All Forum Posts by: Matt H

You can flip a contract for whatever % you want. I've seen as high as 5% for very good deals. I guess it all depends on how desperate you are to flip the paper, how much interest there is in your deal, and how good of a deal you really have tied up. Like if you can prove that your contract could net the investor six figures then definitely charge 5% but if the numbers are tight already then you might want to just dump it at 2%. Here in Alberta commerical realtors make 3% on commerical deals. That's why 3% is sort of the norm around here.

Tash....You got a lot to learn. You might start by going to ebay and getting a copy of "Carlton Sheets No Downpayment course" buy it and listen to it in your car as you drive around. You'll quickly start to learn how this business works.

To answer your question...have you ever watched TLC those shows like "flip this house" and "property ladder"? They buy a house, do some fix ups and then sell for huge profits? Thats' one way to flip a house. Some people buy a house, mow the lawn and spend $20 bucks for a gallon of paint to repaint the front of the house and then relist it at $10k or $20k more and sell it. All the properties I've flipped I didn't do a thing to any of them and flipped for as much as $140k net profit in six months. So flipping properties is an easy way to make huge winfall profits with little to know work.

So yes you can easily tie up a property and then sell the contract for a few thousand dollars profit to a REI by going to your local REI club and letting them know that you have a contract for sale. That's one way to flip stuff without doing much work and when you only have $1500 to work with. It happens all the time.

sarahheck.....Yes I believe your right in that this isn't rocket science but you just need backbone. But one thing, I wouldn't get a note at 10%. Just get a regular mortgage if you can at a low rate. That way the property should throw off a bit of cash. I don't think you'll lose money on it based on those numbers and if you get a regular mortgage for it. Besides as I've said time and time again, you can't get rich off one deal. You have to do lots of deals, so just get that first one out of the way, over and done with so you'll have some experience and the confidence of knowing how a deal is done. That way you can move on to bigger and bigger deals. I wouldn't hold it for 3 years though unless your market is appreciating above the national average. But if you're only making 5% per year then I'd try and flip it right away. Try to get your price though which might take you a little longer to sell, but still it won't take 3 years. Maybe 1 year and you'll have made several times what you put in which you can then use to find a bigger place to flip. And continue to do that leveraging your money over and over again. Because when it comes to flipping you could do many many flips in 3 years. By the end of flipping homes for 3 years you'll already have leveraged you money so many times that you could start shopping for an apartment building to buy and hold. But congrats man you're on your way.

You guys are so funny that I shouldn't even bother to clarify things, but maybe I should....

Mike is right in his assumptions about a few things. The actual liquid cash flow is not $85k. I redid the numbers and now realize that the liquid spendable cash flow of those 4 buildings will be actually $36k conservatively. Plus my other business which does $20k liquid per month so I'd have only $56k in liquid cash flow.

In my original numbers in coming up with the approximate 85k I was factoring in everything. Such as appreciation (5% per year) and mortgage pay down. As if you factor both of those in the numbers into the equation the total income goes way up to $80k for just the buildings. And factoring in my other business ($20) up to $100k in total. So that's where that approximate 85k comes from which was accurate.

The total gross monthly income of the properties and my business is way up there at $157500. And because my operating costs have been so far substantially reduced by having my realtor run the property at 1% management fee I'm quiet certain that these properties are bound to cash flow significantly higher than what I'm assuming. I'm going ultra conservative right now basing the NOI of 50% of the gross and going from there to come up with the cash flow. So I'm curious to see what that much income looks like come august when I close on the last building.

So far the amounts I'm putting down vary. I found out that I might be able to get an additional 5% bring my total LTV up to 90% on 2 of the larger ones. Then I'm putting down 20% on a 29 suiter and I put down 10% on the one I already closed on.

The original question was "What do you do after you got enough property?"

Mike is right though in that not all those funds are coming from the buildings. I was factoring my other business into the equation. Part from another source, part from the buildings if you want be be exact. But you've got a keen eye. The main thing is that there's 182 units and I'm just debating if I should condo convert them all and cash out or not? My thought is that holding would be the comfortable easy route, but if you wanna reach the next level condo converting would be the way to go. But I don't know, do you know?

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I'll supply a little more info:

The building is grossing $15,600 per month. I'm factoring in 50% for expenses even though I know there not that high as I have another building in the same city I run.

But at 50% that leaves $7800 per month NOI.
(rounding these number off by a few dollars)

I have the first in place at: $620 at 6.5% $4,185

I have a second in place for $50k at 6% $325

I could get another loan for $150k at 16% $2,040

Total debt servicing: $6550

Net cash flow: $1250 per month

That's with no money down. I think this looks pretty good.

