, then the holding cost wipes out any gains.

The numbers just don't scream any sort of short term profitability. See any angles where this might be a good deal?

just a few questions before jumping into the actual crunching:

1. any plans for rehab to make unit rent-ready?
2. what #s do you have for regular maint? insurance? any special assessments by the hoa? vacancy?
3. what has been the historical trend for hoa increase? when was the last increase -- when's the next increase due?
4. 430/mo... i'm assuming this is an interest only loan (i get 400/mo @120k purchase for a 4%, 30y term
5. about special assessments, how old is the prop... are common area upgrades (sidings, roof, perimeter security/gates, garages/subterrainian parking, etc.) due soon - when?

if your expenses are about 50% (debt, tax, ins, hoa, maint, special assessment) of the gpri (gross projected rental income), i'd say you're on the right track and ready to do a more detailed DD.

just my $0.02!

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Originally posted by David Niles:

If done properly the BPO should be pretty close to dead on as they should have taken very specific data to the subject property for valuation. The key words are, if done properly.

I do BPOs all the time and most times there is enough local data available to comp things out pretty well, occasionally you get an odd ball area or house that can throw things off.
Zestimates make me laugh.

a good example... say an odd ball area does not have enough local/current data available to get a better picture of the neighborhood value ... again, for lack of knowing an area personally.

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Originally posted by Angel Perez:

Like Michael Quarles stated you shouldn't rely on anything other than your own valuation. These sites don't compare apples to apples but instead apply a market average in the general area without taking specific data into account. That's your job.

i don't mean to use that period as a point of valuation or comps. I was interested to see historically how the neighborhood was in that period. For example, if I can mark a general period when home prices are comparable to the neighborhood today, I can get a better idea of context of that price range in that neighborhood for lack of data in today's 6mo past sale span. in other words it's more to get confirmed insight using today's data and a similar period's data of what price range a neighborhood is (for lack of really knowing the area).

hmmm... hope that made more sense vs. making it more confusing! :)

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I've been looking at the case shiller data and wondering if I'm using it properly. The way i'm looking at it, I'm trying to determine if I can estimate like home values to match across diff periods of time.
For example, if csi in June,'88 is 74.39 and the csi in Feb,'97 is 74.40, does that mean the value of homes in the specific metro should be on average (or median value) be about the same? we would ignore month of the year since the data is seasonally adjusted and time wouldn't matter to much anyway since it's inflation adjusted as well right?

Can anyone chime in to shed some light on this?

Thx

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This is a good opportunity to get to know more than one gc. I was ambivalent w the guy I thot was good N had history too. But I ignored all the lil signs and persisted in hopes the flop was a fluke. Talk about not seeing straight. I'll never ever put myself in that situation again in hopes for being just a fluke. He's not my son, nephew nor family I can't walk away from... why tie myself up to more risk and uncertainty?

Anyway, u can let him finish if that helps ur conscience, But you can't control the quirks that got him where he is today. Ur colleagues,assuming have similar or related complaints, may hint to a bigger pattern u may not b privy to.

My vote is to chalk it up to tuition. As for future work.. too risky to b the gc. maybe earn back his keep as a sub to a new gc. Anyway, sounds like u have a good opp to meet new gcs... don't stick to just one... diversify for backup purposes.

I'd give my family a second chance on a v short leash.. but that's bc its family and my guilt n obligation wud influence the more efficient route of finding another. But then again,if it were family, I'd probably already have a clue for propensities that wud let me know if they were a good fit in the first place for me.

Good luck. I just have awful flashbacks of learning the hard way. I hope u can spare urself any more unnecessary hard lessons.

BTW, convenient of him to ask u to save his ***.. I guess he has no friends or family to borrow from eh? A more honorable and commendable action wud b to minimize ur burden and save his mess up by seeking a solution outside of the mess he created!

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Originally posted by Will Barnard:

Kelvin K. I realized I did not specify "All-in" in my statement above. The 80% I refered to was an "All-in" figure which covers acquisition price plus rehab costs. Thus, you have 20% spread left to cover holding costs, resale costs, debt service, and profit.

Hope that clears it up.

@Will Barnard

sorry bout the confusion... I've recently been making the connection in my head that ARV=FMV. Based on ARV (duh - after repair value), I didn't stop to think about the acronym (too stuck on FMV, which apprently isn't the same as ARV) that repair is already factored/computed and should not even be considered when you are talking about ARV.

for the longest time, I've been focused on FMV, and only recently updated my own vocabulary. :) Thanks again for the patient response. haha..

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Originally posted by Rich Weese:

My self storage units in Florida have been running approximately 15 to 18% vacancy.

My hundred and 154 unit apartment building in Garland Texas has been running under 2% for at least the past year.

My single-family residences in Texas, Arizona, and Utah have been running less than 1% for the past year.

@Rich Weese
only from my reading of different texts, would that low a vacancy imply that your rental rates are below market rate and could prolly be raised? at least that's what i've read from a few books on vacancy for multifam.

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eek... i'm having flashbacks of my personal, similar experience with my home rehab!!! :(

you've gotten some good feedback from the group above. having been thru this recently myself, i SO VOTE FOR

@Aaron McGinnis

that was my mistake when i was in where you are now...

@Karen Margrave

might be something...but might be more hassle than it'll be worth in the end.

how much work is left to do? how much more damage can he do? might have to pull in someone to save the day. really sorry to hear your shituation... that's just terrible. and i certainly don't envy your position!

been there, done that... ONCE... never more...

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Originally posted by Will Barnard:

Every market is different and every market has changing conditions. So impossible to answer your question, but if your question was what is the highest you could go based on ARV for acquisition, and your resale market had little competition and lots of hungry buyers, you can make small amounts of money going as high as 80% assuming your ARV was over $100k and under $600k (this is based on my market in So Cal) though I would not recommend paying that much to anyone starting out.

Also, it depends on if you borrow money and the cost of that money.

@Will Barnard
wow... really? 80% in la, oc, and ventura counties? what kind of rehab costs are you looking at? this is assuming not adding sq footage to the property, right?

80% of 600k, are you saying your MAO would be 480k... what kind of rehab, holding, money, closing, and most importantly, profit are you looking at w/a 80% ARV?

please let me know if i'm doing something wrong or missing something, but this is how i understand your reply:

480k offer
50k rehab
10k? holding (just assumed 5k - ins, 100*6 - util, 3k - tax est for 6mo's)
40k ? money (i just did a sloppy rounded 12%/2 +2pts for a 6mo t/a)
36k closing (assuming 6%.. i didn't even factor closing on purchase)
...
oops...that puts me at 616k without room for profit

even at a 25k rehab, there's no profit.

please enlighten me if i'm misunderstanding something.

thanks!

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All Forum Posts by: Account Closed

Account Closed has started 4 posts and replied 171 times.

Post: My First Post: Condo investment / rental analysis. "Decent" investment?

Post: Condo Deal Analysis

Post: BPO vs Case Shiller vs Zillow – Which valuation is the most reliable

Post: BPO vs Case Shiller vs Zillow – Which valuation is the most reliable

Post: BPO vs Case Shiller vs Zillow – Which valuation is the most reliable

Post: Upside down contractor. Loan to finish project?

Post: ARV

Post: whats a good vacancy rate?

Post: Upside down contractor. Loan to finish project?

Post: ARV