All Forum Posts by: Mike Smith

Yes, use the property analysis tool. I am in your position right now. I have a contract on my first property, a duplex, and used the propoerty analysis tool to analyze the deal. It was very educational and helped me pass on several prior deals. I put in all my know expenses and figured cash flow. Then I threw in extra expenses, like a water heater going out, just to see what it would do to my cash flow. I quickly reallized that many deals are so close to break even that any unexpected expense will cause a loss.

I don't know the cost of insurance and taxes and any other expenses in your area, but your deal sounds like there woulnd't be muhc cash flow. I saw that just based on the deal I'm doing know. Can you raise the rent?

When you say cash flow positive, what exactly do you mean? Any positive cash flow or do you shoot for a certain amount expecting some type of expense to come up?

Thanks for all the replies. I was able to negotiate a better deal and, assuming my numbers are right, I will be able to get at least a 10% cash on cash return, after an amount for unexpected expenses. Since this is my first property, the whole process has been very interesting.

Several years ago, I borrowed a Carlton Sheets course from a friend. I have no idea what it was called or if it is the same one you are referring to. I was very disappointed in it. I quit listening about 3/4 of the way through as it really boiled down to "you've got to find the right deal" and "buy low, sell high."

I'm negotiating my first deal. It is a duplex. Both sides are rented. No room for immediate rent increases. I've got the seller's expenses, which included sewer, water, lawn service, taxes, and insurance and am crunching the numbers. My questions are:

1. It seems to me there should be some additional incidental expenses in owning one of these. Any input on how much I should budget for my analysis?

2. I'm buying this property for cash flow. How much monthly cash flow do you feel is acceptable? I know that is subjective, but I'd like the board's thoughts. Down payment would likely be in the 20K range.

Quick replies would be appreciated. Thanks for the help.

I'm just starting out in investing. I was hesitant to use a realtor too. I'm not sure why. I think newbies have the idea that you need to to do it all yourself to make money. The more I learn, the less I believe this. To answer Ohio's question, I think this is because so many of the people who sell real estate investment advice spend A LOT of time time telling you how to find the properties on your own and how this is the way to make the big money. This gives the impression a realtor is not needed or should not be used, IMO.

Anyway, I recently was referred to a realtor who has some specialty in invesmtent property and owns investment property. This was probably the best thing that has happened to me. I have not bought anything, but he has given me much valuable advice. He is currently helping me locate homes to buy and rent. He has also volunteered to run comps for me on homes that I buy FSBO with the hope I will use his help to sell them. My advice is that a good realtor can really add to your team and fund of knowledge.

Also, the citimortgage website has a feature that you can punch in a zip code and get comps.

Good luck.

Did you have a written agreement with the agent? If so, what does it say?

I assume you mean I won't get a steal because someone has to pay the realtor, correct? Since the owner is a realtor and has a number of other investment properties, I don't think it would be likely the home is priced so low it is a steal. In this case, I think the home is priced acceptably and a little negotiation could make the return even better. My main concern is that if I involve my realtor, he wants a cut and then the seller doesn't have as much room to drop the price during negotiations. Is this a valid concern?

Does anyone know of a source for real estate price appreciation data? I'm wondering if there is anyway to get info on historical rates of appreciation in areas of the country, by zip code, by city, etc.

I have found a property I am interested in purchasing. It is agent owned and is a SFR with a tenant in place. Based on the numbers I'm using, it should cash flow immediately. If it matters, this will be my first investment property. My questions:

1. Should I involved a real estate agent of my own and why?

2. What is the downside of not invovling an agent?

Some initial thoughts I had are:

An agent could help familiarize me with the going rental rates in the area as well as past and future appreciation. I'm being told the current rental rates are below market and, based upon my investigation so far, that appears to be correct. While I'm somewhat familiar with the area, I live in a relatively large metropolitan area and this isn't my usual stomping ground.

An agent may know of future development/zoning/etc. issues of which I'm unaware.

If I get an agent inolved, that will take money out of the pocket of the seller, which may not allow me to get as much of a reduction off the asking price, true?

I know there have been several posts re real estate agents and I'm not looking for a big, heated debate, just the board's thoughts on the pros and cons. Thanks in advance for the replies.