Allcash.....I'm not sure where you're coming from on this. This is like the best deal in the whole country right now! I haven't found anything in a city this size (120k population) for $28k and change a door. And with no money down my returns in infinite in this scenario. Just debating if I should leave that $50k I already put down into the deal or take it out.

I don't like that 16% money either so I'm thinking that I'll leave my $50k in and then pay off the $100k 16% money asap.

Dealfiles.....Ya I could put in the $150k now but I have two other deals coming up that I have to close on. So I'm thinking of borrowing some 16% money very short term until my other deals close, just so that I have enough to close my other deals. Then pay off any 16% money I've borrowed for this deal.

No way that sounds rediculous. 10%. On commercial the going rate is 3%. Definitely shop around. A listing agent doesn't do any work anyway. All they do is list it which is all you need anyway so that 1000's of other realtors and investors will see it on the mls. I would never pay 10%. Pay 3%

All those numbers you provided all look right. Just that I was thinking that your interest rate on your first must be super high, like 8%? What is it anyway? I think that's what's eating up a lot of profit. But if you managed the building yourself your expenses likely will not be 50%. That's why I don't look in big cities much. It's been my experience that usually the cash flow isn't there on buildings that are for sale. Maybe try to focus on smaller cities and towns. But at least your analyzing deals right, so you're one step closer to finding something that will cash flow. One other thing to do though is don't look at the immediate profits. Usually if your putting such as small amount down then the building will have very little cash flow at the start. But figure out where you'll be in five years as you have all the economic factors of mortgage paydown, appreciation, rent increases all working for you. You got to think long term. Another thing is that on lots and lots of buildings I look at there's little to no cash flow and you just have to keep looking. Eventually you find one that does have good cash flow especially in smaller cities. Good luck.

Wheatie....

Thanks for the complement! Anyway I wish I had some numbers to know what exactly your talking about in terms of these buildings. It's pretty rare though to find buildings where the cap rate is over 10%. So what cap rate your talking about is within range.

What your missing is a few things:
Appreciation. The national average is about 5% per year. So on a 1m building you're making $50k per year in appreciation. Also on a 1m building your mortgage paydown ususally starts at about $1500 per month. Another $18,000 per year. Also you should be able to do some minor rent increases each year. Perhaps two 25$ rent increases. Factor that in over the next five years. So as you can see it's not just immediate short term cash flow you have to look at it's all the factors combine that make it all of a sudden more attractive.

Because you got:
Cash flow
Mortgage paydown
apprecition
rents increasing
tax depreciation of the asset

For example on a building I just bought earlier this year. It's cash flow is about $10k per month, Appreciation is another $10k per month. And mortgage paydown is $3k per month. So as you can see cash flow is only amounting to about 40% of what forms of income are coming in.

Also the mls and loopnet and those do work. You just have to monitor them on a regular basis. Maybe see what features they have for emailing you new listings. Because for example I stopped looking. My friend who's pretty new to the game goes on there. Finds a multi family with great cash flow. But even better condo conversion potential. He could easily condo convert that property and make 1m net I had calculated. And he tied it up and is buying it. So it's amazing what kinds of deals you can miss if you stop looking. You could miss your million dollar baby. Hope that helps.

Beek.....

Trust me. Don't waste your time trying to get a big discount on an apartment building. You might get 10% if you're lucky. But you have to understand the market because in commercial what happens is often a building will sell above list just as easy as below. You got big players with big pockets who are thinking long term. And if a place comes on the market they will pay list or higher in many situations if the buildings numbers work. If I find a deal I offer list price. Because if it's already a deal then you don't need to get a discount. What you need is to get the property. And you're not going to find another deal very quickly so when you do find one just offer list or maybe 5% below. But even then if someone else offers list then you lose the deal. But you'll beat out the others who are trying to get that tiny discount. Also when it comes to multi family you got to think long long term. Like figure out where you'll be in 10 years if you can get the property now. usually the situation is pretty good. One other thing, sometimes you can get a discount if you're someone who's paying all cash. Like if you say "I'll give you 1m all cash for your property going for $1.3m" some will do that. But if you're trying to put down $50k to buy a 1m building, and you have to get a first and a seller second then there's absolutely very little chance of you getting any discount. If that's the case then you must offer list, so that it will be a trade off. They get they're price but they give you your terms. ie: seller second. Hope that helps.