All Forum Posts by: Riley F.

Shoot @William Robison a note. He's been very helpful for me and might be able to point you in the right direction.

@Joe Spence

Congratulations on your decision to buy. The one piece of advice that I wish I had when I had started was to take a look at what the market is giving you for cap rates in different types of properties and narrow down your focus area from there. What I mean is, as a buy and hold investor, if you're primarily interested in cash flow, it's entirely possible that because of your specific market's dynamics, single family might have higher cap rates than multi-family. The corollary to this is, just because you narrowed down your focus area, doesn't mean you should neglect glaring opportunities outside of your focus area. As an example, I was almost exclusively looking at 8-10% CoC , REO and HUD SFRs in suburban B / B+ neighborhoods. One day, I completely randomly toss in an offer on a couple of rural duplexes that have been on the market for a while and get bid at 35% CoC. This never would have happened had I rigidly stuck to my buying criteria that I set when I knew absolutely nothing about REI.

Happy hunting.

By good I think @Brant Richardson means correct, not that it's terribly profitable. I guess I'll play devils advocate on this.

@Logan Freeman I'd let this thing die on the vine at the current price, as you managed to shave only $3k off the asking price. This thing has been on the market for around 250 days, and the current asking price is $99k. Maybe the seller will sharpen his pencil and come back to you with a real counter-offer. If you could clip this place at $80k, that would make it a very strong deal - see below analysis:

https://docs.google.com/spreadsheet/ccc?key=0As41cTV1LkrzdDQ0MDI3VThnTURRdVQ5bU9sZWlKMEE&usp=sharing

To me a 14% CoC on a duplex in Independence at retail price is just... meh. Not penicillin and not strychnine, that is wont help or hurt you.

Can I ask about the details of the negotiation? What was your starting offer and what did the counters look like?

Rents weren't...

Dear God my above post has some bad grammar. Must have been drinking when I posted it.

@Brant Richardson

This popped up on my KC alert and I just noticed the date of the original post. Funny how quickly thing change, huh?

I'm sure the realtor you're talking about is @William Robison , whom I can't say enough good things about. Anyone shopping the KC market, especially from out of state, would do well to reach out to William.

Quick update: During DD we found out that rents wasn't $650 per unit as listed on pro forma, they were in fact $700. Strange turn of events which put CoC at around 30+%.

Should close early next week - will keep everyone updated.

I'll be there - thanks for organizing.

@Erik D.

I see a couple of potential obstacles on this one:

1) You are probably going to have a tough time negotiating the short sale for $31,000, though I can't say for sure because I don't know the property or the bank that is holding the paper. Thing is, even if the home owner agrees, the bank likely wont.

2) Rehab cost isn't really determined by preference (read: I am willing to put X into the property), it's really driven by what is required to make the property rent ready as dictated by the market that you're in. You really need to sit down, look at properties that are similar to what you're hoping yours looks like when finished, put together a scope of work, and have a couple of contractors bid on it. It may be that they come in at $25k or less, or maybe that they come in at substantially more. My $0.02 is that you don't want to leave a ton of deferred maintenance in the property and start renting it out, because you'll have trouble with tenant quality and costs down the road.

Just as an update. My offer was accepted on these duplexes on Friday - I'll be moving ahead with due diligence and will keep everyone updated on how things go.

@Brant Richardson

To address your earlier question , yes, the units are all separately metered.

My biggest concern is exit strategy, but lets be honest, if the property yields 25% per year, you exit every 4 years without selling if you can keep it occupied. I was with a friend today who got into Atlanta 2 years ago and sold 2 months ago at a 75% cap gain, and part of me thinks that seems reasonably smart too. I have a hard time wrapping my head around that sort of appreciation levered 5x.

$100k purchase, $20k down, $175k sale price, 208% return on capital invested.

For my proposed houses over 2 years:

$100k purchase, $20k down, $7k cash per year, 70% return on capital.

I know which I consider to be more predictable, which is the latter, and which I consider the be more attractive, which is the former. In between that, it's a balancing act.