All Forum Posts by: Ben Bakhshi

The question wasn't whether 15-20% is enough. The question was attempting to discover:
When am i priced out of my market? If prices rise by 50% with no increase in rents, then the ROI on new purchases is 50% lower. Everyone has their own goals, but since I am relatively new to the business, I am trying to get a feel for what other investors are doing.

Hi all,
When looking for cash-flow properties, the last 2 years have been wonderful. We have some properties in our portfolio that are making 20% per year, most around 15% per year, and some, in nicer areas around 10% per year. None of these required significant fix-up costs.

My hypothesis is that we are in such a unique circumstance with the real estate crash, and 20% returns cannot exist for the long run in the open market. (Private sales, or fixer uppers, may be taken advantage of by saavy investors).

When do you say to yourself:
1. The returns on investment for buying properties in my area are not sufficient for me to buy and hold?

Follow-up question:
2. Is there a "typical" CAP rate that every market re-calibrates to?
Tangential follow-up question:
3a, 3b. What are typical CAP rates for condos, SFHs, 2-4 unit multi-families, and larger multi-families? And how much does this vary based on your region? Is there an equilibrium?

4. What do you think is a sustainable return on investment on the open market in real estate?

For example, as far back as the 90s in California, I remember people would buy real estate so long as rents paid down your expenses, ie. at the end of the year you made 0, but you were still satisfied.

Bump.

I have put together a presentation for this investment deal:
https://docs.google.com/presentation/d/1TRWPx8NcZs6xjwAQx1_tLCJPoUg9KgWYfHB3XsVQXns/edit?usp=sharing

Details:
Property is off-market, asking $55k. In a C area of metro Atlanta. Property was built in 2005.
We are a full service investment and management team looking for a cash partner.
:::
We create an LLC split 50/50 between Management and Investor.
Investor invests full purchase price + closing costs.
Management pays for all taxes, insurance, repairs, including property management for the first 5 years of ownership.
Gross rent is split 50/50.
Currently rented today for $1200 total, below market, to another property manager. (This property manager has introduced the deal, so we are committed to this rental contract for 1 year. Plus = reliable rent, Minus = below market rent.)

After 5 years:
If there is a sale:
Investor is returned their investment first.
Management is returned their repair/improvement expenses.
The rest is split 50/50.
If both parties decide to keep the property. Expense split changes to 50/50.

From day 1 investor will earn ~12.5% per year on their investment.

PM me if you are interested or email me at [email protected]

Let's use the 50% rule.
The house can rent for $900 realistically.
That is $450/mo in profits.
Mortgage and interest come out to about $350/mo
Our down payment is about $15,000 after CC.

Basically that comes out to an 8% return on the down payment, with principle being paid down, and not factoring appreciation.

My question still stands...
Why is the owner willing to take a reduced income from 8% interest payments, as opposed to collecting rent.

A couple other points just came up in my head:
1. She won't have to pay prop. taxes or insurance, so those expenses are gone.

We are approaching some deals that offer owner financing.
As an investor these deals make a lot of sense for buy and hold.

Terms like, 20% down, (prime plus 4.75) 8% interest at 30 year amortization, and interest rate can change after 5 years.
Monthly payments are around $400 a month.
Home can be rented for at least $800 a month.

Just curious because I am finding this almost "too good to be true" despite the high interest rate.

Reasons why I would consider offering owner financing in a sale:
1. I seriously need the down-payment right now.
2. Some other tax related issue that I don't currently understand.

Allow me to clarify, we are attempting to get financing for Investment properties and not a primary residence.

Do you have a name or office or phone number of a Wells Fargo employee that I can reference if I wanted to contact my branch again about his?

Let's talk.
A wholesaler helping me out would be great. Let's get in touch.

Joe Jones,
I think your buyers list needs to be targeted. You should differentiate between:
Owner Occupied - Seeking low down payment, and depending on the location a cheaper mortgage payment than rent payment.
Investors - Down payment up to 50% but would want to have a spread to rent out the property and make 12%.

As an Investor I usually find owner financed deals price right for Owner Occupied buyers than for me.

If you target your deals to the right buyers, I think building a buyers list would be effective.